Document:

aout-ex42_1327.htm

Exhibit 4.2

DESCRIPTION OF SECURITIES 

Following is a brief description of the capital stock, of American Outdoor Brands, Inc. (“we,” “us,” and “our”). This description is not complete and is subject to and qualified in its entirety by reference to our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws, each as amended from time to time. 

Authorized Capital Stock 

Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.001 per share, and 20,000,000 shares of preferred stock, par value $0.001 per share. As of April 30, 2021, no shares of our preferred stock were issued or outstanding.

Voting Rights. Holders of our common stock are entitled to one vote for each share of our common stock held of record by them. 

Quorum. Except as otherwise provided by Delaware law, our Amended and Restated Certificate of Incorporation, or our Amended and Restated Bylaws, at each meeting of our stockholders the presence in person or by proxy of the holders of a majority in voting power of the then outstanding shares of our stock entitled to vote at the meeting will be necessary and sufficient to constitute a quorum. 

Election of Directors. Except for directors, if any, elected by the holders of one or more series of preferred stock created and issued by our Board of Directors and with respect to newly created directorships and vacancies on our Board of Directors, each of our directors will be elected by a majority of the votes cast with respect to the nominee for election to our Board of Directors at any meeting of our stockholders at which directors are to be elected and a quorum is present, except that directors will be elected by a plurality of the votes cast at such meeting if one or more of our stockholders have nominated one or more individuals for election at such meeting and not withdrawn such nomination or nominations on or prior to the tenth day preceding the date that we first mailed notice of such meeting to our stockholders.  

Under Delaware law, stockholders do not have cumulative voting rights in connection with the election of directors unless the corporation’s certificate of incorporation provides for such rights.  Our Amended and Restated Certificate of Incorporation does not provide the holders of our commons stock cumulative voting rights in connection with the election of directors.

Other Elections, Questions, or Business. When a quorum is present at any meeting of our stockholders, elections, questions, or business presented to our stockholders at such meeting (other than the election of directors) is decided by the affirmative vote of a majority of votes cast with respect to such election, question, or business unless the election, question, or business is one which, by express provision of our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws, the laws of the state of Delaware, the rules or regulations of any stock exchange applicable to us, or any regulation applicable to us or our securities, a vote of a different number or voting by class or series is required, in which case, such express provision will govern. 

Dividends. Subject to Delaware law and the rights, if any, of the holders of one or more series of preferred stock created and issued by our Board of Directors, dividends may be declared and paid on our common stock at such times and in such amounts as our Board of Directors may determine in its discretion. 

Liquidation. Subject to Delaware law and the rights, if any, of the holders of one or more series of preferred stock created and issued by our Board of Directors, the holders of our common stock are entitled to receive our assets available for distribution to our stockholders ratably in proportion to the number of shares of our common stock held by them. A merger or consolidation of us with or into another entity, or a sale or conveyance of all or any part of our assets (which does not in fact result in the liquidation, dissolution, or winding up of us and the distribution of our assets to our stockholders) will not be deemed to be a liquidation, dissolution, or winding up for purposes of the prior sentence.  

ACTIVE 58769836v2

 

Miscellaneous. All outstanding shares of our common stock are fully paid and non-assessable. The holders of our common stock do not have any preemptive rights to subscribe for any additional shares of our stock or other obligations convertible into or exercisable for shares of our stock that we may issue in the future. There are no redemption or sinking fund provisions applicable to our common stock. The holders of our common stock are subject to, and may be adversely affected by, the rights, preferences, and privileges, if any, of the holders of one or more series of preferred stock that our Board of Directors may create and issue in the future. 

Preferred Stock 

Our Amended and Restated Certificate of Incorporation authorize our Board of Directors, without further action by our stockholders, to create and issue one or more series of preferred stock and to fix the powers, preferences, and rights, if any, and the qualifications, limitations, or restrictions, if any, of each such series of preferred stock. Such powers, preferences, and rights, if any, may include, without limitation, the right to vote together with the holders of our common stock on elections, questions, and matters, special class or series voting rights, redemption rights and preferences, dividend rights and preferences, liquidation rights and preferences, and conversion or exchange rights. 

The authority possessed by our Board of Directors to create and issue one or more series of preferred stock could potentially be used to discourage attempts by third parties to obtain control of our company through a merger, tender offer, proxy contest, or otherwise, by making such attempts more difficult or costly. Our Board of Directors may create and issue one or more series of preferred stock having voting rights or conversion rights that, if exercised, could adversely affect the voting power of the holders of our common stock. 

Anti-Takeover Considerations 

The provisions of the Delaware General Corporation Law (“DGCL”) contain, and our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws will contain, provisions that could serve to discourage or to make more difficult a change in control of our company without the support of our Board of Directors or without meeting various other conditions. These provisions, summarized below, are expected to discourage certain types of coercive takeover practices and takeover bids that our Board of Directors considers inadequate and to encourage persons seeking to acquire control of our company to first negotiate with our Board of Directors. We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.

State Takeover Legislation. We are subject to Section 203 of the DGCL, an anti-takeover statute. Subject to certain exceptions set forth therein, Section 203 of the DGCL prohibits a business combination with any interested stockholder for a period of three years following the time that the interested stockholder became an interested stockholder, unless (a) prior to such time our Board of Directors approved either the business combination or the transaction which resulted in the interested stockholder becoming an interested stockholder, (b) upon the consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our outstanding voting stock at the time the transaction commenced, excluding for purposes of determining our outstanding voting stock (but not our outstanding voting stock held by the interested stockholder) our outstanding voting stock held by our directors and officers and our employee stock plan in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer (if any), and (c) at or subsequent to such time, the business combination is approved by our Board of Directors and authorized at a meeting of our stockholders by the affirmative vote of at least 66 2/3% of our outstanding voting stock which is not owned  by the interested stockholder.  

 

An interested stockholder generally is defined in Section 203 of the DGCL to include (a) any person (other than the corporation and any of its direct or indirect majority-owned subsidiaries) that is the owner of 15% or more of the outstanding voting stock of the corporation, or is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within three years immediately prior to the date of determination; and (b) the affiliates and associates of any such person. 

 

 

The provisions of Section 203 of the DGCL may encourage persons interested in acquiring us to negotiate in advance with our Board of Directors and may also have the effect of preventing changes in our management. It is possible that the provisions of Section 203 of the DGCL could make it more difficult to accomplish transactions which one or more of our stockholders may otherwise deem to be in their best interests. 

Stockholder Action by Written Consent. Delaware law provides that, unless otherwise stated in the corporation’s certificate of incorporation, any action which may be taken at an annual meeting or special meeting of stockholders may be taken without a meeting, if a consent in writing is signed by the holders of the outstanding stock having the minimum number of votes necessary to authorize the action at a meeting of stockholders. Our Amended and Restated Certificate of Incorporation prohibits action by written consent of the holders of our common stock such that actions by the holders of our common stock must be effected at a duly called annual or special meeting of such holders. 

Meetings of Stockholders. Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws provide for the calling of special meetings of holders of our common stock solely by the Chairperson of our Board of Directors, our President, or our Board of Directors. Delaware law requires the notice of a special meeting of stockholders to state the purpose or purposes for which the special meeting is called. 

No Cumulative Voting. Delaware law permits stockholders to cumulate their votes and either cast them for one candidate or distribute them among two or more candidates in the election of directors only if expressly authorized in a corporation’s certificate of incorporation. Our Amended and Restated Certificate of Incorporation does not authorize cumulative voting. 

Advance Notice and Procedures for Stockholder Nominations and Proposals. Our Amended and Restated Bylaws establish advance notice and procedures for stockholder nomination of candidates for election to our Board of Directors and the proposal of other business to be considered by our stockholders at an annual meeting. Generally, stockholder nominations of candidates for election to our Board of Directors at the annual meeting of our stockholders and stockholder proposal of other business for consideration at the annual meeting of stockholders are required to be made not later than the close of business on the 90th day, nor earlier than the close of business on the 120th day in advance of the first anniversary of the previous year’s annual meeting. Certain information relating to the stockholder nominations and proposals is also required to be provided to our company under our amended and restated bylaws. 

Removal of Directors. Our Amended and Restated Certificate of Incorporation provides for the directors elected by the holders of our common stock to be classified and therefore for the removal of directors elected by such holders solely for cause. Our Amended and Restated Certificate of Incorporation also provides for the removal of any director elected by the holders of our common stock solely by 66 2/3% of the voting power of such holders.

Size of the Board of Directors. Our Amended and Restated Bylaws provides that, subject to Delaware law and the rights, if any, of the holders of any series of preferred stock then outstanding to elect one or more directors, our Board of Directors will consist of not less than three nor more than twelve directors, the exact number thereof to be determined from time to time by resolution of our Board of Directors. 

Vacancies. Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws provide that subject to the rights, if any, of the holders of any series of preferred stock then outstanding, newly created directorships resulting from an increase in the number of directors or any vacancies on our Board of Directors resulting from the death, resignation, disqualification, removal, or other cause will be filled solely and exclusively by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Any director so elected will hold office until his or her successor is elected and qualified, subject to his or her earlier death, resignation, disqualification, or removal.  

 

Amendments to Certificate of Incorporation. Pursuant to Section 242 of the DGCL, any amendment to our Amended and Restated Certificate of Incorporation (other than an amendment changing our name, deleting provisions of our original certificate of incorporation which named the incorporator, or effecting a change, exchange, reclassification, subdivision, combination, or cancellation of stock, if such change, exchange, reclassification, subdivision, combination, or cancellation has become effective), requires our Board of Directors to adopt a resolution setting forth the amendment proposed, declaring its advisability, and either calling a special meeting of our stockholders entitled 

 

 

to vote in respect thereof for the consideration of such amendment or directing that the amendment be considered at the next annual meeting of our stockholders. Section 242 of the DGCL requires that any amendment to our Amended and Restated Certificate of Incorporation so approved by our Board of Directors must be adopted by a majority of our outstanding stock entitled to vote thereon and, in the circumstances enumerated in Section 242 of the DGCL, a majority of the outstanding stock of each class entitled to vote thereon as a class. Section 242 of the DGCL requires any amendment to our Amended and Restated Certificate of Incorporation so approved by our Board of Directors and our stockholders to be filed with the Secretary of State of the state of Delaware in order to become effective.  

In addition to the requirements of Section 242 of the DGCL, our Amended and Restated Certificate of Incorporation provides that any amendment of the provisions of our Amended and Restated Certificate of Incorporation providing for (a) the directors elected by the holders of our common stock to be classified (and therefore for the removal of such directors solely for cause), (b) the removal of directors elected by the holders of our common stock solely by 66 2/3% of the voting power of such holders, (c) the filling of vacancies with respect to directors elected by the holders of our common stock and newly created directorships created from an increase in the number of such directors solely by our Board of Directors, (d) the amendment of our Amended and Restated Bylaws by our Board of Directors, (e) the amendment of our Amended and Restated Bylaws by 66 2/3% of the voting power of our stockholders, (f) the calling of special meetings solely by the Chairperson of our Board of Directors, our President, or our Board of Directors, and (g) the prohibition on the ability of holders of our common stock to act by written consent in lieu of a meeting, in each case, will require a vote of 66 2/3% of the voting power of our stockholders.

Amendments to Bylaws. Our Amended and Restated Certificate of Incorporation provides that our Amended and Restated Bylaws may be amended by the Board of Directors and that any amendment of our Amended and Restated Bylaws by our stockholders requires a vote of 66 2/3% of the voting power thereof.

Series of Preferred Stock. Our Amended and Restated Certificate of Incorporation empowers our Board of Directors to create and issue, without stockholder approval, one or more series of preferred stock having such powers, preferences, and rights, if any, and such qualifications, limitations, and restrictions, if any, as established our Board of Directors. 

Limitations on Personal Liability of Directors, Indemnification and Advancement Rights of Directors and Officers, and Director and Officer Insurance 

Section 102(b)(7) of the DGCL permits the certificate of incorporation of a Delaware corporation to contain a provision eliminating or limiting the personal liability of a director of the corporation to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except that such provision may not eliminate or limit the liability of a director: (a) for any breach of his or her duty of loyalty to the corporation or its stockholders; (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (c) under Section 174 of the DGCL (making directors of a Delaware corporation liable for willful or negligent violations of the provisions of the DGCL limiting redemptions and dividends); or (d) for any transaction form which he or she derives an improper personal benefit. Our Amended and Restated Certificate of Incorporation contains such a provision.  

 

Our Amended and Restated Bylaws require our company to indemnify, to the fullest extent permitted by applicable law, any individual, or Covered Person, who was or is made or is threatened to be made a party to or is otherwise involved in any action, suit, or proceeding by reason of the fact that he or she, or an individual for whom he or she is a legal representative, is or was a director or officer of our company or a director level or above employee of our company or any of our consolidated subsidiaries (as shown in our company’s or the applicable covered subsidiary’s, as the case may be, human resources records) or, while a director or officer of our company or a director level or above employee of our company or any of our consolidated subsidiaries (as shown in our company’s or the applicable covered subsidiary’s, as the case may be, human resources records), is or was serving at the request of our company or any of our consolidated subsidiaries as a director, officer, employee, or agent of another corporation or of a partnership, joint venture, trust, enterprise, or nonprofit entity, including service with respect to employee benefit plans, its participants or beneficiaries, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Covered Person. Notwithstanding the preceding sentence, except for actions brought by a Covered Person to enforce his or her indemnification or advancement rights under our Amended and Restated 

 

 

Bylaws, our company is required by our Amended and Restated Bylaws to indemnify a Covered Person in connection with a proceeding (or part thereof) commenced by such Covered Person only if the commencement of such proceeding (or part thereof) by the Covered Person was authorized in the specific case by our Board of Directors.

Our Amended and Restated Bylaws require advance expenses (including legal expenses), to the fullest extent permitted by applicable law, incurred by a Covered Person in defending any proceeding in advance of its final disposition, except that such payment of expenses in advance of the final disposition of the proceeding will be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified under our Amended and Restated Bylaws or otherwise.

The limitation of liability provision of our Amended and Restated Certificate of Incorporation may discourage our stockholders from bringing litigation asserting duty of care violations against our directors. However, these provisions will not limit or eliminate our rights, or those of our stockholders, to seek non-monetary relief such as an injunction or rescission in the event of a breach of a duty of care by our directors. Further, these provisions will not alter the liability of our directors under the federal securities laws.

The indemnification and advancements provisions of our Amended and Restated Bylaws may discourage litigation against our directors and officers, as our company may be required to advance expenses and/or indemnify our directors and officers for their expenses (including legal fees) incurred in defense of such litigation. These provisions may also have the effect of reducing the likelihood of litigation against our directors and officers, even though such litigation, if successful, might otherwise benefit our company and our stockholders. 

Exclusive Forum 

Our Amended and Restated Bylaws provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the state of Delaware will be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or employees or our stockholders, (c) any civil action to interpret, apply, or enforce any provision of the DGCL, (d) any civil action to interpret, apply, enforce, or determine the validity of the provisions of our Amended and Restated Certificate of Incorporation, or Amended and Restated Bylaws, or (e) any action asserting a claim governed by the internal affairs doctrine. However, if the Court of Chancery of the state of Delaware lacks jurisdiction over such action, our Amended and Restated Bylaws provide that the sole and exclusive forum for such action will be another state or federal court located within the state of Delaware, in all cases, subject to such court having personal jurisdiction over the indispensable parties named as defendants. Our Amended and Restated Bylaws also provide that any person purchasing or otherwise acquiring any interest in our stock will be deemed to have notice of and consented to the foregoing Delaware exclusive forum provisions. Our Amended and Restated Bylaws provide that the foregoing Delaware exclusive forum provisions do not apply to any action asserting claims under the Exchange Act or the Securities Act. The Delaware exclusive forum provisions will require our stockholders to bring certain types of actions or proceedings relating to Delaware law in the Court of Chancery of the state of Delaware or another state or federal court in the state of Delaware and therefore may prevent our stockholders from bringing such actions or proceedings in another court that a stockholder may view as more convenient, cost-effective, or advantageous to the stockholder or the claims made in such action or proceeding, and may discourage the actions or proceedings covered by the Delaware exclusive forum provisions.  

 

Transfer Agent and Registrar 

The transfer agent and registrar for our common stock is Issuer Direct Corporation. 

Listing 

Our common stock is listed on Nasdaq under the ticker symbol “AOUT.”Exhibit
4.1 

 

NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE
OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

PREFERRED
INVESTMENT OPTION

 

CYTRX
CORPORATION

 

	Preferred
    Investment Option Shares: _______	 	Issuance
    Date: July __, 2021	 

 

THIS
PREFERRED INVESTMENT OPTION (the “Preferred Investment Option”) certifies that, for value received, _____________
or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the Authorized Share Increase Date (the “Initial Exercise Date”) and
on or prior to 5:00 p.m. (New York City time) on the date that is five years and six-months after the Initial Exercise Date (the “Termination
Date”) but not thereafter, to subscribe for and purchase from CytRx Corporation, a Delaware corporation (the “Company”),
up to ______ shares (as subject to adjustment hereunder, the “Preferred Investment Option Shares”) of Common Stock.
The purchase price of one share of Common Stock under this Preferred Investment Option shall be equal to the Exercise Price, as defined
in Section 2(b).

 

Section
1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain
Securities Purchase Agreement (the “Purchase Agreement”), dated July 13, 2021, among the Company and the purchasers
signatory thereto.

 

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Section
2. Exercise.

 

a) Exercise
of Preferred Investment Option. Exercise of the purchase rights represented by this Preferred Investment Option may be made, in whole
or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company
of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form attached hereto as Annex
A (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days
comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder
shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s
check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable
Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee
or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required
to physically surrender this Preferred Investment Option to the Company until the Holder has purchased all of the Preferred Investment
Option Shares available hereunder and the Preferred Investment Option has been exercised in full, in which case, the Holder shall surrender
this Preferred Investment Option to the Company for cancellation within three (3) Trading Days of the date on which the final Notice
of Exercise is delivered to the Company. Partial exercises of this Preferred Investment Option resulting in purchases of a portion of
the total number of Preferred Investment Option Shares available hereunder shall have the effect of lowering the outstanding number of
Preferred Investment Option Shares purchasable hereunder in an amount equal to the applicable number of Preferred Investment Option Shares
purchased. The Holder and the Company shall maintain records showing the number of Preferred Investment Option Shares purchased and the
date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Trading Day of receipt of such
notice. The Holder and any assignee, by acceptance of this Preferred Investment Option, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion of the Preferred Investment Option Shares hereunder, the number of
Preferred Investment Option Shares available for purchase hereunder at any given time may be less than the amount stated on the face
hereof.

 

b) Exercise
Price. The exercise price per share of Common Stock under this Preferred Investment Option shall be $0.88, subject to adjustment
hereunder (the “Exercise Price”).

 

c) Cashless
Exercise. If at any time after the six-month anniversary of the Closing Date there is no effective registration statement registering,
or the prospectus contained therein is not available for the resale of the Preferred Investment Option Shares by the Holder, then this
Preferred Investment Option may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a number of Preferred Investment Option Shares equal to the quotient obtained by dividing
[(A-B) (X)] by (A), where:

 

(A)
= as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of
Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and
delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in
Rule 600(b)(68) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder,
either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the
Common Stock on the principal Trading Market as reported by Bloomberg L.P. as of the time of the Holder’s execution of the applicable
Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered
within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day)
pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise
is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular
trading hours” on such Trading Day;

 

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(B)
= the Exercise Price of this Preferred Investment Option, as adjusted hereunder; and

 

(X)
= the number of Preferred Investment Option Shares that would be issuable upon exercise of this Preferred Investment Option in accordance
with the terms of this Preferred Investment Option if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If
Preferred Investment Option Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with
Section 3(a)(9) of the Securities Act, the Preferred Investment Option Shares shall take on the characteristics of the Preferred Investment
Options being exercised, and the holding period of the Preferred Investment Option Shares being issued may be tacked on to the holding
period of this Preferred Investment Option. The Company agrees not to take any position contrary to this Section 2(c).

 

“Bid
Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock
is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date)
on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not
then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or
a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common
Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser
selected in good faith by the Holders of a majority in interest of the Preferred Investment Options then outstanding and reasonably acceptable
to the Company, the fees and expenses of which shall be paid by the Company.

 

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“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date)
on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not
then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or
a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common
Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser
selected in good faith by the Holders of a majority in interest of the Preferred Investment Options then outstanding and reasonably acceptable
to the Company, the fees and expenses of which shall be paid by the Company.

 

d) Mechanics
of Exercise.

 

i. Delivery
of Preferred Investment Option Shares Upon Exercise. The Company shall cause the Preferred Investment Option Shares purchased hereunder
to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance
account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company
is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Preferred
Investment Option Shares to or resale of the Preferred Investment Option Shares by the Holder or (B) the Preferred Investment Option
Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 (assuming cashless exercise
of the Preferred Investment Options), and otherwise by physical delivery of a certificate, registered in the Company’s share register
in the name of the Holder or its designee, for the number of Preferred Investment Option Shares to which the Holder is entitled pursuant
to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading
Days after the delivery to the Company of the Notice of Exercise and (ii) one (1) Trading Day after delivery of the aggregate Exercise
Price to the Company (such date, the “Preferred Investment Option Share Delivery Date”). Upon delivery of the Notice
of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Preferred Investment Option
Shares with respect to which this Preferred Investment Option has been exercised, irrespective of the date of delivery of the Preferred
Investment Option Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received
within two (2) Trading Days following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder
the Preferred Investment Option Shares subject to a Notice of Exercise by the Preferred Investment Option Share Delivery Date, the Company
shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Preferred Investment Option Shares subject
to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing
to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Preferred
Investment Option Share Delivery Date until such Preferred Investment Option Shares are delivered or Holder rescinds such exercise. The
Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Preferred Investment Option remains
outstanding and exercisable.

 

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ii. Delivery
of New Preferred Investment Options Upon Exercise. If this Preferred Investment Option shall have been exercised in part, the Company
shall, at the request of a Holder and upon surrender of this Preferred Investment Option certificate, at the time of delivery of the
Preferred Investment Option Shares, deliver to the Holder a new Preferred Investment Option evidencing the rights of the Holder to purchase
the unpurchased Preferred Investment Option Shares called for by this Preferred Investment Option, which new Preferred Investment Option
shall in all other respects be identical with this Preferred Investment Option.

 

iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Preferred Investment Option Shares pursuant
to Section 2(d)(i) by the Preferred Investment Option Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv. Compensation
for Buy-In on Failure to Timely Deliver Preferred Investment Option Shares Upon Exercise. In addition to any other rights available
to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Preferred Investment Option Shares in accordance
with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Preferred Investment Option Share Delivery Date,
and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s
brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Preferred Investment
Option Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay
in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Preferred Investment Option
Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the
sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of
the Preferred Investment Option and equivalent number of Preferred Investment Option Shares for which such exercise was not honored (in
which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with
an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the
Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit
a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock
upon exercise of the Preferred Investment Option as required pursuant to the terms hereof.

 

    	5

     

    

 

v. No
Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this
Preferred Investment Option. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise,
the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole share.

 

vi. Charges,
Taxes and Expenses. Issuance of Preferred Investment Option Shares shall be made without charge to the Holder for any issue or transfer
tax or other incidental expense in respect of the issuance of such Preferred Investment Option Shares, all of which taxes and expenses
shall be paid by the Company, and such Preferred Investment Option Shares shall be issued in the name of the Holder or in such name or
names as may be directed by the Holder; provided, however, that, in the event that Preferred Investment Option Shares are
to be issued in a name other than the name of the Holder, this Preferred Investment Option when surrendered for exercise shall be accompanied
by the assignment form attached hereto as Annex B (the “Assignment Form”) duly executed by the Holder, and
the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.
The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository
Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of
the Preferred Investment Option Shares.

 

    	6

     

    

 

vii. Closing
of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Preferred
Investment Option, pursuant to the terms hereof.

 

e) Beneficial
Ownership Limitations. The Company shall not effect any exercise of this Preferred Investment Option, and a Holder shall not have
the right to exercise any portion of this Preferred Investment Option, pursuant to Section 2 or otherwise, to the extent that after giving
effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s
Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution
Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties
shall include the number of shares of Common Stock issuable upon exercise of this Preferred Investment Option with respect to which such
determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the
remaining, nonexercised portion of this Preferred Investment Option beneficially owned by the Holder or any of its Affiliates or Attribution
Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including,
without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding
sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any
schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the
determination of whether this Preferred Investment Option is exercisable (in relation to other securities owned by the Holder together
with any Affiliates and Attribution Parties) and of which portion of this Preferred Investment Option is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether
this Preferred Investment Option is exercisable (in relation to other securities owned by the Holder together with any Affiliates and
Attribution Parties) and of which portion of this Preferred Investment Option is exercisable, in each case subject to the Beneficial
Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares
of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent
periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C)
a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon
the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number
of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including this Preferred Investment Option, by the Holder or its Affiliates
or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect
to the issuance of shares of Common Stock issuable upon exercise of this Preferred Investment Option. The Holder, upon notice to the
Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership
Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock upon exercise of this Preferred Investment Option held by the Holder and the provisions of this Section 2(e)
shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after
such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than
in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable
to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Preferred
Investment Option.

 

    	7

     

    

 

Section
3. Certain Adjustments.

 

a) Stock
Dividends and Splits. If the Company, at any time while this Preferred Investment Option is outstanding: (i) pays a stock dividend
or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company
upon exercise of this Preferred Investment Option), (ii) subdivides outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv)
issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event, and the number of shares issuable upon exercise of this Preferred Investment Option shall be proportionately
adjusted such that the aggregate Exercise Price of this Preferred Investment Option shall remain unchanged. Any adjustment made pursuant
to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination
or re-classification.

 

b) [RESERVED]

 

c) Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells
any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any
class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number
of shares of Common Stock acquirable upon complete exercise of this Preferred Investment Option (without regard to any limitations on
exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders
of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however,
that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the
Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall
be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).

 

d) Pro
Rata Distributions. During such time as this Preferred Investment Option is outstanding, if the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return
of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way
of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Preferred Investment Option, then, in each such case, the Holder shall be entitled to participate
in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Preferred Investment Option (without regard to any limitations on exercise hereof,
including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution,
or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation
in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any such Distribution
would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent)
and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto
would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

    	8

     

    

 

e) Fundamental
Transaction. If, at any time while this Preferred Investment Option is outstanding, (i) the Company (and all of its Subsidiaries,
taken as a whole), directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with
or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance
or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders
of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects
any reclassification, reorganization or recapitalization 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, or (v) the Company, directly or indirectly,
in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon
any subsequent exercise of this Preferred Investment Option, the Holder shall have the right to receive, for each Preferred Investment
Option Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at
the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Preferred Investment Option), 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 as a result of such Fundamental Transaction
by a holder of the number of shares of Common Stock for which this Preferred Investment Option is exercisable immediately prior to such
Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Preferred Investment Option). For purposes
of any such exercise, the determination of the Exercise 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 Exercise 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 Preferred Investment Option following such Fundamental Transaction. Notwithstanding anything to
the contrary, in the event of a Fundamental Transaction (other than (x) any stock split or reverse stock split, (y) any transaction effected
solely for the purpose of changing the jurisdiction of incorporation of the Company, or (z) any holding company reorganization or parent-subsidiary
merger not requiring stockholder approval pursuant to Sections 251(g) or 253 of the Delaware General Corporation Law (or any successor
provisions thereof)), the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any
time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public
announcement of the applicable Fundamental Transaction), purchase this Preferred Investment Option from the Holder by paying to the Holder
an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Preferred Investment Option on the date
of the consummation of such Fundamental Transaction; provided, however, if the Fundamental Transaction is not within the
Company’s control, including not approved by the Company’s Board of Directors, Holder shall only be entitled to receive from
the Company or any Successor Entity, as of the date of consummation of such Fundamental Transaction, the same type or form of consideration
(and in the same proportion), at the Black Scholes Value (as defined below) of the unexercised portion of this Preferred Investment Option,
that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction, whether
that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given the choice
to receive from among alternative forms of consideration in connection with the Fundamental Transaction. “Black Scholes Value”
means the value of this Preferred Investment Option based on the Black-Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction
for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time
between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility
equal to the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as
of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price
per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus the
value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the greater of (x) the last VWAP
immediately prior to the public announcement of such Fundamental Transaction and (y) the last VWAP immediately prior to the consummation
of such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the
applicable Fundamental Transaction and the Termination Date. The payment of the Black Scholes Value will be made by wire transfer of
immediately available funds within five Trading Days of the Holder’s election (or, if later, on the effective date of the Fundamental
Transaction). The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the
“Successor Entity”) to assume in writing all of the obligations of the Company under this Preferred Investment Option
and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and
substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction
and shall, at the option of the Holder, deliver to the Holder in exchange for this Preferred Investment Option a security of the Successor
Entity evidenced by a written instrument substantially similar in form and substance to this Preferred Investment Option which is exercisable
for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common
Stock acquirable and receivable upon exercise of this Preferred Investment Option (without regard to any limitations on the exercise
of this Preferred Investment Option) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price
hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price
being for the purpose of protecting the economic value of this Preferred Investment Option immediately prior to the consummation of such
Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for the Company (so that from and after the date of such Fundamental
Transaction, the provisions of this Preferred Investment Option and the other Transaction Documents referring to the “Company”
shall refer instead to the Successor Entity), and the Successor Entity may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Preferred Investment Option and the other Transaction Documents with the same effect
as if such Successor Entity had been named as the Company herein.

 

    	9

     

    

 

f) Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

g) Notice
to Holder.

 

i. Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly
deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number
of Preferred Investment Option Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common
Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock
of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any
sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its
last email or other address as it shall appear upon the Preferred Investment Option Register of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective
or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer
or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect
the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Preferred
Investment Option constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company
shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled
to exercise this Preferred Investment Option during the period commencing on the date of such notice to the effective date of the event
triggering such notice except as may otherwise be expressly set forth herein.

 

    	10

     

    

 

Section
4. Transfer of Preferred Investment Option.

 

a) Transferability.
Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof and to the provisions of
Section 4.1 of the Purchase Agreement, this Preferred Investment Option and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon surrender of this Preferred Investment Option at the principal office
of the Company or its designated agent, together with a written assignment of this Preferred Investment Option substantially in the form
attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the
making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Preferred Investment
Option or Preferred Investment Options in the name of the assignee or assignees, as applicable, and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a new Preferred Investment Option evidencing the portion
of this Preferred Investment Option not so assigned, and this Preferred Investment Option shall promptly be cancelled. Notwithstanding
anything herein to the contrary, the Holder shall not be required to physically surrender this Preferred Investment Option to the Company
unless the Holder has assigned this Preferred Investment Option in full, in which case, the Holder shall surrender this Preferred Investment
Option to the Company within three (3) Trading Days of the date on which the Holder delivers a duly executed Assignment Form to the Company
assigning this Preferred Investment Option in full. The Preferred Investment Option, if properly assigned in accordance herewith, may
be exercised by a new holder for the purchase of Preferred Investment Option Shares without having a new Preferred Investment Option
issued.

 

b) New
Preferred Investment Options. This Preferred Investment Option may be divided or combined with other Preferred Investment Options
upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations
in which new Preferred Investment Options are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with
Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Preferred
Investment Option or Preferred Investment Options in exchange for the Preferred Investment Option or Preferred Investment Options to
be divided or combined in accordance with such notice. All Preferred Investment Options issued on transfers or exchanges shall be dated
the Initial Exercise Date and shall be identical with this Preferred Investment Option except as to the number of Preferred Investment
Option Shares issuable pursuant thereto.

 

c) Preferred
Investment Option Register. The Company shall register this Preferred Investment Option, upon records to be maintained by the Company
for that purpose (the “Preferred Investment Option Register”), in the name of the record Holder hereof from time to
time. The Company may deem and treat the registered Holder of this Preferred Investment Option as the absolute owner hereof for the purpose
of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

d) Transfer
Restrictions. If, at the time of the surrender of this Preferred Investment Option in connection with any transfer of this Preferred
Investment Option, the transfer of this Preferred Investment Option shall not be either (i) registered pursuant to an effective registration
statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume
or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition
of allowing such transfer, that the Holder or transferee of this Preferred Investment Option, as the case may be, comply with the provisions
of Section 5.7 of the Purchase Agreement.

 

    	11

     

    

 

e) Representation
by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Preferred Investment Option
and, upon any exercise hereof, will acquire the Preferred Investment Option Shares issuable upon such exercise, for its own account and
not with a view to or for distributing or reselling such Preferred Investment Option Shares or any part thereof in violation of the Securities
Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section
5. Miscellaneous.

 

a) No
Rights as Stockholder Until Exercise; No Settlement in Cash. This Preferred Investment Option does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i),
except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Preferred Investment Option Shares on
a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv)
herein, in no event shall the Company be required to net cash settle an exercise of this Preferred Investment Option.

 

b) Loss,
Theft, Destruction or Mutilation of Preferred Investment Option. The Company covenants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Preferred Investment Option or any stock certificate
relating to the Preferred Investment Option Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory
to it (which, in the case of the Preferred Investment Option, shall not include the posting of any bond), and upon surrender and cancellation
of such Preferred Investment Option or stock certificate, if mutilated, the Company will make and deliver a new Preferred Investment
Option or stock certificate of like tenor and dated as of such cancellation, in lieu of such Preferred Investment Option or stock certificate.

 

c) Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted
herein shall not be a Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.

 

d) Authorized
Shares.

 

The
Company covenants that, during the period the Preferred Investment Option is exercisable, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the Preferred Investment Option Shares upon the exercise of
any purchase rights under this Preferred Investment Option. The Company further covenants that its issuance of this Preferred Investment
Option shall constitute full authority to its officers who are charged with the duty of issuing the necessary Preferred Investment Option
Shares upon the exercise of the purchase rights under this Preferred Investment Option. The Company will take all such reasonable action
as may be necessary to assure that such Preferred Investment Option Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed or quoted. The Company
covenants that following the Initial Exercise Date all Preferred Investment Option Shares that may be issued upon the exercise of the
purchase rights represented by this Preferred Investment Option will, upon exercise of the purchase rights represented by this Preferred
Investment Option and payment for such Preferred Investment Option Shares in accordance herewith, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other
than taxes in respect of any transfer occurring contemporaneously with such issue).

 

    	12

     

    

 

Except
and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending
its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale
of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Preferred
Investment Option, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions
as may be necessary or appropriate to protect the rights of Holder as set forth in this Preferred Investment Option against impairment.
Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Preferred Investment Option
Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) following the Initial
Exercise Date take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Preferred Investment Option Shares upon the exercise of this Preferred Investment Option and (iii) following the Initial
Exercise Date use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory
body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Preferred Investment
Option.

 

Before
taking any action which would result in an adjustment in the number of Preferred Investment Option Shares for which this Preferred Investment
Option is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto,
as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e) Jurisdiction.
All questions concerning the construction, validity, enforcement and interpretation of this Preferred Investment Option shall be determined
in accordance with the provisions of the Purchase Agreement.

 

f) Restrictions.
The Holder acknowledges that the Preferred Investment Option Shares acquired upon the exercise of this Preferred Investment Option, if
not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities
laws.

 

    	13

     

    

 

g) Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of
this Preferred Investment Option or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision
of this Preferred Investment Option, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts
as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those
of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.

 

h) Notices.
Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Purchase Agreement.

 

i) Limitation
of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Preferred Investment Option
to purchase Preferred Investment Option Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise
to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability
is asserted by the Company or by creditors of the Company.

 

j) Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Preferred Investment Option. The Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this Preferred Investment Option and hereby agrees to waive and
not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k) Successors
and Assigns. Subject to applicable securities laws, this Preferred Investment Option and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted
assigns of Holder. The provisions of this Preferred Investment Option are intended to be for the benefit of any Holder from time to time
of this Preferred Investment Option and shall be enforceable by the Holder or holder of Preferred Investment Option Shares.

 

l) Amendment.
This Preferred Investment Option may be modified or amended or the provisions hereof waived with the written consent of the Company and
the Holder.

 

m) Severability.
Wherever possible, each provision of this Preferred Investment Option shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Preferred Investment Option shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Preferred Investment Option.

 

n) Headings.
The headings used in this Preferred Investment Option are for the convenience of reference only and shall not, for any purpose, be deemed
a part of this Preferred Investment Option.

 

********************

 

(Signature
Page Follows)

 

    	14

     

    

 

IN
WITNESS WHEREOF, the Company has caused this Preferred Investment Option to be executed by its officer thereunto duly authorized as of
the date first above indicated.

 

	 	CytRx Corporation

 

	 	By:	                                           

    

    

    

	 	Name:	 
	 	Title:	 

 

    	15

     

    

 

Annex
A

 

NOTICE
OF EXERCISE

 

To: CytRx
Corporation

 

(1) The
undersigned hereby elects to purchase ________ Preferred Investment Option Shares of the Company pursuant to the terms of the attached
Preferred Investment Option (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.

 

(2) Payment
shall take the form of (check applicable box):

 

[  ] in lawful money of the United States; or

 

[  ] if permitted, the cancellation of such number of Preferred Investment Option Shares as is necessary, in accordance with the formula
set forth in subsection 2(c), to exercise this Preferred Investment Option with respect to the maximum number of Preferred Investment
Option Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3) Please
issue said Preferred Investment Option Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

 

 

The
Preferred Investment Option Shares shall be delivered to the following DWAC Account Number (if permitted):

 

_______________________________

 

_______________________________

 

_______________________________

 

(4) Accredited
Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act
of 1933, as amended.

 

[SIGNATURE
OF HOLDER]

 

Name
of Investing Entity: ________________________________________________________________________

Signature
of Authorized Signatory of Investing Entity: _________________________________________________

Name
of Authorized Signatory: ___________________________________________________________________

Title
of Authorized Signatory: ____________________________________________________________________

Date:
________________________________________________________________________________________

 

    	 

     

    

 

Annex
B

 

ASSIGNMENT
FORM

 

(To
assign the foregoing Preferred Investment Option, execute this form and supply required information. Do not use this form to purchase
shares.)

 

FOR
VALUE RECEIVED, the foregoing Preferred Investment Option and all rights evidenced thereby are hereby assigned to

 

	Name:	
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	Phone
    Number:	
	 	 
	Email
    Address:	
	 	 
	Dated:
    _______________ __, ______	 
	 	 
	Holder’s
    Signature:_____________________________	 
	 	 
	Holder’s
    Address:______________________________

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