Document:

EXHIBIT 10.10

 

SECURITIES PURCHASE AGREEMENT

 

THIS
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of February 13, 2017, is entered into by and between
Helix TCS, Inc., a Delaware corporation (the “Company”), and RedDiamond Partners, LLC (as the “Lender”).
Capitalized terms used in this Agreement and not otherwise defined shall have the meanings ascribed to them in Section 1.

 

W I T N E S S E T H:

 

WHEREAS, the Company
and the Lender are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities
registration for offers and sales to accredited investors afforded, inter alia, by Rule 506 under Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities
Act of 1933, as amended (the “1933 Act”), and/or Section 4(a)(2) of the 1933 Act;

 

WHEREAS, the Lender
wishes to lend funds to the Company, subject to and upon the terms and conditions of this Agreement and acceptance of this Agreement
by the Company, the repayment of which will be represented by two (2) 10% Fixed Secured Convertible Promissory Notes of the Company
(each, a “Note”), on the terms and conditions referred to herein; and

 

WHEREAS, the Company’s
obligations to repay the Notes will be secured by the assets of the Company pursuant to a security agreement (“Security
Agreement”) and guaranteed by its subsidiaries (the “Guarantors”) pursuant to a subsidiary guarantee
agreement (the “Subsidiary Guarantee Agreement”) executed by the Guarantors and acknowledged by the Company;

 

NOW THEREFORE, in
consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.       AGREEMENT
TO PURCHASE; WARRANTS; DEFINITIONS.

 

a.       Purchase.

 

(i)       Subject
to the terms and conditions of this Agreement and the other Transaction Agreements, the Lender hereby agrees to loan to the Company
the aggregate Loan Amount of $208,333.33 (the “Loan Amount”). One Note shall be issued to the Lender in the
principal amount of $183,333.33 and the second Note shall be issued to the Lender in the principal amount of $25,000 and both Notes
will mature 6 months from the date of issuance.

 

(ii)       The
obligation to repay the loans from the Lender shall be evidenced by the Company’s issuance of the Notes, each of which which
shall be in the form of Annex I, annexed hereto. The Notes will be secured by assets of the Company under the terms of the
Security Agreement, which shall be  

 

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substantially in the form of Annex II and guaranteed by the Guarantors under the terms
of the Subsidiary Guarantee Agreement, which shall be substantially in the form of Annex II.1 hereto, which the Company
will acknowledge.

 

(iii)       The
loans to be made by the Lender and the issuance of the Notes to the Lender and the other transactions contemplated hereby are sometimes
referred to herein and in the other Transaction Agreements as the purchase and sale of the Securities (as defined below), and are
referred to collectively as the “Transactions.”

 

b.Warrants.In
consideration for acting as financing agent hereunder, the Lender shall receive warrants to purchase 25,000 shares of Common Stock
(the “Warrant”). The Warrant will have an exercise price of $1.00 per share, be exercisable for five (5) years from
issuance and shall be substantially in the form of Annex I.1 hereto.

 

c.Certain Definitions.As
used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:

 

“Affiliate” means,
with respect to a specific Person referred to in the relevant provision, another Person who or which controls or is controlled
by or is under common control with such specified Person.

 

“Certificates”
means each of the Notes, duly executed by the Company and issued pursuant to the terms of this Agreement in the name of the Lender.

 

“Closing Date”
means the date of the closing of the Transactions, as provided herein.

 

“Common Stock”
means the Company’s common stock, par value $0.001 per share.

 

“Company Control Person”
means each director, executive officer, promoter, and such other Persons as may be deemed in control of the Company pursuant to
Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as defined below).

 

“Holder” means
the Person holding the relevant Securities at the relevant time.

 

“Last Audited Date”
means December 31, 2015.

 

“Lender Control Person”
means each director, executive officer, promoter, and such other Persons as may be deemed in control of the Lender pursuant to
Rule 405 under the 1933 Act or Section 20 of the 1934 Act.

 

"Material Adverse Effect" means an event or combination of events, which
individually or in the aggregate, would reasonably be expected to (w) adversely
affect the legality, validity or enforceability of the Securities or any of the
Transaction Agreements, (x) have or result in a material adverse effect on the 

 

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results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and its subsidiaries, taken as a whole, (y) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Agreements or the transactions contemplated thereby, or (z)
materially and adversely affect the value of the rights granted to the Lender in
the Transaction Agreements.

 

“Person” means
any living person or any entity, such as, but not necessarily limited to, a corporation, partnership or trust.

 

“Principal Trading
Market” means the OTCQB or such other market on which the Common Stock is principally traded at the relevant time, including
the OTC Pink marketplace.

 

“Registrable Securities”
means the Shares, unless such shares can then be sold by the Holder without volume or other restrictions or limit.

 

“Registration Rights
Provisions” means the piggy-back registration rights contemplated by the terms of this Agreement, including, but not necessarily
limited to, Section 4(f) hereof, and of the other Transaction Agreements.

 

“Registration Statement”
means an effective registration statement covering the Registrable Securities.

 

“SEC Documents”
means all reports, schedules, forms, statements, prospectuses, registration statements and other documents, as such documents may
be amended or supplemented, required to be filed by the Company with or furnished to the SEC by it since Februray 2017.

 

“Securities”
means the Notes, and the Shares.

 

“Shares” means
the shares of common stock underlying the Notes and Warrant.

 

“State of Incorporation”
means Delaware.

 

“Trading Day”
means any day during which the Principal Trading Market shall be open for business.

 

“Transfer Agent”
means Corporate Stock Transfer, the transfer agent for the Company’s Common Stock.

 

“Transaction Agreements”
means this Purchase Agreement, the Notes, the Warrant, Security Agreement, and the Subsidiary Guarantee Agreement, and includes
all ancillary documents referred to in those agreements.

 

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c.       Form
of Payment; Delivery of Certificates.

 

(i)       The
Lender shall pay the Loan Amount by delivering immediately available good funds in United States Dollars to the Company no later
than the date required by the terms of each Note.

 

(ii)       No
later than the Closing Date, the Company shall deliver the Certificates, each duly executed on behalf of the Company and issued
in the name of the Lender, to the Lender.

 

d.       Method
of Payment. Payment of the Loan Amount shall be made by wire transfer of funds from the Escrow Agent.

 

2. LENDER REPRESENTATIONS,
WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT INVESTIGATION.

 

The Lender represents and
warrants to, and covenants and agrees with, the Company as follows:

 

a.       Without
limiting Lender's right to sell the Securities pursuant to an effective registration statement or otherwise in compliance with
the 1933 Act, the Lender is purchasing the Securities for its own account for investment only and not with a view towards the public
sale or distribution thereof and not with a view to or for sale in connection with any distribution thereof.

 

b.       The
Lender is (i) an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under
the 1933 Act by reason of Rule 501(a)(3), (ii) experienced in making investments of the kind described in this Agreement and the
related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company or any of its Affiliates or selling agents), to
protect its own interests in connection with the transactions described in this Agreement, and the related documents, and to evaluate
the merits and risks of an investment in the Securities, and (iv) able to afford the entire loss of its investment in the Securities.

 

c.       The
Lender understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration
requirements of the 1933 Act and state securities laws and that the Company is relying upon the truth and accuracy of, and the
Lender's compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Lender set forth
herein in order to determine the availability of such exemptions and the eligibility of the Lender to acquire the Securities.

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d.       The
Lender and its advisors, if any, have been furnished with or have been given access to all materials relating to the business,
finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested
by the Lender, including those set forth on in any annex attached hereto. The Lender and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and its management and have received complete and satisfactory answers to any such
inquiries. Without limiting the generality of the foregoing, the Lender has also had the opportunity to obtain and to review the
Company's filings on EDGAR.

 

e.       The
Lender understands that its investment in the Securities involves a high degree of risk.

 

f.       The
Lender hereby represents that, in connection with its purchase of the Securities, it has not relied on any statement or representation
by the Company or any of its officers, directors, employees. attorneys or agents, except as specifically set forth herein.

 

g.       The
Lender understands that no United States federal or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.

 

h.       This
Agreement and the other Transaction Agreements to which the Lender is a party, and the transactions contemplated thereby, have
been duly and validly authorized, executed and delivered on behalf of the Lender and are valid and binding agreements of the Lender
enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally.

 

3.       COMPANY
REPRESENTATIONS, ETC.  The Company represents and warrants to the Lender as of the date hereof and as of the Closing Date that,
except as otherwise provided in Annex III hereto:

 

a.       Rights
of Others Affecting the Transactions. There are no preemptive rights of any shareholder of the Company, as such, to acquire
the Notes. No party other than the Lender has a currently exercisable right of first refusal which would be applicable to any or
all of the transactions contemplated by the Transaction Agreements.

 

b.       Status.
The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Incorporation
and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company is
duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary,  

 

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other than those jurisdictions in which the failure to so
qualify would not have or result in a Material Adverse Effect. The Company has registered its stock and is obligated to file reports
pursuant to Section 12 or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the “1934 Act”).
The Common Stock is quoted on the Principal Trading Market. The Company has received no notice, either oral or written, with respect
to the continued eligibility of the Common Stock for such quotation on the Principal Trading Market, and the Company has maintained
all requirements on its part for the continuation of such quotation.

 

c.       Authorized
Shares.

 

(i)       The
authorized capital stock of the Company consists of 200,000,000 shares of Common Stock, $0.001 par value per share, of which approximately
30,000,000 shares are outstanding as of the date hereto, and 20,000,000 shares of Preferred Stock, $0.001 par value per share,
with one million (1,000,000) of such shares being designated as Series A Preferred Stock, of which 1,000,000 shares are outstanding
as of the date hereto.

 

(ii)       As
of the date hereof and as of the Closing Date, (1) there are no outstanding securities which are convertible into shares of Common
Stock, whether such conversion is currently exercisable or exercisable only upon some future date or the occurrence of some event
in the future and (2) the Company has not issued any warrants or other rights to acquire shares of the Common Stock other than
those referred to in the Company’s SEC Documents. If any such securities are listed on Annex III, the number or amount of
each such outstanding convertible security and the conversion terms thereof or of each such warrant or other right and the terms
of its exercise are set forth in said Annex III.

 

(iii)       All
issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and non-assessable.
The Company has sufficient authorized and unissued shares of Common Stock as may be necessary to effect the issuance of the Shares
on the Closing Date.

 

(iv)       As
of the Closing Date, the Securities shall have been duly authorized by all necessary corporate action on the part of the Company,
and, when issued on the Closing Date.

 

d.       Transaction
Agreements and Stock. This Agreement and each of the other Transaction Agreements, and the transactions contemplated thereby,
have been duly and validly authorized by the Company, this Agreement has been duly executed and delivered by the Company and this
Agreement is, and the Notes, each of the other Transaction Agreements, when executed and delivered by the Company, will be, valid
and binding agreements of the Company enforceable in accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.

 

e.       Non-contravention.
The execution and delivery of this Agreement and each of the other Transaction Agreements by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions contemplated by this Agreement, the Notes, and the other
Transaction Agreements do not and will not conflict with or result in a breach by the Company of any of the terms or provisions
of, or constitute a default under (i) the certificate 

 

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of incorporation or by-laws of the Company, each as currently in effect, (ii)
any indenture, mortgage, deed of trust, or other material agreement or
instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, or (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, except such conflict, breach or default which would
not have or result in a Material Adverse Effect.

 

f.       Approvals.
No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the shareholders of the Company is required to be obtained by the Company for the issuance and sale of the
Securities to the Lender as contemplated by this Agreement, except such authorizations, approvals and consents that have been obtained.

 

g.       Filings.
None of the Company’s SEC Documents contained, at the time they were filed, any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make the statements made therein in light of the circumstances
under which they were made, not misleading. Since February 2017, the Company has timely filed all requisite forms, reports and
exhibits thereto required to be filed by the Company with the SEC.

 

h.       Absence
of Certain Changes. Since the Last Audited Date, there has been no material adverse change and no Material Adverse Effect,
except as disclosed in the Company’s SEC Documents. Since the Last Audited Date, except as provided in the Company’s
SEC Documents, the Company has not (i) incurred or become subject to any material liabilities (absolute or contingent) except liabilities
incurred in the ordinary course of business consistent with past practices; (ii) discharged or satisfied any material lien or encumbrance
or paid any material obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course
of business consistent with past practices; (iii) declared or made any payment or distribution of cash or other property to shareholders
with respect to its capital stock, or purchased or redeemed, or made any agreements to purchase or redeem, any shares of its capital
stock; (iv) sold, assigned or transferred any other tangible assets, or canceled any debts owed to the Company by any third party
or claims of the Company against any third party, except in the ordinary course of business consistent with past practices; (v)
waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount
of existing business; (vi) made any increases in employee compensation, except in the ordinary course of business consistent with
past practices; or (vii) experienced any material problems with labor or management in connection with the terms and conditions
of their employment.

 

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i.       Full
Disclosure. To the best of the Company’s knowledge, there is no fact known to the Company (other than general economic
conditions known to the public generally or as disclosed in the Company’s SEC Documents) that has not been disclosed in writing
to the Lender that would reasonably be expected to have or result in a Material Adverse Effect.

 

j.       Absence
of Litigation. Except as disclosed in the Company’s SEC Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the Company, threatened against or affecting the Company
before or by any governmental authority or nongovernmental department, commission, board, bureau, agency or instrumentality or
any other person, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or which would adversely
affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, any of the
Transaction Agreements. The Company is not aware of any valid basis for any such claim that (either individually or in the aggregate
with all other such events and circumstances) could reasonably be expected to have a Material Adverse Effect. There are no outstanding
or unsatisfied judgments, orders, decrees, writs, injunctions or stipulations to which the Company is a party or by which it or
any of its properties is bound, that involve the transaction contemplated herein or that, alone or in the aggregate, could reasonably
be expect to have a Material Adverse Effect.

 

k.       Absence
of Events of Default. Except as set forth in Section 3(e) hereof, (i) neither the Company nor any of its subsidiaries is in
default in the performance or observance of any material obligation, agreement, covenant or condition contained in any material
indenture, mortgage, deed of trust or other material agreement to which it is a party or by which its property is bound, and (ii)
no Event of Default (or its equivalent term), as defined in the respective agreement to which the Company or its subsidiary is
a party, and no event which, with the giving of notice or the passage of time or both, would become an Event of Default (or its
equivalent term) (as so defined in such agreement), has occurred and is continuing, which would have a Material Adverse Effect.

 

l.       Absence
of Certain Company Control Person Actions or Events. To the Company’s knowledge, none of the following has occurred during
the past five (5) years with respect to a Company Control Person:

 

(1) A petition under the federal bankruptcy
laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court
for the business or property of such Company Control Person, or any partnership in which he was a general partner at or within
two years before the time of such filing, or any corporation or business association of which he was an executive officer at or
within two years before the time of such filing;

 

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(2) Such Company Control Person was convicted
in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

(3) Such Company Control Person was the subject
of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining him from, or otherwise limiting, the following activities:

 

(i) acting, as an investment advisor,
underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank,
savings and loan association or insurance company, as a futures commission merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, any other Person regulated by the Commodity Futures Trading Commission ("CFTC")
or engaging in or continuing any conduct or practice in connection with such activity;

 

(ii) engaging in any type of business
practice; or

 

(iii) engaging in any activity in connection
with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws
or federal commodities laws;

 

(4) Such Company Control Person was the subject
of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending
or otherwise limiting for more than 60 days the right of such Company Control Person to engage in any activity described in paragraph
(3) of this item, or to be associated with Persons engaged in any such activity; or

 

(5) Such Company Control Person was found by
a court of competent jurisdiction in a civil action or by the CFTC or SEC to have violated any federal or state securities law,
and the judgment in such civil action or finding by the CFTC or SEC has not been subsequently reversed, suspended, or vacated.

 

m.       No
Undisclosed Liabilities or Events. To the best of the Company's knowledge,
the Company has no liabilities or obligations other than those disclosed in the
Transaction Agreements or the Company's SEC Documents or those incurred in the
ordinary course of the Company's business since the Last Audited Date, or which
individually or in the aggregate, do not or would not have a Material Adverse
Effect. No event or circumstances has occurred or exists with respect to the
Company or its properties, business, operations, condition (financial or
otherwise), or results of operations, which, under applicable law, rule or 

 

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regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed. There
are no proposals currently under consideration or currently anticipated to be
under consideration by the Board of Directors or the executive officers of the
Company which proposal would (x) change the articles or certificate of
incorporation or other charter document or by-laws of the Company, each as
currently in effect, with or without shareholder approval, which change would
reduce or otherwise adversely affect the rights and powers of the shareholders
of the Common Stock or (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries.

 

n.       Dilution.
The Shares may have a dilutive effect on the ownership interests of the other shareholders (and Persons having the right to become
shareholders) of the Company. The Company's executive officers and directors have studied and fully understand the nature of the
Securities being sold hereby and recognize that they have such a potential dilutive effect. The board of directors of the Company
has concluded, in its good faith business judgment, that such issuance is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Shares upon conversion of the Note is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other shareholders of the Company, and the Company will honor
such obligations, including honoring every Conversion Notice, unless the Company is subject to an injunction (which injunction
was not sought by the Company) prohibiting the Company from doing so.

 

o.       Recognition
of Security Agreement Subsidiary Guarantee Agreement. (1) The Company acknowledges that the execution and delivery of the Security
Agreement, and the fulfillment o f the terms thereof, is a condition to the closing of the Transactions. The Company will recognize
the terms of the Security Agreement and, as provided therein, the first prioty lien on its assets and will take no position which
would be inconsistent with the rights of the Lenders.

 

(2) The Company acknowledges
that the execution and delivery of the Subsidiary Guarantee Agreement, and the fulfillment o f the terms thereof, is a condition
to the closing of the Transactions. The Company will recognize the terms of the Subsidiary Guarantee Agreement and will take no
position which would be inconsistent with the rights of the Lenders in accordance with the terms of the Subsidiary Guarantee Agreement.

 

p.       Fees
to Brokers and Others. The Company has taken no action which would give rise to any claim by any Person for brokerage commission
or similar payments by Lender relating to this Agreement or the transactions contemplated hereby. The Company shall indemnify and
hold harmless each of Lender, its employees, officers, directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses suffered in respect
of any such claimed or existing fees, as and when incurred.

 

q.       Confirmation.
The Company confirms that all statements of the Company contained herein shall survive acceptance of this Agreement by the Lender.
The Company agrees that, if any events occur or circumstances exist prior to the Closing Date or the release of the Loan Amount
to the Company which would make any of the Company’s representations, warranties, agreements or other information set forth
herein materially untrue or materially inaccurate as of such  

 

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date, the Company shall immediately notify the Lender (directly or
through its counsel, if any) and the Escrow Agent in writing prior to such date of such fact, specifying which representation,
warranty or covenant is affected and the reasons therefor.

 

4.       CERTAIN
COVENANTS AND ACKNOWLEDGMENTS.

 

a.       Transfer
Restrictions. The Lender acknowledges that (1) the Securities have not been and are not being registered under the provisions
of the 1933 Act and, except as provided in the Registration Rights Provisions or otherwise included in an effective registration
statement, the Shares have not been and are not being registered under the 1933 Act, and may not be transferred unless (A) subsequently
registered thereunder or (B) the Lender shall have delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration; (2) any sale of the Securities made in reliance on Rule 144 promulgated under the 1933
Act may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom the sale is made, may be deemed to be an underwriter,
as that term is used in the 1933 Act, may require compliance with some other exemption under the 1933 Act or the rules and regulations
of the SEC thereunder; and (3) neither the Company nor any other Person is under any obligation to register the Securities (other
than pursuant to the Registration Rights Provisions) under the 1933 Act or to comply with the terms and conditions of any exemption
thereunder.

 

b.       Restrictive
Legend. The Lender acknowledges and agrees that, until such time as the relevant Shares have been registered under the 1933
Act, as contemplated by the Registration Rights Provisions and sold in accordance with an effective Registration Statement or otherwise
in accordance with another effective registration statement, the certificates and other instruments representing any of the Securities
shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of
any such Securities):

 

THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

c.       Filings.
The Company undertakes and agrees to make all necessary filings in connection with the sale of the Securities to the Lender under
any United States laws and regulations applicable to the Company, or by any domestic securities exchange or trading market, and
to provide a copy thereof to the Lender promptly after such filing.

 

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d.       Reporting
Status. So long as the Lender beneficially owns any of the Securities and for at least twenty (20) Trading Days thereafter,
the Company shall file all reports required to be filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, shall take
all reasonable action under its control to ensure that adequate current public information with respect to the Company, as required
in accordance with Rule 144(c)(2) of the 1933 Act, is publicly available, and shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination.
The Company will take all reasonable action under its control to maintain the continued listing and quotation and trading of its
Common Stock (including, without limitation, all Registrable Securities) on the Principal Trading Market and, to the extent applicable
to it, will comply in all material respects with the Company’s reporting, filing and other obligations under the by-laws
or rules of the Principal Trading Market applicable to it at least through the date which is sixty (60) days after the later of
the date on which all of the Notes have been converted or been paid in full.

 

e.       Use
of Proceeds. The Company’s use the proceeds is described on Annex IV.

 

f.       Piggy-Back
Registration Rights; Rule 144.

 

(i)       The
Holder shall have piggy-back registration rights with respect to the Registrable Securities. If the Company participates (whether
voluntarily or by reason of an obligation to a third party) in the registration of any shares of the Company’s stock (other
than a registration on Form S-8 or on Form S-4), the Company shall give written notice thereof to the Holder and the Holder shall
have the right, exercisable within ten (10) Trading Days after receipt of such notice, to demand inclusion of all or a portion
of the Holder’s Registrable Securities in such registration statement. The Company undertakes to register at least 300% of
the shares issuable upon conversion of the Note to account for market price fluctuations. If the Holder exercises such election,
the Registrable Securities so designated shall be included in the registration statement (without any holdbacks) at no cost or
expense to the Holder (other than any commissions, if any, relating to the sale of Holder’s shares). Each Holder’s
rights under this Section 4(g)(i) shall expire at such time as such Holder can sell all of such Holder’s remaining Registrable
Securities under Rule 144 (as defined below) without volume or other restrictions or limitations.

 

(ii)       With
a view to making available to the Holder the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit Holder to sell securities of the Company to the public without registration (collectively,
“Rule 144”), the Company agrees to:

 

(a)       make
and keep public information available, as those terms are understood and defined in Rule 144;

 

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(b)       file
with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act; and

 

(c)       furnish
to the Holder so long as such party owns Registrable Securities, promptly upon request, (i) a written statement by the Company
that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) if not available on the SEC’s
EDGAR system, a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed
by the Company and (iii) such other information as may be reasonably requested to permit the Holder to sell such securities pursuant
to Rule 144 without registration; and

 

(d)       at
the request of any Holder then holding Registrable Securities, give the Transfer Agent instructions (supported by an opinion of
Company counsel, if required or requested by the Transfer Agent) to the effect that, upon the Transfer Agent’s receipt from
such Holder of

 

(i) a certificate (a “Rule 144
Certificate”) certifying (A) that the Holder’s holding period (as determined in accordance with the provisions
of Rule 144) for the Shares which the Holder proposes to sell (the “Securities Being Sold”) is not less than
(6) months and (B) as to such other matters as may be appropriate in accordance with Rule 144 under the Securities Act, and

 

(ii) an opinion of counsel acceptable
to the Lender that, based on the Rule 144 Certificate, Securities Being Sold may be sold pursuant to the provisions of Rule 144,
even in the absence of an effective registration statement,

 

the Transfer Agent is to effect the transfer
of the Securities Being Sold and issue to the buyer(s) or transferee(s) thereof one or more stock certificates representing the
transferred Securities Being Sold without any restrictive legend and without recording any restrictions on the transferability
of such shares on the Transfer Agent’s books and records (except to the extent any such legend or restriction results from
facts other than the identity of the relevant Holder, as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held by the Lender). If the Transfer Agent reasonably
requires any additional documentation at the time of the transfer, the Company shall deliver or cause to be delivered all such
reasonable additional documentation as may be necessary to effectuate the issuance of an unlegended certificate.

 

 

5.       TRANSFER
AGENT INSTRUCTIONS.

 

a.       The
Company warrants that, with respect to the Securities, other than the stop
transfer instructions to give effect to Section 4(a) hereof, it will give its
transfer agent no instructions inconsistent with instructions to issue Common
Stock from time to time upon the conversion of the Note in such amounts as 

 

-13-  

specified from time to time by the Company to the transfer agent, bearing the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Shares under the 1933 Act, registered in the name of the
Lender or its nominee and in such denominations to be specified by the Holder in
connection with each conversion. Except as so provided, the Shares shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the other Transaction Agreements.
Nothing in this Section shall affect in any way the Lender's obligations and
agreement to comply with all applicable securities laws upon resale of the
Securities. If the Lender provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by the
Lender of any of the Securities in accordance with clause (1)(B) of Section 4(a)
of this Agreement is not required under the 1933 Act, the Company shall (except
as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer
of the Securities promptly instruct the Company's transfer agent to issue one or
more certificates for Common Stock without legend in such name and in such
denominations as specified by the Lender.

 

b.       The
Company will authorize the Transfer Agent to give information relating to the Company directly to the Holder or the Holder’s
representatives upon the request of the Holder or any such representative, to the extent such information relates to (i) the status
of shares of Common Stock issued or claimed to be issued to the Holder in connection with a Notice of Exercise or transfer of Pledged
Shares to the Holder, or (ii) the aggregate number of outstanding shares of Common Stock of all shareholders (as a group, and not
individually) as of a current or other specified date. At the request of the Holder, the Company will provide the Holder with a
copy of the authorization so given to the Transfer Agent.

 

6.       CLOSING
DATE.

 

a.        The
Closing Date shall occur on the date which is the first Trading Day after each of the conditions contemplated by Sections 7 and
8 hereof shall have either been satisfied or been waived by the party in whose favor such conditions run.

 

b.       The
closing of the Transactions shall occur on the Closing Date at the offices of Sichenzia Ross Ference Kesner LLP and shall take
place no later than 5:00 P.M., New York time, on such day or such other time as is mutually agreed upon by the Company and the
Lender.

 

 

7.       CONDITIONS
TO THE COMPANY'S OBLIGATION TO SELL.

 

The Lender understands that
the Company's obligation to sell the Notes to the Lender pursuant to this Agreement on the Closing Date is conditioned upon:

 

-14-  

		a.	The execution and delivery of this Agreement by the Lender

 

		b.	Delivery by the Lender good funds as payment in full of an amount equal to the Loan Amount in accordance
with this Agreement;

 

		c.	The accuracy on such Closing Date of the representations and warranties of the Lender contained
in this Agreement, each as if made on such date, and the performance by the Lender on or before such date of all covenants and
agreements of the Lender required to be performed on or before such date; and

 

		d.	There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions
contemplated hereby, or requiring any consent or approval which shall not have been obtained.

 

8.       CONDITIONS
TO THE LENDER'S OBLIGATION TO PURCHASE.

 

The Company understands that
the Lender's obligation to purchase the Notes on the Closing Date is conditioned upon:

 

		a.	The execution and delivery of this Agreement and the other Transaction Agreements by the Company;

 

		b.	The execution and delivery of the Notes;

 

		c.	The execution and delivery of the Warrant;

 

		d.	The execution and delivery of the Security Agreement by the Guarantors;

 

		e.	The execution and delivery of the Subsidiary Guarantee Agreement by the Guarantors;

 

		f.	The accuracy in all material respects on the Closing Date of the representations and warranties
of the Company contained in this Agreement, each as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on or before such date;

 

		g.	On the Closing Date, the Lender shall have received an irrevocable letter to the transfer agent,
dated the Closing Date, in form, scope and substance reasonably satisfactory to the Lender, substantially to the effect set forth
in Annex VI attached hereto

 

-15-  

 

		h.	There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions
contemplated hereby, or requiring any consent or approval which shall not have been obtained; and

 

		i.	From and after the date hereof to and including the Closing Date, each of the following conditions
will remain in effect: (i) the trading of the Common Stock shall not have been suspended by the SEC or on the Principal Trading
Market; (ii) trading in securities generally on the Principal Trading Market shall not have been suspended or limited; (iii) no
minimum prices shall been established for securities traded on the Principal Trading Market; and (iv) there shall not have been
any material adverse change in any financial market.

 

 

 

9.       INDEMNIFICATION
AND REIMBURSEMENT.

 

a.        (i)
The Company agrees to indemnify and hold harmless the Lender and its officers, directors, employees, and agents, and each Lender
Control Person from and against any losses, claims, damages, liabilities or expenses incurred (collectively, “Damages”),
joint or several, and any action in respect thereof to which the Lender, its partners, Affiliates, officers, directors, employees,
and duly authorized agents, and any such Lender Control Person becomes subject to, resulting from, arising out of or relating to
any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Company
contained in this Agreement, as such Damages are incurred, except to the extent such Damages result primarily from Lender's failure
to perform any covenant or agreement contained in this Agreement or the Lender's or its officer’s,
director’s, employee’s,
agent’s or Lender Control Person’s
gross negligence, recklessness or bad faith in performing its obligations under this Agreement.

 

(ii)       The
Company hereby agrees that, if the Lender, other than by reason of its gross negligence, illegal or willful misconduct (in each
case, as determined by a non-appealable judgment to such effect), (x) becomes involved in any capacity in any action, proceeding
or investigation brought by any shareholder of the Company, in connection with or as a result of the consummation of the transactions
contemplated by this Agreement or the other Transaction Agreements, or if the Lender is impleaded in any such action, proceeding
or investigation by any Person, or (y) becomes involved in any capacity in any action, proceeding or investigation brought by the
SEC, any self-regulatory organization or other body having jurisdiction, against or involving the Company or in connection with
or as a result of the consummation of the transactions contemplated by this Agreement or the other Transaction Agreements, or (z)
is impleaded in any such action, proceeding or investigation by any Person, then
in any such case, the Company shall indemnify, defend and hold harmless the
Lender from and against and in 

 

-16-  

respect of all losses, claims, liabilities, damages or expenses resulting from,
imposed upon or incurred by the Lender, directly or indirectly, and reimburse
such Lender for its reasonable legal and other expenses (including the cost of
any investigation and preparation) incurred in connection therewith, as such
expenses are incurred. The indemnification and reimbursement obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any Affiliates of the Lender who are actually named in such action, proceeding
or investigation, and partners, directors, agents, employees and Lender Control
Persons (if any), as the case may be, of the Lender and any such Affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, the Lender, any such Affiliate and
any such Person. The Company also agrees that neither the Lender nor any such
Affiliate, partner, director, agent, employee or Lender Control Person shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
this Agreement or the other Transaction Agreements, except as may be expressly
and specifically provided in or contemplated by this Agreement.

 

b.       All
claims for indemnification by any Indemnified Party (as defined below) under this Section shall be asserted and resolved as follows:

 

(i)       
In the event any claim or demand in respect of which any Person claiming indemnification under any provision of this Section (an
"Indemnified Party") might seek indemnity under paragraph (a) of this Section is asserted against or sought to
be collected from such Indemnified Party by a Person other than a party hereto or an Affiliate thereof (a "Third Party Claim"),
the Indemnified Party shall deliver a written notification, enclosing a copy of all papers served, if any, and specifying the nature
of and basis for such Third Party Claim and for the Indemnified Party's claim for indemnification that is being asserted under
any provision of this Section against any Person (the "Indemnifying Party"), together with the amount or, if not
then reasonably ascertainable, the estimated amount, determined in good faith, of such Third Party Claim (a "Claim Notice")
with reasonable promptness to the Indemnifying Party. If the Indemnified Party fails to provide the Claim Notice with reasonable
promptness after the Indemnified Party receives notice of such Third Party Claim, the Indemnifying Party shall not be obligated
to indemnify the Indemnified Party with respect to such Third Party Claim to the extent that the Indemnifying Party's ability to
defend has been prejudiced by such failure of the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days following receipt by the Indemnifying Party of either
a Claim Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether the Indemnifying Party
disputes its liability or the amount of its liability to the Indemnified Party under this Section and whether the Indemnifying
Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim. The following provisions
shall also apply.

 

-17-  

(x) If the Indemnifying Party notifies
the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Indemnified Party with respect
to the Third Party Claim pursuant to this paragraph (b) of this Section, then the Indemnifying Party shall have the right to defend,
with counsel reasonably satisfactory to the Indemnified Party, at the sole cost and expense of the Indemnifying Party, such Third
Party Claim by all appropriate proceedings, which proceedings shall be vigorously and diligently prosecuted by the Indemnifying
Party to a final conclusion or will be settled at the discretion of the Indemnifying Party (but only with the consent of the Indemnified
Party in the case of any settlement that provides for any relief other than the payment of monetary damages or that provides for
the payment of monetary damages as to which the Indemnified Party shall not be indemnified in full pursuant to paragraph (a) of
this Section). The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement
thereof; provided, however, that the Indemnified Party may, at the sole cost and expense of the Indemnified Party, at any time
prior to the Indemnifying Party's delivery of the notice referred to in the first sentence of this subparagraph (x), file any motion,
answer or other pleadings or take any other action that the Indemnified Party reasonably believes to be necessary or appropriate
protect its interests; and provided further, that if requested by the Indemnifying Party, the Indemnified Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnifying Party in contesting any Third Party
Claim that the Indemnifying Party elects to contest. The Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this subparagraph (x), and except as provided
in the preceding sentence, the Indemnified Party shall bear its own costs and expenses with respect to such participation. Notwithstanding
the foregoing, the Indemnified Party may take over the control of the defense or settlement of a Third Party Claim at any time
if it irrevocably waives its right to indemnity under paragraph (a) of this Section with respect to such Third Party Claim.

 

(y) If the Indemnifying Party fails to
notify the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Third Party Claim pursuant
to paragraph (b) of this Section, or if the Indemnifying Party gives such notice but fails to prosecute vigorously and diligently
or settle the Third Party Claim, or if the Indemnifying Party fails to give any notice whatsoever within the Dispute Period, then
the Indemnified Party shall have the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim
by all appropriate proceedings, which proceedings shall be prosecuted by the Indemnified Party in a reasonable manner and in good
faith or will be settled at the discretion of the Indemnified Party (with the consent of the Indemnifying Party, which consent
will not be unreasonably withheld). The Indemnified Party will have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying Party will, at
the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnified Party and its counsel in
contesting any Third Party Claim which the Indemnified Party is contesting. Notwithstanding the foregoing provisions of this  

 

-18-  

subparagraph
(y), if the Indemnifying Party has notified the Indemnified Party within the Dispute Period that the Indemnifying Party disputes
its liability or the amount of its liability hereunder to the Indemnified Party with respect to such Third Party Claim and if such
dispute is resolved in favor of the Indemnifying Party in the manner provided in subparagraph(z) below, the Indemnifying Party
will not be required to bear the costs and expenses of the Indemnified Party's defense pursuant to this subparagraph (y) or of
the Indemnifying Party's participation therein at the Indemnified Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and expenses incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant
to this subparagraph (y), and the Indemnifying Party shall bear its own costs and expenses with respect to such participation.

 

(z) If the Indemnifying Party notifies
the Indemnified Party that it does not dispute its liability or the amount of its liability to the Indemnified Party with respect
to the Third Party Claim under paragraph (a) of this Section or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party with respect to such
Third Party Claim, the amount of Damages specified in the Claim Notice shall be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party
on demand. If the Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such claim,
the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute; provided,
however, that if the dispute is not resolved within thirty (30) days after the Claim Notice, the Indemnifying Party shall be entitled
to institute such legal action as it deems appropriate.

 

(ii)       In
the event any Indemnified Party should have a claim under paragraph (a) of this Section against the Indemnifying Party that does
not involve a Third Party Claim, the Indemnified Party shall deliver a written notification of a claim for indemnity under paragraph
(a) of this Section specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable,
the estimated amount, determined in good faith, of such claim (an "Indemnity Notice")
with reasonable promptness to the Indemnifying Party. The failure by any
Indemnified Party to give the Indemnity Notice shall not impair 

 

-19-  

such party's rights hereunder except to the extent that the Indemnifying Party
demonstrates that it has been irreparably prejudiced thereby. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim or the amount of the claim described in such Indemnity Notice or fails to
notify the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes the claim or the amount of the claim described in such Indemnity
Notice, the amount of Damages specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under paragraph (a) of
this Section and the Indemnifying Party shall pay the amount of such Damages to
the Indemnified Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute; provided, however, that it the dispute
is not resolved within thirty (30) days after the Claim Notice, the Indemnifying
Party shall be entitled to institute such legal action as it deems appropriate.

 

c.       The
indemnity agreements contained herein shall be in addition to (i) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to.

 

10.       JURY
TRIAL WAIVER.  The Company and the Lender hereby waive a trial by jury in any action, proceeding or counterclaim brought by
either of the Parties hereto against the other in respect of any matter arising out or in connection with the Transaction Agreements.

 

11.       GOVERNING
LAW: MISCELLANEOUS.

 

a.       (i)
This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each of the parties
consents to the exclusive jurisdiction of the federal courts whose districts encompass any part of the County of New York or the
state courts of the State of New York sitting in the County of New York in connection with any dispute arising under this Agreement
or any of the other Transaction Agreements and hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions or to any claim
that such venue of the suit, action or proceeding is improper. To the extent determined by such court, the Company shall reimburse
the Lender for any reasonable legal fees and disbursements incurred by the Lender in enforcement of or protection of any of its
rights under any of the Transaction Agreements. Nothing in this Section shall affect or limit any right to serve process in any
other manner permitted by law.

 

(ii) The Company and the Lender acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement or the
other Transaction Agreements were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and the other Transaction
Agreements 

 

-20-  

and to enforce specifically the terms and provisions hereof and thereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.

 

b.       Failure
of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

 

c.       This
Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.

 

d.       All
pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

 

e.       A
facsimile transmission of this signed Agreement shall be legal and binding on all parties hereto.

 

f.       This
Agreement may be signed in one or more counterparts, each of which shall be deemed an original.

 

g.       The
headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

 

h.       If
any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.

 

i.       This
Agreement may be amended only by an instrument in writing signed by the party to be charged with enforcement thereof.

 

j.       This
Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.

 

12.       NOTICES.
Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of

 

(a) the date delivered, if delivered
by personal delivery as against written receipt therefor or by confirmed facsimile transmission,

 

-21-  

(b) the fifth Trading Day after deposit,
postage prepaid, in the United States Postal Service by registered or certified mail, or

 

(c) the third Trading Day after mailing
by domestic or international express courier, with delivery costs and fees prepaid,

 

in each case, addressed to each of the other
parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by ten (10) day’s
advance written notice similarly given to each of the other parties hereto):

 

COMPANY: 

 

Helix TCS, Inc.

5300 DTC Parkway

Greenwood Village, CO

T: 720-328-5372

Email: sogur@helixtcs.com

 

 

 

LENDER:

 

At the address set forth
on the signature page of this Agreement.

with a copy to:

 

Darrin M. Ocasio, Esq.

Sichenzia Ross Ference
Kesner LLP

61 Broadway, 32nd
flr.

New York, NY 10006

T: (212) 930-9700

F: (212) 930-9725

 

13.       SURVIVAL
OF REPRESENTATIONS AND WARRANTIES. The Company’s and the Lender’s representations and warranties herein shall survive
the execution and delivery of this Agreement and the delivery of the Certificates and the payment of the Loan Amount, and shall
inure to the benefit of the Lender and the Company and their respective successors and assigns.

 

 

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]

-22-  

 

IN WITNESS WHEREOF,
with respect to the Loan Amount specified below, this Agreement has been duly executed by the Lender and the Company as of the
date set first above written.

 

LOAN AMOUNT:

 

Note 1 – $183,333.33

Note 2 - $25,000.00

 

LENDER:

 

 

 

REDDIAMOND
PARTNERS, LLC

 

 

By: _________________________________

(Signature of Authorized
Person)

 

_____________________________________

Printed Name and Title

 

COMPANY:

 

 

HELIX TCS, INC.

 

By: _________________________________

(Signature of Authorized Person)

 

_____________________________________

Printed Name and Title

 

 

-23-  

ANNEX IFORM OF NOTE

 

ANNEX I.1FORM OF WARRANT

 

ANNEX IISECURITY AGREEMENT

 

ANNEX II.1SUBSIDARY
GUARANTEE AGREEMENT

 

ANNEX IIICOMPANY DISCLOSURE
MATERIALS

 

ANNEX IVUSE OF PROCEEDS

 

ANNEX VIRREVOCABLE
TRANSFER AGENT LETTER

 

-24-Exhibit

 
 
 
Preferred Apartment Communities, Inc. 
 
and 
 
Computershare Trust Company, N.A., 
 
Warrant Agent 
 
 
 

Warrant Agreement 
 
Dated as of February 23, 2017

TABLE OF CONTENTS
Page
		
	Section 1.
	Certain Definitions    1

		
	Section 2.
	Appointment of Warrant Agent.    2

		
	Section 3.
	Issuance and Form of Global Warrant Certificate.    2

		
	Section 4.
	Warrant Register    3

		
	Section 5.
	Transfer and Exchange of Warrants.    3

		
	Section 6.
	Exercise of Warrants; Mechanics of Exercise.    4

		
	Section 7.
	Adjustment of Exercise Price    6

		
	Section 8.
	Certain Representations; Reservation and Availability of Shares of Common Stock or Cash.    7

		
	Section 9.
	Fractional Shares of Common Stock.    8

		
	Section 10.
	Warrant Holder Not Deemed a Stockholder    8

		
	Section 11.
	The Warrant Agent.    9

		
	Section 12.
	Purchase or Consolidation or Change of Name of Warrant Agent.    10

		
	Section 13.
	Duties of Warrant Agent.    11

		
	Section 14.
	Change of Warrant Agent.    12

		
	Section 15.
	Issuance of New Global Warrant Certificates.    13

		
	Section 16.
	Notices.    13

		
	Section 17.
	Supplements and Amendments    14

		
	Section 18.
	Successors    14

		
	Section 19.
	Benefits of this Agreement    14

		
	Section 20.
	Governing Law    14

		
	Section 21.
	Counterparts    14

		
	Section 22.
	Captions    14

		
	Section 23.
	Information    14

		
	Section 24.
	Force Majeure    14

Exhibit A  –  Form of Global Warrant Certificate 

i

WARRANT AGREEMENT
WARRANT AGREEMENT dated as of February 23, 2017 (this “Agreement”), between Preferred Apartment Communities, Inc., a Maryland corporation (the “Company”), Computershare, Inc., a Delaware corporation (“Computershare”) and its fully owned subsidiary Computershare Trust Company, N.A., national banking association (collectively with Computershare, the “Warrant Agent”). 
W I T N E S S E T H
WHEREAS, the Company proposes to issue up to 1,500,000 units (the “Units”) in connection with the Company's public offering (the "Series A Offering") with each unit comprised of (i) one share of Series A Redeemable Preferred Stock (the “Series A Preferred Stock”), and (ii) one warrant (each, a “Warrant,” and collectively, the “Warrants”) to purchase 20 shares of common stock of the Company, par value $0.01 (the “Common Stock”).  The Units will not be certificated.  The shares of Series A Preferred Stock and the Warrants are immediately detachable and will be issued separately;
WHEREAS, the Company desires that the Warrant Agent to act on behalf of the Company in connection with the issuance, transfer, exchange, exercise and replacement of the Warrants, and this Agreement sets forth, among other things, the form and provisions of the Warrants and the terms and conditions on which they may be issued, transferred, exchanged, exercised and replaced;

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree that the Agreement read as follows:

Section 1.Certain Definitions.  For purposes of this Agreement, the following terms have the meanings indicated:
“Affiliate” has the meaning ascribed to it in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
 “Business Day” means any day other than a Saturday, Sunday or a day on which the New York Stock Exchange is authorized or obligated by law or executive order to close.
“Close of Business” on any given date means 5:00 p.m., New York City time, on such date; provided, however, that if such date is not a Business Day, it means 5:00 p.m., New York City time, on the next succeeding Business Day.
“Exercise Price”, for any particular Warrant, means the Initial Exercise Price, as adjusted from time to time pursuant to Section 7.
“Holder” means a holder of beneficial interest in a Warrant.

“Initial Exercise Price”, for any particular Warrant, means the greater of (i) $19.50 and (ii) 120% of the closing price of the Common Stock on the Trading Day immediately preceding the issuance of such Warrant.
“NYSE” means the New York Stock Exchange.
 “OP Units” means units of equity interests in Preferred Apartment Communities Operating Partnership, L.P., a Delaware limited partnership, which is a subsidiary of the Company.
“Person” means an individual, corporation, association, partnership, limited liability company, joint venture, trust, unincorporated organization, government or political subdivision thereof or governmental agency or other entity.
“Securities Act” means the Securities Act of 1933, as amended.
“Trading Day” means, (i) if the Common Stock is listed or admitted to trading on the NYSE, a day on which the NYSE is open for the transaction of business, (ii) if the Common Stock is not listed or admitted to trading on the NYSE but is listed or admitted to trading on another national securities exchange or automated quotation system, a day on which the principal national securities exchange or automated quotation system, as the case may be, on which the Common Stock is listed or admitted to trading is open for the transaction of business, or (iii) if the Common Stock is not listed or admitted to trading on any national securities exchange or automated quotation system, any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
 “Warrant Shares” means shares of Common Stock issuable upon exercise of Warrants.  Initially, the number of shares of Common Stock with respect to which a Warrant may be exercised is 20.
Section 2.    Appointment of Warrant Agent.   The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Warrant Agent hereby accepts such appointment.  The Company may from time to time appoint such Co-Warrant Agents as it may, in its sole discretion, deems necessary or desirable.
Section 3.    Issuance and Form of Global Warrant Certificate.
(a)    The Company shall execute and the Warrant Agent shall countersign and deliver one or more global certificates (each, a “Global Warrant Certificate”), evidencing the Warrants, and each such Global Warrant Certificate (i) shall be registered in the name of The Depository Trust Company (the “Depository”) or of the nominee of the Depository, and (ii) shall be delivered by the Warrant Agent to the Depository or pursuant to the Depository’s instructions or held by the Warrant Agent as custodian for the Depository.  Each Global Warrant Certificate shall evidence such number of Warrants as is set forth therein.

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(b)    Each Global Warrant Certificate shall be substantially in the form set forth in Exhibit A attached hereto.  The Global Warrant Certificate may bear such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Agreement, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules and regulations of the Depository, any law or with any rules made pursuant thereto or with any rules of any securities exchange or as may, consistently herewith, be determined by the officers of the Company executing such Global Warrant Certificate, as evidenced by their execution of the Global Warrant Certificate, which shall be reasonably acceptable to the Warrant Agent.
(c)    The Company shall supply the Warrant Agent with an opinion of counsel indicating that the Warrants and any shares of Common Stock issued upon exercise thereof were registered under the Securities Act or issued pursuant to an exemption from the registration requirements of the Securities Act and that the Warrants and any shares of Common Stock issued upon exercise thereof will be, when issued, validly issued, fully paid and non-assessable.
Section 4.    Warrant Register.  The Warrants will be issued in registered form only.  The Warrant Agent will keep or cause to be kept, at one of its offices in Canton, Massachusetts, or at the office of one of its agents, books for registration and transfer of the Global Warrant Certificates issued hereunder.  The Warrant Agent will create a special account for the issuance of Global Warrant Certificates.
Section 5.    Transfer and Exchange of Warrants.
(a)    The registration of the transfer and exchange of Warrants or beneficial interests therein shall be effected through the Depository in accordance with this Agreement and the procedures and requirements of the Depository. Such requirements shall include, inter alia, a signature guarantee from an eligible guarantor institution participating in a signature guarantee program approved by the Securities Transfer Association. The Company may instruct the Warrant Agent from time to time that certain Warrants are subject to restrictions on transfer, in which case the Warrant Agent shall not permit the transfer of such Warrants without the consent of the Company.  A Global Warrant Certificate may only be transferred as a whole, and not in part, and only by (i) the Depository to a nominee of the Depository, (ii) a nominee of the Depository to the Depository or another nominee of the Depository, or (iii) the Depository or any such nominee to a successor Depository or its nominee. 
(b)    To permit registrations of transfers and exchanges, the Company shall execute and the Warrant Agent shall countersign, by either manual or facsimile or other electronic submission, each Global Warrant Certificate.  No service charge shall be made for any registration of transfer or exchange. Any transfer tax, assessments, or similar governmental charge payable in connection with any registration of transfer or exchange shall be paid by the Holder of such Warrants.  All Warrants issued upon any transfer or exchange pursuant to the 

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terms of this Agreement shall be valid obligations of the Company, entitled to the same benefits under this Agreement as the Warrants surrendered upon such transfer or exchange.
(c)    If any Global Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company shall issue, and the Warrant Agent shall countersign and deliver, in exchange and substitution for, and upon cancellation of the mutilated Global Warrant Certificate, or in lieu of and substitution for the Global Warrant Certificate lost, stolen or destroyed, a new Global Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence reasonably satisfactory to the Warrant Agent of the loss, theft or destruction of such Global Warrant Certificate and an affidavit and the posting of an indemnity or bond satisfactory to it. Applicants for such substitute Global Warrant Certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Warrant Agent may prescribe and as required by Section 8-405 of the Uniform Commercial Code as in effect in the State of New York. 
Section 6.    Exercise of Warrants; Mechanics of Exercise.
(a)    Subject to the terms and conditions set forth herein and set forth in each Global Warrant Certificate, each Warrant shall be exercisable for 20 shares of Common Stock at the Exercise Price (subject to any adjustment pursuant to Section 7) commencing one year from the date of issuance thereof (the “Initial Exercise Date”).  Such Warrant shall cease to be exercisable and shall terminate and become void, and all rights thereunder and under this Agreement shall cease, at the Close of Business on the third anniversary of the Initial Exercise Date (the “Expiration Date”).
(b)    A Holder may exercise a Warrant in whole, but not in part, by delivering, not later than 5:00 p.m. New York time, on any Business Day to the Warrant Agent at its office:  (i) the exercise notice set forth in Exhibit A to the Global Warrant Certificate (the “Exercise Notice”) and (ii) payment, for the account of the Company, of an amount equal to the product of (A) the Exercise Price and (B) 20.  Such payment shall be made in United States dollars by certified or official bank check payable to the order of the Company or by wire transfer of funds to an account designated by the Company for such purpose. Any Holder shall effect compliance with the requirements in clauses (i) and (ii) above through the relevant members of the Depository in accordance with the procedures of the Depository. If the Exercise Notice or the Exercise Price is received by the Warrant Agent after the Close of Business, the Warrant will be deemed to be received and exercised on the next Business Day. If the Warrant is received or deemed to be received after the Expiration Date, the exercise thereof will be null and void and any funds delivered to the Warrant Agent will be returned to the Holder as soon as practicable. In no event will interest accrue on funds deposited with the Warrant Agent in respect of an exercise or attempted exercise of a Warrant. 
(c)    Notwithstanding any provision herein to the contrary, if on the date of any exercise of any Warrant a registration statement covering the Warrant Shares is not effective and an exemption from registration (other than Section 3(a)(9) of the Securities Act) is not available for the issuance of such Warrant Shares, the Holder shall satisfy its obligation to pay the Exercise Price through a “cashless exercise,” in which event the Warrant Agent shall 

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issue to the Holder, subject to confirmation by the Company, the number of Warrant Shares as follows (the “Cashless Exercise Ratio”):
X = Y [(A-B)/A]
where:
X = the number of shares of Common Stock to be issued to the holder
Y = the number of shares of Common Stock with respect to which the Warrant is being exercised
A = the Fair Market Value of one share of Common Stock
B = the Exercise Price
For the purpose of computation of the Cashless Exercise Ratio, the “Fair Market Value” per share of Common Stock at any date shall be deemed to be the closing price of the Common Stock on the Trading Day immediately preceding the date as of which the Fair Market Value is being determined.
(d)    No payment or adjustment shall be made on account of any distributions or dividends on the Warrant Shares.  The Company shall calculate and transmit to the Warrant Agent, and the Warrant Agent shall have no obligation under this section to calculate, the Cashless Exercise Ratio.
(e)    If less than all the Warrants evidenced by a Global Warrant Certificate surrendered are exercised, a new Global Warrant Certificate shall be issued for the remaining number of Warrants evidenced by the Global Warrant Certificate so surrendered, and the Warrant Agent is hereby authorized to countersign the new Global Warrant Certificate pursuant to the provisions of Section 3 and this Section 6.
(f)    The Warrant Agent shall not effect any exercise of any Warrant, and a Holder shall not have the right to exercise a Warrant to the extent that after giving effect to such issuance, 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), 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 shall include the Warrant Shares issuable upon exercise of the Warrant, but shall exclude the number of shares of Common Stock which would be issuable upon exercise or conversion of the unexercised or nonconverted portion of any other Warrants or any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein, in each case beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 6(f), 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 

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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 6(f) applies, the determination of whether the Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of the Warrant is exercisable shall be in the sole discretion of the Holder, and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of the Warrant that are in non-compliance with the Beneficial Ownership Limitation.  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.  The “Beneficial Ownership Limitation” shall be 9.8% in value of the shares of the Company’s capital stock outstanding, or 9.8% (in value or number of shares, whichever is more restrictive) of the shares of the Common Stock outstanding, in each case immediately after giving effect to the issuance of the Warrant Shares.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6 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 the Warrant.
(g)    As soon as reasonably practicable after the exercise of any Warrant, the Company shall issue, or otherwise deliver, in authorized denominations to or upon the order of the holder of such by same-day or next-day credit to the Depository for the account of such holder or for the account of a participant in the Depository the Warrant Shares to which such holder is entitled, in each case registered in such name and delivered to such account as directed in the Exercise Notice by such Holder or by the direct participant in the Depository through which such holder is acting.
(h)    The Company acknowledges that the bank accounts maintained by Computershare in connection with the services provided under this Agreement will be in its name and that Computershare may receive investment earnings in connection with the investment at Computershare for the benefit of funds held in those accounts from time to time. Neither the Company nor the Warrantholders will receive interest on any deposits or Exercise Price.
Section 7.    Adjustment of Exercise Price.  The Exercise Price and the Warrant Shares are subject to adjustment from time to time as set forth in this Section 7.
(a)    In case the Company shall, while any Warrants remain outstanding and unexpired, (i) declare a dividend or make a distribution on its outstanding Common Stock in Common Stock, (ii) subdivide or reclassify its outstanding Common Stock into a greater number of shares, (iii) combine or reclassify its outstanding Common Stock into a smaller number of shares, or (iv) enter into any transaction whereby the outstanding shares of Common Stock are at any time changed into or exchanged for a different number or kind of shares or other securities of the Company or of another entity through reorganization, merger, consolidation, liquidation or recapitalization, then an appropriate adjustment in the number of 

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shares of Common Stock (or other securities for which such shares of Common Stock have previously been exchanged or converted) purchasable under the Warrants shall be made and the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination, reclassification, reorganization, merger, consolidation, liquidation or recapitalization shall be proportionately adjusted so that the holder of this warrant exercised after such date shall be entitled to receive the aggregate number and kind of shares or other securities which, if the Warrant had been exercised by such holder immediately prior to such date, the holder would have been entitled to receive upon such dividend, distribution, subdivision, combination, reclassification, reorganization, merger, consolidation, liquidation or recapitalization.  For example, if the Company declares a two-for-one stock subdivision (split) and the Exercise Price hereof immediately prior to such event was $10.00 and the number of shares of Common Stock issuable upon exercise of the Warrant was 20, the adjusted Exercise Price immediately after such event would be $5.00 and the adjusted number of shares of Common Stock issuable upon exercise of the Warrant would be 40.  Any such adjustment shall be made successively whenever any event listed above shall occur.
(b)    No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the number of shares of Common Stock purchasable upon the exercise of each Warrant; provided, however, that any adjustments which by reason of this Section 7(b) are not required to be made shall be carried forward and taken into account in any subsequent adjustment(s). All calculations shall be made to the nearest one hundredth (1/100) of a share.
(c)    When a specified event requiring an adjustment occurs, the Company shall promptly prepare a certificate setting forth, as applicable:  (i) the Exercise Price of each Warrant, and (ii) the number of Warrant Shares covering each Warrant, each as adjusted, and a brief statement of the facts accounting for such adjustment.  The Company shall promptly file with the Warrant Agent and with each transfer agent for the Common Stock a copy of such certificate and instruct the Warrant Agent to mail a brief summary thereof to each Holder.
Section 8.    Certain Representations; Reservation and Availability of Shares of Common Stock or Cash.
(a)    This Agreement has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by the Warrant Agent, constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, and the Warrants have been duly authorized, executed and issued by the Company and, assuming due authentication thereof by the Warrant Agent pursuant hereto, constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms and entitled to the benefits hereof; in each case except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally or by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

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(b)    As of September 30, 2016, the authorized capital stock of the Company consists of (i) 400,066,666 shares of Common Stock, of which (A) 24,681,281 shares of Common Stock are issued and outstanding, (B) 47,623,720 shares of Common Stock are reserved for issuance upon exercise of the Warrants, (C) adequate shares are reserved for issuance upon redemption of the Series A Preferred Stock, and (D) 1,977,113 shares of Common Stock are reserved for issuance upon exercise of an equity incentive plan, and (ii) 15,000,000 shares of preferred stock, $0.01 par value per share, of which 3,050,000 shares have been designated as shares of Series A Preferred Stock, which are issuable in connection with the Series A Offerings.  As of the date hereof, there are no other outstanding obligations, warrants, options or other rights to subscribe for or purchase from the Company any class of capital stock of the Company, other than the rights of holders of OP Units to convert their OP Units into shares of Common Stock.
(c)    The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Common Stock or its authorized and issued shares of Common Stock held in its treasury, free from preemptive rights, the number of shares of Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants.
(d)    The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the original issuance or delivery of the Global Warrant Certificate or the Warrant Shares.  The Company shall not, however, be required to pay any tax or governmental charge which may be payable in respect of any transfer involved in the transfer or delivery of a Global Warrant Certificate or the issuance of Warrant Shares in a name other than that of the Holder until any such tax or governmental charge shall have been paid (any such tax or governmental charge being payable by the Holder at the time of surrender) or until it has been established to the Company’s reasonable satisfaction that no such tax or governmental charge is due.
Section 9.    Fractional Shares of Common Stock.
(a)    The Company shall not issue fractions of Warrant Shares.  Whenever any fraction of Warrant Shares would otherwise be required to be issued or distributed, (i) a cash adjustment shall be paid in respect of such fraction in an amount equal to such fraction multiplied by the Exercise Price, or (ii) the actual issuance or distribution made shall reflect a rounding of such fraction to the nearest whole share (up or down), with half shares or less being rounded down and fractions in excess of half of a share being rounded up.
(b)    The Holder of a Warrant by the acceptance of the Warrant expressly waives his right to receive any fractional Warrant Share.
Section 10.    Warrant Holder Not Deemed a Stockholder.   No Holder of a Warrant or record holder of a Global Warrant Certificate shall be entitled to vote, receive dividends or distributions on, or be deemed for any purpose the holder of Common Stock or any other securities of the Company which may at any time be issuable on the exercise of the Warrants represented thereby, nor shall anything contained herein or in any Global Warrant 

8

Certificate be construed to confer upon the Holder of a Warrant or record holder of a Global Warrant Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders, or to receive dividends or distributions or subscription rights, or otherwise, until such Warrant(s) evidenced by such Global Warrant Certificate shall have been exercised in accordance with the provisions hereof.
Section 11.    The Warrant Agent.
(a)    The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Warrant Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder, as set forth in the Fee Schedule provided to the Company and attached hereto as Schedule 1.  
(b)    The Company covenants and agrees to indemnify and to hold the Warrant Agent harmless against any costs, expenses (including reasonable fees of its legal counsel), losses or damages, which may be paid, incurred or suffered by or to which it may become subject, arising from or out of, directly or indirectly, any claims or liability resulting from its actions as Warrant Agent pursuant hereto; provided, that such covenant and agreement does not extend to, and the Warrant Agent shall not be indemnified with respect to, such costs, expenses, losses and damages incurred or suffered by the Warrant Agent as a result of, or arising out of, its gross negligence, bad faith, or willful misconduct.  
(c)    Promptly after the receipt by the Warrant Agent of notice of any demand or claim or the commencement of any action, suit, proceeding or investigation, the Warrant Agent shall, if a claim in respect thereof is to be made against the Company, notify the Company thereof in writing.   The Company shall be entitled to participate as its own expense in the defense of any such claim or proceeding, and, if it so elects at any time after receipt of such notice, it may assume the defense of any suit brought to enforce any such claim or of any other legal action or proceeding. For the purposes of this Section 11, the term “expense or loss” means any amount paid or payable to satisfy any claim, demand, action, suit or proceeding settled with the express written consent of the Warrant Agent, and all reasonable costs and expenses, including, but not limited to, reasonable counsel fees and disbursements, paid or incurred in investigating or defending against any such claim, demand, action, suit, proceeding or investigation.
(d)    The Warrant Agent shall be responsible for and shall indemnify and hold the Company harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to the Warrant Agent’s refusal or failure to comply with the terms of this Agreement, or which arise out of Warrant Agent’s negligence or willful misconduct or which arise out of the breach of any representation or warranty of the Warrant Agent hereunder, for which the Warrant Agent is not entitled to indemnification under this Agreement; provided, however, that Warrant Agent’s 

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aggregate liability during any term of this Agreement with respect to, arising from, or arising in connection  with  this  Agreement, or from all services provided or omitted to be provided under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the amounts paid under this Agreement by the Company to Warrant Agent as fees and charges, but not including reimbursable expenses.
(e)    Promptly after the receipt by the Company of notice of any demand or claim or the commencement of any action, suit, proceeding or investigation, the Company shall, if a claim in respect thereof is to be made against the Warrant Agent, notify the Warrant Agent thereof in writing.  The Warrant Agent shall be entitled to participate at its own expense in the defense of any such claim or proceeding, and, if it so elects at any time after receipt of such notice, it may assume the defense of any suit brought to enforce any such claim or of any other legal action or proceeding.  For the purposes of this Section 11, the term “expense or loss” means any amount paid or payable to satisfy any claim, demand, action, suit or proceeding settled with the express written consent of the Company, and all reasonable costs and expenses, including, but not limited to, reasonable counsel fees and disbursements, paid or incurred in investigating or defending against any such claim, demand, action, suit, proceeding or investigation.
(f)    Neither party to this Agreement shall be liable to the other party for any consequential, indirect, special or incidental damages under any provisions of this Agreement or for any consequential, indirect, penal, special or incidental damages arising out of any act or failure to act hereunder even if that party has been advised of or has foreseen the possibility of such damages.
Section 12.    Purchase or Consolidation or Change of Name of Warrant Agent.
(a)    Any corporation into which the Warrant Agent or any successor Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent or any successor Warrant Agent shall be party, or any corporation succeeding to the corporate trust business of the Warrant Agent or any successor Warrant Agent, shall be the successor to the Warrant Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Warrant Agent under the provisions of Section 14.  In case at the time such successor Warrant Agent shall succeed to the agency created by this Agreement any of the Global Warrant Certificates shall have been countersigned but not delivered, any such successor Warrant Agent may adopt the countersignature of the predecessor Warrant Agent and deliver such Global Warrant Certificates so countersigned; and in case at that time any of the Global Warrant Certificates shall not have been countersigned, any successor Warrant Agent may countersign such Global Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the successor Warrant Agent; and in all such cases such Global Warrant Certificates shall have the full force provided in the Global Warrant Certificates and in this Agreement.

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(b)    If at any time the name of the Warrant Agent shall be changed and at such time any of the Global Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent may adopt the countersignature under its prior name and deliver Global Warrant Certificates so countersigned; and in case at that time any of the Global Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Global Warrant Certificates either in its prior name or in its changed name; and in all such cases such Global Warrant Certificates shall have the full force provided in the Global Warrant Certificates and in this Agreement.
Section 13.    Duties of Warrant Agent.   The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the Holders of the Warrants, by their acceptance thereof, shall be bound:
(a)    The Warrant Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Warrant Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.
(b)    Whenever in the performance of its duties under this Agreement the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman, President or any Vice President of the Company and by the Treasurer or any Assistant Treasurer or the Secretary of the Company and delivered to the Warrant Agent; and such certificate shall be full authentication to the Warrant Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.
(c)    The Warrant Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct pursuant to Section 11.
(d)    The Warrant Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Global Warrant Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e)    The Warrant Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Warrant Agent) or in respect of the validity or execution of any Global Warrant Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Global Warrant Certificate; nor shall it be responsible for the adjustment of the Exercise Price or the making of any change in the number of Warrant Shares required under the provisions of Section 7 or responsible for the manner, method or amount of any such change or the ascertaining of the existence of facts that would require any such adjustment or change (except with respect to the 

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exercise of Warrants evidenced by a Global Warrant Certificate after actual notice of any adjustment of the Exercise Price); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Global Warrant Certificate or as to whether any shares of Common Stock will, when issued, be duly authorized, validly issued, fully paid and nonassessable.
(f)    The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing by the Warrant Agent of the provisions of this Agreement.
(g)    The Warrant Agent is hereby authorized to accept instructions with respect to the performance of its duties hereunder from the Chairman or the President or any Vice President or the Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable and shall be indemnified and held harmless for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer, provided Warrant Agent carries out such instructions without gross negligence, bad faith or willful misconduct.
(h)    The Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement.  Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.
(i)    The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorney or agents, and the Warrant Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorney or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.
Section 14.    Change of Warrant Agent.   The Warrant Agent may resign and be discharged from its duties under this Agreement upon 30 days’ notice in writing mailed to the Company and to each transfer agent of the Common Stock by registered or certified mail, and to the Holders by first-class mail.  The Company may remove the Warrant Agent or any successor Warrant Agent upon 30 days’ notice in writing, mailed to the Warrant Agent or successor Warrant Agent, as the case may be, and to each transfer agent of the Common Stock by registered or certified mail, and to the Depository by first-class mail.  If the Warrant Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Warrant Agent.  If the Company shall fail to make such appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Warrant Agent or 

12

by the Depository, then the Depository may apply to any court of competent jurisdiction for the appointment of a new Warrant Agent.  Any successor Warrant Agent appointed hereunder shall execute, acknowledge and deliver to the Warrant Agent and to the Company an instrument accepting such appointment hereunder and thereupon such new warrant agent without any further act or deed shall become vested with all the rights, powers, duties and responsibilities of the Warrant Agent hereunder with like effect as if it had been named as warrant agent; but if for any reason it becomes necessary or expedient to have the former warrant agent execute and deliver any further assurance, conveyance, act or deed, the same shall be done at the expense of the Company and shall be legally and validly executed and delivered by the former warrant agent. Not later than the effective date of any such appointment, the Company shall file notice thereof with the former Warrant Agent and each transfer agent for the Common Stock, and shall forthwith mail notice thereof to the registered holders at their addresses as they appear on the registry books. Failure to file or mail such notice, or any defect therein, shall not affect the legality or validity of the appointment of the successor Warrant Agent.
Section 15.    Issuance of New Global Warrant Certificates.   Notwithstanding any of the provisions of this Agreement or of the Warrants to the contrary, the Company may, at its option, issue new Global Warrant Certificate(s) evidencing the Warrants in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Exercise Price per share and the number or kind or class of shares of stock or other securities or property purchasable under Global Warrant Certificate(s) made in accordance with the provisions of this Agreement.
Section 16.    Notices.   All notices, demands, approvals, consents and other communications provided for or permitted hereunder (each a “Notice”) shall be in writing and shall be sent by (a) registered or certified first-class mail (return receipt requested), (b) courier service, (c) personal delivery, or (d) telecopier (provided that, in the case of this clause (d), such Notice also is sent concurrently by another means specified above) as follows:
(a)    If to the Company, to:
Preferred Apartment Communities, Inc. 
3284 Northside Parkway NW, Suite 150 
Atlanta, Georgia 30327 
Attention:  Jeffrey Sprain, Esq. 
Fax:  (770) 818-4105
(b)    If to the Warrant Agent, to:
Computershare Trust Company, N.A. 
250 Royall Street 
Canton, Massachusetts 02021 
Attention:  Client Administration 
Fax:  (781) 575-2549

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Any notice required to be delivered by the Company to the registered holder of any Global Warrant Certificate may be given by the Warrant Agent on behalf of the Company.
Each Notice shall be deemed to have been duly given and effective upon actual receipt (or refusal of receipt).  Any party may by Notice to the other parties given in accordance with this Section 16 designate another address or person for receipt of Notices hereunder.  If the address of a party has changed, then such party promptly shall by Notice to the other parties given in accordance with this Section 16 designate a new address for receipt of Notices hereunder.  For the avoidance of doubt, if a Notice given in accordance with this Section 16 to a party is returned to the sender as being refused or undeliverable (or having a similar status), then such Notice to such party shall be deemed to have been duly given and effective on the date that such Notice was originally sent.
Section 17.    Supplements and Amendments.  The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any Holders in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions with regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not adversely affect the interests of the Holders.
Section 18.    Successors.  All covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 19.    Benefits of this Agreement.  Nothing in this Agreement shall be construed to give any Person other than the Company and the Warrant Agent any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the Holders.
Section 20.    Governing Law.  This Agreement and each Global Warrant Certificate issued hereunder shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to the conflicts of law principles thereof.
Section 21.    Counterparts.  This Agreement may be executed (including by facsimile or other electronic transmission) with counterpart signature pages or in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
Section 22.    Captions.  The captions of the sections of this Agreement have been inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
Section 23.    Information.  The Company agrees to promptly provide the Holders the information it is required to provide to the holders of the Common Stock, which 

14

information may be provided via the Securities and Exchange Commission's EDGAR filing system.
Section 24.    Force Majeure.  Notwithstanding anything to the contrary contained herein, Warrant Agent shall not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.

15

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
PREFERRED APARTMENT 
COMMUNITIES, INC.
		
	By: 
	/s/ Jeffrey R. Sprain     
Name: Jeffrey R. Sprain 
Title:   Senior Vice President, General Counsel and Corporate Secretary

COMPUTERSHARE TRUST COMPANY, N.A.
		
	By: /s/ Dan DeWeever
	 
Name: Dan DeWeever 
Title:  Product Director

COMPUTERSHARE INC.
		
	By: 
	/s/ Dan DeWeever         
Name: Dan DeWeever 
Title:  Product Director

[Signature Page to Warrant Agreement]

Exhibit A

Form of Global Warrant Certificate
(on file with the Company)

Schedule 1 

(on file with the Company)

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