Document:

Exhibit 10.1

 

Execution Version

 

 

 

 

SERIES A SECURITIES
PURCHASE AGREEMENT

 

BY AND BETWEEN

 

THE PURCHASERS
LISTED ON SCHEDULE I HERETO

 

AND

 

PLBY Group, inc.

 

DATED AS OF May
13, 2022

 

 

 

 

     

     

    

 

TABLE OF CONTENTS

 

Page

 

	ARTICLE I SALE AND PURCHASE OF SECURITIES	1
	Section 1.1	Sale and Purchase of Securities	1
	Section 1.2	Closing	2
	ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE ISSUER	2
	Section 2.1	Capitalization	2
	Section 2.2	Private Offering; No General Solicitation	2
	Section 2.3	Organization.	3
	Section 2.5	Validity; Binding Nature	3
	Section 2.6	Financial Statements	3
	Section 2.7	Litigation	4
	Section 2.8	Ownership of Property	4
	Section 2.9	ERISA	4
	Section 2.10	Investment Company Act	5
	Section 2.11	Federal Reserve Regulations	5
	Section 2.12	Taxes, Etc	5
	Section 2.13	Solvency	5
	Section 2.14	Environmental Laws.	5
	Section 2.15	Intellectual Property	6
	Section 2.16	Labor Matters	6
	Section 2.17	Compliance with Laws	6
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS	8
	Section 3.1	Existence, Qualification and Power; Compliance with Laws	8
	Section 3.2	Authorization; No Contravention	9
	Section 3.3	Governmental Authorization	9
	Section 3.4	Binding Effect	9
	Section 3.5	Investment Matters	9
	Section 3.6	Brokerage	11
	Section 3.7	Litigation	11
	Section 3.8	Disclaimer	11
	Section 3.9	Ownership	11
	Section 3.10	Tax Status	11

 

     

     

    

 

	ARTICLE IV CONDITIONS	12
	Section 4.1	Conditions to the Several, and not Joint, Obligations of the Purchasers	12
	Section 4.2	Conditions to the Obligations of the Issuer	13
	ARTICLE V ADDITIONAL COVENANTS	13
	Section 5.1	Further Assurances	13
	Section 5.2	Transfer Restrictions	13
	Section 5.3	Expenses	13
	Section 5.4	Confidentiality	14
	Section 5.6	Ownership	15
	Section 5.7	Tax Matters.	15
	ARTICLE VI MISCELLANEOUS	16
	Section 6.1	Survival; Damages	16
	Section 6.2	Entire Agreement; Parties in Interest	16
	Section 6.3	No Recourse	16
	Section 6.4	Governing Law	17
	Section 6.5	Jurisdiction	17
	Section 6.6	Waiver of Jury Trial	17
	Section 6.7	Remedies	17
	Section 6.8	Notice	18
	Section 6.9	Amendments; Waivers	19
	Section 6.10	Counterparts	19
	Section 6.11	Assignment	19
	Section 6.12	Severability	19
	Section 6.13	Certain Issuer Acknowledgements	19
	Section 6.14	USA PATRIOT Act	20
	Section 6.15	Rights of Third Parties	20
	ARTICLE VII DEFINITIONS	20
	Section 7.1	Certain Definitions	20
	Section 7.2	Other Terms	28
	Section 7.3	Construction	28

 

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LIST OF SCHEDULES

 

	SCHEDULE I	List of Purchasers

 

LIST OF EXHIBITS

 

	EXHIBIT A	Series A Certificate of Designation
	EXHIBIT B	Ownership of Issuer Securities
	EXHIBIT C	Solvency Certificate

 

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SERIES
A SECURITIES PURCHASE AGREEMENT

 

This SERIES A SECURITIES PURCHASE
AGREEMENT (this “Agreement”), dated as of May 13, 2022, is made by and between
the Purchasers named in Schedule I hereto (the “Purchasers”) and PLBY Group, Inc., a Delaware corporation
(the “Issuer” and, together with the Purchasers and any Affiliated Transferee that becomes a party to this Agreement,
the “Parties”).

 

PRELIMINARY
STATEMENTS

 

A.            Beginning
on the date of this Agreement, the Issuer may deliver a notice to the Purchasers (the “Initial Draw Notice”)
requesting that the Purchasers purchase 25,000 authorized but unissued shares of non-convertible Series A Preferred Stock, par value
$0.0001 per share, with an initial Stated Value of $1,000.00 per share (the “Series A Preferred Shares”), on the
terms and subject to the conditions set forth in this Agreement, at a price per Preferred Share equal to the Purchase Price (as defined
below) (the “Initial Purchase”). Thereafter, at any time until the expiration of the Delayed Draw Period (as defined
herein), and from time to time, the Issuer may deliver a notice to the Purchasers (a “Delayed Draw Notice”) requesting
that the Purchasers purchase up to 25,000 Series A Preferred Shares (the “Subsequent Commitment”) in increments
of not less than 5,000 Preferred Shares or such lesser amount if less than 5,000 Preferred Shares remains of the Subsequent Commitment
(each, a “Subsequent Purchase”), at a price per Preferred Share equal to the Purchase Price. The Initial Purchase shall
be consummated (the “Initial Closing”) and any Subsequent Purchase shall be consummated (a “Subsequent Closing”
and, together with the Initial Closing, each, a “Closing”) on a Business Day specified in the Initial Draw Notice or
Delayed Draw Notice, as applicable, occurring not less than five Business Days after the date of such notice (unless, at the election
of the Company such Initial Closing occurs on May 16, 2022), subject to the terms and conditions of this Agreement.

 

B.            The
Purchasers agree, jointly and severally, in the respective percentages set forth in Schedule I hereto, to (x) purchase 25,000
Shares at the Initial Closing and (y) at any Subsequent Closing, purchase the Series A Preferred Shares in the respective
amounts as set forth in the applicable Delayed Draw Notice, and to complete a Closing on the date specified in such Initial Draw Notice
(unless, at the election of the Company such Initial Closing occurs on May 16, 2022) or Delayed Draw Notice, as applicable and the
Issuer hereby agrees to issue and sell to the Purchasers, at each Closing, the Series A Preferred Shares on the terms and subject
to the conditions set forth in this Agreement and in the Initial Draw Notice (unless, at the election of the Company such Initial Closing
occurs on May 16, 2022) or any Delayed Draw Notice, as applicable.

 

C.            The
terms of the Series A Preferred Shares are set forth in the Series A Certificate of Designation, attached here to as Exhibit A.

 

The Parties agree as follows:

 

ARTICLE I

SALE AND PURCHASE OF SECURITIES

 

Section 1.1            Sale
and Purchase of Securities.

 

(a)            Sale
and Purchase. Subject to all of the terms and conditions of this Agreement, and in reliance on the representations, warranties, covenants
and other agreements set forth herein,

 

    

     

    

 

(i) at
the Initial Closing, (x) the Issuer will issue and sell to the Purchasers the Series A Preferred Shares in connection with the
Initial Purchase for $1,000.00 per Series A Preferred Share, representing 100.00% of the initial Stated Value of each Series A
Preferred Share (the “Purchase Price”), and in aggregate, an amount equal to $25,000,000.00 and (y) each Purchaser
will, severally and not jointly, purchase such number of Series A Preferred Shares and pay the portion of the Purchase Price in accordance
with the respective percentages set forth in Schedule I hereto, by wire transfer in immediately available funds;

 

(ii) at
each Subsequent Closing, (x) the Issuer will issue and sell to the Purchasers such amount of Series A Preferred Shares as set
forth in the applicable Delayed Draw Notice, at the Purchase Price and (y) each Purchaser will, severally and not jointly,
purchase such number of Series A Preferred Shares and pay the portion of the Purchase Price in accordance with the respective percentages
set forth in Schedule I hereto, by wire transfer in immediately available funds.

 

(b)            Series A
Preferred Shares. The Series A Preferred Shares will (i) be issued at each Closing to the Purchasers fully paid, non-assessable
and free and clear of any Liens (other than restrictions on transfer set forth in the Series A Certificate of Designation or under
applicable securities laws), (ii) be registered to the Purchasers in the Issuer’s stock records, in the amounts purchased by
the Purchasers, and (iii) have the designations, rights, preferences, powers, restrictions and limitations set forth in the Series A
Certificate of Designation, attached hereto as Exhibit A.

 

(c)            Certificates.
The Board of Directors of the Issuer has determined by resolution that shares of Series A Preferred Shares will not be represented
by certificates and will be uncertificated shares.

 

Section 1.2            Closing.
Each Closing will take place remotely via the exchange of signatures, at such time set forth in the applicable Initial Draw Notice (unless,
at the election of the Company such Initial Closing occurs on May 16, 2022) or Delayed Draw Notice.

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE ISSUER

 

The Issuer represents and warrants to the Purchasers
as of the date hereof and on each Subsequent Closing that:

 

Section 2.1            Capitalization.

 

(a)            As
of the date of this Agreement (after giving effect to the filing and effectiveness of the Series A Certificate of Designation with
the Secretary of State of the State of Delaware (the “Delaware Secretary”)), the authorized capital stock of the Issuer
will consist of (i) 5,000,000 shares of Preferred Stock, par value $0.0001 per share, (ii) 50,000 Series A Preferred Shares
and (iii) 150,000,000 shares of Common Stock, par value $0.0001 per share (the “Common Stock”). As of the date
hereof, 45,221,175 shares of Common Stock will be issued and outstanding.

 

(b)            When
issued and sold against receipt of the consideration therefor, the Series A Preferred Shares will be duly authorized, validly issued,
fully paid and non-assessable and free and clear of any Liens (other than restrictions on transfer set forth in the Series A Certificate
of Designation or under applicable securities laws).

 

Section 2.2            Private
Offering; No General Solicitation.

 

(a)            Assuming
the accuracy of the representations and warranties of the Purchasers set forth in ARTICLE III, it is not necessary in connection
with the issue of the Series A Preferred Shares to the Purchasers in the manner contemplated by this Agreement, to register the Series A
Preferred Shares under the Securities Act.

 

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(b)            None
of the Issuer or its Affiliates or any Person acting on any of their behalf (other than the Purchasers and their respective Affiliates,
as to whom the Issuer makes no representation or warranty) directly or indirectly, has offered, sold or solicited any offer to buy, and
will not, directly or indirectly, offer, sell or solicit any offer to buy, any security of a type or in a manner which would be integrated
with the issue of the Series A Preferred Shares (other than any issuance of Series A Preferred Shares on any Closing Date).
None of the Issuer or its Affiliates or any Person acting on any of their behalf (other than the Purchasers and their respective assignees,
as to whom the Issuer makes no representation or warranty) has engaged or will engage in any form of general solicitation or general advertising
(within the meaning of Rule 502(c) of Regulation D or in any matter involving a public offering within the meaning of Section 4(a)(2) of
the Securities Act) in connection with the offering of the Series A Preferred Shares.

 

(c)            The
Series A Preferred Shares will not, on the date they are issued, be of the same class as securities listed on a national securities
exchange registered under Section 6 of the Exchange Act or quoted on a U.S. automated interdealer quotation system.

 

Section 2.3            Organization.
Each Group Party is validly existing and in good standing under the laws of the jurisdiction of its organization; and each Group Party
is duly qualified to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification
is required, except for such jurisdictions where the failure to so qualify has not had, and would not reasonably be expected to have,
a Material Adverse Effect.

 

Section 2.4            Authorization;
No Conflict.  The Issuer is duly authorized to execute and deliver the Preferred Agreements, and the Issuer is duly authorized
to perform its obligations under the Preferred Agreements. The execution, delivery and performance by the Issuer of this Agreement does
not and will not (a) require any consent or approval of any Governmental Authority (other than any consent or approval which has
been obtained and is in full force and effect), or (b) conflict with (i) any provision of applicable law in any material respects,
(ii) the charter, by-laws or other organizational documents of any Group Party, or (iii) any agreement, indenture, instrument
or other document, or any judgment, order or decree, which is binding upon any Group Party or any of their respective properties, except
in the case of this clause (iii), for such conflicts that would not reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect.

 

Section 2.5            Validity;
Binding Nature. This Agreement is the legal, valid and binding obligation of the Issuer, enforceable against the Issuer
in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors’ rights
generally and to general principles of equity.

 

Section 2.6            Financial
Statements.

 

(a)            The
Issuer has filed or furnished, as applicable, all forms, reports, schedules and other statements required to be filed or furnished by
it with the SEC under the Exchange Act since January 1, 2022 (collectively, the “Issuer Reports”).

 

(b)            As
of its respective date, and, if amended, as of the date of the last such amendment, each Issuer Report complied in all material respects
as to form with the applicable requirements of the Exchange Act, and any rules and regulations promulgated thereunder applicable
to such Issuer Report. As of its respective date, and, if amended, as of the date of the last such amendment, and, except to the extent
that information contained in any Issuer Report has been revised or superseded by a later filed Issuer Report filed and made publicly
available prior to the date of this Agreement, no Issuer Report contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which
they were made, not misleading.

 

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(c)            Each
of the consolidated statements of financial position, and the related consolidated statements of income, changes in equity and cash flows,
included in the Issuer Reports filed with the SEC under the Securities Act or Exchange Act, as applicable, (A) have been prepared
from, and are in accordance with, the books and records of the Issuer and its subsidiaries, (B) fairly present in all material respects
the consolidated financial position of the Issuer and its subsidiaries as of the dates shown and the results of the consolidated operations,
changes in equity and cash flows of the Issuer and its subsidiaries for the respective fiscal periods or as of the respective dates therein
set forth, subject, in the case of any unaudited financial statements, to normal recurring year-end audit adjustments, and (C) have
been prepared in accordance with GAAP consistently applied during the periods involved, except as otherwise set forth therein or in the
notes thereto, and in the case of unaudited financial statements except for the absence of footnote disclosure.

 

Section 2.7            Litigation.
Except as disclosed in the reports that the Company is required to file with the SEC pursuant to Section 13(a) or 15(d) of
the Exchange Act, there are no Adverse Proceedings, individually or in the aggregate, that could reasonably be expected to have a Material
Adverse Effect, and neither the Issuer nor any of its Subsidiaries (a) is in violation of any applicable laws (including Environmental
Laws) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (b) is subject to
or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any federal,
state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, individually
or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

Section 2.8            Ownership
of Property. Each Group Party has good title to each of the properties and assets material to its business, and all such
properties and assets are free and clear of Liens except Permitted Liens (as defined in the Senior Credit Agreement) and except as would
not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

Section 2.9            ERISA.
Except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:

 

(a)            the
Issuer, each of its Subsidiaries and each of their respective ERISA Affiliates are in compliance with all applicable provisions and requirements
of ERISA and the Internal Revenue Code and the regulations and published interpretations thereunder with respect to each Employee Benefit
Plan.

 

(b)            each
Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service indicating that such Employee Benefit Plan is so qualified and, to the knowledge
of the Issuer, nothing has occurred subsequent to the issuance of such determination letter which would cause such Employee Benefit Plan
to lose its qualified status.

 

(c)            no
liability under Title IV of ERISA with respect to any Pension Plan has been or is reasonably expected to be incurred by the Issuer, any
of its Subsidiaries or any of their ERISA Affiliates.

 

(d)            no
ERISA Event has occurred or is reasonably expected to occur.

 

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(e)            the
present value of the aggregate benefit liabilities under each Pension Plan sponsored, maintained or contributed to by the Issuer, any
of its Subsidiaries or any of their ERISA Affiliates (determined as of the end of the most recent plan year on the basis of the actuarial
assumptions specified for funding purposes in the most recent actuarial valuation for such Pension Plan), did not exceed the aggregate
current value of the assets of such Pension Plan.

 

(f)            as
of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the Issuer, its Subsidiaries
and their respective ERISA Affiliates do not have any potential liability for a complete withdrawal from such Multiemployer Plan (within
the meaning of Section 4203 of ERISA), based on information available pursuant to Section 4221(e) of ERISA.

 

(g)            each
Foreign Plan which is required under all applicable laws, rules, regulations and orders of any Governmental Authority to be funded satisfies
in all material respects any applicable funding standard under all applicable laws, rules, regulations and orders of any Governmental
Authority.

 

Section 2.10          Investment
Company Act. No Group Party is an “investment company,” or an “affiliated person” of, or a “promoter”
or “principal underwriter” for, an “investment company,” within the meaning of the Investment Company Act of 1940,
and neither the sale of the Series A Preferred Shares, nor the application of the proceeds or repayment thereof by the Group Parties,
nor the consummation of the other transactions contemplated hereby, will require any Group Party or any other Group Party to register
as an “investment company” under the Investment Company Act of 1940.

 

Section 2.11          Federal
Reserve Regulations. No Group Party is engaged principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock.

 

Section 2.12          Taxes,
Etc. All Tax returns and reports of the Issuer and its Subsidiaries required to be filed by any of them have been timely
filed, and all Taxes shown on such tax returns to be due and payable, and all other taxes, assessments, fees and other governmental charges
upon any of the Issuer and its Subsidiaries and upon any of their respective properties, assets, income, businesses and franchises which
are due and payable have been paid when due and payable, except in each case to the extent that the failure to so file or pay would not
reasonably be expected to have a Material Adverse Effect. Except for Tax assessments that would not reasonably be expected to have a Material
Adverse Effect, there is no proposed Tax assessment in writing against the Issuer or any of its Subsidiaries which is not being actively
contested by the Issuer or such Subsidiary in good faith and by appropriate proceedings; provided, such reserves or other appropriate
provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor.

 

Section 2.13          Solvency.
Both before and after giving effect to the sale of Series A Preferred Shares, the disbursement of the proceeds of such sale, the
use of the proceeds of all sales and the payment of all transaction costs in connection with the foregoing, the Issuer and its Subsidiaries,
on a consolidated basis, are Solvent.

 

Section 2.14          Environmental
Laws. Neither the Issuer nor any of its Subsidiaries nor any of their respective Facilities (including any facilities of
any of their predecessors) or operations are subject to any outstanding written order, consent decree or settlement agreement with any
Person relating to any Environmental Law, any Environmental Claim, or any Hazardous Materials Activity that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect. Except as could not reasonably be expected to have a Material Adverse
Effect, neither the Issuer nor any of its Subsidiaries has received any letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9604) or any comparable state law. There are and,
to each of the Issuer’s and its Subsidiaries’ knowledge, have been, no conditions, occurrences, or Hazardous Materials Activities
which could reasonably be expected to form the basis of an Environmental Claim against the Issuer or any of its Subsidiaries that, individually
or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Neither the Issuer nor any of its Subsidiaries nor,
to the Issuer’s knowledge, any predecessor of the Issuer or any of its Subsidiaries has filed any notice under any Environmental
Law indicating past or present treatment of Hazardous Materials at any Facility (including any facilities of any of their predecessors),
and none of the Issuer’s or any of its Subsidiaries’ operations involves the generation, transportation, treatment, storage
or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect. Compliance with all current or reasonably foreseeable future requirements
pursuant to or under Environmental Laws could not be reasonably expected to have, individually or in the aggregate, a Material Adverse
Effect. No event or condition has occurred or is occurring with respect to the Issuer or any of its Subsidiaries relating to any Environmental
Law, any Release of Hazardous Materials, or any Hazardous Materials Activity which individually or in the aggregate has had, or could
reasonably be expected to have, a Material Adverse Effect.

 

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Section 2.15          Intellectual
Property. each of the Issuer and its Subsidiaries owns or licenses or otherwise has the right to use all Patents, Patent
applications, Trademarks, Trademark applications, service marks, trade names, Copyrights, Copyright applications and other Intellectual
Property rights (in each case as defined in the Senior Credit Agreement) that are reasonably necessary in all material respects for the
operation of its business, without infringement upon or conflict with the rights of any other Person with respect thereto, and all such
Intellectual Property is subsisting and, to the knowledge of such party, valid and enforceable, has not been abandoned, and is not subject
to any outstanding order, judgment or decree restricting its use or adversely affecting such party’s rights thereto, except, in
each case, for such failure to possess such rights, infringements, conflicts, nonsubsistence, invalidity, unenforceability, abandonment
or outstanding orders, judgments or decrees, which, individually or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect. To the knowledge of any of the Issuer or its Subsidiaries, no slogan or other advertising device, product, process, method,
substance or other Intellectual Property or goods bearing or using any Intellectual Property presently contemplated to be sold by or employed
by any of the Issuer or its Subsidiaries infringes any Patent, Trademark, service mark, trade name, Copyright, license or other Intellectual
Property owned by any other Person in any material respect, and no claim or litigation regarding any of the foregoing is pending or, to
the knowledge of the Issuer, threatened in writing, except for such infringements and conflicts which could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 2.16          Labor
Matters. Neither the Issuer nor any of its Subsidiaries is engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Effect. There is (a) no unfair labor practice complaint pending or, to the knowledge of the Issuer,
threatened against the Issuer or any of its Subsidiaries before the National Labor Relations Board and no grievance or arbitration proceeding
arising out of or under any collective bargaining agreement to which the Issuer or any of its Subsidiaries is a party is pending or, to
the knowledge of the Issuer, threatened against the Issuer or any of its Subsidiaries, (b) no strike or work stoppage in existence
or, to the knowledge of the Issuer, threatened involving the Issuer or any of its Subsidiaries, and (c) to the knowledge of the Issuer,
no union representation question existing with respect to the employees of the Issuer or any of its Subsidiaries and, to the knowledge
of the Issuer, no union organization activity that is taking place, except (with respect to any matter specified in clause (a), (b) or
(c) above, either individually or in the aggregate) as is not reasonably likely to have a Material Adverse Effect.

 

Section 2.17          Compliance
with Laws.

 

(a)            Generally.
Each of the Issuer and its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all Governmental Authorities, in respect of the conduct of its business and the ownership of its property (including compliance
with all applicable Environmental Laws with respect to any Real Estate Asset or governing its business and the requirements of any permits
issued under such Environmental Laws with respect to any such Real Estate Asset or the operations of the Issuer or any of its Subsidiaries),
except such non-compliance that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

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(b)            Anti-Terrorism
Laws, Etc. Without limiting the foregoing, no Group Party (i) is in violation in any material respect of any Anti-Terrorism Law,
(ii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts
to violate, any of the prohibitions set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. No Group Party (x) conducts
any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person,
or (y) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to Executive
Order No. 13224, any similar executive order or other Anti-Terrorism Law. No part of the proceeds of the sale of any Series A
Preferred Shares will be used for any payments to any Governmental Authority or employee, political party, official of a political party,
candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain
any improper advantage, in violation of the FCPA. The Issuer has established procedures and controls which it reasonably believes are
adequate (and otherwise comply with applicable law) to ensure that the Group Parties are and will continue to be in compliance with all
applicable current and future Anti-Terrorism Laws and U.S. economic sanctions laws.

 

(c)            Anti-Corruption
Laws, Etc.

 

(i)            Since
January 1, 2022, there has been no action taken by any Group Party or, to the knowledge of the Issuer, any officer, director, or
employee, or any agent, representative, sales intermediary, or other third party of any Group Party, in each case, acting on behalf of
any Group Party in violation of any applicable Anti-Corruption Law. Since January 1, 2022, none of the Group Parties has been convicted
of violating any Anti-Corruption Laws or, to the knowledge of the Issuer, subjected to any investigation by a Governmental Authority for
violation of any applicable Anti-Corruption Laws. There is no material suit, litigation, arbitration, claim, audit, action, proceeding
or investigation pending or, to the knowledge of any Executive Officer of the Issuer, threatened against or affecting the Group Parties
or any of their Subsidiaries related to any applicable Anti-Corruption Law, before or by any Governmental Authority. Since January 1,
2022, none of the Group Parties has conducted or initiated any internal investigation or made a voluntary, directed, or involuntary disclosure
to any Governmental Authority with respect to any alleged act or omission arising under or relating to any noncompliance with any Anti-Corruption
Law. Since January 1, 2022, none of the Group Parties has received any written notice, request or citation for any actual or potential
noncompliance in any material respect with any of the foregoing.

 

(ii)           To
the actual knowledge of the Group Parties after making due inquiry, none of the Group Parties has, since January 1, 2022, directly
or indirectly offered, promised, given, paid or authorized the offer, promise, giving or payment of anything of value to a Governmental
Official or a commercial counterparty for the purposes of: (1) influencing any act, decision or failure to act by such Governmental
Official in his or her official capacity or such commercial counterparty, (2) inducing a Governmental Official to do or omit to do
any act in violation of the Governmental Official’s lawful duty, or (3) inducing a Governmental Official or a commercial counterparty
to use his or her influence with a government or instrumentality to affect any act or decision of such government or entity; in each case
in order to obtain, retain or direct business or to otherwise secure an improper advantage in violation of any applicable law or regulation
or which would cause any holder to be in violation of any law or regulation applicable to such holder.

 

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(d)            Foreign
Assets Control Regulations and Anti-Money Laundering. Each Group Party is and will remain in compliance in all material respects with
all U.S. economic sanctions laws, executive orders and implementing regulations as promulgated by OFAC, and all applicable anti-money
laundering and counter-terrorism financing provisions of the Bank Secrecy Act and all regulations issued pursuant to it. No Group Party
(i) is a Person designated by the U.S. government on the list of the Specially Designated Nationals and Blocked Persons (the “SDN
List”) with which a U.S. Person cannot deal or otherwise engage in business transactions, (ii) is a Person who is otherwise
the target of U.S. economic sanctions laws such that a U.S. Person cannot deal or otherwise engage in business transactions with such
Person or (iii) is controlled by (including without limitation by virtue of such Person being a director or owning voting shares
or interests), or acts, directly or indirectly, for or on behalf of, any Person or entity on the SDN List or a foreign government that
is the target of U.S. economic sanctions prohibitions such that the entry into, or performance under, this Agreement or any other Preferred
Agreement would be prohibited under U.S. law. None of the Group Parties has been notified that its name appears or may in the future appear
on a state list of Persons that engage in investment or other commercial activities in any country that is subject to U.S. economic sanctions
laws.

 

Section 2.18          No
Material Adverse Changes. Since December 31, 2021, there has been no change, event, occurrence, effect, fact, circumstance
or condition that has had or would reasonably be expected to have a Material Adverse Effect.

 

Section 2.19         Brokerage.
There are no broker fees payable by or on behalf of the Issuer or its Subsidiaries in connection with the sale of the Series A Preferred
Shares.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

 

Each Purchaser severally,
and not jointly, represents and warrants to the Issuer as of the date hereof that:

 

Section 3.1            Existence,
Qualification and Power; Compliance with Laws. Such Purchaser,

 

(a)            if
an entity, is a Person duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation
or organization (to the extent such concept exists in such jurisdiction);

 

(b)            has
all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease
its assets and carry on its business as currently conducted and (ii) execute, deliver and perform its obligations under the Preferred
Agreements;

 

(c)            if
an entity, is duly qualified and in good standing (to the extent such concept exists in such jurisdiction) under the Laws of each jurisdiction
where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; and

 

(d)            is
in compliance with all applicable Laws, writs, injunctions and orders;

 

except in each case, other than with respect to
clauses (a) and (b)(ii), to the extent that failure to do so would not reasonably be expected to result in a material adverse effect
on such Purchaser’s ability to perform its obligations hereunder.

 

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Section 3.2            Authorization;
No Contravention.

 

(a)            If
such Purchaser is an entity, the execution, delivery and performance by such Purchaser has been duly authorized by all necessary corporate,
limited liability, partnership or other organizational action of such Purchaser.

 

(b)            The
execution, delivery and performance by the Issuer of this Agreement will not, if such Purchaser is an entity, contravene the terms of
any of its Organizational Documents.

 

Section 3.3            Governmental
Authorization. No material approval, consent, exemption, authorization, or other action by, or notice to, or filing with,
any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against,
such Purchaser of this Agreement or any other Preferred Agreement, except for,

 

(a)            the
approvals, consents, exemptions, authorizations, actions, notices and filings that have been duly obtained, taken, given or made and are
in full force and effect; and

 

(b)            those
approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make would not
reasonably be expected to result in a material adverse effect on such Purchaser’s ability to perform its obligations hereunder.

 

Section 3.4            Binding
Effect. This Agreement has been duly executed and delivered by such Purchaser. This Agreement constitutes a legal, valid
and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except as such enforceability
may be limited by Debtor Relief Laws and by general principles of equity and principles of good faith and fair dealing.

 

Section 3.5            Investment
Matters.

 

(a)            Such
Purchaser is, and was at the time such Purchaser was offered the Series A Preferred Shares, (i) a qualified institutional buyer
(within the meaning of Rule 144A(a)(1) under the Securities Act), (ii) an institutional accredited investor (as such term
is defined in Rule 501(a)(1), (2), (3), (7) or (8) of Regulation D) or (iii) a non-U.S. Person (as such term is defined
in Regulation S) and will not acquire the Series A Preferred Shares for the account or benefit of any U.S. Person (as such term is
defined in Regulation S).

 

(b)            Such
Purchaser is acquiring the Series A Preferred Shares for its own account, for investment purposes only and not with a view to any
distribution thereof that would not otherwise comply with the Securities Act.

 

(c)            Such
Purchaser understands that (i) the Series A Preferred Shares have not been registered under the Securities Act and the Series A
Preferred Shares are being issued by the Issuer in transactions exempt from the registration requirements of the Securities Act and (ii) all
or any part of the Series A Preferred Shares may not be offered or sold except pursuant to effective registration statements under
the Securities Act or pursuant to applicable exemptions from registration under the Securities Act and in compliance with applicable state
Laws.

 

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(d)           Such
Purchaser understands that the exemption from registration afforded by Rule 144 promulgated under the Securities Act (“Rule 144”)
(the provisions of which are known to such Purchaser) depends on the satisfaction of various conditions, which may not be satisfied, and
that, if satisfied, Rule 144 may afford the basis for sales only in limited amounts. Such Purchaser understands that no public market
now exists for the Series A Preferred Shares, and that the Issuer has made no assurances that a public market will ever exist for
the Series A Preferred Shares.

 

(e)           Such
Purchaser did not employ any broker or finder in connection with the transactions contemplated in this Agreement and no fees or commissions
are payable to such Purchaser, except as otherwise expressly provided for in this Agreement.

 

(f)            No
portion of the funds or assets that will be used by such Purchaser to pay its respective portion of the Purchase Price or to acquire or
hold the Series A Preferred Shares, constitute or will constitute the assets of any (i) employee benefit plan subject to Title
I of ERISA, (ii) plan described in and subject to Section 4975 of the IRC (each such employee benefit plan and plan described
in clauses (i) and (ii) referred to herein as an “ERISA Plan”), (iii) plan, account or other arrangement
subject to provisions under any other federal, state, local, non-U.S. or other laws or regulations that are similar to the fiduciary responsibility
or prohibited transaction provisions of Title I of ERISA or Section 4975 of the IRC that could cause the underlying assets of the
Issuer to be treated as assets of such plan, account or arrangement (a “ Similar Law Plan”) or (iv) entity whose
underlying assets are deemed to include “plan assets” of any such ERISA Plan or Similar Law Plan pursuant to Section 3(42)
of ERISA and any regulations that may be promulgated thereunder or otherwise.

 

(g)           Such
Purchaser has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits
and risks of the prospective investment in the Series A Preferred Shares and has so evaluated the merits and risks of such investment.
Such Purchaser understands that it must bear the economic risk of its investment in the Series A Preferred Shares indefinitely and
is able to bear such risk and is able to afford a complete loss of such investment.

 

(h)           Such
Purchaser acknowledges that it has reviewed all materials such Purchaser deemed necessary for the purpose of making an investment decision
with respect to the Series A Preferred Shares, including information regarding the Transactions, and such Purchaser has evaluated
the risks of investing in the Series A Preferred Shares and understands there are substantial risks of loss incidental to the investment
and has determined that it is a suitable investment for such Purchaser. Such Purchaser has had a reasonable opportunity to ask questions
of and receive answers concerning the Group Parties and all such questions have been answered to such Purchaser’s satisfaction.
The determination of such Purchaser to acquire any Series A Preferred Shares pursuant to this Agreement has been made by such Purchaser
independent of any such answers given or other statements made by the Group Companies and their respective Affiliates and representatives.

 

(i)            Such
Purchaser has had the opportunity to consult with its own tax and other advisors with respect to the consequences to such Purchaser of
the purchase, receipt or ownership of the Series A Preferred Shares, including the tax consequences under federal, state, local and
other income tax laws of the United States or any other country and the possible effects of changes in such tax laws. Such Purchaser acknowledges
that none of the Issuer, its Subsidiaries, Affiliates, successors, beneficiaries, heirs, and assigns and its and their past and present
directors, managers, officers, employees, and agents (including, without limitation, their attorneys) makes or has made any representation
or warranties to such Purchaser regarding the consequences to such Purchaser of the purchase, receipt or ownership of the Series A
Preferred Shares or the consequences of the transactions contemplated by this Agreement, including the tax consequences under federal,
state, local and other tax laws of the United States or any other country and the possible effects of changes in such tax laws. Such Purchaser
has had an opportunity to consult with independent legal counsel regarding his, her or its rights and obligations under this Agreement
and such Purchaser fully understands the terms and conditions contained herein.

 

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(j)            The
office or offices of each Purchaser in which its principal place of business is identified in the address or addresses of such Purchaser
set forth on Schedule I.

 

Section 3.6            Brokerage
Fees. Such Purchaser is not a party to any contract, agreement or understanding with any person (other than this Agreement) that would
give rise to a valid claim against any Group Party for a brokerage fee, finder’s fee or like payment in connection with the purchase
of the Series A Preferred Shares.

 

Section 3.7            Litigation.
No litigation (including derivative actions), arbitration proceeding or governmental investigation or proceeding is pending or, to such
Purchaser’s knowledge, threatened in writing against such Purchaser which would reasonably be expected to result in a material adverse
effect on such Purchaser’s ability to perform its obligations hereunder and the other Preferred Agreements to which it is a party.

 

Section 3.8            Disclaimer.
Such Purchaser has not relied, is not relying and will not at any time rely on any communication (written or oral) of the Group Parties
or any of their Affiliates or any of their respective directors, managers, officers, employees, agents, legal counsel, accountants, investment
bankers, finders or other advisors or representatives of any of the foregoing (the “Issuer Parties”), as investment
advice or as a recommendation to acquire the Series A Preferred Shares, it being understood that information and explanations related
to the terms and conditions of the Series A Preferred Shares, the Preferred Agreements or any other document or information provided
in connection with any of the foregoing shall not be considered investment advice or a recommendation to acquire the Series A Preferred
Shares. Such Purchaser confirms that no Issuer Party has given any guarantee or representation as to the potential success, return, effect
or benefit (either legal, regulatory, tax, financial, accounting or otherwise) of an investment in the Series A Preferred Shares.
In deciding to acquire the Series A Preferred Shares, such Purchaser has not relied, is not relying and will not at any time rely
on the advice or recommendations of any Issuer Party and such Purchaser has made its own independent decision that the investment in the
Series A Preferred Shares is suitable and appropriate for such Purchaser. Such Purchaser acknowledges that no Issuer Party has made,
is making, or will make, and such Purchaser has not relied, is not relying, and will not at any time rely on, any representation or warranty
whatsoever (express or implied) except as may be expressly set forth in the Preferred Agreements, and that to the extent any Issuer Party
has made or purported to make any such representation or warranty they are all hereby disclaimed by the Issuer and waived by such Purchaser.
Without limiting the generality of the foregoing, such Purchaser acknowledges that it, together with its advisors, has made its own investigation
of the Group Parties, and has not relied, is not relying and will not at any time rely on any implied warranties or upon any representation
or warranty whatsoever as to the prospects (financial or otherwise) or the viability or likelihood of success of the business of the Group
Parties contained in any information (written or oral) provided by any Issuer Party, except as expressly covered by a representation and
warranty contained in ARTICLE II.

 

Section 3.9            Ownership
of Issuer Securities. Such Purchaser, together with any of its subsidiaries or its affiliates, is the Economic Owner of
such number of share of Common Stock of the Issuer and any other securities convertible or exchangeable into shares of Common Stock of
the Issuer set forth opposite its name in Exhibit B and has no agreement, arrangement or understanding with any person to
acquire Economic Ownership of such person’s shares of Common Stock of the Issuer (other than pursuant to the Preferred Agreements).

 

Section 3.10          Tax
Status. Such Purchaser is a United States person as defined in Section 7701 of the Internal Revenue Code.

 

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ARTICLE IV

CONDITIONS

 

Section 4.1            Conditions
to the Several, and not Joint, Obligations of the Purchasers.

 

(a)            The
purchase on each Closing Date of the Series A Preferred Shares by the Purchasers shall be subject to the satisfaction or waiver by
the Purchasers of the following conditions:

 

(i)            The
Purchasers shall have received, and the Issuer shall have delivered, at the Initial Closing, a customary officer’s certificate certifying
that the conditions specified in Section 4.1(a)(ii) have been satisfied.

 

(ii)            (x) The
representations and warranties set forth in ARTICLE II shall be true and correct in all material respects (provided that any
such representations or warranties that are qualified by materiality, material adverse effect or similar language shall be true and correct
in all respects) as though such representations and warranties had been made on and as of the applicable Closing Date (except to the extent
that such representation or warranty refers to an earlier date, then such representation or warranty shall be true and correct in all
material respects as of such earlier date) and (y) the Issuer shall have performed and complied in all material respects with all
agreements and obligations required by this Agreement to be performed or complied with by the Issuer on or prior to such applicable Closing
Date.

 

(iii)            The
Purchasers shall have received at the Initial Closing customary evidence of authority, good standing certificate (to the extent applicable)
in the jurisdiction of organization of the Issuer and a solvency certificate, substantially in the form set forth in Exhibit C,
from the chief financial officer, chief accounting officer or other officer of the Issuer (or, at the sole option and discretion of the
Issuer, a third party opinion as to the solvency of the Issuer and its subsidiaries on a consolidated basis issued by a nationally recognized
firm).

 

(iv)            The
Purchasers shall have received at the Initial Closing an opinion addressed to the Purchasers from Latham & Watkins L LP, legal
counsel to the Company, dated as of the Initial Closing.

 

(v)            On
the date of this Agreement, the Purchasers (or their counsel) shall have received a counterpart of this Agreement (which may include a
copy transmitted by facsimile or other electronic method).

 

(vi)            The
Issuer shall have filed, prior to the Initial Closing, the Series A Certificate of Designation in the form of Exhibit A
hereto with the Delaware Secretary.

 

(vii)            All
fees and reasonable and documented out-of-pocket expenses of the Purchasers, to the extent invoiced at least three (3) Business Days
prior to the date of the Initial Closing (except as otherwise reasonably agreed by the Issuer) and required to be paid in connection with
the Initial Closing.

 

(viii)            The
Issuer shall have paid the relevant Fees to the Purchasers of the Series A Preferred Shares in the respective percentages
set forth in Schedule I hereto on the applicable Closing Date, which may, at the election of the Purchasers, be withheld from the
applicable aggregate Purchase Price of the Series A Preferred Shares.

 

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(ix)            Ben
Kohn shall be the Chief Executive Officer of the Issuer as of the Initial Closing.

 

Section 4.2            Conditions
to the Obligations of the Issuer.

 

(a)            The
issue and sale on each Closing Date of the Series A Preferred Shares by the Issuer shall be subject to the receipt by the Issuer
of a properly completed IRS Form W-9 (and any applicable successor form reasonably requested by the Issuer) from each Purchaser.

 

ARTICLE V

ADDITIONAL COVENANTS

 

Section 5.1            Further
Assurances. The Parties will execute and deliver such customary documents and other customary papers and take such further
actions as may be reasonably required to carry out the provisions hereof and the transactions contemplated hereby.

 

Section 5.2             Transfer
Restrictions.

 

(a)            The
shares of the Series A Preferred Shares may not be Transferred except pursuant to a Permitted Transfer. Any Holder wishing to complete
a Permitted Transfer shall (i) notify the Issuer in writing reasonably in advance of such Transfer and (ii) provide, prior to
and as a condition to such Transfer, such evidence to the Issuer as the Issuer may reasonably request to confirm that such transfer is
a Permitted Transfer.

 

(b)            In
the case of a Permitted Transfer, the Issuer will cooperate with such Holder (and any other applicable Holder) in connection with such
Transfer and the Issuer will recognize and register on its books any such Transfer that is a Permitted Transfer. Any Transfer of Series A
Preferred Shares other than in a Permitted Transfer made in compliance with the terms of this Agreement shall be null and void, ab initio,
and of no effect.

 

(c)            At
the request of a Holder in connection with a Permitted Transfer to “qualified institutional buyers” (within the meaning of
Rule 144A of the Securities Act) or institutional accredited investor (as such term is defined in Rule 501(a)(1), (2), (3),
(7) or (8) of Regulation D) without registration under the Securities Act, the Issuer will agree to, while the Series A
Preferred Shares remain outstanding and constitute “restricted securities” (within the meaning of Rule 144(a)(3) under
the Securities Act), during any period in which the Issuer is not subject to and in compliance with Section 13 or 15(d) of the
Exchange Act and not exempt from reporting under Rule 12g3 2(b) under the Exchange Act, furnish to Holders and prospective purchasers
of the Series A Preferred Shares designated by Holders (provided that they are not competitors (as determined in good faith by the
Issuer) of the Issuer and its Subsidiaries), upon the request of such Holders or such prospective purchasers, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

 

(d)            Notwithstanding
any other provisions of this Section 5.2, no Transfer of Series A Preferred Stock may be made unless: (i) in accordance
with Rule 144 or Rule 144A; or (ii) in the opinion of counsel (who may be counsel for the Issuer ), reasonably satisfactory
in form and substance to the Board of Directors and counsel for the Issuer (which opinion may be waived, in whole or in part, at the discretion
of the Board of Directors), such Transfer would not require registration under applicable federal securities laws. Such opinion of counsel
shall be delivered in writing to the Issuer prior to the date of the Transfer.

 

Section 5.3            Expenses.
(a) The Issuer will reimburse the Holders on demand for all reasonable and documented out-of-pocket legal and tax advisory due diligence
expenses, but limited in the case of legal fees and expenses, to the reasonable and documented out-of-pocket fees, charges and disbursements
of one counsel for the Purchasers and if reasonably necessary, a single local counsel to the Purchasers in each relevant material jurisdiction
(which may be a single local counsel acting in multiple jurisdictions), incurred in connection with the preparation, execution and delivery
of this Agreement and the Series A Certificate of Designation and any related documentation and (b) all reasonable and documented
out-of-pocket expenses incur red by the Holders (but limited, in the case of legal fees and expenses, to the actual reasonable and documented
out-of-pocket fees, disbursements and other charges of one firm of outside counsel to all such Persons taken as a whole and, if necessary,
of one local counsel in any relevant material jurisdiction to all such Persons, taken as a whole) in connection with the enforcement
of their respective rights in connection with this Agreement and the Series A Certificate of Designation and any related documentation
or in connection with the redemption or repayment of the Series A Preferred Stock. Except to the extent required to be paid on a
Closing Date, all amounts due under this Section 5.3 shall be payable by the Company within 30 days of receipt by the Company of
an invoice setting forth such expenses in reasonable detail, together with backup documentation supporting the relevant reimbursement
request.

 

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Section 5.4            Confidentiality.

 

(a)            No
Holder shall use at any time any Confidential Information, except in connection with its investment in the Issuer and as set forth herein.
Each Holder shall also keep the Confidential Information confidential and shall not disclose it or cause or permit its Representatives
to disclose it, except (i) as required by applicable law, regulation or legal process or in response to any inquiry from, or upon
the request or demand of, a Governmental Authority having jurisdiction over such Holder, and only after compliance with Section 5.4(b) and
(ii) that it may disclose the Confidential Information or portions thereof to those of its Representatives who need to know such
information in connection with the investment by such Holder in the Issuer; provided that such Representatives (x) are informed of
the confidential and proprietary nature of the Confidential Information and (y) have agreed to maintain the confidentiality of the
Confidential Information in a manner consistent with the provisions of this Section 5.4. Each Holder shall be responsible
for any breach of this Section 5.4 by its Representatives. Notwithstanding anything herein to the contrary, (A) each
Holder and each Representative thereof may disclose to any and all Persons, without limitation of any kind, the tax treatment, tax structure
or tax strategies of, and the tax strategies relating to, the Issuer and the Transactions and all materials of any kind (including opinions
and other tax analyses) that are provided to such Holder or Representative thereof relating to such tax treatment, tax structure, or tax
strategies, (B) each Holder that is an investment fund may disclose Confidential Information (subject to confidentiality restrictions
at least as restrictive as set forth herein) relating directly to its investment in the Issuer on a confidential basis to its and its
Affiliates’ investors, limited partners so long as they are under similar confidential duties to such Holder, or prospective investors
in connection with its ordinary course reporting and fundraising activities, (C) each Holder may disclose Confidential Information
to other Holders or as required in any legal proceeding initiated by the Holder to enforce its rights under this Agreement, (D) each
Holder may disclose Confidential Information (subject to confidentiality restrictions at least as restrictive as set forth herein)to any
nationally recognized rating agency or investor of a Holder that requires access to information about a Holder’s investment portfolio
in connection with ratings issued or investment decisions with respect to such Holder and (E) each Holder may disclose Confidential
Information to prospective purchasers (subject to confidentiality restrictions at least as restrictive as set forth herein)in connection
with a Permitted Transfer. The provisions of this Section 5.4 shall apply to all Holders for so long as such Person holds
any Series A Preferred Shares.

 

(b)            If
any Holder or Representative thereof becomes legally compelled (including by deposition, interrogatory, request for documents, subpoena,
civil investigative demand or similar process) to disclose any of the Confidential Information, such Holder or Representative thereof
shall provide the Issuer with prompt and, if possible, prior written notice of such requirement to disclose such Confidential Information,
to the extent such notice is legally permissible. Upon receipt of such notice, the Issuer may seek a protective order or other appropriate
remedy. If such protective order or other remedy is not obtained, such Holder and its Representatives shall disclose only that portion
of the Confidential Information which is legally required to be disclosed (as determined in good faith by counsel to such Holder) and
shall take all reasonable steps to preserve the confidentiality of the Confidential Information. In addition, neither such Holder or its
Representatives shall oppose any action (and such Holder and its Representatives shall, if and to the extent requested by the Issuer and
legally permissible to do so, cooperate with and assist the Issuer, at the Issuer’s expense and on a reasonable basis, in any reasonable
action) by the Issuer to obtain an appropriate protective order or other reliable assurance that confidential treatment shall be accorded
the Confidential Information.

 

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Section 5.5            Indemnification
by the Issuer. The Issuer agrees to indemnify each Purchaser and its Representatives (collectively, “Purchaser
Related Parties” and with the Purchasers, each, an “Indemnitee”) from, and hold each of them harmless against,
any and all actions, suits, proceedings (including any investigations, litigation or inquiries), demands, and causes of action, and, in
connection therewith, and promptly upon demand, pay or reimburse each of them for all costs, losses, liabilities, damages, or expenses
of any kind or nature whatsoever, including, the reasonable fees and disbursements of counsel and all other reasonable expenses incurred
in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or
involve any of them as a result of, arising out of, or in any way related to the breach of any of the representations, warranties or covenants
of the Issuer contained herein (collectively, “Indemnified Liabilities”), provided, that the Issuer shall have no obligation
to any Indemnitee hereunder with respect to (i) any Indemnified Liabilities to the extent such Indemnified Liabilities arise from
the gross negligence or willful misconduct of such Indemnitee, in each case, as determined by a final, non-appealable judgment of a court
of competent jurisdiction or (ii) claims brought by an Indemnitee solely against another Indemnitee and not arising out of any act
or omission of the Issuer; provided also that such claim for indemnification relating to a breach of the representations or warranties
is made prior to the expiration of such representations or warranties; and provided further, that no Purchaser Related Party shall be
entitled to recover special, indirect, incidental, consequential (including lost profits or diminution in value) or punitive damages.
Notwithstanding anything to the contrary, indirect, incidental and consequential damages shall not be deemed to include diminution in
value of the Purchased Units to the extent resulting from, arising out of or in any way related to the breach of any of the representations,
warranties or covenants of the Issuer contained herein, which is specifically included in damages covered by the Purchaser Related Parties’
indemnification.

 

Section 5.6            Ownership
of Issuer Securities. Upon reasonable request from the Issuer, each Purchaser, together with any of its Subsidiaries or
its Affiliates, shall promptly notify the Issuer in writing of its aggregate beneficial ownership of shares of Common Stock and any other
securities convertible or exchangeable into shares of Common Stock (a “Beneficial Ownership Notice”), which the Issuer
may rely upon for purposes of the payment of any amounts in shares of Common Stock pursuant to the terms of the Series A Certificate
of Designation. To the extent any such Purchaser does not promptly (and in no event later than two Business Days after any such request)
provide a Beneficial Ownership Notice, the Issuer may rely on the most recent Beneficial Ownership Notice received from such Purchaser
for purposes of any such payment of shares of Common Stock (or, to the extent no prior Beneficial Ownership Notice has been provided,
the information set forth in Exhibit B).

 

Section 5.7             Tax
Matters.

 

(a)            The
Parties shall cooperate in good faith to agree on the proper treatment of the Series A Preferred Shares and any payments (or deemed
payments) with respect thereto for U.S. federal income Tax purposes and shall file all Tax returns consistent with such agreed treatment.
Unless otherwise required by a final determination by the Internal Revenue Service or a change in applicable law after the date hereof,
each of the Parties shall not take, and the Issuer shall cause any paying agent or other agent of the Issuer not to take, any position
on any Tax return or other Tax filing or proceeding that is inconsistent with such agreed treatment.

 

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ARTICLE VI

MISCELLANEOUS

 

Section 6.1            Survival;
Damages.

 

(a)            All
representations and warranties made by the Issuer and the Purchasers contained in this Agreement, or made by or on behalf of them, respectively,
pursuant to this Agreement, and all covenants of the Issuer and the Purchasers in this Agreement, shall survive the execution and delivery
of this Agreement and shall continue in full force and effect until such time when either (i) the Series A Preferred Shares
are no longer outstanding or (ii) the Purchasers no longer hold any Series A Preferred Shares. Notwithstanding the foregoing,
any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching
party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration
of such survival period and such claims shall survive until finally resolved. All covenants made herein to be performed at or prior to
any Closing shall terminate upon such Closing and all other covenants shall survive such Closing according to their respective terms.
The aggregate amount of all damages for which the Issuer shall be liable for any breach of this Agreement shall not exceed the aggregate
price paid for the Preferred Shares.

 

(b)            To
the fullest extent permitted by applicable Law, no Party shall assert, and each hereby waive, any claim against any other Party, on any
theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of,
in connection with, or as a result of this Agreement, any other Preferred Agreement or any agreement or instrument contemplated hereby
or thereby or the transactions contemplated hereby or thereby.

 

Section 6.2            Entire
Agreement; Parties in Interest. The Preferred Agreements constitute the entire agreement, and supersede all other prior
agreements and understandings, both written and oral, between the Parties with respect to the subject matter hereof. This Agreement will
be binding upon and inure solely to the benefit of each Party and their respective successors, legal representatives and permitted assigns,
and nothing in this Agreement, express or implied, is intended to or will confer upon any other Person any rights, benefits or remedies
of any nature whatsoever under or by reason of this Agreement except for the provisions of Section 6.3, which will be enforceable
by the beneficiaries contemplated thereby.

 

Section 6.3            No
Recourse. Notwithstanding anything to the contrary in this Agreement, this Agreement may only be enforced by a Party against,
and any proceedings that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of
this Agreement, may only be made by such Party against, another Party or, if applicable, such other Party’s Affiliated Transferees
that become party to this Agreement, and no current, former or future Affiliates of a Party or any Affiliated Transferee (except for any
Affiliated Transferees in their capacity as such), or any of the foregoing Persons’ respective Representatives (collectively, the
 “Related Parties”) will have any liability for any liabilities of such Party for any claim (whether in tort, contract
or otherwise) based on, in respect of, or by reason of, the purchase of the Series A Preferred Shares hereunder or in respect of
any oral representations made or alleged to be made in connection herewith or therewith. In no event will a Party or any of its Affiliates
or Representatives, and each Party agrees not to and to cause its Affiliates and Representatives not to, seek to enforce this Agreement
against, make any claims for breach of this Agreement against, or seek to recover losses or other damages in connection therewith from,
any Related Party.

 

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Section 6.4            Governing
Law. This Agreement and all questions relating to the interpretation or enforcement of this Agreement will be governed
by and construed in accordance with the Laws of the State of Delaware.

 

Section 6.5            Jurisdiction.
EACH PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE DELAWARE COURT OF
CHANCERY IN NEW CASTLE COUNTY, OR IN THE EVENT (BUT ONLY IN THE EVENT) THAT SUCH COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION OVER
SUCH ACTION, THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER PREFERRED AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN SUCH DELAWARE STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL
COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED
IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN THIS Section 6.5.
EACH PARTY HERETO AGREES THAT THE HOLDERS OF THE SERIES A PREFERRED SHARES RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

Section 6.6            Waiver
of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER PREFERRED AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER PREFERRED AGREEMENTS BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 6.6.

 

Section 6.7            Remedies.

 

(a)            Each
Party hereby acknowledges and agrees that the subject matter of this Agreement and the Series A Certificate of Designation is unique,
that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement and/or the Series A Certificate
of Designation are not performed in accordance with their specific terms or otherwise are breached, and that remedies at law would not
be adequate to compensate such other Parties not in default or in breach. Accordingly, each Party agrees that the other Parties will be
entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and/or the Series A Certificate
of Designation and to enforce specifically the terms and provisions of hereof and thereof in addition to any other remedy to which they
may be entitled, at law or in equity. The Parties waive any defense that a remedy at law is adequate and waive any requirement to prove
special damages, post bond or provide similar security in connection with actions instituted for injunctive relief or specific performance
of this Agreement.

 

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(b)            All
remedies available under this Agreement, at law or otherwise, will be deemed cumulative and not alternative or exclusive of other remedies.
The exercise by any Party of a particular remedy will not preclude the exercise of any other remedy.

 

Section 6.8            Notice.

 

(a)            Except
as otherwise provided in this Agreement, any notice or other communication required or permitted to be delivered to any Party under this
Agreement will be in writing and delivered by (i) email or (ii) registered mail via a national courier service to the following
email address or physical address, as applicable:

 

If to the Issuer:

 

PLBY Group, Inc.

10960 Wilshire Boulevard, Suite 2200

Los Angeles, California 90024

Attn: Chris Riley

Email: criley@plbygroup.com

 

With a copy to:

 

Latham & Watkins, LLP

1271 Avenue of Americas

New York, NY 10020

Attention: Jason Silvera and Peter Sluka

E-mail:    jason.silvera@lw.com; and 

peter.sluka@lw.com

 

If to the Purchasers:

 

Drawbridge DSO Securities LLC

c/o Fortress Investment Group
LLC

1345 Avenue of the Americas,
46th Floor

New York, NY, 10105

 

with a copy (which will not
constitute notice) to:

 

Kirkland & Ellis LLP

2049 Century Park East, Suite 3700

Los Angeles, CA 90067

	Facsimile:	 	(310) 552-5900
	Attention:	 	Tim Cruickshank
 Thomas Dobleman
 H. Thomas Felix

 

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(b)            Notice
or other communication pursuant to Section 6.8(a) will be deemed given or received when delivered, except that any notice
or communication received by email transmission on a non-Business Day or on any Business Day after 5:00 p.m., New York City time, or overnight
delivery on a non-Business Day will be deemed to have been given and received at 9:00 a.m., New York City time, on the next Business Day.
Any Party may specify a different address, by written notice to the other Parties. The change of address will be effective upon the other
Parties’ receipt of the notice of the change of address.

 

Section 6.9            Amendments;
Waivers. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, a Holder Majority and the Issuer, or in the case of a waiver, by the Party against whom the waiver
is to be effective. No knowledge, investigation or inquiry, or failure or delay by the Issuer or any Purchaser in exercising any right
hereunder will operate as a waiver thereof nor will any single or partial exercise thereof preclude any other or further exercise of any
other right hereunder. No waiver of any right or remedy hereunder will be deemed to be a continuing waiver in the future or a waiver of
any rights or remedies arising thereafter.

 

Section 6.10          Counterparts.
This Agreement may be executed in two or more counterparts, each of which constitutes an original, and all of which taken together constitute
one instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with
the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall
be deemed to have been duly and validly delivered and be valid and effective for all purposes. For the avoidance of doubt, the foregoing
also applies to any amendment, extension or renewal of this Agreement.

 

Section 6.11          Assignment.
This Agreement will be binding upon and will inure to the benefit of the Parties and their respective permitted assigns and successors.
Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by any of the Parties without the prior
written consent of the other Parties, except that each Purchaser may, without the consent of the Issuer, assign all or a portion of their
rights, interests and obligations hereunder to one or more Persons who are an Affiliated Transferee; provided, that such Affiliated
Transferee enters into a joinder to this Agreement and that any such assignment to an Affiliated Transferee will not relieve any Purchaser
of any of its funding obligations hereunder on any applicable Closing Date. In the event of an assignment to an Affiliated Transferee,
such Affiliated Transferee shall become a party to this Agreement by execution of a joinder hereto in form and substance reasonably acceptable
to the Issuer. Any assignment or transfer in violation of this Section 6.11 shall be null and void.

 

Section 6.12          Severability.
In the event that any provision of this Agreement, or the application thereof becomes or is declared by a court of competent jurisdiction
to be illegal, void, invalid or unenforceable, the remainder of this Agreement will continue in full force and effect and the application
of such provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the Parties; provided,
however, that in no event shall this Agreement be enforced without giving effect to Section 6.3. The Parties further
agree to replace such illegal, void, invalid or unenforceable provision of this Agreement with a legal, valid and enforceable provision
that achieves, to the extent possible, the economic, business and other purposes of such illegal, void, invalid or unenforceable provision.

 

Section 6.13          Certain
Issuer Acknowledgements. The Issuer acknowledges on its behalf and on behalf of its Subsidiaries that:

 

(a)            Certain
of the Purchasers and their respective Affiliates may be full service securities or investment firms engaged, either directly or through
their respective Affiliates, in various activities, including securities trading, commodities trading, investment management, investment
banking, financial advisory, financing and brokerage activities and financial planning and benefits counseling for both companies and
individuals. In the ordinary course of such activities, such Purchaser and its Affiliates may actively engage in commodities trading or
trade the debt and equity securities (or related derivative securities) and financial instruments (including bank loans and other obligations)
of the Issuer and other Subsidiaries of the Issuer for their own account and for the accounts of their customers and may at any time hold
long and short positions in such securities and financial instruments. Each Purchaser or its Affiliates may also co-invest with, make
direct investments in, and invest or co-invest client monies in or with funds or other investment vehicles managed by other parties, and
such funds or other investment vehicles may trade or make investments in securities of the Issuer or other Subsidiaries of the Issuer
or engage in commodities trading with any thereof.

 

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(b)            The
Purchasers and their respective Affiliates are involved in a broad range of transactions and may have economic interests that conflict
with those of the Issuer and its Subsidiaries. Each Purchaser is and will act under this Agreement as an independent contractor. Nothing
in this Agreement or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty
of the Purchasers to the Issuer, any of its Subsidiaries or any Affiliate or equity holder thereof. The transactions contemplated by this
Agreement are arm’s-length commercial transactions between the Purchasers, on the one hand, and the Issuer on the other hand. In
connection with the Transactions and with the process leading to the Transactions each Purchaser is acting solely as a principal and not
as agent or fiduciary of the Issuer or any of its Subsidiaries or member of management, equity holders or creditors thereof or any other
Person. The Purchasers have not assumed an advisory or fiduciary responsibility or any other obligation in favor of the Issuer or any
of its Subsidiaries with respect to the Transactions or the process leading thereto (irrespective of whether any of the Purchasers or
any of their respective Affiliates has advised or is currently advising the Issuer or any of its Affiliates or equity holders on other
matters), except for the obligations expressly set forth in this Agreement or other applicable Preferred Agreement. Each of the Purchasers
and the Issuer has consulted its own legal, tax, accounting, regulatory and financial advisors to the extent it has deemed appropriate.
The Issuer is responsible for making its own independent judgment with respect to the Transactions and the process leading thereto.

 

Section 6.14          USA
PATRIOT Act. The Purchasers hereby notify the Issuer that, pursuant to the requirements of the USA PATRIOT Act, the Purchasers
may be required to obtain, verify and record information that identifies the Issuer, including its name, address and other information
that will allow the Purchasers to identify, the Issuer in accordance with the USA PATRIOT Act.

 

Section 6.15         Rights
of Third Parties. Except as expressly stated in this Agreement, including Related Parties, who are express third party
beneficiaries of the provisions of Section 6.3, this Agreement does not confer any rights on any person other than the Parties.

 

ARTICLE VII

DEFINITIONS

 

Section 7.1            Certain
Definitions. The following words and phrases have the meanings specified in this Section 7.1:

 

“Adverse Proceeding”
means any action, suit, proceeding, hearing (in each case, whether administrative, judicial or otherwise), governmental investigation
or arbitration (whether or not purportedly on behalf of the Issuer or any of its Subsidiaries) at law or in equity, or before or by any
Governmental Authority, domestic or foreign (including any Environmental Claims), whether pending or, to the knowledge of the Issuer or
any of its Subsidiaries, threatened against or affecting the Issuer or any of its Subsidiaries or any property of the Issuer or any of
its Subsidiaries.

 

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“Affiliate”
means, with respect to respect to a specified person, another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person specified. “Control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise. “Controlled” has the meaning correlative thereto. For the avoidance
of doubt, none of the Holders shall be deemed to be an Affiliate of the Issuer or any of its Subsidiaries.

 

“Affiliated Transferee”
means, as to a Purchaser, a Person that is (a) a wholly-owned Affiliate of such Purchaser, including another Purchaser, or (b) any
investment funds, entities or accounts managed or controlled by such Purchaser or a wholly-owned Affiliate of such Purchaser.

 

“Anti-Corruption Laws” means
Laws relating to anti-bribery or anti-corruption (governmental or commercial) which apply to the Issuer and its Subsidiaries, including
Laws that prohibit the corrupt payment, offer, promise, or authorization of the payment or transfer of anything of value (including gifts
or entertainment), directly or indirectly, to any foreign government official, foreign government employee or commercial entity to obtain
a business advantage, including the FCPA, the U.K. Bribery Act of 2010, and all national and international Laws enacted to implement the
OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions.

 

“Anti-Terrorism Laws” means
Laws applicable to the Issuer and its Subsidiaries relating to terrorism or money laundering, including Executive Order No. 13224,
the PATRIOT Act, the Laws comprising or implementing the Bank Secrecy Act, and the Laws administered by OFAC.

 

“Benefit Plan” means any Plan
(other than a Multiemployer Plan) subject to the provisions of Section 412 of the IRC or Section 302 of ERISA and in respect
of which a the Issuer or any ERISA Affiliate is, or within the immediately preceding five(5) years was an “employer”
as defined in Section 3(5) of ERISA.

 

“Blocked Person”
means a Person designated by the U.S. government on the OFAC Lists.

 

“Business Day”
means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in
fact closed in, New York, New York.

 

“Closing Date”
means the date of any Closing.

 

“Commitment Fee”
means a cash fee equal to 1.00% of $50,000,000.00, due and payable at the Initial Closing.

 

“Confidential Information”
means oral and written information concerning the Issuer or any of its Subsidiaries or Affiliates or their respective businesses or operations
furnished to any Holder or its Representatives by or on behalf of the Issuer or any of its Subsidiaries, Affiliates or Representatives
(irrespective of the form of communication and whether such information is so furnished before, on or after the date hereof) or any other
Person known, after reasonable investigation, to be prohibited from disclosing such information by a legal, contractual or fiduciary obligation;
provided, that the term “Confidential Information” does not include any information which (i) at the time
of disclosure is or thereafter becomes generally available to the public (other than as a result of a disclosure directly or indirectly
by such Holder or its Representatives in violation of Section 5.4); (ii) is or becomes available to such Holder on a
non-confidential basis from a source other than the Issuer or any of its respective Subsidiaries, Affiliates or Representatives, provided
that such source was not known by such Holder, after reasonable investigation, to be prohibited from disclosing such information to such
Holder by a legal, contractual or fiduciary obligation; or (iii) with respect to any Holder that is not an individual, the identity
of the Issuer or any of its Subsidiaries or Affiliates or the amount invested by such Person the Issuer or any of its Subsidiaries or
Affiliates.

 

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“Contractual Obligation”
means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which
such Person is a party or by which it or any of its property is bound.

 

“Debtor Relief Laws”
means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States, Australia, England and Wales
or any other applicable jurisdictions from time to time in effect.

 

“Delayed Draw Period”
means the date that is six months after the date of the Initial Closing.

 

“Draw
Fee” means a cash fee equal to 2.00% of the aggregate Purchase Price of the number of Series A Preferred Shares
to be purchased at any Closing, due and payable at such Closing.

 

“Employee Benefit
Plan” means any “employee benefit plan” as defined in Section 3(3) of ERISA which is or was, within the
preceding six years, sponsored, maintained or contributed to by, or required to be contributed by, the Issuer or any of its Subsidiaries
or, solely with respect to any such plan that is subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Internal
Revenue Code, any of their respective ERISA Affiliates.

 

“Environmental Claim”
means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive
(conditional or otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any
actual or alleged violation of any Environmental Law; (ii) in connection with any Hazardous Material or any actual or alleged Hazardous
Materials Activity; or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources
or the environment.

 

“Environmental Laws”
means any and all current or future foreign or domestic, federal or state (or any subdivision of either of them), statutes, ordinances,
orders, rules, regulations, judgments, Governmental Authorizations, or any other requirements of Governmental Authorities relating to
(i) environmental matters, including those relating to any Hazardous Materials Activity; (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials; or (iii) occupational safety and health, industrial hygiene, land use or the protection
of human, plant or animal health or welfare, in any manner applicable to the Issuer or any of its Subsidiaries.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.

 

“ERISA Affiliate”
means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not
incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of
the Internal Revenue Code of which that Person is a member; and (iii) for purposes relating to Section 412 of the Internal Revenue
Code only, any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue
Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above
is a member. Any former ERISA Affiliate of the Issuer or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of
the Issuer or any such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate
of the Issuer or such Subsidiary and with respect to liabilities arising after such period for which the Issuer or such Subsidiary could
be liable under the Internal Revenue Code or ERISA.

 

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“ERISA Event”
means (i) a “reportable event” within the meaning of Section 4043(c) of ERISA and the regulations issued thereunder
with respect to any Pension Plan (excluding those for which the provision for thirty (30) day notice to the PBGC has been waived by regulation);
(ii) the failure by the Issuer, any of its Subsidiaries or any of their respective ERISA Affiliates to meet the minimum funding standard
of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(c) of
the Internal Revenue Code), to make by its due date a required installment under Section 430(j) of the Internal Revenue Code
with respect to any Pension Plan or to make any required contribution to a Multiemployer Plan; (iii) the filing by the administrator
of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the withdrawal by the Issuer, any of its Subsidiaries or any of their respective
ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in
liability to the Issuer, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4063 or Section 4064
of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition
which constitutes grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the
imposition of liability on the Issuer, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or
Section 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of the Issuer,
any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections
4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential withdrawal liability therefor, a determination that a Multiemployer
Plan is in “endangered status” or “critical status” (as defined in Section 305(b) of ERISA), or the
receipt by the Issuer, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that
it is in insolvency pursuant to Section 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A
or Section 4042 of ERISA; (viii) the occurrence of an act or omission which could reasonably be expected to give rise to the
imposition on the Issuer, any of its Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges
under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of
ERISA in respect of any Employee Benefit Plan; (ix) receipt from the Internal Revenue Service of notice of the failure of any Pension
Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify
under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for
exemption from taxation under Section 501(a) of the Internal Revenue Code; (x) the imposition of a Lien upon the assets
of the Issuer, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 430(k) of the Internal
Revenue Code or Section 303(k) of ERISA with respect to any Pension Plan or a violation of Section 436 of the Internal
Revenue Code; or (xi) the occurrence of any Foreign Plan Event.

 

“Exchange Act”
means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

 

“Executive Officer”
means, as to any Person, any individual holding the position of chief executive officer, chief financial officer, chief operating officer,
chief compliance officer, chief legal officer of such Person or any other executive officer of such Person having substantially the same
authority and responsibility as any of the foregoing.

 

“Facility”
means any real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned,
leased, operated or used by any Group Party.

 

“FCPA”
means the U.S. Foreign Corrupt Practices Act (15 U.S.C. §§78dd-1 et seq.).

 

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“Fees”
means, as applicable, each Draw Fee and the Commitment Fee.

 

“Foreign Plan”
means any employee benefit plan, program, policy, arrangement or agreement maintained or contributed to by, or required to be maintained
or contributed to by, the Issuer or any of its Subsidiaries primarily for the benefit of their respective employees residing outside the
United States.

 

“Foreign Plan Event”
means, with respect to any Foreign Plan, (a) the existence of unfunded liabilities in excess of the amount permitted under any applicable
law, (b) the failure by the Issuer or its Subsidiaries to make the required contributions or payments, under any applicable law,
on or before the due date for such contributions or payments, (c) the receipt by the Issuer or its Subsidiaries of a notice from
a Governmental Authority relating to the intention to terminate any such Foreign Plan or to appoint a trustee or similar official to administer
any such Foreign Plan, or alleging the insolvency of any such Foreign Plan, (d) the incurrence of any liability by the Issuer or
any of its Subsidiaries under applicable law due to the complete or partial termination of such Foreign Plan or the complete or partial
withdrawal of any participating employer therein, or (e) the occurrence of any transaction that is prohibited under any applicable
law and that could reasonably be expected to result in the incurrence of any liability by the Issuer or any of its Subsidiaries, or the
imposition on the Issuer or any of its Subsidiaries of any fine, excise tax or penalty resulting from any noncompliance with any applicable
law.

 

“GAAP”
has the meaning set forth in the Series A Certificate of Designation.

 

“Governmental Authority”
means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity, officer or examiner exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to any government, any court, any securities exchange or any self-regulatory organization
(including the National Association of Insurance Commissioners), in each case whether associated with a state of the United States, the
United States, or a foreign entity or government (including any supra-national body exercising such powers or functions, such as the European
Union or the European Central Bank).

 

“Governmental Authorization”
means any permit, license, authorization, plan, directive, consent order or consent decree of or from any Governmental Authority.

 

“Governmental Official”
includes, but is not limited to, any employee, agent, or instrumentality of any government, including departments or agencies of a government
and businesses that are wholly or partially government-owned, and any employees of such businesses, as well as departments or agencies
of public international organizations. This term includes, but is not limited to, all employees, agents, and instrumentalities of state-owned
or state-controlled entities or businesses, including hospitals, laboratories, universities, and other research institutions. The term
Governmental Official also applies to individuals who are members of political parties or hold positions in political parties.

 

“Group Parties”
means the Issuer and each of its Subsidiaries, each being a “Group Party.”

 

“Hazardous Materials”
means any chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority or which
may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the
indoor or outdoor environment.

 

“Hazardous Materials
Activity” means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including
the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement,
generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of
any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.

 

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“Holder”
has the meaning given in the Series A Certificate of Designation.

 

“Holder Majority”
has the meaning given in the Series A Certificate of Designation.

 

“Internal Revenue
Code” means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor
statute.

 

“Law” means
collectively, all international, supranational, foreign, federal, state and local laws (including common law), statutes, treaties, rules,
guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities and executive orders, including the
interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration
thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements
with, any Governmental Authority.

 

“Legal Requirements”
means, as to any Person, the Organizational Documents of such Person, and any treaty, law (including the common law), statute, ordinance,
code, rule, regulation, guidelines, license, permit requirement, order or determination of an arbitrator or a court or other Governmental
Authority, and the interpretation or administration thereof, in each case applicable to or binding upon such Person or any of its property
or to which such Person or any of its property is subject, in each case whether or not having the force of law.

 

“Lien”
means any mortgage, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), security interest, or other security device
or security arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC (as in effect from time to time in the relevant jurisdiction)
or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing).

 

“Margin Stock”
shall have the meaning assigned to such term in Regulation U of the Board.

 

“Material Adverse
Effect” means a material adverse effect on and/or material adverse developments with respect to (i) the business, operations,
properties, assets or condition (financial or otherwise) of the Issuer and its Subsidiaries taken as a whole; or (ii) the ability
of the Issuer to fully and timely perform its obligations under the Preferred Documents.

 

“Multiemployer Plan”
means any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA.

 

“OFAC Lists”
means, collectively, the SDN List and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and
regulations of OFAC or pursuant to any other applicable executive orders of the United States.

 

“Organizational Documents”
means (i) with respect to any corporation or company, its certificate, certificate of registration, constitution, memorandum or articles
of incorporation, organization or association, as amended, and its by-laws, as amended, or equivalent document, (ii) with respect
to any limited partnership, its certificate or declaration of limited partnership, as amended, and its partnership agreement, as amended,
(iii) with respect to any general partnership, its partnership agreement, as amended, and (iv) with respect to any limited liability
company, its articles of organization, as amended, and its operating agreement, as amended.

 

    25

     

    

 

“PBGC”
means the Pension Benefit Guaranty Corporation or any successor thereto.

 

“Pension Plan”
means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or
Section 302 of ERISA.

 

“Permitted Liens”
has the meaning set forth under the Senior Credit Agreement.

 

“Permitted Transfer”
of Series A Preferred Shares means:

 

(i)             a
Transfer of Series A Preferred Shares by a Holder to the Issuer or any of its Subsidiaries; or

 

(ii)            a
Transfer of Series A Preferred Shares by a Holder to (a) its Affiliates (including accounts or funds managed or advised by such
Holder or its Affiliates), (b) other persons with the consent of the Issuer (such consent not to be unreasonably withheld) or (c) for
so long as a Default pursuant to the Series A Certificate of Designation or Credit Agreement has occurred and is continuing, to other
persons without the consent of the Issuer, provided that, in each case, such transfer is made in compliance with all applicable securities
laws.

 

Notwithstanding the foregoing, a transfer shall not be treated as a
Permitted Transfer unless the applicable transferee satisfies its obligation to deliver a Form W-9 to the Issuer.

 

“Person”
means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.

 

“Preferred Agreements”
means this Agreement and the Series A Certificate of Designation.

 

“Real Estate Asset”
means, at any time of determination, any interest (fee, leasehold or otherwise) then owned by any Group Party in any real property.

 

“Release”
means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Material), including the movement of any Hazardous Material through the
air, soil, surface water or groundwater.

 

“Representatives”
means, with respect to any Person, such Person’s officers, directors, partners, limited partners, investors, lenders, rating agencies,
managed accounts, employees, investment bankers, attorneys, accountants and other advisors, agents and representatives.

 

“Responsible Officer”
of any Person means any executive officer, president, Financial Officer of such Person and any other officer or similar official thereof
with significant responsibility for the administration of the obligations of such Person in respect of this Agreement.

 

“SEC” means
the U.S. Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

 

“Senior Credit Agreement”
shall have the meaning given in the Series A Certificate of Designation.

 

    26

     

    

 

“Series A Certificate
of Designation” means that certain Certificate of Designation of Series A Preferred Shares of the Issuer.

 

“Solvent”
means that as of the date of determination, (i) the sum of the debt (including contingent liabilities) of the Issuer and its Subsidiaries,
taken as a whole, does not exceed the present fair saleable value (on a going concern basis) of the assets of the Issuer and its Subsidiaries,
taken as a whole; (ii) the capital of the Issuer and its Subsidiaries, taken as a whole, is not unreasonably small in relation to
the business of the Issuer and its Subsidiaries, taken as a whole, contemplated as of the date of this Agreement; and (iii) the Issuer
and its Subsidiaries, taken as a whole, do not intend to incur, or believe that they will incur, debts including current obligations beyond
their ability to pay such debt as they mature in the ordinary course of business. For the purposes hereof, the amount of any contingent
liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities
meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).

 

“Stated Value”
shall have the meaning given in the Series A Certificate of Designation.

 

“Subsidiary”
means, with respect to any Person, any corporation, partnership, joint venture, limited liability company, association or other entity,
the management of which is, directly or indirectly, controlled by, or of which an aggregate of more than 50% of the outstanding Voting
Stock is, at the time, owned or controlled directly or indirectly by, such Person or one or more subsidiaries of such Person. Unless the
context otherwise requires, each reference to Subsidiaries herein shall be a reference to Subsidiaries of the Issuer.

 

“Tax” means
any present or future tax, goods and services tax, levy, impost, duty, assessment, charge, fee, deduction or withholding (including backup
withholding) (together with interest, penalties and other additions thereto) imposed by any Governmental Authority having the power to
tax.

 

“Transaction”
means the issuance of the Series A Preferred Shares, the consummation of the other transactions contemplated by the Preferred Agreements
and payment of fees and expenses in connection therewith.

 

“Transfer”
means any sale, pledge, assignment, encumbrance or other transfer or disposition of any Series A Preferred Shares to any Person,
whether directly, indirectly, voluntarily, involuntarily, by operation of law, pursuant to judicial process or otherwise. Notwithstanding
the foregoing, a bona fide direct or indirect transfer of an interest in an investment partnership or other investment fund that
was not established just to hold Series A Preferred Shares shall not be deemed a Transfer hereunder. The words “Transferred”,
 “Transferor” and “Transferee” shall have correlative meanings.

 

“U.S.”
means the United States of America.

 

“USA PATRIOT Act”
means The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title
III of Public Law No. 107-56 (signed into law October 26, 2001)), as amended or modified from time to time.

 

“Voting Stock”
means, with respect to any person, any class or classes of Equity Interests pursuant to which the holders thereof have the general voting
power under ordinary circumstances to elect at least a majority of the Board of Directors of such person.

 

    27

     

    

 

Section 7.2            Other
Terms. The following term shall have the meanings specified in the indicated Section of this Agreement.

 

	“Agreement”	Preamble
	“Closing”	Section 1.2
	“Common Stock” 	Section 2.1
	“Delaware Secretary”	Section 2.1
	“Delayed Draw Notice”	Preliminary Statements
	“ERISA Plan” 	Section 3.5(f)
	“Initial Closing”	Preliminary Statements
	“Initial Draw Notice”	Preliminary Statements
	“Initial Purchase”	Preliminary Statements
	“Issuer”	Preamble
	“Issuer Parties”	Section 3.8
	“Parties” 	Preamble
	“Purchase Price”	Section 1.1(a)
	“Purchasers”	Preamble
	“Related Parties”	Section 6.3
	“Rule 144”	Section 3.5(d)
	“Series A Preferred Shares”	Preliminary Statements
	“Similar Law Plan”	Section 3.5(f)
	“Subsequent Closing”	Preliminary Statements
	“Subsequent Commitment”	Preliminary Statements
	“Subsequent Purchase”	Preliminary Statements

 

Section 7.3            Construction.
Unless the context otherwise requires or otherwise specified herein:

 

(a)            the
meanings of defined terms are equally applicable to the singular and plural forms of the defined terms;

 

(b)            the
term “including” is by way of example and not limitation;

 

(c)            in
the computation of periods of time from a specified date to a later specified date, the word “from” means “from and
including;” the words “to” and “until” each mean “to but excluding;” and the word “through”
means “to and including”;

 

(d)            the
word “incur” shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and
the words “incurred” and “incurrence” shall have correlative meanings);

 

(e)            section
headings herein are included for convenience of reference only.

 

(f)            the
word “or” is not exclusive;

 

(g)            the
word “will” shall be interpreted to express a command;

 

(h)            provisions
apply to successive events and transactions;

 

    28

     

    

 

(i)             unless
the context otherwise requires, references to sections of, or rules under, the Securities Act or the Exchange Act shall be deemed
to include substitute, replacement or successor sections or rules adopted by the SEC from time to time;

 

(j)            any
reference to a statute refers to the statute, any amendments or successor legislation and all rules and regulations promulgated under
or implementing the statute, as in effect at the relevant time;

 

(k)            references
to a Person also include its permitted assigns and successors;

 

(l)            unless
the context otherwise requires, any reference to an “Article,” “Section”, “clause”, “Exhibit”
or “Schedule” in this Agreement refers to an Article, Section, clause, Exhibit or Schedule, as the case may be, of this
Agreement;

 

(m)            the
words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement
as a whole and not any particular Article, Section, clause or other subdivision;

 

(n)            all
references to $, currency, monetary values and dollars set forth herein mean U.S. dollars;

 

(o)            words
used herein implying any gender shall apply to both genders;

 

(p)            a
statement that a copy of an item has been delivered means a correct and accurate copy of such item has been delivered;

 

(q)            when
the payment of any obligation or the performance of any covenant, duty or obligation is stated to be due or performance required on a
day which is not a Business Day, the date of such payment or performance shall extend to the immediately succeeding Business Day and such
extension of time shall be reflected in computing interest, dividends, premium or fees, as the case may be; and

 

(r)            the
Parties acknowledge and agree that (a) each Party and its counsel has reviewed, or has had the opportunity to review, the terms and
provisions of this Agreement, (b) any rule of construction to the effect that any ambiguities are resolved against the drafting
Party will not be used to interpret this Agreement and (c) the provisions of this Agreement will be construed without regard to which
Party was generally responsible for the preparation of this Agreement.

 

[Remainder of page intentionally left blank]

 

    29

     

    

 

IN WITNESS WHEREOF, the undersigned,
intending to be legally bound hereby, has duly executed this Series A Securities Purchase Agreement as of the date and year first
written above.

 

	IssueR:	PLBY GROUP, INC.
	 	 
	 	 
	 	By:	/s/ Bernhard L. Kohn III                   
	 	Name: Bernhard L. Kohn III
	 	Title: Chief Executive Officer

 

 

Signature Page to Series
A Securities Purchase Agreement

 

    

     

    

 

	PURCHASERS:	For and on behalf of:  
	 	 
	 	DRAWBRIDGE DSO SECURITIES LLC  
	 	 
	 	 
	 	By:	/s/ Radhika Hulyalkar
	 	Name: Radhika Hulyalkar
	 	Title: Deputy Chief Financial Officer  

 

 

Signature Page to Series
A Securities Purchase Agreement

 

    

     

    

 

Schedule I

 

LIST OF PURCHASERS

 

	Name	Purchase Percentage
	Drawbridge DSO Securities LLC 	100%

 

    I-1

     

    

 

Exhibit A

 

SERIES A CERTIFICATE OF DESIGNATION

 

[See
Attached.]

 

    

     

    

 

Exhibit B

 

OWNERSHIP OF ISSUER SECURITIES

 

	Name	Shares of Common Stock beneficially owned
	Drawbridge DSO Securities LLC 	1,817,620

 

    

     

    

 

Exhibit C

 

SOLVENCY CERTIFICATEex_376753.htm

 

Exhibit 4.1

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

 

	
			Principal Amount: US$277,777.00 

			Purchase Price: US$250,000.00

				Issue Date: May 10, 2022

 

PROMISSORY NOTE

 

FOR VALUE RECEIVED, MITESCO, INC., a corporation (hereinafter called the “Borrower”) (Trading Symbol: MITI), hereby promises to pay to the order of Kishon Investments, LLC, a Nevada limited liability corporation (the “Holder”) the sum of US$277,777.00 (the “Principal”) together with guaranteed interest (the “Interest”) on the Principal balance hereof in the amount of ten percent (10%) (the “Interest Rate”) per calendar year from the date hereof (the “Issue Date”). All Principal and Interest owing hereunder, along with any and all other amounts, shall be due and owing on November 10, 2022 (the “Maturity Date”). Interest shall accrue on a monthly basis and is payable on the first of each month following the Issue Date (with the first payment due on July 1, 2022) or upon acceleration or by prepayment or otherwise. Notwithstanding the foregoing, the final payment of Principal and Interest shall be due on the Maturity Date. This Note may be prepaid in whole or in part as set forth herein. Any amount of Principal or Interest on this Note which is not paid when due shall bear interest at the rate of the lesser of (i) eighteen percent (18%) per annum and (ii) the maximum amount permitted under law from the due date thereof until the same is paid (the “Default Interest”). Default Interest shall commence accruing upon an Event of Default and shall be computed on the basis of a 360-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock, $0.0001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of

 

 

 

 

interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”). The Maturity Date may be extended by mutual consent of the Holder and the Borrower to up to six (6) months following the date of the original Maturity Date hereunder. In the event that the Maturity Date is extended, the interest rate shall equal twelve percent (12%) per annum for any period following the original Maturity Date, payable monthly.

 

This Note carries an original issue discount of $27,777 (the “OID”), to cover the Holder’s monitoring costs associated with the purchase and sale of the Note, which is included in the principal balance of this Note. Thus, the purchase price of this Note shall be $250,000 computed as follows: the Principal Amount minus the OID.

 

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

The following terms shall also apply to this Note:

 

ARTICLE I.     CONVERSION RIGHTS UPON EVENT OF DEFAULT

 

1.1    Conversion Right. The Holder shall have the right beginning on the date that is 180 days from the Issue Date, from time to time following an Event of Default, and ending on the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the Conversion Price (as defined below) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the

 

2

 

 

applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower or Borrower’s transfer agent by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower or Borrower’s transfer agent before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the unpaid principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, provided however, that the Borrower shall have the right to pay any or all interest in cash plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

 

1.2    Conversion Price.

 

(a)    Calculation of Conversion Price. Subject to the adjustments described herein, the conversion price (the “Conversion Price”) shall equal the lowest trading price during the previous twenty (20) Trading Day period ending on date of conversion of this Note. To the extent the Conversion Price of the Borrower’s Common Stock closes below the par value per share, the Borrower will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Borrower agrees to honor all conversions submitted pending this adjustment. If the shares of the Borrower’s Common Stock have not been delivered within three (3) business days to the Borrower or Borrower’s transfer agent, the Notice of Conversion may be rescinded. At any time after the Closing Date, if in the case that the Borrower’s Common Stock is not deliverable by DWAC (including if the Borrower’s transfer agent has a policy prohibiting or limiting delivery of shares of the Borrower’s Common Stock specified in a Notice of Conversion), an additional 10% discount will apply for all future conversions under all Notes until DWAC delivery becomes available. If in the case that the Borrower’s Common Stock is “chilled” for deposit into the DTC system and only eligible for clearing deposit, a 15% discount shall apply for all future conversions under all Note until such chill is lifted. Additionally, if the Borrower ceases to be a reporting company pursuant to the 1934 Act or if the Note cannot be converted into free trading shares after one hundred eighty-one (181) days from the Issue Date (other than as a result of the Holder’s status as an affiliate of the Company), an additional 15% discount will be attributed to the Conversion Price. If the trading price cannot be calculated for such security on such date in the manner provided above, the trading price shall be the fair market value as mutually determined by the Borrower and the Holder. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTC Pink, OTCQB or on the principal securities exchange or other securities market on which the Common Stock is then being traded. The Borrower shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. Holder shall be entitled to deduct $500.00 from the conversion amount in each Notice of Conversion to cover Holder’s deposit fees associated with each Notice of Conversion.

 

While this Note is outstanding, each time any 3rd party has the right to convert monies owed to that 3rd party (or receive shares pursuant to a settlement or otherwise), including but not limited to under Section 3(a)(9) and Section 3(a)(10), at a discount to market greater than the

 

3

 

 

Conversion Price in effect at that time (prior to all other applicable adjustments in the Note), but excluding any 3rd party loans that are already outstanding on the Issue Date, then the Holder, in Holder’s sole discretion, may utilize such greater discount percentage (prior to all applicable adjustments in this Note) until this Note is no longer outstanding. While this Note is outstanding, each time any 3rd party has a look back period greater than the look back period in effect under the Note at that time, including but not limited to under Section 3(a)(9) and Section 3(a)(10), then the Holder, in Holder’s sole discretion, may utilize such greater number of look back days until this Note is no longer outstanding. The Borrower shall give written notice to the Holder within one (1) business day of becoming aware of any event that could permit the Holder to make any adjustment described in the two immediately preceding sentences.

 

(b)    Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

 

(c)    Pro Rata Conversion; Disputes. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion of this Note, the Borrower shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 4.13.

 

(d)    If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then the Conversion Price hereunder shall equal such par value for such conversion and the Conversion Amount for such conversion shall be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to equal the same number of conversion shares as would have been issued had the Conversion Price not been subject to the minimum price set forth in this Section 1.2(c).

 

4

 

 

1.3    Authorized Shares. The Borrower covenants that during the period while any outstanding balance is owing hereunder or any conversion of the Note is available, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved at least four (4) times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time) (the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 3(d) of the Purchase Agreement. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note. Notwithstanding the foregoing, in no event shall the Reserved Amount be lower than the initial Reserved Amount, regardless of any prior conversions.

 

If, at any time the Borrower does not maintain or replenish the Reserved Amount as required hereunder within three (3) business days of the request of the Holder, the principal amount of the Note shall increase by Five Thousand and No/100 United States Dollars ($5,000) (under Holder’s and Borrower’s expectation that any principal amount increase will tack back to the Issue Date) per occurrence.

 

1.4    Method of Conversion.

 

(a)    Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after an Event of Default, by (A) submitting to the Borrower or Borrower’s transfer agent a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 11:59 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

 

(b)    Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in

 

5

 

 

the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

 

(c)    Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

 

(d)    Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.

 

(e)    Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 11:59 p.m., New York, New York time, on such date.

 

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(f)    Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its commercially reasonable best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal At Custodian (“DWAC”) system.

 

(g)    DTC Eligibility & Market Loss. If the Borrower fails to maintain its status as “DTC Eligible” for any reason, the principal amount of the Note shall increase by Five Thousand and No/100 United States Dollars ($5,000) (under Holder’s and Borrower’s expectation that any principal amount increase will tack back to the Issue Date) and the Variable Conversion Price shall be redefined to mean seventy percent (70%) multiplied by the Market Price, subject to adjustment as provided in this Note.

 

(h)    Failure to Deliver Common Stock Prior to Delivery Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $1,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock until the Borrower issues and delivers a certificate to the Holder or credit the Holder's balance account with OTC for the number of shares of Common Stock to which the Holder is entitled upon such Holder's conversion of any Conversion Amount (under Holder's and Borrower's expectation that any damages will tack back to the Issue Date). Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(h) are justified.

 

(i)    Rescindment of a Notice of Conversion.  If (i) the Borrower fails to respond to Holder within one (1) business day from the Conversion Date confirming the details of Notice of Conversion, (ii) the Borrower fails to provide any of the shares of the Borrower’s Common Stock requested in the Notice of Conversion within three (3) business days from the date of receipt of the Note of Conversion, (iii) the Holder is unable to procure a legal opinion required to have the shares of the Borrower’s Common Stock issued unrestricted and/or deposited to sell for any reason related to the Borrower’s standing, (iv) the Holder is unable to deposit the shares of the Borrower’s Common Stock requested in the Notice of Conversion for any reason related to the Borrower’s standing, (v) at any time after a missed Deadline, at the Holder’s sole discretion,

 

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or (vi) if OTC Markets changes the Borrower's designation to ‘Limited Information’ (Yield), ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull & Crossbones), ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign) or other trading restriction on the day of or any day after the Conversion Date, the Holder maintains the option and sole discretion to rescind the Notice of Conversion (“Rescindment”) with a “Notice of Rescindment.”

 

1.5    Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or other applicable exemption or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Holder who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be reasonably

 

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accepted by the Borrower so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Borrower does not accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

1.6    Effect of Certain Events.

 

(a)    Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

 

(b)    Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, fifteen (15) days prior written notice (but in any event at least ten (10) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if

 

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not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

(c)    Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

 

(d)    Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, except for shares of Common Stock issued in an Exempt Issuance (as defined in the Purchase Agreement), any shares of Common Stock for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance. For purposes of the Transaction Documents, “Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Company, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder (subject to adjustment for forward and reverse stock splits and the like that occur after the date hereof) and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the issue price, exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities, (c) securities issued in connection with indebtedness not to exceed an aggregate of net proceeds from such indebtedness to the Company in an amount of $3,500,000 (provided that such securities are on terms substantially similar to those set forth in the Transaction Documents or are on terms substantially similar to those made with the chief executive officer of the Company and certain board members in the six months preceeding the date hereof), and (d) securities issued in connection with uplisting of the Common Stock.

 

The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to

 

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purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

 

Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than in an Exempt Issuance), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

(e)    Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

 

(f)    Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the

 

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Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

 

1.7    Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

 

1.8    Prepayment. The Borrower may at any time pay or prepay all or any portion of the amounts outstanding hereunder by making a payment to the Holder of an amount in cash equal to the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note plus (y) Default Interest, if any.

 

ARTICLE II.     CERTAIN COVENANTS

 

2.1    Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

 

2.2    Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem,

 

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repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares, except Borrower may repurchase or otherwise acquire, for cash, any shares of the Preferred Series C and Preferred Series D.

 

2.3    Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors financial institutions or other lenders incurred in the ordinary course of business, (c) borrowings, the proceeds of which shall be used to repay this Note, (d) borrowings which are expressly subordinated to this Note, (e) indebtedness incurred by the Borrower solely for the purposes of immediate material working capital needs, and (f) indebtedness incurred in connection with an Exempt Issuance. The Borrower shall use the proceeds from any borrowings or financings following the date hereof to repay this Note and the Borrower’s failure to comply with this covenant shall constitute an Event of Default hereunder.

 

2.4    Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets shall be conditioned on a specified use of the proceeds towards the repayment of this Note.

 

2.5    Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.

 

2.6    Section 3(a)(9) or 3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while this note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than Fifteen Thousand Dollars $15,000, will be assessed and will become immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.

 

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2.7    Preservation of Existence, etc. The Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.

 

2.8    Non-circumvention. The Borrower hereby covenants and agrees that the Borrower will not, by amendment of its Certificate or Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder.

 

ARTICLE III.     EVENTS OF DEFAULT

 

If any of the following events of default (each, an “Event of Default”) shall occur:

 

3.1    Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise and such failure continues for a period of five (5) business days after written notice thereof to the Borrower from Holder.

 

3.2    Conversion and the Shares. The Borrower (i) fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, (ii) fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, (iii) directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, (iv) fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion, (v) fails to remain current in its obligations to its transfer agent, (vi) causes a conversion of this Note to be delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent, (vii) fails to repay Holder, within forty eight (48) hours of a demand from the Holder, any amount of funds advanced by Holder to Borrower’s transfer agent in order to process a conversion, (viii) fails to reserve sufficient amount of shares of common stock to satisfy the Reserved Amount at all

 

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times, (ix) fails to provide a Rule 144 opinion letter from the Borrower’s legal counsel to the Holder, covering the Holder’s resale into the public market of the respective conversion shares under this Note, within two (2) business days of the Holder’s submission of a Notice of Conversion to the Borrower (provided that the Holder must request the opinion from the Borrower at the time that Holder submits the respective Notice of Conversion and the date of the respective Notice of Conversion must be on or after the date which is six (6) months after the date that the Holder funded the Purchase Price under this Note), and/or (x) an exemption under Rule 144 is unavailable for the Holder’s deposit into Holder’s brokerage account and resale into the public market of any of the conversion shares under this Note at any time after the date which is six (6) months after the date that the Holder funded the Purchase Price under this Note (other than as a result of Holder’s status as an affiliate of the Borrower).

 

3.3    Reserved.

 

3.4    Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of five (5) days after written notice thereof to the Borrower from the Holder.

 

3.5    Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.6    Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors or commence proceedings for its dissolution, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed for the Borrower or for a substantial part of its property or business without its consent and shall not be discharged within fifteen (15) days after such appointment.

 

3.7    Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder.

 

3.8    Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower, or the Borrower admits in writing its inability to pay its debts generally as they mature, or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable or the Borrower admits in writing its inability to pay its debts generally as they mature, or have filed against it an involuntary petition for bankruptcy relief, all under international, federal or state laws as applicable.

 

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3.9    Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC Pink, OTCQB, Nasdaq National Market, Nasdaq Small Cap Market, New York Stock Exchange, NYSE MKT, or an equivalent replacement exchange

 

3.10    Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act (including but not limited to becoming delinquent in its filings); and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

 

3.11    Liquidation.Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

3.12    Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

 

3.13    Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future), or any disposition or conveyance of any material asset of the Borrower.

 

3.14    Financial Statement Restatement.The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.15    Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder; provided that the Borrower shall not have to request notice in connection with a reverse split made on, prior or in connection with the uplisting of the Common Stock.

 

3.16   Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

 

3.17   Cessation of Trading. Any cessation of trading of the Common Stock on at least one of the OTC Pink, OTCQB, Nasdaq National Market, Nasdaq Small Cap Market, New York Stock Exchange, NYSE MKT, or an equivalent replacement exchange, and such cessation of trading shall continue for a period of five consecutive (5) Trading Days.

 

16

 

 

3.18   Cross-Default.  Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements (as defined herein), after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder (and any affiliate of the Holder) or any other third party, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the agreements and instruments defined as the Documents. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

 

3.19    Bid Price. The Borrower shall lose the “bid” price for its Common Stock ($0.0001 on the “Ask” with zero market makers on the “Bid” per Level 2) and/or a market (including the OTC Pink, OTCQB or an equivalent replacement exchange).

 

3.20    OTC Markets Designation. OTC Markets changes the Borrower’s designation to ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign).

 

3.21   Inside Information. Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.

 

3.22   Unavailability of Rule 144. If, at any time on or after the date which is six (6) months after the Issue Date, the Holder is unable to (i) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any portion of the Note into free trading shares of the Borrower’s Common Stock pursuant to Rule 144, and (ii) thereupon deposit such shares into the Holder’s brokerage account (in each case, other than as a result of Holder’s status as an affiliate of the Borrower).

 

3.23   Delisting or Suspension of Trading of Common Stock. If, at any time on or after the Issue Date, the Borrower’s Common Stock (i) is suspended from trading, (ii) halted from trading, and/or (iii) fails to be quoted or listed (as applicable) on any level of the OTC Markets, any tier of the NASDAQ Stock Market, the New York Stock Exchange, or the NYSE American.

 

3.24   Failure to File Registration Statement. If the Borrower shall fail to file a registration statement as required under Section 4(q) of the Purchase Agreement.

 

UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3 OF THIS NOTE, THE NOTE SHALL BECOME IMMEDIATELY AND AUTOMATICALLY DUE

 

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AND PAYABLE WITHOUT DEMAND, PRESENTMENT, OR NOTICE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (A) IN THE EVENT OF AN OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED IN OF SECTION 3.2, 3.9, 3.10, 3.16, 3.17, 3.19, 3.20, 3.22, 3.23 OR 3.24, THE THEN OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE PLUS (X) ACCRUED AND UNPAID INTEREST ON THE UNPAID PRINCIPAL AMOUNT OF THIS NOTE TO THE DATE OF PAYMENT (THE “MANDATORY PREPAYMENT DATE”) PLUS (Y) DEFAULT INTEREST, IF ANY, ON THE AMOUNTS REFERRED TO IN CLAUSES (W) AND/OR (X) PLUS (Z) ANY AMOUNTS OWED TO THE HOLDER PURSUANT TO SECTIONS 1.3 AND 1.4(G) HEREOF, MULTIPLIED BY ONE AND ONE-HALF (1.5); OR (B) IN THE EVENT OF THE OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED IN ANY OTHER SECTION, THE THEN OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE PLUS (X) ACCRUED AND UNPAID INTEREST ON THE UNPAID PRINCIPAL AMOUNT OF THIS NOTE TO THE MANDATORY PREPAYMENT DATE, PLUS (Y) DEFAULT INTEREST, IF ANY, ON THE AMOUNTS REFERRED TO IN CLAUSES (W) AND/OR (X) PLUS (Z) ANY AMOUNTS OWED TO THE HOLDER PURSUANT TO SECTIONS 1.3 AND 1.4(G) HEREOF (THE THEN OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE TO THE DATE OF PAYMENT PLUS THE AMOUNTS REFERRED TO IN CLAUSES (X), (Y) AND (Z) SHALL COLLECTIVELY BE KNOWN AS THE “DEFAULT SUM”) or (ii) at the option of the Holder, the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest trading price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity. Further, if a breach of Sections 3.9, 3.10 and/or 3.19 occurs or is continuing after the nine (9) month anniversary of this Note, then the principal amount of the Note shall increase by Fifteen Thousand and No/100 United States Dollars ($15,000) (under Holder’s and Borrower’s expectation that any principal amount increase will tack back to the Issue Date) and the Holder shall be entitled to use the lowest trading price during the delinquency period as a base price for the conversion with the Variable Conversion Price shall be redefined to mean forty percent (40%) multiplied by the Market Price, subject to adjustment as provided in this Note. For example, if the lowest trading price during the delinquency period is $0.50 per share and the conversion discount is 50%, then the Holder may elect to convert future conversions at $0.25 per share. If this Note is not paid at Maturity Date, then the outstanding principal due under this Note shall increase by Fifteen Thousand and No/100 United States Dollars ($15,000).

 

The Holder shall have the right at any time after an Event of Default occurs under this Note to require the Borrower, to immediately issue, in lieu of the Default Amount and/or Default Sum, the

 

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number of shares of Common Stock of the Borrower equal to the Default Amount and/or Default Sum divided by the Conversion Price then in effect, pursuant to the terms of this Note (including but not limited to any beneficial ownership limitations contained herein). This requirement by the Borrower shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action.

 

If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Borrower for its attorneys' fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, the Holder shall be entitled to use the lowest trading price during the delinquency period as a base price for the conversion and the Variable Conversion Price shall be redefined to mean forty percent (40%) multiplied by the Market Price, subject to adjustment as provided in this Note.

 

ARTICLE IV.     MISCELLANEOUS

 

4.1    Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

4.2    Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, electronic mail, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by electronic mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If to the Borrower, to:

 

Mitesco, Inc.

1600 Highway 100 South, Suite 432

St. Louis Park, MN 55416

Attn: Larry Diamond, CEO

E-mail: LDiamond@Mitescoinc.com; with a copy JLindstrom@Mitescoinc.com

 

 

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If to the Holder:

 

Kishon Investments, LLC

3172 North Rainbow Blvd, Suite 1385

Las Vegas, Nevada 89108

Attn: Jehuda Josephson

Email:

 

4.3    Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

4.4    Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Neither the Borrower nor the Holder shall assign this Note or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

 

4.5    Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.

 

4.6    Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts located in the State of New York or federal courts located in the State of New York. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or

 

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unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

4.7    Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

 

4.8    Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

 

4.9    Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to

 

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the Holder in accordance with the terms of this Section 4.9 including, but not limited to, name changes, recapitalizations, etc. as soon as possible under law.

 

4.10    Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Borrower covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Borrower from paying all or a portion of the principal or interest on this Note.

 

4.11    Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required. No provision of this Note shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

 

4.12    Severability. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 

4.13    Dispute Resolution. In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum, Closing or Maturity Date, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation of the Conversion Price or the applicable prepayment amount(s) (as the case may be), the Borrower or the Holder shall submit the disputed determinations or arithmetic calculations via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation within two (2) Business Days of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower or the Holder, then the Borrower shall, within two (2) Business Days, submit via facsimile (a) the disputed determination of the Conversion Price, the closing bid price, the or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, Conversion Amount, any prepayment amount or Default Amount, Default Sum to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower shall cause at its expense the investment bank or the accountant to

22

 

 

perform the determinations or calculations and notify the Borrower and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable error.

 

4.14    Reserved.  

 

4.15    Registration Statement. As required by Section 4(q) of the Purchase Agreement, the Borrower shall promptly, but in any event no later than 180 days from the date of this Note, the Company shall prepare and file with the SEC a registration statement covering the resale of all of the Conversion Shares, Commitment Fee Shares and Warrant Shares.

 

 

[signature page follows]

 

 

 

 

23

 

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer as of the date first above written.

 

 

MITESCO, INC.

 

 

By:________________________________

Name:

Title:

 

 

24

 

 

EXHIBIT A

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert $_________________principal amount of the Note (defined below) together with $________________ of accrued and unpaid interest thereto, totaling $_____________ into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of Mitesco, Inc., a Delaware corporation (the “Borrower”), according to the conditions of the convertible note of the Borrower dated as of March __, 2022 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

[ ]          The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system (“DWAC Transfer”).

 

Name of DTC Prime Broker:

Account Number:

 

[ ]          The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

 

Name: [NAME]

Address: [ADDRESS]

 

Date of Conversion:                                                 _____________

Applicable Conversion Price:                                  $____________

Number of Shares of Common Stock to be Issued

Pursuant to Conversion of the Notes:                  ______________

Amount of Principal Balance Due remaining

Under the Note after this conversion:                  ______________

Accrued and unpaid interest remaining:                  ______________

 

[HOLDER]

 

 

By:_____________________________

Name: [NAME]

Title: [TITLE]

Date: [DATE]

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