Document:

Exhibit 10.22

 

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE WARRANT UNDER SUCH ACT AND APPLICABLE SECURITIES LAWS OR SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.  INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

 

Warrant to Purchase 11,799,685 Series F
 Preferred Shares (subject to adjustment)

 

Dated: November 13, 2020

 

WARRANT TO PURCHASE SERIES F PREFERRED SHARES

 

OF

 

CLOOPEN GROUP HOLDING LIMITED

 

This certifies that, subject to the terms and conditions hereunder, Novo Investment HK Limited (諾河投資香港有限公司), a limited company duly incorporated under the laws of Hong Kong whose registered office is at SUITE 603 6/F LAWS COMM PLAZA, 788 CHEUNG SHA WAN RD KL (the “Holder”), or its assigns permitted hereunder, for value received, is entitled to purchase from Cloopen Group Holding Limited (the “Company”), a company incorporated in the Cayman Islands, 11,799,685 fully paid, non-assessable, convertible and redeemable Series F Preferred Shares of the Company (subject to any conversion immediately prior to the initial public offering of the Company) to be issuable upon exercise of this Warrant (collectively referred to as the “Warrant Shares”).  The Holder shall have the right to exercise this Warrant, in whole no later than ten (10) Business Days after the date that the Holder Closing Conditions under Section 1(e) have been satisfied or waived by the Holder and the Company Closing Conditions under Section 1(f) have been satisfied or waived by the Company, provided that unless otherwise extended by the Founder SUN Changxun and mutually agreed by the Holder, this Warrant cannot be exercised after the end of six (6) months following the date hereof (the “Exercise Period”).  The Warrant Share Exercise Price (as defined below) and the number of Warrant Shares purchasable hereunder are subject to adjustment as provided in Section 3 of this Warrant.  The “Warrant Share Exercise Price” shall be the per share exercise price for the Warrant Shares, which shall be initially US$2.8814 and as adjusted from time to time pursuant to Section 3 hereof.  The “Consideration” shall be the aggregate purchase amount for all Warrant Shares, which shall be US$34,000,000. The “Exercise Date” shall mean the date on which the Holder or its assigns permitted hereunder exercises this Warrant in accordance with the terms and conditions set forth in this Warrant.  The term “Warrant” as used herein shall include this Warrant and any warrants delivered in substitution or exchange therefor as provided herein.  The term “Business Day” means any day that is not a Saturday, Sunday, legal holiday or other day on which commercial banks are required or authorized by Law to be closed in the PRC and Hong Kong.  For purpose of this Warrant, all capitalized terms used and not otherwise defined herein shall have their respective meanings given to them in that certain Series F Preferred Share Purchase Agreement dated November 4, 2020 by and among the Company, the Holder and certain parties named therein (the “Purchase Agreement”).

 

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This Warrant is subject to the following terms and conditions:

 

1.     Exercise; Issuance of Certificates; Payment for Warrant Shares.

 

(a)  The purchase rights represented by this Warrant are, subject always to the terms and conditions hereunder, exercisable at the option of the Holder, at any time, or from time to time, during the term hereof as described in the first paragraph above, up to the date of expiration of the Exercise Period, for all of the Warrant Shares (but not for a fraction of a share), by the surrender of this Warrant to the Company accompanied with the Form of Subscription annexed hereto as Exhibit A duly completed and executed on behalf of the Holder, followed up with the payment of the Consideration in cash in lawful money of the United States within three (3) Business Days from the Exercise Date.

 

(b)       The Company agrees that the Warrant Shares purchased under this Warrant shall be and are deemed to be issued to the Holder hereof as the record owner of such shares immediately prior to the close of business on the date on which this Warrant shall have been surrendered, properly endorsed, with the completed, executed Form of Subscription delivered, and payment made for such shares, subject to the entry of such shares in the register of members of the Company, which the Company shall undertake to do immediately upon receipt of the Consideration.  A certificate or certificates for the number of Warrant Shares issuable upon exercise, together with any other securities or property to which the Holder hereof is entitled upon such exercise, shall be delivered to the Holder hereof by the Company at the Company’s expense as promptly as practicable on or after such date and in any event within ten (10) days thereafter.  Each share certificate so delivered shall be in such denominations of the Warrant Shares as may be requested by the Holder hereof and shall be registered in the name of such Holder.  In case of a purchase of less than all the Warrant Shares which may be purchased under this Warrant, the Company at its expense, within a reasonable time, shall cancel this Warrant and execute and deliver a new Warrant or Warrants of like tenor exercisable for the balance of the shares purchasable under the Warrant surrendered upon such purchase to the Holder hereof.

 

(c)       The Parties hereto agree and acknowledge that the purchase right of the Holder under this Warrant shall survive the closing of the Company’s initial public offering, provided however, in case that this Warrant is exercised before the closing of the Company’s Qualified IPO (as defined under the Memorandum and Articles), upon the exercise of this Warrant, the Warrant Shares purchased by the Holder shall be Series F Preferred Shares, and the Holder shall be entitled to all and any rights as a Series F Investor same as other existing Series F Investors under the Transaction Documents (as may be amended or restated from time to time), and in case that this Warrant is exercised after the closing of the Company’s Qualified IPO, the Warrant Shares issued to the Holder upon the exercise of this Warrant shall be Ordinary Shares or other class of shares that the Series F Preferred Shares will be converted into immediately prior to the initial public offering of the Company.

 

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(d)       The payment of the Consideration shall be paid by wire transfer of immediately available funds in U.S. dollars to an account designated by the Company.

 

(e)       Unless otherwise waived by the Holder, the obligations of the Holder to exercise this Warrant herein, are subject to the fulfillment of each of the following conditions (the “Holder Closing Conditions”):

 

(1)     Each of the representations and warranties of the Warrantors contained in Section 3 of the Purchase Agreement shall have been true, correct and not misleading when made and shall be true, correct and not misleading as of the Exercise Date with the same effect in all material respects as though such representations and warranties had been made as of the Exercise Date, except in either case for those representations and warranties that address matters only as of a particular date, which representations will have been true, correct and not misleading as of such particular date.

 

(2)     Each Warrantor shall have performed and complied with all obligations and conditions contained in the Purchase Agreement in all material respects that are required to be performed or complied with by them on or before the Exercise Date.

 

(3)     All Consents of any competent Governmental Authority or of any other Person that are required to be obtained by any Group Company or other Warrantors in connection with the consummation of the transactions contemplated by the Transaction Documents (including but not limited to those related to the lawful issuance and sale of the Warrant Shares, and any waivers of notice requirements, rights of first refusal, preemptive rights, put or call rights, or similar rights directly or indirectly affecting any of the shares or securities of the Company), including necessary board and shareholder approvals of the Group Companies, shall have been duly obtained and effective as of the Exercise Date, and evidence thereof shall have been delivered to the Holder.

 

(4)     All corporate and other proceedings in connection with the transactions to be completed at the Exercise Date and all documents incident thereto with respect to the Purchase Agreement and the other Transaction Documents and the transactions contemplated thereby, shall have been completed in form and substance reasonably satisfactory to the Holder, and the Holder shall have received the copies of such documents as it may reasonably request.

 

(5)     There shall have been no Material Adverse Effect since the Statement Date.

 

(6)     The Warrantors shall have tendered delivery of the following items: (x) a scanned copy of the updated register of members of the Company, certified by the Company’s registered office provider or the administrator, reflecting the issuance of the applicable Warrant Shares to the Holder, (y) a scanned copy of the share certificate issued in the name of the Holder representing the applicable Warrant Shares being purchased by the Holder at the Exercise Date.

 

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(7)     The Holder shall have received (A) a legal opinion addressed to the Holder dated as of the Exercise Date from the PRC legal counsel of the Company and (B) a legal opinion addressed to Holder dated as of the Exercise Date from the Cayman counsel of the Company, in each case in form and substance reasonably satisfactory to the Holder.

 

(8)     The Company shall have executed and delivered to the Holder at the Exercise Date a scanned copy of the certificate dated as of the Exercise Date stating that the conditions specified in this Section 1(e)(1) to Section 1(e)(7) hereof have been fulfilled as of the Exercise Date.

 

(9)     The Holder shall have obtained the ODI Approvals in connection with the exercise of this Warrant in compliance with applicable Laws and evidence thereof shall have been delivered to the Company.

 

(f)        Unless otherwise waived by the Company, the obligations of the Company to issue the Warrant Shares to the Holder are subject to the following conditions (the “Company Closing Conditions”):

 

(1)     The representations and warranties of the Holder contained in Section 4 of the Purchase Agreement shall have been true and complete when made and shall be true and complete as of the Exercise Date with the same effect as though such representations and warranties had been made of the Exercise Date, except in either case for those representations and warranties that address matters only as of a particular date, which representations will have been true and complete as of such particular date.

 

(2)     The Holder shall have performed and complied with all covenants, obligations and conditions contained in the Purchase Agreement that are required to be performed or complied with by the Holder on or before the Exercise Date.

 

(3)     The Holder shall have obtained the ODI Approvals in connection with the exercise of this Warrant in compliance with applicable Laws and evidence thereof shall have been delivered to the Company.

 

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2.     Shares to be Fully Paid; Reservation of Shares.

 

The Company covenants and agrees that the Warrant Shares which may be issued upon the exercise of the rights represented by this Warrant and payment of the Consideration, all set forth herein, will, upon issuance, be duly authorized, validly issued, fully paid and non-assessable and free from all preemptive rights of any shareholder and free of all taxes, liens and charges with respect to the issue thereof (other than taxes in respect of any transfer occurring contemporaneously or otherwise specified herein).  The Company agrees that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to executing and issue the necessary certificates for the Preferred Shares upon the exercise of this Warrant.  The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved, for the purpose of issue or transfer upon exercise of the subscription rights evidenced by this Warrant, a sufficient number of shares of authorized and unissued Preferred Shares and Ordinary Shares, issuable upon conversion of such Preferred Shares, or other securities and property, when and as required to provide for the exercise of the rights represented by this Warrant.  The Company will take all steps necessary to amend its Articles (as defined below) to provide sufficient reserves of Preferred Shares issuable upon exercise of the Warrant (and Ordinary Shares for issuance on conversion of such Preferred Shares) and any other such action as may be necessary to assure that such Preferred Shares and Ordinary Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any domestic securities exchange upon which the Shares may be listed; provided, however, that the Company shall not be required to effect a registration under U.S. Federal or State securities laws or any applicable foreign securities laws with respect to such exercise.

 

3.     Adjustment of Warrant Share Exercise Price and Number of Warrant Shares.

 

The Warrant Share Exercise Price and the number of Warrant Shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 3.  Upon each adjustment of the Warrant Share Exercise Price, the Holder of this Warrant shall thereafter be entitled to purchase, for a total amount of the Consideration, the number of shares obtained by dividing the Consideration by the Warrant Share Exercise Price resulting from such adjustment(s).

 

3.1        Split, Subdivision or Combination of Shares.  In case the Company shall at any time while this Warrant, or any portion hereof, remains outstanding and unexpired split or subdivide the outstanding Preferred Shares, which purchase rights under this Warrant exist, into a greater number of shares of the same class, the Warrant Share Exercise Price in effect immediately prior to such split or subdivision shall be proportionately reduced, and conversely, in case the outstanding Preferred Shares of the Company, which purchase rights under this Warrant exist, shall be combined into a smaller number of shares, the Warrant Share Exercise Price in effect immediately prior to such combination shall be proportionately increased.

 

3.2        Reclassification, etc.  If the Company, at any time while this Warrant, or any portion hereof, remains outstanding and unexpired by reclassification of the share capital of the Company or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, or other assets or property, then, as a condition of such reclassification, this Warrant shall thereafter represent the right to purchase and receive (in lieu of the Preferred Shares of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such number and kind of shares, securities or other assets or property, as may be issued or payable as the result of such change with respect to or in exchange for the number of outstanding shares of such Preferred Shares equal to the number of shares purchasable and receivable under this Warrant immediately prior to such reclassification or other change and the Warrant Share Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 3.  In any reclassification described above, appropriate provision shall be made with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Warrant Share Exercise Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, in relation to any shares, securities or assets thereafter deliverable upon the exercise hereof.  No adjustment shall be made pursuant to this Section 3.2, upon any conversion or redemption of the Preferred Shares which is the subject of Section 3.3.

 

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3.3        Conversion or Redemption of Preferred Shares. Should all or any class of the Company’s Preferred Shares be, or if outstanding would be, at any time prior to the expiration of this Warrant or any portion thereof, redeemed or converted into the Company’s Shares in accordance with applicable article of the Articles of the Company, then, in the sole discretion of the Holder, this Warrant shall become immediately exercisable prior to such event for that number of the Company’s Shares equal to the number of Ordinary Shares that would have been received if this Warrant had been exercised in full and the Warrant Shares received thereupon had been simultaneously converted immediately prior to such event, and the Warrant Share Exercise Price shall immediately be adjusted to equal the quotient obtained by dividing (x) the Consideration of the maximum number of Warrant Shares for which this Warrant was exercisable immediately prior to such conversion or redemption, by (y) the number of Ordinary Shares for which this Warrant is exercisable immediately after such conversion or redemption.  For purposes of the foregoing, the “Articles” shall mean the Articles of Association of the Company as amended and/or restated and effective immediately prior to the redemption or conversion of all of the Company’s Preferred Shares.

 

3.4        Merger, Sale of Assets, etc.  If at any time while this Warrant, or any portion hereof, is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the Company’s capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise, or (iii) a sale or transfer of the Company’s properties and assets as, or substantially as, an entirety to any other person, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Warrant Share Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 3.  The foregoing provisions of this Section 3.4 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant.  If the per-share consideration payable to the holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the then Company’s Board of Directors on a fair and reasonable basis.  In all events, appropriate adjustment (as determined in good faith by the then Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.

 

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3.5        Dilutive Issuance.   In the event of an issuance of New Securities (as defined in the Memorandum and Articles), at any time after the Series F Issue Date (as defined in the Memorandum and Articles) and prior to the consummation of an IPO of the Company, for a consideration per share received by the Company (net of any selling concessions, discounts or commissions) (the “New Securities Price”) less than the Warrant Share Exercise Price with respect to any Warrant Shares in effect immediately prior to such issue, then and in such event, the Warrant Share Exercise Price with respect to such Warrant Shares shall be reduced, concurrently with such issue, to the New Securities Price.  In the event that the offer price of an IPO of the Company is less than the Warrant Share Exercise Price, the Warrant Share Exercise Price hereunder shall be reduced to the offer price of the IPO concurrently with the confirmation of the IPO offer price.  For the avoidance of doubt, this Section 3.5 shall automatically terminate upon the consummation of an IPO of the Company.

 

3.6        Certificate as to Adjustments.  Upon the occurrence of each adjustment or readjustment pursuant to this Section 3, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.  The Company shall, upon the written request, at any time, of the Holder, furnish or cause to be furnished to the Holder a like certificate setting forth: (i) such adjustments and readjustments; (ii) the Warrant Share Exercise Price at the time in effect; and (iii) the number of shares and the amount, if any, of other property that at the time would be received upon the exercise of the Warrant.

 

3.7        Notice of Adjustment.  Upon any adjustment of the Warrant Share Exercise Price or any increase or decrease in the number of shares purchasable upon the exercise of this Warrant, pursuant to this Section 3, the Company shall give written notice thereof, in the form of an issued certificate, by first class mail, postage prepaid, addressed to the registered Holder of this Warrant at the address of the Holder as shown on the books of the Company.  The notice shall be signed by the Company’s Chief Executive Officer and shall set forth, in reasonable detail, the Warrant Share Exercise Price resulting from such adjustment, the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of this Warrant after giving effect to such adjustment, the event requiring the adjustment, the amount of the adjustment, and the method of calculation of such adjustment and the facts upon which such calculation is based.

 

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3.8        No Impairment.  The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 3 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Warrant against impairment. For the avoidance of doubt, the Company acknowledges and agrees that the Holder shall be entitled to the benefit of all adjustments in the number of Warrant Shares of the Company issuable upon the Holder’s exercise of this Warrant that all the other Series F Investors might have on a pro rata basis prior to the Holder’s exercise of this Warrant.

 

4.     No Voting or Dividend Rights.

 

Subject to Section 3 of this Warrant, nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to consent to receive notice as a shareholder of the Company or any other matters or any rights whatsoever as a shareholder of the Company.  No dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby or the shares purchasable hereunder until, and only to the extent that, this Warrant shall have been exercised.

 

5.              Transfer.

 

(a)   Warrant Register.  The Company will maintain a register (the “Warrant Register”) containing the names and addresses of the Holder.  The Holder of this Warrant or any portion thereof may change its address as shown on the Warrant Register by written notice to the Company requesting such change.  Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the Warrant Register and at the address shown on the Warrant Register.  Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat such Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary.

 

(b)   Warrant Agent.  The Company may, by written notice to the Holder, appoint an agent for the purpose of maintaining the Warrant Register referred to in Section 5(a) above, issuing the Series F Preferred Shares or other securities then issuable upon the exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or any or all of the foregoing.  Thereafter, any such registration, issuance, exchange, or replacement, as the case may be, shall be made at the office of such agent.

 

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(c)   Transfer or Assign.  Prior to the Exercise Date, (i) if any of the Deemed Liquidation Events or Redemption Events (as defined in the Memorandum and Articles) occurs, (ii) the Company initiates the procedures for launching its initial public offering, or (iii) the Holder fails to obtain the ODI Approvals within the Exercise Period, then the Parties hereby agree that the Holder is entitled to, and the Company undertakes to use its best efforts to cooperate with and assist, and undertake to procure that each of the then shareholders of the Company use their best efforts to cooperate with and assist Holder to, prior to the earliest date of the: (x) the closing of the Deemed Liquidation Events, Redemption Events (as defined in the Memorandum and Articles) or  at least thirty days prior to the public filing of the Company’s initial public offering; or (y) the expiration date of the Exercise Period, as the case may be, transfer or assign the Warrant to an affiliate or any third party designated by the Holder, which shall be capable to exercise the Warrant and pay the Company the Consideration without the need to obtain the ODI Approvals under the applicable Laws, to exercise such Warrant and be registered by the Company as the holder of the Warrant Shares, provided that (i) the transferee shall not be the competitors as listed in Schedule C attached to the Six Amended and Restated Right of First Refusal and Co-sale Agreement (which also includes any affiliate of such entities) or their affiliates; (ii) such transfer shall be effected in compliance with this Section 5(c); (iii) such transfer is effected in compliance with all applicable Laws; (iv) the transferee shall execute and deliver such documents and take such other actions as may be necessary for the transferee to join in and be bound by the Warrant as a “Holder”, as the case may be, upon and after such transfer; (v) such transfer shall not adversely affect any Group Company and/or the Group as a whole with respect to its listing plan in the PRC in any event according to the then effective PRC laws and regulations of relevant stock exchange administration authorities (including without limitation any applicable laws and regulations regarding competition in the same business (同业竞争), unfair related-party transactions (不公平的关联交易) or change of actual controlling person of the Company (实际控制人变更)).

 

(d)     Exchange of Warrant Upon a Transfer.  On surrender of this Warrant for exchange, properly endorsed on the Assignment Form (attached as Exhibit B hereto) and subject to the provisions of this Warrant with respect to compliance with the Act and with the limitations on assignments and transfers contained in this Section 5, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof.

 

6.    Notification of Certain Events.  Notwithstanding anything to the contrary set forth in this Warrant, if prior to the Exercise Date, (i) any of the Deemed Liquidation Events or Redemption Events (as defined in the Memorandum and Articles) occurs; or (ii) the Company initiates the procedures for launching its IPO, the Company shall send to the Holder at least thirty (30) days prior written notice of the expected effective date of such event; provided, however, that if the Company is not reasonably able to provide thirty (30) days prior written notice, the Company shall send to the Holder written notice of the expected or actual date of such event as soon as reasonably practicable.  The notice provisions set forth in this section may be shortened or waived prospectively or retrospectively by the consent of the Holder; and the Holder may, at its discretion, immediately exercise this Warrant in accordance with terms and conditions hereof. For the avoidance of doubt, this Section 6 shall automatically terminate upon the consummation of an IPO of the Company.

 

7.    Participation in Distribution. In the event that a liquidation, dissolution or winding up of the Company or a Deemed Liquidation Event (as defined under the Memorandum and Articles) occurs prior to the Holder’s exercise of the Warrant, if the Holder or its Affiliate hasn’t transferred the Warrant to any party other than its Affiliates, the Holder or its Affiliates shall have the right to participate in the distribution of the Company’s assets and funds and the proceeds resulting from the aforesaid  liquidation, dissolution or winding up of the Company or such Deemed Liquidation Event and receive its corresponding assets, funds and proceeds on a parity with other holders of the Series F Preferred Shares pursuant to this Section 7, provided that if the Holder or its Affiliates elects to participate, the Holder or its Affiliates shall pay to one or more Group Companies an amount equal to the Consideration. For the avoidance of doubt, this Section 7 shall automatically terminate upon the consummation of an IPO of the Company.

 

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8.              Use of Consideration.

 

The Company shall use the Consideration for purposes of business expansion, capital expenditures and general working capital needs the Group Companies. The Consideration shall not be used in the repayment of any debts or obligations of any Group Company or its Subsidiaries or any Principal or in the repurchase or cancellation of securities held by any shareholder of the Group Companies unless otherwise approved by the exercising Holder in writing.  “Group Company”, “Subsidiaries” and “Principal” shall have the meaning ascribed to it in the Purchase Agreement.

 

9.              Representations and Warranties of the Holder.

 

(a)    Purchase for Own Account. The Holder represents that it is acquiring the Warrant and the Preferred Shares issuable upon exercise of the Warrant (collectively, the “Securities”) for investment for such Holder’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof, and such Holder has no present intention of selling, granting any participation in, or otherwise distributing the same.  If not an individual, such Holder also represents that such Holder has not been formed for the specific purpose of acquiring the Securities.

 

(b)    Information and Sophistication.  The Holder understands that the purchase of the Securities involves substantial risk.  Such Holder (a) has experience as an investor in securities of companies in the development stage and acknowledges that such Holder can bear the economic risk of such Holder’s investment in the Securities and has such knowledge and experience in financial or business matters that such Holder is capable of evaluating the merits and risks of this investment in the Securities and protecting its own interests in connection with this investment and/or (b) has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables such Holder to be aware of the character, business acumen and financial circumstances of such persons.

 

(c)     Further Limitations on Disposition.  Without in any way limiting the representations set forth above and any restrictions that may be imposed under the Shareholders Agreement relating to the Company as valid by then, such Holder further agrees not to make any disposition of all or any portion of the Preferred Shares or the Ordinary Shares to be issued upon exercise hereof or conversion thereof except:

 

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(i)      pursuant to a registration statement under the Securities Act covering such disposition; or

 

(ii)     pursuant to an exemption from registration under the Securities Act, including, without limitation, Rule 144, Rule 144A or Regulation S thereunder.

 

(d)    Accredited Investor.  The Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act or not a “U.S. person” as defined in Rule 902 of Regulation S of the Securities Act.

 

10.       Amendments and Waivers.

 

(a)   Any term of this Warrant may be amended (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Holder.

 

(b)   No waivers of, or exceptions to, any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

 

11.       Notices.

 

(a)    Any notice, offer, request, payment, demand or other communication required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficiently served if delivered in person or by next-day or second-day courier service, fax, electronic mail or similar means to the address of that Party is set out below or such other address as either may from time to time provide to the other.

 

	
 
    	
If notice to the Company:
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
16/F Tower A, Fairmont Tower, 33 Guangshun North Main Street,   Wang Jing, Chaoyang District, Beijing, 100102
    
	
 
    	
Tel:
    	
[REDACTED]
    
	
 
    	
Attention:
    	
[REDACTED]
    
	
 
    	
Email address:
    	
[REDACTED]
    
	
 
    	
 
    	
 
    
	
 
    	
If notice to the   Holder:
    
	
 
    	
 
    
	
 
    	
Address: Building B, 6th Floor, Enfei Science and Technology   Mansion, No.12, Fuxing Road, Haidian District, Beijing (100038)
    
	
 
    	
Tel: [REDACTED]
    
	
 
    	
Attention: [REDACTED]
    
	
 
    	
Email: [REDACTED]
    

 

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(b)    Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending by next-day or second-day service through an internationally-recognized courier a letter containing the notice, with a written confirmation of delivery, and to have been effected at the earlier of (i) delivery (or when delivery is refused) and (ii) expiration of two (2) Business Days after the letter containing the same is sent as aforesaid.  Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organization, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid, if such day is a Business Day and if sent during normal business hours of the recipient, otherwise the next Business Day.

 

(c)     A party thereto may change its address from time to time by written notice to the other party, which change of address shall be effective only upon receipt of such notice by the other party.

 

12.      Confidentiality.  The terms and conditions described in this Warrant (“Financial Terms”), including its existence shall be confidential information and shall not be disclosed to any third party except that (i) each party, as appropriate, may disclose any of the Financing Terms to its current or bona fide prospective investors, employees, investment bankers, lenders, accountants and attorneys, in each case only where such Persons are under appropriate nondisclosure obligations; (ii) the Holder may disclose any of the Financing Terms to its fund manager and the employees thereof so long as such Persons are under appropriate nondisclosure obligations; and (iii) if any party is requested or becomes legally compelled (including without limitation, pursuant to any Laws relating to securities or any applicable listing rules) to disclose the existence or content of any of the Financing Terms in contravention of the provisions of this Section, such party shall promptly provide the other Parties with written notice of that fact so that such other parties may seek a protective order, confidential treatment or other appropriate remedy and in any event shall furnish only that portion of the information that is legally required and shall exercise reasonable efforts to obtain reliable assurance that confidential treatment will be accorded such information.

 

13.      Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Warrant shall inure to the benefit of and be binding upon the respective successors and assigns of the Holder hereto whose rights or obligations hereunder are affected by such terms and conditions.

 

12

 

14.      Descriptive Headings and Governing Law.  The titles and subtitles used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant.  Unless a provision hereof expressly provides otherwise:  (i) the term “or” is not exclusive; (ii) words in the singular include the plural, and words in the plural include the singular; (iii) the terms “herein”, “hereof”, and other similar words refer to this Warrant as a whole and not to any particular section, subsection, paragraph, clause, or other subdivision; (iv) the term “including” will be deemed to be followed by, “but not limited to”, (v) the masculine, feminine, and neuter genders will each be deemed to include the others; (vi) the terms “shall”, “will”, and “agrees” are mandatory, and the term “may” is permissive; (vii) the term “day” means “calendar day”, and “month” means calendar month, (viii) all references in this Warrant to designated “Sections” and other subdivisions are to the designated Sections and other subdivisions of the body of this Warrant, (ix) all references in this Warrant to designated Schedules, Exhibits and Appendices are to the Schedules, Exhibits and Appendices attached to this Warrant, (x) the phrase “directly or indirectly” means directly, or indirectly through one or more intermediate Persons or through contractual or other arrangements, and “direct or indirect” has the correlative meaning, (xi) references to Laws include any such Law modifying, re-enacting, extending or made pursuant to the same or which is modified, re-enacted, or extended by the same or pursuant to which the same is made, (xii) each representation, warranty, agreement, and covenant contained herein will have independent significance, regardless of whether also addressed by a different or more specific representation, warranty, agreement, or covenant, (xiii) all accounting terms not otherwise defined herein have the meanings assigned under the Accounting Standards, (xiv) pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms, and (xv) all references to dollars or to “USD” are to currency of the United States of America and all references to RMB are to currency of the PRC (and each shall be deemed to include reference to the equivalent amount in other currencies).  This Warrant shall in all respects be construed and enforced in accordance with and governed by the laws of Hong Kong, without regard to principles of conflict of laws thereunder.

 

15.      Jurisdiction.

 

(a)  Any dispute, controversy or claim (each, a “Dispute”) arising out of or relating to this Agreement, or the interpretation, breach, termination, validity or invalidity thereof, shall be referred to arbitration upon the demand of either party to the dispute with notice (the “Arbitration Notice”) to the other.

 

(b)  The Dispute shall be settled by arbitration in Hong Kong by the Hong Kong International Arbitration Centre (the “HKIAC”) in accordance with the Hong Kong International Arbitration Centre Administered Arbitration Rules (the “HKIAC Rules”) in force when the Arbitration Notice is submitted in accordance with the HKIAC Rules. There shall be three (3) arbitrators. The claimant in the Dispute shall choose one (1) arbitrator, and the respondent shall choose one (1) arbitrator. The HKIAC Council shall select the third arbitrator, who shall be qualified to practice law in Hong Kong. If any of the members of the arbitral tribunal have not been appointed within thirty (30) days after the arbitration notice set forth in Section 14.4(i) above is given, the relevant appointment shall be made by the HKIAC Council.

 

(c)  The arbitral proceedings shall be conducted in English.  To the extent that the HKIAC Rules are in conflict with the provisions of this Section, including the provisions concerning the appointment of the arbitrators, the provisions of this Section shall prevail.

 

13

 

(d)  Each party to the arbitration shall cooperate with each other party to the arbitration in making full disclosure of and providing complete access to all information and documents requested by such other party in connection with such arbitral proceedings, subject only to any confidentiality obligations binding on such party.

 

(e)  The award of the arbitral tribunal shall be final and binding upon the parties thereto, and the prevailing party may apply to a court of competent jurisdiction for enforcement of such award.

 

(f)  The arbitral tribunal shall decide any Dispute submitted by the parties to the arbitration strictly in accordance with the substantive Laws of Hong Kong (without regard to principles of conflict of laws thereunder) and shall not apply any other substantive Law.

 

(g)  Any party to the Dispute shall be entitled to seek preliminary injunctive relief, if possible, from any court of competent jurisdiction pending the constitution of the arbitral tribunal.

 

(h)  During the course of the arbitral tribunal’s adjudication of the Dispute, this Agreement shall continue to be performed except with respect to the part in dispute and under adjudication.

 

16.      Lost Warrants.  Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of an indemnity agreement reasonably satisfactory in form and substance to the Company, or in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, shall execute and deliver a new Warrant, of like tenor and amount, in lieu of the lost, stolen, destroyed or mutilated Warrant.

 

17.      Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  The Company shall, in lieu of issuing any fractional share to which the Holder would otherwise be entitled, the Company shall pay the holder entitled to such fraction a sum in cash equal to such fraction multiplied by the then effective Warrant Share Exercise Price.

 

18.      Effectiveness. The Warrant shall take effect on the date hereof, and shall be lapsed, nullified and cancelled upon the expiration of the Exercise Period if the Warrant is not exercised, provided that, the Exercise Period may be extended by the Founder SUN Changxun and mutually agreed by the Holder.

 

14

 

19.      No Presumption.  The parties acknowledge that any applicable Law that would require interpretation of any claimed ambiguities in this Warrant against the party that drafted it has no application and is expressly waived.  If any claim is made by a party relating to any conflict, omission or ambiguity in the provisions of this Warrant, no presumption or burden of proof or persuasion will be implied because this Warrant was prepared by or at the request of any party or its counsel.

 

20.      Counterparts.  This Warrant may be executed in one or more counterparts, including counterparts transmitted by facsimile or e-mail, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.  Delivery of executed signature pages by facsimile or electronic transmission (via scanned PDF) by the parties will constitute effective and binding execution and delivery of this Warrant.

 

15

 

IN WITNESS WHEREOF, the Company and Holder have caused this Warrant to be duly executed by their respective authorized representative as of the date first above written.

 

	
 
    	
Cloopen Group Holding Limited
    
	
 
    	
 
    
	
 
    	
a Cayman Islands company
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ SUN   Changxun
    
	
 
    	
Name: SUN Changxun
    
	
 
    	
Title: Director
    

 

 

IN WITNESS WHEREOF, the Company and Holder have caused this Warrant to be duly executed by their respective authorized representative as of the date first above written.

 

	
 
    	
Novo Investment HK Limited
    
	
 
    	
(諾河投資香港有限公司)
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Zhang, Ying
    
	
 
    	
Name: Zhang, Ying
    
	
 
    	
Title: Director
    

 

 

Exhibit A

 

FORM OF SUBSCRIPTION

 

(To be signed only upon exercise of Warrant)

 

2

 

Exhibit B

 

ASSIGNMENT FORM

 

3EXHIBIT
4.1

 

THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED
BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

		Right
to Purchase ____________shares of Common Stock
    of Stem Holdings, Inc. (subject to
    adjustment as provided herein)

 

COMMON
STOCK PURCHASE WARRANT

 

	No.______________________

        Name:____________________
	 	Issue
                                         Date:____________

        Price:_________________

 

 

STEM
HOLDINGS, INC., a corporation organized under the laws of the State of Nevada (the “Company”), hereby certifies
that, for value received,_____________________ , with an address at ___________________, or its assigns (the “Holder”), is entitled, subject to the
terms set forth below, to purchase from the Company at any time after the Issue Date until 5:00 p.m., E.S.T. on the two (2) year
anniversary of the Issue Date (the “Expiration Date”), up to_________________ fully paid and non-assessable shares of Common
Stock at a per share purchase price of $0.53 per share. The aforedescribed purchase price per share, as adjusted from time
to time as herein provided, is referred to herein as the “Purchase Price.” The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as provided herein. The Company may reduce the Purchase
Price for some or all of the Warrants, temporarily or permanently, provided such reduction is made as to all outstanding
Warrants for all Holders of such Warrants.

 

As
used herein the following terms, unless the context otherwise requires, have the following respective meanings:

 

(a)
The term “Company” shall mean Stem Holdings, Inc., a Nevada corporation.

 

(b)
The term “Common Stock” includes (i) the Company’s Common Stock, $0.001 par value per share and (ii)
any other securities into which or for which any of the securities described in (i) may be converted or exchanged pursuant to
a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

 

    	 

     

    

 

(c)
The term “Other Securities” refers to any stock (other than Common Stock) and other securities of the Company
or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall
have received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 hereof
or otherwise.

 

(d)
The term “Warrant Shares” shall mean the Common Stock issuable upon exercise of this Warrant.

 

1.
Exercise of Warrant.

 

1.1.
Number of Shares Issuable upon Exercise. From and after the Issue Date through and including the Expiration Date, the Holder
shall be entitled to receive, upon exercise of this Warrant in whole in accordance with the terms of Section 1.2 hereof
or upon exercise of this Warrant in part in accordance with Section 1.3 hereof, shares of Common Stock of the Company,
subject to adjustment pursuant to Section 2 hereof.

 

1.2.
Full Exercise. This Warrant may be exercised in full by the Holder hereof by delivery to the Company of an original or
facsimile copy of the Notice of Exercise form attached as Exhibit A hereto (the “Notice of Exercise”)
duly executed by such Holder and delivered within two (2) business days thereafter of payment, in cash, wire transfer or by certified
or official bank check payable to the order of the Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in effect. The original Warrant is not required to
be surrendered to the Company until it has been fully exercised.

 

1.3.
Partial Exercise. This Warrant may be exercised in part (but not for a fractional share) by delivery of a Notice of Exercise
in the manner and at the place provided in Section 1.2 hereof, except that the amount payable by the Holder on such partial
exercise shall be the amount obtained by multiplying (a) the number of whole shares of Common Stock designated by the Holder in
the Notice of Exercise by (b) the Purchase Price then in effect. On any such partial exercise, upon the written request of the
Holder, provided the Holder has surrendered the original Warrant, the Company, at its expense, will forthwith issue and deliver
to or upon the order of the Holder a new Warrant of like tenor, in the name of the Holder hereof or as such Holder (upon payment
by such Holder of any applicable transfer taxes) may request, the whole number of shares of Common Stock for which such Warrant
may still be exercised.

 

1.4.
Fair Market Value. For purposes of this Warrant, the Fair Market Value of a share of Common Stock as of a particular
date (the “Determination Date”) shall mean:

 

(a)
If the Company’s Common Stock is traded on an exchange or on the NASDAQ Capital Market, NASDAQ Global Select Market, the
New York Stock Exchange or the NYSE Euronext, the average of the closing sale prices of the Common Stock for the five (5) trading
days immediately prior to (but not including) the Determination Date;

 

    	2

     

    

 

(b)
If the Company’s Common Stock is not traded on an exchange or on the NASDAQ Global Market, NASDAQ Global Select Market,
the NASDAQ Capital Market, the New York Stock Exchange or the NYSE Euronext, but is traded on the OTC Bulletin Board or in the
over-the- counter market or Pink Sheets, the average of the closing bid and ask prices reported for the five (5) trading days
immediately prior to (but not including) the Determination Date;

 

(c)
Except as provided in clause (d) below and Section 3.1 hereof, if the Company’s Common Stock is not publicly traded,
then as the Holder and the Company shall mutually agree, or in the absence of such an agreement after good faith efforts of the
Company and the Holder to reach an agreement, by arbitration in accordance with the rules then standing of the American Arbitration
Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the
matter to be decided; or

 

(d)
If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock
pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per
share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of
the shares of Common Stock then issuable upon exercise of all of the Warrants are outstanding at the Determination Date.

 

1.5.
Company Acknowledgment. The Company will, at the time of the exercise of the Warrant, upon the request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to such Holder any rights to which such Holder shall continue to be
entitled after such exercise in accordance with the provisions of this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford to such Holder any such rights.

 

1.6.
Delivery of Stock Certificates, etc. on Exercise. The Company agrees that, provided the purchase price listed in the Notice
of Exercise is received as specified in Section 2 hereof, the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder hereof as the record owner of such shares as of the close of business on the date on
which delivery of a Notice of Exercise shall have occurred and payment made for such shares as aforesaid. As soon as practicable
after the exercise of this Warrant in full or in part and the payment is made, and in any event within five (5) business days
thereafter (“Warrant Share Delivery Date”), the Company, at its expense (including the payment by it of any
applicable issue taxes), will cause to be issued in the name of, and delivered to, the Holder hereof, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate
or certificates for the number of duly and validly issued, fully paid and non-assessable shares of Common Stock (or Other Securities)
to which such Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such Holder would otherwise
be entitled, either (i) cash equal to such fraction multiplied by the then Fair Market Value of one full share of Common Stock,
together with any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled
upon such exercise pursuant to Section 1 hereof or otherwise (ii) an extra share of Common Stock. The Company understands
that a delay in the delivery of the Warrant Shares after the Warrant Share Delivery Date could result in economic loss to the
Holder. If a warrant holder notifies the Company of such Holder’s election to exercise and the Company does not deliver
the shares of Common Stock issuable upon such exercise, and the Holder has to buy shares of the Company’s Common Stock on
the open market because of the Holder’s obligation to deliver shares of Common Stock, then the Company will pay such Holder
the difference between the price paid on the open market and the value of such Common Stock on the date of exercise. The Company
will also pay interest at the annual rate of 15% for each day that it is late in delivering shares of its Common Stock.

.

    	3

     

    

 

2.
Adjustment for Reorganization, Consolidation, Merger, etc.

 

2.1.
Fundamental Transaction. If, at any time while this Warrant is outstanding, (A) the Company effects any merger or consolidation
of the Company with or into another entity, (B) the Company effects any sale of all or substantially all of its assets in one
or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another entity) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property,
(D) the Company consummates a stock purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, or spin-off) with one or more persons or entities whereby such other persons or entities acquire more than the
50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by such other persons or entities
making or party to, or associated or affiliated with the other persons or entities making or party to, such stock purchase agreement
or other business combination), (E) any “person” or “group” (as these terms are used for purposes of Sections
13(d) and 14(d) of the 1934 Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934
Act), directly or indirectly, of 50% of the aggregate Common Stock of the Company, or (F) the Company effects any reclassification
of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged
for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent
exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon
such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder, (a) upon exercise
of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable upon or
as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number
of shares of Common Stock for which this Warrant is exercisable immediately prior to such event or (b) if the Company is acquired
in (1) a transaction where the consideration paid to the holders of the Common Stock consists solely of cash, (2) a “Rule
13e-3 transaction” as defined in Rule 13e-3 under the 1934 Act, or (3) a transaction involving a person or entity not traded
on a national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market, cash
equal to the Black-Scholes Value (as defined herein). For purposes of any such exercise, the determination of the Purchase Price
shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable
in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Purchase Price among
the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of
this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor
to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms
of any agreement pursuant to which a Fundamental Transaction is effected include terms requiring any such successor or surviving
entity to comply with the provisions of this Section 2.1 and insuring that this Warrant (or any such replacement security)
will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. “Black-Scholes Value”
shall be determined in accordance with the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg
L.P. using (i) a price per share of Common Stock equal to the Volume Weighted Average Price of the Common Stock for the Trading
Day immediately preceding the date of consummation of the applicable Fundamental Transaction, (ii) a risk-free interest rate corresponding
to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of the date of such request and (iii) an
expected volatility equal to the 100 day volatility obtained from the HVT function on Bloomberg L.P. determined as of the Trading
Day immediately following the public announcement of the applicable Fundamental Transaction.

 

    	4

     

    

 

2.2.
Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 2 hereof, this Warrant shall continue in full force and effect and the terms hereof shall be
applicable to the Other Securities and property receivable on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding
upon the issuer of any Other Securities, including, in the case of any such transfer, the person acquiring all or substantially
all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant
as provided in Section 5hereof.

 

3.
Accredited Investor Status. This Warrant may only be exercised by a Holder that is an “accredited investor”
as that term is defined in Rule 501 promulgated under the Securities Act of 1933, as amended.

 

4.
Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of Common
Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or
(c) combine its outstanding shares of the Common Stock into a smaller number of shares of Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price
by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event
and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product
so obtained shall thereafter be the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive event or events described in this Section 4. The number of shares
of Common Stock that the Holder of this Warrant shall thereafter, on the exercise hereof, be entitled to receive shall be adjusted
to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Purchase Price that would otherwise
(but for the provisions of this Section 4) be in effect, and (b) the denominator is the Purchase Price in effect on the
date of such exercise.

 

    	5

     

    

 

5.
Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable on the exercise of the Warrants or in the Purchase Price, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Warrant and
prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment
or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional
shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price and the number of shares
of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and
as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the
Holder of the Warrant and any Warrant Agent (as defined herein) of the Company (appointed pursuant to Section 11 hereof).
Holder will be entitled to the benefit of the adjustment regardless of the giving of such notice. The timely giving of such notice
to Holder is a material obligation of the Company.

 

6.
Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial Statements. The Company will at all times reserve
and keep available, solely for issuance and delivery on the exercise of the Warrants, all shares of Common Stock (or Other Securities)
from time to time issuable on the exercise of the Warrant. This Warrant entitles the Holder hereof, upon written request, to receive
copies of all financial and other information distributed or required to be distributed to the holders of the Company’s
Common Stock.

 

7.
Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced
hereby, may be transferred by any registered holder hereof (a “Transferor”). On the surrender for exchange
of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor
Endorsement Form”) and together with an opinion of counsel reasonably satisfactory to the Company that the transfer
of this Warrant will be in compliance with applicable securities laws, the Company will issue and deliver to or on the order of
the Transferor thereof a new Warrant or Warrants of like tenor, in the name of the Transferor and/or the transferee(s) specified
in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof
for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor.

 

    	6

     

    

 

8.
Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity
agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense, twice only, will execute and deliver, in lieu thereof, a new Warrant
of like tenor.

 

9.
Maximum Exercise. The Holder shall not be entitled to exercise this Warrant on an exercise date, in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially
owned by the Holder and its Affiliates on an exercise date, and (ii) the number of shares of Common Stock issuable upon the exercise
of this Warrant with respect to which the determination of this limitation is being made on an exercise date, which would result
in beneficial ownership by the Holder and its Affiliates of more than 4.99% of the outstanding shares of Common Stock on such
date. For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the 1934 Act and Rule 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to aggregate exercises
which would result in the issuance of more than 4.99%. The restriction described in this paragraph may be waived, in whole or
in part, upon sixty-one (61) days’ prior notice from the Holder to the Company to increase such percentage. The Holder may
decide whether to convert the Preferred Stock or exercise this Warrant to achieve an actual 4.99% or increase such ownership position
as described above.

 

10.
Warrant Agent. The Company may, by written notice to the Holder, appoint an agent (a “Warrant Agent”)
for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1 hereof,
exchanging this Warrant pursuant to Section 7 hereof, and replacing this Warrant pursuant to Section 8 hereof, or
any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office
by such Warrant Agent.

 

11.
Transfer on the Company’s Books. Until this Warrant is transferred on the books of the Company, the Company may treat
the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

 

12.
Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid,
or (iv) transmitted by hand delivery, telegram, or facsimile addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received), or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be: (i) if to the Company, to Stem Holdings, Inc., 2201 NW Corporate Blvd,
Ste 205, Boca Raton, FL 33431 Attn: Adam Berk, with a copy by fax only to (which shall not constitute notice) Law Offices of Robert
Diener, 41 Ulua Place, Haiku, HI 96708, Attn: Robert L. B. Diener, Esq., facsimile: (310) 362-8887, and (ii) if to the Holder,
to the address and facsimile number of record with the Company.

 

    	7

     

    

 

13.
Law Governing This Warrant. This Warrant shall be governed by and construed in accordance with the laws of the State of
Florida without regard to its principles of conflicts of laws or of any other State. Any action brought by either party hereto
against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts of Florida
or in the federal courts located in the state and county of Palm Beach. The parties to this Warrant hereby irrevocably waive any
objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction
or venue or based upon forum non conveniens. The Company and the Holder waive trial by jury. The prevailing
party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any
provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform to, such statute or rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereto hereby irrevocably
waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this
Warrant or any other transaction document by mailing a copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service
shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any other manner permitted by law.

 

[-Signature
Page Follows-]

 

    	8

     

    

 

IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

 

	 	STEM
    HOLDINGS, INC.
	 	By:	
	 	Name:	Adam
    Berk
	 	Title:	CEO/President

 

    	9

     

    

 

Exhibit
A

FORM
OF EXERCISE

(to
be signed only on exercise of Warrant)

 

TO:
STEM HOLDINGS, INC.

FROM:_____________

Warrant
#__________

 

The
undersigned, pursuant to the provisions set forth in the attached Warrant (No.« ____________), hereby irrevocably
elects to purchase (check applicable box):

 

____________shares
of the Common Stock covered by such Warrant; or _______.

 

The
undersigned herewith makes payment of the full purchase price for such shares at the price per share provided for in such Warrant,
which is $____________. Such payment takes the form of (check applicable box or boxes):

 

___________
$_________in lawful money of the United States; and/or

 

The
undersigned requests that the certificates for such shares be issued in the name of, and delivered to ____________________________________,
whose address is_____________________________________________

_______________________________________________________________________________________________.

 

The
undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the
within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities
Act”), or pursuant to an exemption from registration under the Securities Act. The undersigned hereby represents an d warrants
that the undersigned in an “accredited investor” as that term is defined in Rule 501 promulgated under the Securities
Act.

 

	Dated:
	 	 	 
	 	 	 	(Signature
    must conform to name of holder as specified on the face of the Warrant)
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	(Address)

 

EIN/SSN:

 

    	 

     

    

 

Exhibit
B

 

FORM
OF TRANSFEROR ENDORSEMENT

Name:_______________;
Warrant #____________

(To
be signed only on transfer of Warrant)

 

For
value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees”
the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of STEM HOLDINGS,
INC. to which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on
the books of STEM HOLDINGS, INC., with full power of substitution in the premises.

 

	Transferees
    	 	Percentage
    Transferred 	 	Number
    Transferred

 

	Dated:
_____________,_____	 	 
	 	 	(Signature
                                         must conform to name of holder as specified

        on
        the face of the warrant)

	Signed
    in the presence of:	 	 
	 	 	 
	 	 	 
	(Name)
    	 	
	 	 	(address)
	ACCEPTED
    AND AGREED: 	 	 
	[TRANSFEREE]
    	 	 
	 	 	(address)
	 	 	 
	(Name)	 	 

 

EIN/SSN:

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