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UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM
8-K
CURRENT REPORT
Pursuant to Section
13 or 15(d)
of the Securities Exchange
Act of 1934
Date of Report (Date of
earliest event reported): October 17, 2024
Incannex
Healthcare Inc.
(Exact name of registrant
as specified in its charter)
| Delaware |
|
001-41106 |
|
93-2403210 |
(State or other Jurisdiction
of Incorporation) |
|
(Commission File Number) |
|
(IRS Employer
Identification No.) |
|
Suite
105, 8
Century Circuit Norwest,
NSW
2153
Australia |
|
Not applicable |
| (Address of Principal Executive Offices) |
|
(Zip Code) |
Registrant’s Telephone
Number, including Area Code: +61 409 840 786
(Former Name or
Former Address, if Changed Since Last Report): Not Applicable
Check the appropriate box below if the Form
8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section
12(b) of the Act:
| Title
of each class |
|
Trading
Symbol |
|
Name
of exchange on which registered |
| Common Stock, $0.0001 par value per share |
|
IXHL |
|
The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the
Securities Exchange Act of 1934 (§240.12b-2 of this chapter)
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act.
Item 2.03 Creation of a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On October 17, 2024,
Incannex Healthcare Inc. (“Company”) completed a closing for the issuance of a secured convertible debenture (“Debenture”)
in the principal amount of $3,333,333, with 10% original issue discount and payment-in-kind interest rate at 5%, to Arena Special Opportunities
(Offshore) Master II LP (“Arena”). The Debenture matures on April 14, 2026.
The net proceeds received
from the issuance of the Debenture, after deduction of expenses reimbursable to Arena, amounted to $2,877,588 million. The funds will
be utilized to advance the development of the company's three lead assets, ensuring continued progress in their research and development
pipeline, while also providing essential working capital to support the company's operational growth and strategic initiatives.
Further information is
included in Item 3.02 to this Form 8-K and in the Forms 8-K filed by the Company on September 10, 2024, which are incorporated herein
by reference.
Item 3.02 Unregistered Sales of Equity
Securities.
As discussed in Item
2.03, the Company completed closing for the issuance of the Debenture to Arena on October 17, 2023. The Debenture has a conversion price
of $1.84 per share of common stock, subject to adjustments pursuant to the terms of the Debenture. The issuance of the Debenture is exempt
under Section 4(a)(2) of the Securities Act of 1933.
In addition, the Company
issued a warrant (“Warrant”) to Arena. The Warrant is exercisable for 453,749 shares of common stock of the Company. The exercise
price of the Warrant is 115% of the closing price of the shares of common stock recorded on Nasdaq on October 14, 2024. The issuance of
the Warrant is exempt under Section 4(a)(2) of the Securities Act of 1933.
The Company is obligated
to file a registration statement to register the shares of common stock underlying the Debenture and the Warrant.
Further information is
included in Item 2.03 to this Form 8-K and in the Forms 8-K filed by the Company on September 10, 2024, which are incorporated herein
by reference.
Item 9.01 Financial Statements and Exhibits.
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| |
Incannex Healthcare Inc. |
| |
|
|
| Date: October 21, 2024 |
|
/s/ Joel Latham |
| |
Name: |
Joel Latham |
| |
Title: |
Chief Executive Officer and President |
Exhibit 10.2
NEITHER THIS SECURITY NOR THE SECURITIES
INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES
Original Issue Date: October 14, 2024
Original Principal Amount: $3,333,333
10% ORIGINAL ISSUE DISCOUNT
SECURED
CONVERTIBLE DEBENTURE
DUE APRIL 14, 2026
THIS 10% ORIGINAL
ISSUE DISCOUNT SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued 10% Original Issue Discount Secured
Convertible Debentures of INCANNEX HEALTHCARE INC.,
a Delaware corporation (together with its successors and assigns, the “Company”), whose registered office is at Suite
105, 8 Century Circuit, Norwest, NSW 2153, Australia, designated as its 10% Original Issue Discount Secured Convertible Debenture due
April 14, 2026 (this debenture, the “Debenture” and, collectively with the other debentures of such series, the “Debentures”).
FOR VALUE RECEIVED, the Company
promises to pay to Arena Special Opportunities (Offshore) Master II LP or its registered assigns (the “Holder”), or
shall have paid pursuant to the terms hereunder, the principal sum of $3,333,333 on April 14, 2026 (the “Maturity Date”)
or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder
on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof. All payments
due hereunder (to the extent not converted into shares Common Stock in accordance with the terms hereof) shall be made in lawful money
of the United States of America at the address or otherwise pursuant to such instructions as the Holder shall provide to the Company by
written notice made in accordance with the provisions of this Debenture. This Debenture is subject to the following additional provisions:
Section 1. Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined herein
shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:
“Alternate Consideration”
shall have the meaning set forth in Section 5(e).
“Alternate
Conversion Price” shall have the meaning set forth in Section 4(b).
“Alternate
Conversion Floor Price” shall have the meaning set forth in Section 4(b).
“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in the Purchase
Agreement) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary
thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed
within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order
of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers
any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60
calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit
of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts, (g) the Company or any Significant Subsidiary thereof admits in writing that it is generally
unable to pay its debts as they become due, (h) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of
effecting any of the foregoing.
“Base Conversion
Price” shall have the meaning set forth in Section 5(b).
“Beneficial
Ownership Limitation” shall have the meaning set forth in Section 4(d).
“Business
Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized
or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee”
or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority
so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York are generally
are open for use by customers on such day.
“Buy-In”
shall have the meaning set forth in Section 4(c)(v).
“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital shares of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company (other than by means of conversion or exercise of the Debentures and the Warrants issued together with
the Debentures), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the
Company and, after giving effect to such transaction, the shareholders of the Company immediately prior to such transaction own less than
66% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company (and all of its Subsidiaries,
taken as a whole) sells or transfers all or substantially all of its assets to another Person and the shareholders of the Company immediately
prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, (d)
a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved
by a majority of those individuals who are members of the Board of Directors on the Execution Date (or by those individuals who are serving
as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members
of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company
is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.
“Conversion
Date” shall have the meaning set forth in Section 4(a).
“Conversion
Price” shall have the meaning set forth in Section 4(b).
“Conversion
Shares” means, collectively, the shares Common Stock issuable upon conversion of this Debenture in accordance with the terms
hereof.
“Debenture
Register” shall have the meaning set forth in Section 2.
“Dilutive
Issuance” shall have the meaning set forth in Section 5(b).
“Dilutive
Issuance Notice” shall have the meaning set forth in Section 5(b).
“Dollars”
and “$” mean dollars in lawful currency of the United States of America.
“Effectiveness
Period” shall have the meaning set forth in the Registration Rights Agreement.
“Event
of Default” shall have the meaning set forth in Section 8(a).
“Execution
Date” means September 6, 2024.
“Floor
Price” shall mean $0.33.
“Floor
Price Spread Amount” shall have the meaning set forth in Section 4(c)(i).
“Fundamental
Transaction” shall have the meaning set forth in Section 5(e).
“Indebtedness”
or “indebtedness” of any person shall mean, if and to the extent (other than with respect to clause (i)) the same would
constitute indebtedness or a liability on a balance sheet prepared in accordance with GAAP, without duplication, (a) all obligations of
such person for borrowed money, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such
person, (d) all obligations of such person issued or assumed as the deferred purchase price of property or services (other than such obligations
accrued in the ordinary course of business or consistent with past practice or industry norm), to the extent that the same would be required
to be shown as a long term liability on a balance sheet prepared in accordance with GAAP, (e) all capitalized lease obligations of such
person, (f) the principal component of all obligations, contingent or otherwise, of such person as an account party in respect of letters
of credit, (g) the principal component of all obligations of such person in respect of bankers’ acceptances, and (h) all guarantees
by such person of indebtedness described in clauses (a) to (g) above; provided, that Indebtedness shall not include (A) trade and
other ordinary-course payables and intercompany liabilities arising in the ordinary course of business or consistent with past practice
or industry norm, (B) accrued expenses, (C) prepaid or deferred revenue, (D) purchase price holdbacks arising in the ordinary course of
business or consistent with past practice or industry norm in respect of a portion of the purchase prices of an asset to satisfy unperformed
obligations of the seller of such asset, or (E) earn-out obligations until such obligations become a liability on the balance sheet of
such person in accordance with GAAP.
“Mandatory
Default Amount” means the sum of (a) 150% of the outstanding principal amount of this Debenture, plus 100% of accrued and unpaid
interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.
“New York
Courts” shall have the meaning set forth in Section 9(f).
“Notice
of Conversion” shall have the meaning set forth in Section 4(a).
“Optional
Redemption” shall have the meaning set forth in Section 6(b).
“Optional
Redemption Amount” shall have the meaning set forth in Section 6(b).
“Optional
Redemption Date” shall have the meaning set forth in Section 6(b).
“Optional
Redemption Notice” shall have the meaning set forth in Section 6(b).
“Optional
Redemption Notice Date” shall have the meaning set forth in Section 6(b).
“Common
Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which such
securities may hereafter be reclassified or changed.
“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Stock, including, without limitation, any debt, preference shares, right, option, warrant or other instrument that
is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Original
Issue Date” means the date of the first issuance of the Debenture (i.e., the date first written above), regardless of any transfers
of the Debenture and regardless of the number of instruments which may be issued to evidence such Debenture.
“Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures, and (b) the indebtedness existing on the Execution Date
set forth on Schedule 20 to the Perfection Certificate.
“Permitted
Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental
charges or levies not yet delinquent by more than 30 days or Liens for taxes, assessments and other governmental charges or levies being
contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the
Company) have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s
business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar
Liens arising in the ordinary course of the Company’s business which secure obligations which are not more than 30 days overdue,
and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair
the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property
or asset subject to such Lien, (c) Liens incurred in connection with Permitted Indebtedness under clauses (a), (b), and (d) thereunder,
(d) Liens incurred in connection with Permitted Indebtedness under clause (c) thereunder, provided that such Liens are not secured by
assets of the Company or its Subsidiaries other than the assets so acquired or leased, (e) Liens incurred on Australian research and development
tax incentives in Australia for the fiscal years ended June 30, 2023 and 2024 pursuant to the terms of a Senior Secured Research &
Development facility with FC Securities PTY Ltd, as trustee for the Fixed Interest Receivables Securities Trust, which shall have a senior
security interest pursuant to the terms of intercreditor agreement with the Purchasers in a form typical for transactions of this type.
“Purchase
Agreement” means the Securities Purchase Agreement, dated as of September 6, 2024, by and among the Company, and the Purchasers
party thereto (as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms).
“Registration
Rights Agreement” means the Registration Rights Agreement, dated as of the Execution Date, among the Company and the Purchasers
of the Securities issued by the Company pursuant to the Purchase Agreement.
“Registration
Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering
the resale of the Underlying Shares by the Holder as provided for in the Registration Rights Agreement.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Share
Delivery Date” shall have the meaning set forth in Section 4(c)(ii).
“Standard
Settlement Period” shall have the meaning set forth in Section 4(c)(ii).
“Successor
Entity” shall have the meaning set forth in Section 5(e).
“Surviving
Entity” shall have the meaning set forth in Section 10.
“Trading
Day” means a day on which the principal Trading Market is open for trading.
“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date
in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock
Exchange (or any successors to any of the foregoing).
“VWAP”
shall have the meaning set forth in Section 4(b).
Section 2. Interest.
Interest shall accrue on the outstanding principal amount of this Debenture from and including the 15th day of October 2024
(or such latter date that funds are received by the Escrow Agent and released to the Company pursuant to the terms of the Escrow Agreement)
at the rate of five percent (5%) per annum paid-in-kind (“PIK Interest”) unless there is an Event of Default, in which
case Default Interest shall accrue and be paid instead of PIK Interest. The PIK Interest shall be added to the outstanding principal amount
of this Debenture on a monthly basis as additional principal obligations hereunder and shall automatically and thereafter constitute a
part of the outstanding principal amount for all purposes hereof (including the accrual of interest thereon at the rates applicable to
the principal amount generally). The Borrower will not issue additional debentures to represent the PIK Interest. Interest shall be calculated
on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue
Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts
which may become due hereunder, has been made. Interest shall cease to accrue with respect to any portion of the principal amount of this
Debenture that is converted to Conversion Shares, provided that the Company delivers the Conversion Shares and pays the applicable Floor
Price Spread Amount with respect to such conversion, if any, within the time period required by Section 4 hereof. Accrued and unpaid
interest hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Company regarding registration
and transfers of this Debenture (the “Debenture Register”); provided, notwithstanding anything to the contrary
set forth herein, the Company represents and warrants that as of the Original Issue Date, the Person in whose name this Debenture is duly
registered on the Debenture Register as the owner of this Debenture for the purpose of receiving payment as herein provided and for all
other purposes is Arena Special Opportunities (Offshore) Master II LP. Upon the occurrence and during the continuance of an Event of Default,
interest shall accrue on the outstanding principal amount of this Debenture at the rate of two percent (2.00%) per month (“Default
Interest”). Accrued and unpaid Default Interest shall be due and payable monthly in arrears in cash on the first of each month
following the occurrence of any Event of Default for Default Interest accrued through the last day of the prior month.
Section 3. Registration
of Transfers and Exchanges.
(a) Different
Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
(b) Investment
Representations. This Debenture has been issued subject to certain investment representations of the original Holder set forth in
the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state
securities laws and regulations.
(c) Reliance
on Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and any agent of the Company
may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Company nor
any such agent shall be affected by notice to the contrary.
Section 4. Conversion.
(a) Voluntary
Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall be convertible,
in whole or in part, into shares of Common Stock at the option of the Holder, at the time of each drawdown (subject to the conversion
limitations set forth in Section 4(d) hereof). The Holder shall effect conversions by delivering to the Company a Notice of Conversion,
the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal
amount of this Debenture to be converted and the date on which such conversion shall be effected (such date, the “Conversion
Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice
of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee
(or other type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions hereunder, the Holder
shall not be required to physically surrender this Debenture to the Company unless the entire principal amount of this Debenture, plus
all accrued and unpaid interest thereon, has been so converted in which case the Holder shall surrender this Debenture as promptly as
is reasonably practicable after such conversion without delaying the Company’s obligation to deliver the shares on the Share Delivery
Date. Any conversion hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal
to the applicable principal amount being converted provided that the Company delivers the Conversion Shares and pays the applicable Floor
Price Spread Amount with respect to such conversion, if any, in accordance with this Section 4. The Holder and the Company shall
maintain records showing the principal amount(s) converted and the date of such conversion(s). The Company may deliver an objection to
any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy,
the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by
acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion
of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof.
(b) Conversion
Price; Alternate Conversion Price. The conversion price of the Debenture in effect as of any Conversion Date shall be a price per
share of Common Stock equal to $1.84 (the “Conversion Price”) and subject to adjustment as provided herein; provided
that, if the closing price of the Common Stock is less than the Conversion Price for five (5) or more Trading Days during any twenty (20)
Trading Day period following the Original Issue Date, the Holder shall be entitled to convert this Debenture at a price per share equal
to the Alternate Conversion Price (each an “Alternate Conversion”) so long as no Alternate Conversion is at a price
per share less than the Alternate Conversion Floor Price; and provided further that no conversion under this Debenture is at a price per
share less than the Floor Price.
As used herein:
| (A) | “Alternate Conversion Price” means the lower of (i) the then-current Conversion Price
and (ii) ninety-five percent (95%) of the lowest daily VWAP during the five (5) Trading Days prior to the delivery by the Holder of the
applicable Notice of Conversion. |
| (B) | “Alternate Conversion Floor Price” means (i) initially, $1.50, (ii) thereafter, 50%
of the closing price of the Common Stock on the date that is 6 months following Original Issue Date, and (iii) thereafter, 50% of the
closing price of the Common Stock on the date that is 12 months following Original Issue Date. Notwithstanding the foregoing, following
an Event of Default pursuant to section 8(a)(i), (ii), (iv), (vi), (vii), (viii), (ix), (x), (xi), (xii) (xiv), (xv), (xvi), (xvii) or
(xviii), the “Alternate Conversion Floor Price” shall be the lower of (x) the Alternate Conversion Floor Price immediately
prior to such Event of Default, and (y) 50% of the closing price of the Common Stock on the date of such Event of Default. Further to
the foregoing, the Alternate Conversion Floor Price may be reduced at any time from the Alternate Conversion Floor Price then in effect
upon the written consent of the Company and the Requisite Holders. |
| (C) | “VWAP” means, as of any date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the per share daily volume weighted average price
of the Common Stock for such date (or if such date is not a Trading Day, for the nearest preceding Trading Day) on the Trading Market
on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m. (New York City time)), (b) if the Common Stock is listed on the OTCQB or OTCQX, the per share volume weighted average
price of the Common Stock for such date (or if such date is not a Trading Day, for the nearest preceding Trading Day) on OTCQB or OTCQX
as applicable, (c) if the Common Stock is not then listed or quoted for trading on any Trading Market or OTCQB or OTCQX and if prices
for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share
of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company,
the fees and expenses of which shall be paid by the Company. |
(c) Mechanics
of Conversion; Floor Price Spread Payments.
(i) Conversion
Shares Issuable Upon Conversion of Principal Amount; Floor Price Spread Payments. The number of Conversion Shares issuable upon a
conversion as of any Conversion Date hereunder shall be equal to the quotient obtained by dividing the outstanding principal amount
of this Debenture to be converted by the Conversion Price as of such Conversion Date; provided, notwithstanding anything to the
contrary set forth herein, that if the Floor Price exceeds the Conversion Price on any Conversion Date, then (1) the number of Conversion
Shares issuable upon the applicable conversion hereunder shall be equal to the quotient obtained by dividing the outstanding principal
amount of this Debenture to be converted by the Floor Price as of such Conversion Date, and (2) the Company shall pay the Holder an amount
in cash on the applicable Share Delivery Date with respect to such conversion (a “Floor Price Spread Amount”) equal
to the product obtained by multiplying (A) the amount obtained by subtracting the Conversion Price as of such Conversion
Date from the Floor Price as of such Conversion Date by (B) the amount obtained by subtracting (x) the quotient obtained by dividing
the outstanding principal amount of this Debenture to be converted by the Conversion Price as of such Conversion Date from (y) the
quotient obtained by dividing the outstanding principal amount of this Debenture to be converted by the Floor Price as of such
Conversion Date.
(ii) Delivery
of Conversion Shares Upon Conversion; Floor Price Spread Payments. Not later than the earlier of (i) two (2) Trading Days and (ii)
the number of Trading Days comprising the Standard Settlement Period (as defined below) after each Conversion Date (the “Share
Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) the Conversion Shares which, on or after
the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Applicable Effective Date, shall be free of restrictive
legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion
Shares being acquired upon the applicable conversion of this Debenture). On or after the earlier of (i) the six-month anniversary of the
Original Issue Date or (ii) the Applicable Effective Date, the Company shall deliver any Conversion Shares required to be delivered by
the Company under this Section 4(c) electronically through the Depository Trust Company or another established clearing corporation
performing similar functions. Any Floor Price Spread Amount payable with respect to a conversion of the Debenture as determined in accordance
with Section 4(c)(i) above shall be due and payable by the Company in full on the Share Delivery Date for such conversion. As used
herein, the term “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading
Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of any Notice
of Conversion.
(iii) Failure
to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed
by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time
on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the Company shall promptly return to the
Holder any original Debenture delivered to the Company and the Holder shall promptly return to the Company the Conversion Shares issued
to such Holder pursuant to the rescinded Conversion Notice.
(iv) Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of
this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder
to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person,
and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with
the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company
of any such action the Company may have against the Holder. In the event the Holder of this Debenture shall elect to convert any or all
of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated
or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a
court, on notice to Holder, restraining and or enjoining conversion of all or part of this Debenture shall have been sought and obtained,
and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Debenture,
which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying
dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction,
the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason
to deliver to the Holder such Conversion Shares pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay
to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading
Day (increasing to $20 per Trading Day on the fifth (5th) Trading Day after such liquidated damages begin to accrue) for each Trading
Day after such Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion. Nothing herein shall
limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 hereof for the Company’s
failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available
to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise
of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable
law.
(v) Compensation
for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the Holder,
if the Company fails for any reason to deliver to the Holder such Conversion Shares by the Share Delivery Date pursuant to Section
4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction
or otherwise), or the Holder’s brokerage firm otherwise purchases, Common Stock to deliver in satisfaction of a sale by the Holder
of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”),
then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount,
if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds
(y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue
multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage
commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Debenture in a principal amount equal to the principal
amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares
of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(c)(ii).
For example, if the Holder purchases a number of shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted conversion of this Debenture with respect to which the actual sale price of the Conversion Shares (including any
brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence,
the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit
a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Conversion Shares upon
conversion of this Debenture as required pursuant to the terms hereof.
(vi) Reservation
of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized
and unissued Common Stock for the sole purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture,
each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and
any other holders of the Debentures), not less than such aggregate number of shares of Common Stock as shall (subject to the terms and
conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5)
upon the conversion of the then outstanding principal amount of this Debenture and payment of interest hereunder. The Company covenants
that all Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and,
if the Registration Statement is then effective under the Securities Act, shall be registered for public resale in accordance with such
Registration Statement (subject to such Holder’s compliance with its obligations under the Registration Rights Agreement).
(vii) Fractional
Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Debenture. As to
any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election,
either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price
or round up to the next whole share.
(viii) Transfer
Taxes and Expenses. The issuance of Conversion Shares on conversion of this Debenture shall be made without charge to the Holder hereof
for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided
that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery
of any such Conversion Shares upon conversion in a name other than that of the Holder of this Debenture so converted and the Company shall
not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository
Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of
the Conversion Shares.
(d) Holder’s
Conversion Limitations. The Company shall not effect any conversion of this Debenture, and a Holder shall not have the right to convert
any portion of this Debenture, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion,
the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the
Holder’s Affiliates (such Persons, “Attribution Parties”)) would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of
this Debenture with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would
be issuable upon (i) conversion of the remaining, unconverted principal amount of this Debenture beneficially owned by the Holder or any
of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities
of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation,
any other Debentures or the Warrants) beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set
forth in the preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in
this Section 4(d) applies, the determination of whether this Debenture is convertible (in relation to other securities owned by
the Holder together with any Affiliates and Attribution Parties) and of which principal amount of this Debenture is convertible shall
be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination
of whether this Debenture may be converted (in relation to other securities owned by the Holder together with any Affiliates or Attribution
Parties) and which principal amount of this Debenture is convertible, in each case subject to the Beneficial Ownership Limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report
filed with the Commission, as the case may be, (B) a more recent public announcement by the Company, or (C) a more recent written notice
by the Company or the Company’s Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written
or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares
of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect
to the conversion or exercise of securities of the Company, including this Debenture, by the Holder or its Affiliates since the date as
of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall
be 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of Common Stock issuable
upon conversion of this Debenture. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 4(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares
of Common Stock outstanding immediately after giving effect to the issuance of Common Stock upon conversion of this Debenture held by
the Holder and the Beneficial Ownership Limitation provisions of this Section 4(d) shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial
Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with
the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the
intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect
to such limitation. Notwithstanding anything to the contrary contained in this Debenture or the other Transaction Documents, while the
Company is listed on the Trading Market and prior to the receipt of the Shareholder Approval, the Holder and the Company agree that nothing
in the Transaction Documents shall require the Company to issue any Common Stock to Lender to the extent such issuance would result in
the aggregate number of Underlying Shares issued by the Company pursuant to the Transaction Documents to exceed the Conversion Cap. The
limitations contained in this paragraph shall apply to a successor holder of this Debenture.
Section 5. Certain Adjustments.
(a) Share
Dividends and Share Splits. If the Company, at any time while this Debenture is outstanding: (i) pays a share dividend or otherwise
makes a distribution or distributions payable in Common Stock on Common Stock or any Common Stock Equivalents (which, for avoidance of
doubt, shall not include any Common Stock issued by the Company upon conversion of, or payment of interest on, the Debentures), (ii) subdivides
outstanding Common Stock into a larger number of shares, (iii) combines (including by way of a reverse share split) outstanding Common
Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of Common Stock or any capital shares
of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common
Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and
shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
(b) Subsequent
Equity Sales. If, at any time while this Debenture is outstanding, the Company or any Subsidiary, as applicable, sells or grants any
option to purchase, or otherwise issues, any Common Stock or Common Stock Equivalents entitling any Person to acquire Common Stock at
an effective price per share that is lower than the then Conversion Price and/or the then Floor Price (such lower price, the “Base
Conversion Price” and such issuances, collectively, a “Dilutive Issuance”), then simultaneously with the
consummation of each Dilutive Issuance, the Conversion Price and/or the Floor Price, as applicable, shall be reduced to equal the Base
Conversion Price (subject to adjustment for reverse and forward share splits, recapitalizations and similar transactions following the
date of the Purchase Agreement); provided, for the avoidance of doubt, the effect of any adjustment to the Conversion Price and/or
Floor Price pursuant to this Section 5(b) shall be to reduce and not increase the Conversion Price and/or Floor Price, as applicable.
Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. If the Company
enters into a Variable Rate Transaction, despite the prohibition set forth in the Purchase Agreement, the Company shall be deemed to have
issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted or exercised.
The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange
price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification,
whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive
Issuance, the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of
such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.
(c) Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, if at any time the Company grants, issues
or sells any Common Stock Equivalents or rights to purchase shares, warrants, securities or other property pro rata to the record holders
of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete conversion of this Debenture (without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined
for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right
to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall
not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Common Stock as a result of such
Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever,
as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(d) Pro
Rata Distributions. During such time as this Debenture is outstanding, if the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, shares or other securities, property or options by way of a dividend, spin off, reclassification,
corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after
the issuance of this Debenture, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same
extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete
conversion of this Debenture (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership
Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as
of which the record holders of Common Stock are to be determined for the participation in such Distribution (provided, however,
that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership
of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance
for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation).
(e) Fundamental
Transaction. If, at any time while this Debenture is outstanding, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company (and all of its Subsidiaries,
taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of
all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender
offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted
to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related
transactions consummates a share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization,
spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than
50% of the outstanding Common Stock (not including any Common Stock held by the other Person or other Persons making or party to, or associated
or affiliated with the other Persons making or party to, such share purchase agreement or other business combination) (each a “Fundamental
Transaction”), then, upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for each
Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction
(without regard to any limitation in Section 4(d) on the conversion of this Debenture), the number of shares of Common Stock of
the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for
which this Debenture is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section
4(d) on the conversion of this Debenture). For purposes of any such conversion, the determination of the Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of
one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate
Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders
of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder
shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental
Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor
Entity”) to assume in writing all of the obligations of the Company under the Debentures and the other Transaction Documents
(as defined in the Purchase Agreement) in accordance with the provisions of this Section 5(e) pursuant to written agreements in
form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the holder of this Debenture, deliver to the Holder in exchange for this Debenture a security
of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Debenture which is convertible
for a corresponding number of capital shares of such Successor Entity (or its parent entity) equivalent to the Common Stock acquirable
and receivable upon conversion of this Debenture (without regard to any limitations on the conversion of this Debenture) prior to such
Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such capital shares (but taking into
account the relative value of the Common Stock pursuant to such Fundamental Transaction and the value of such capital shares, such number
of capital shares and such conversion price being for the purpose of protecting the economic value of this Debenture immediately prior
to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the
occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after
the date of such Fundamental Transaction, the provisions of this Debenture and the other Transaction Documents referring to the “Company”
shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations
of the Company under the Debentures and the other Transaction Documents with the same effect as if such Successor Entity had been named
as the Company herein.
(f) Calculations.
All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.
(g) Notice
to the Holder.
(i) Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall
promptly deliver to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
(ii) Notice
to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common
Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall
authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any capital shares of any
class or of any rights, (D) the approval of any shareholders of the Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any
sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last address as it shall appear
upon the Debenture Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified,
a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants,
or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer
or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of
record shall be entitled to exchange their Common Stock for securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in
the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that
any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries,
the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain
entitled to convert this Debenture during the 20-day period commencing on the date of such notice through the effective date of the event
triggering such notice except as may otherwise be expressly set forth herein.
Section 6. Mandatory Prepayment; Redemption.
(a) Mandatory
Prepayment. If, at any time prior to the full repayment or full conversion of all amounts owed under this Debenture, the Company or
any of its Subsidiaries receives cash proceeds from the issuance of equity or indebtedness (other than the issuance of other Debentures),
in one or more financing transactions, whether publicly offered or privately arranged (including, without limitation, pursuant to the
Arena ELOC), the Company shall, within one (1) Business Day of the Company or the applicable Subsidiary’s receipt of such proceeds,
inform the Holder of such receipt via written notice (a “Mandatory Prepayment Notice”), whereupon the Holder shall
have the right in its sole discretion to require, by written notice to the Company delivered within five (5) Business Days of the Holder’s
receipt of any such Mandatory Prepayment Notice, that the Company immediately apply up to twenty-five percent (25%) of the gross cash
proceeds received from the applicable financing transaction to prepay the Company’s then outstanding obligations under the Debentures
(a “Mandatory Prepayment Exercise Notice”). The Company shall, within one (1) Business Day of the Company’s receipt
of a Mandatory Prepayment Exercise Notice, prepay the Company’s then outstanding obligations under the Debentures; provided,
such gross cash proceeds shall be applied to prepay all of the Debentures then outstanding pro rata in proportion to the respective outstanding
principal amount of each Debenture at the time the Holder delivers the applicable Mandatory Prepayment Exercise Notice.
(b) Optional
Redemption at Election of Company.
(i) Subject
to the provisions of this Section 6(b), the Company may deliver a notice to the Holder at any time (an “Optional Redemption
Notice”, and the date such notice is deemed delivered hereunder, the “Optional Redemption Notice Date”) of
its irrevocable election to redeem all or any portion of the then outstanding principal amount of this Debenture for cash in an amount
equal to the sum of (1) 110% of the portion of the outstanding principal amount of this Debenture elected to be redeemed plus 100% of
accrued but unpaid interest thereon and (2) all liquidated damages and other amounts then due in respect of the Debenture (the “Optional
Redemption Amount”) on the 30th calendar day following the Optional Redemption Notice Date (such date, the “Optional
Redemption Date”, and such redemption, the “Optional Redemption”); provided, notwithstanding anything
to the contrary set forth herein, the Company may not deliver an Optional Redemption Notice at a time when an Event of Default has occurred
and is continuing.
(ii) The
Optional Redemption Amount shall be payable in full on the Optional Redemption Date. If the Company elects to redeem this Debenture pursuant
to this Section 6 or any other Debenture, it shall redeem all outstanding Debentures in full simultaneously by paying the Holder
the applicable Optional Redemption Amount payable with respect to all outstanding Debentures on the same Optional Redemption Date. If
any portion of the Optional Redemption Amount payable in respect of an Optional Redemption shall not be paid by the Company by the applicable
due date, interest shall accrue thereon at an interest rate equal to the lesser of two (2%) per annum or the maximum rate permitted by
applicable law until such amount is paid in full. Notwithstanding anything herein contained to the contrary, if any portion of the Optional
Redemption Amount remains unpaid after such date, the Holder may elect, by written notice to the Company given at any time thereafter,
to invalidate such Optional Redemption, ab initio, and, with respect to the Company’s failure to honor the Optional Redemption,
the Company shall have no further right to exercise such Optional Redemption. The Holder may elect to convert the outstanding principal
amount of the Debenture pursuant to Section 4 prior to actual payment in cash for any redemption under this Section 6 by
the delivery of a Notice of Conversion to the Company. The Company covenants and agrees that it will honor all Notices of Conversion tendered
from the time of delivery of the Optional Redemption Notice through the date all amounts owing thereon are due and paid in full.
Section 7. Negative
Covenants. As long as any portion of this Debenture remains outstanding, unless the Holder shall have otherwise given prior written
consent, the Company shall not, and shall not permit any direct or indirect Subsidiary of the Company to, directly or indirectly:
(a) other
than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any
kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits therefrom;
(b) other
than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property
or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;
(c) amend
its charter documents, including, without limitation, its certificate of incorporation or memorandum of association, and articles of association
or bylaws, as applicable, in any manner that materially and adversely affects any rights of the Holder;
(d) repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of Common Stock or Common
Stock Equivalents other than as to (i) the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents
and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Company, provided that such
repurchases shall not exceed an aggregate of $100,000 for all officers and directors during the term of this Debenture;
(e) repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than (i) the Debentures if on a pro-rata basis,
(ii) regularly scheduled principal and interest payments of Indebtedness outstanding as of the Execution Date in accordance with the terms
thereof as in effect as of the Execution Date and (iii) regularly scheduled principal and interest payments of Permitted Indebtedness
pursuant to the terms thereof; provided that payments pursuant to the foregoing clauses (ii) and (iii) shall not be permitted if, at such
time, or after giving effect to such payment, any Event of Default exists or occurs;
(f) pay
cash dividends or distributions on any equity securities of the Company;
(g) enter
into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of
the Company (even if less than a quorum otherwise required for board approval);
(h) sell,
dispose, assign, exchange, gift, lease, pledge, hypothecate or otherwise transfer, directly or indirectly, in one transaction or a series
of transactions, any material portion of its assets outside the ordinary course of business;
(i) engage
in any line of business substantially different from (i) those lines of business conducted by the Company and its Subsidiaries on the
date hereof or (ii) any business substantially related or incidental, complementary, corollary, synergistic or ancillary thereto or reasonable
extensions thereof; or
(j) enter
into any agreement with respect to any of the foregoing.
Section 8. Events of Default.
(a) “Event
of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event
shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order,
rule or regulation of any administrative or governmental body):
(i) any
default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages, any Floor Price Spread Amount,
and/or any other amounts owing to a Holder on any Debenture, as and when the same shall become due and payable (whether on a Conversion
Date, Share Delivery Date, Optional Redemption Date, or the Maturity Date or by acceleration or otherwise, as applicable) which default,
solely in the case of an interest payment or other payment default under clause (B) above, is not cured within 3 Trading Days;
(ii) the
Company or any of its Subsidiaries shall fail to observe or perform any other covenant or agreement contained in this Debenture (other
than a breach by the Company of its obligations to deliver Common Stock to the Holder upon conversion, which breach is addressed in clause
(xi) below) or in any other Transaction Document, which failure is not cured, if possible to cure, within the earlier to occur of (A)
5 Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) 10 Trading Days after the
Company has become or should have become aware of such failure;
(iii)
any representation or warranty made by or on behalf of the Company, any of its Subsidiaries or any of their respective officers in this
Debenture, any other Transaction Document, or any written statement, report, financial statement or certificate pursuant hereto or thereto
shall be untrue or incorrect in any material respect as of the date when made or deemed made;
(iv)
the Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any
indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater
than $250,000 whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become due and payable;
(v) the
Company or any Subsidiary shall default on any of its obligations under any other material agreement, lease, document or instrument to
which the Company or any Subsidiary is obligated (and not covered by clause (v) above), which default is not cured, if possible to cure,
within the earlier of (A) 5 Trading Days after notice of such default sent by the Holder or by any other Holder to the Company and (B)
10 Trading Days after the Company has become or should have become aware of such default;
(vi)
the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing
or quotation for trading thereon within 5 Trading Days;
(vii) the
Company (and all of its Subsidiaries, taken as a whole) shall be a party to any Change of Control Transaction or Fundamental Transaction;
(viii) the
Company or any of its Subsidiaries shall sell dispose, assign, exchange, gift, lease, pledge, hypothecate or otherwise transfer, directly
or indirectly, in one transaction or a series of transactions, any asset, undertaking or business outside of the ordinary course of business,
without the prior written consent of the Holder;
(ix)
the Initial Registration Statement (as defined in the Registration Rights Agreement) shall not have been declared effective by the Commission
on or prior to the 90th calendar day after the Closing Date or the Company does not meet the current public information requirements under
Rule 144 in respect of the Registrable Securities (as defined in the Registration Rights Agreement);
(x)
if, during an Effectiveness Period (as defined in the Registration Rights Agreement), either (a) the effectiveness of any Registration
Statement lapses for any reason or (b) the Holder shall not be permitted to resell Registrable Securities (as defined in the Registration
Rights Agreement) under a Registration Statement for a period of more than 20 consecutive Trading Days or 30 non-consecutive Trading Days
during any 12 month period; provided, however, that if the Company is negotiating a merger, consolidation, acquisition or
sale of all or substantially all of its assets or a similar transaction and, in the written opinion of counsel to the Company, a Registration
Statement would be required to be amended to include information concerning such pending transaction(s) or the parties thereto which information
is not available or may not be publicly disclosed at the time, the Company shall be permitted an additional 10 consecutive Trading Days
during any 12 month period pursuant to this Section 8(a)(x);
(xi)
the Company shall fail for any reason to deliver Conversion Shares to a Holder prior to the fifth Trading Day after a Conversion Date
pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement,
of the Company’s intention to not honor requests for conversions of any Debentures in accordance with the terms hereof;
(xii) the
electronic transfer by the Company of Common Stock through the Depository Trust Company or another established clearing corporation is
no longer available or is subject to a “chill”;
(xiii) any
monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective
property or other assets for more than $250,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or
unstayed for a period of 45 calendar days;
(xiv) the
Company or any Significant Subsidiary shall be subject to a Bankruptcy Event;
(xv) the
Company or any Subsidiary shall attempt to liquidate or dissolve itself without the prior written consent of the Holder;
(xvi) any
corporate action, legal proceedings or other procedure or step is taken in relation to: (a) the suspension of payments, a moratorium of
any indebtedness, winding up, dissolution, administration or reorganization (by way of voluntary arrangement, scheme of arrangement or
otherwise) of the Company or any Subsidiary; (b) a composition, compromise, assignment or arrangement with any creditor of the Company
or any Subsidiary; (c) the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other
similar officer in respect of the Company or any Subsidiary or any of their assets; (d) enforcement of any Lien over any assets of the
Company or any Subsidiary; or (e) or any analogous procedure or step is taken in any jurisdiction in relation to the foregoing.
(xvii) the
Company or any of its Subsidiaries shall: (i) apply for or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets; (ii) make a general assignment for
the benefit of its creditors; (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect)
or under the comparable laws of any jurisdiction (foreign or domestic); (iv) file a petition seeking to take advantage of any bankruptcy,
insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors' rights generally; (v) acquiesce in
writing to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or
under the comparable laws of any jurisdiction (foreign or domestic); (vi) issue a notice of bankruptcy or winding down of its operations
or issue a press release regarding same; or (vii) take any action under the laws of any jurisdiction (foreign or domestic) analogous to
any of the foregoing;
(xviii) a
proceeding or case shall be commenced in respect of the Company or any of its Subsidiaries, without its application or consent, in any
court of competent jurisdiction, seeking: (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or
readjustment of its debts; (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial
part of its assets in connection with the liquidation or dissolution of the Company or any of its Subsidiaries; or (iii) similar relief
in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii)
shall continue undismissed, or unstayed and in effect, for a period of forty-five (45) days or any order for relief shall be entered in
an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction
(foreign or domestic) against the Company or any of its Subsidiaries or action under the laws of any jurisdiction (foreign or domestic)
analogous to any of the foregoing shall be taken with respect to the Company or any of its Subsidiaries and shall continue undismissed,
or unstayed and in effect for a period of forty-five (45) days;
(xix) any
Subsidiary is not or ceases to be a Subsidiary of the Company; or
(xx) any
Transaction Document or any interest of the Holder thereunder shall, for any reason, be terminated, invalidated, void or unenforceable.
(b) Remedies
Upon Event of Default. If any Event of Default occurs, then the Holder may, by written notice to the Company, declare the entire outstanding
principal amount of this Debenture, plus accrued but unpaid interest, liquidated damages and all other amounts then owing in respect thereof
to be forthwith due and payable immediately in cash at the Mandatory Default Amount, whereupon the entire principal amount of this Debenture,
all such accrued and unpaid interest, liquidated damages and all such other amounts shall become forth with due and payable immediately
in cash at the Mandatory Default Amount without presentment, demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Company, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under applicable law; provided however, that in the case of any Event
of Default pursuant to clause (xvi), (xvii) or (xviii) of Section 8(a), the entire outstanding principal amount of this
Debenture, plus accrued but unpaid interest, liquidated damages and all other amounts then owing in respect thereof shall automatically
become and be due and payable in cash at the Mandatory Default Amount, without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Company.
Section 9. Miscellaneous.
(a) Notices.
All notices, requests, demands, and other communications provided for hereunder must be in writing and will be deemed to have been duly
given and effective on the earliest of: (a) the date of transmission shown in a delivery confirmation report generated by the sender’s
email system which indicates that delivery of the email to the recipient’s email address has been completed, if such notice or communication
is sent via e-mail prior to 5:30 p.m. (New York City time) on any Business Day; (b) the next Business Day after the date of transmission
shown in a delivery confirmation report generated by the sender’s email system which indicates that delivery of the email to the
recipient’s email address has been completed, if such notice or communication is sent via e-mail on a day that is not a Business
Day or later than 5:30 p.m. (New York City time) on any Business Day; (c) the second Business Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be
given, addressed as follows:
If to the Company:
Incannex Healthcare Inc.
Suite 105
8 Century Circuit
Norwest, NSW 2153, Australia
Attention: Joel Latham
Email: joel@incannex.com.au
With a copy to (which shall not constitute notice):
Rimôn Law Pty Ltd
Level 2
50 Bridge Street
Sydney, NSW 2000, Australia
Attention: Andrew Reilly
Email: andrew.reilly@rimonlaw.com
If to the Holder:
Arena Special Opportunities (Offshore)
Master II LP
405 Lexington Avenue, 59th Floor New
York, NY 10174
Attention: Yoav Stramer, Director
e-mail: ystramer@arenaco.com
or as to the Company or the Holder, at
such other address as shall be designated by such party in a written notice to the other party delivered in accordance with this Section
9(a).
(b) Amendments.
This Debenture and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder. The term
“Debenture” and all references thereto, as used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or supplemented.
(c) Assignability.
This Debenture shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. The Company shall not assign this Debenture or any rights or obligations hereunder without the prior written consent
of the Holder. The Holder may, without the consent of the Company, assign its rights hereunder (i) to any of its “affiliates”,
as that term is defined under the Exchange Act, and (ii) solely during the continuance of any Event of Default, to any other Person. The
Company’s prior written consent, not to be unreasonably withheld, conditioned or delayed, shall be required for the Holder to assign
its rights hereunder to any Person that is not one of its “affiliates”, as that term is defined under the Exchange Act during
any period in which an Event of Default is not then continuing. Notwithstanding anything in this Debenture to the contrary, this Debenture
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 Debenture, acknowledge and agree that following conversion of a portion of this Debenture, the unpaid and unconverted
outstanding principal amount of this Debenture represented by this Debenture may be less than the amount stated on the face hereof.
(d) Absolute
Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Debenture
at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of the Company.
This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.
(e) Lost
or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed
Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed, but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably satisfactory to the Company.
(f) Governing
Law; Submission to Jurisdiction; Waivers. All questions concerning the construction, validity, enforcement and interpretation of this
Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard
to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement
and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the
City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of
such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such suit, action or proceeding 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 Debenture 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 applicable law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Debenture or the transactions contemplated hereby.
(g) Waiver.
Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Company or the Holder
to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture on any other occasion.
Any waiver by the Company or the Holder must be in writing.
(h) Severability.
If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if
any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.
If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable
law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the
Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now
or at any time hereafter in force, or which may affect the covenants or the performance of this Debenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to
any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution
of every such as though no such law has been enacted.
(i) Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Debenture shall be cumulative
and in addition to all other remedies available under this Debenture and any of the other Transaction Documents at law or in equity (including
a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual
and consequential damages for any failure by the Company to comply with the terms of this Debenture. The Company covenants to the Holder
that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided
for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the
Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy
at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach,
the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened
breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide
all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance
with the terms and conditions of this Debenture.
(j) Next
Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day.
(k) Headings.
The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or
affect any of the provisions hereof.
(l) Payments.
So long as the Maturity Date has not yet occurred and the Debenture has not been accelerated, payments made hereunder (other than payments
effected pursuant to any conversion of the Debenture) shall be applied, (i) first, to reimbursable expenses of the Holder and liquidated
damages then due and payable hereunder and/or pursuant to any other Transaction Documents, and (ii) then payments matching specific scheduled
payments then due shall be applied to those scheduled payments. At any time after the Maturity Date or after the Debenture has been accelerated,
all payments remitted to the Holder by the Company and all proceeds of the collateral securing the Company’s obligations hereunder
or any enforcement action (including any payments by any guarantors of the Company’s obligations hereunder) received by the Holder
shall be applied as follows: (i) first, to the reimbursable expenses of the Holder, indemnity claims of the Holder and liquidated damages
then due and payable to the Holder hereunder and/or pursuant to any other Transaction Documents, (ii) second, to pay interest due and
payable in respect of the Debenture until paid in fall, (iii) third, to pay principal of the Debenture until paid in full; (iv) fourth,
to pay any other obligations then due in respect of the Debenture or any other Transaction Documents; and (v) lastly, to the Company or
such other Person entitled thereto under applicable law.
(m) Costs
and Expenses. The Company agrees to pay the Holder, immediately upon written notice from the Holder, all out-of- pocket costs, expenses,
and disbursements, including without limitation, legal expenses and attorneys’ fees incurred by the Holder in connection with: (i)
the collection, attempted collection, or negotiation and documentation of any settlement or workout of any payment due hereunder, (ii)
enforcement of this Debenture or any other Transaction Document (including without limitation, any costs and expenses of any third party
provider engaged by the Holder for such purpose), (iii) collection, protection, or enforcement of any rights of the Holder in the collateral
securing the Company’s obligations hereunder, and (iv) any suit or proceeding whatsoever in regard to this Debenture or the protection
or enforcement of the lien of any instrument securing this Debenture, including, without limitation, in connection with any litigation,
mediation, bankruptcy or administrative proceeding, and including any appellate proceeding or judicial or non-judicial foreclosure proceeding
in connection therewith.
(n) Secured
Obligations. The obligations of the Company under the Debentures are secured by (i) a pledge of all assets of the Company and the
Significant Subsidiaries pursuant to the terms of the Security Agreement (ii) the Guarantee and (iii) the other Security Documents.
(o) Guaranteed
Obligations. The obligations of the Company under the Debentures are guaranteed by each Significant Subsidiary pursuant to the Guarantee
(as amended, amended and restated, supplemented, or otherwise modified from time to time).
Section 10. New
Subsidiaries. If the Company or any Subsidiary forms or acquires any new direct or indirect Subsidiary, or any Subsidiary merges,
amalgamates, or consolidates with or into any other Person and such Subsidiary is not the surviving entity as a result of such merger,
amalgamation, or consolidation (any such surviving entity, a “Surviving Entity”), the Company agrees to, or to cause
such Subsidiary or Surviving Entity to, concurrently with such formation, acquisition, merger, amalgamation or consolidation, as applicable,
(i) provide notice to the Holder of such formation, acquisition, merger, amalgamation or consolidation, (ii) cause such newly formed or
acquired Subsidiary or Surviving Entity to become a party to the Subsidiary Guarantee pursuant to an assumption agreement in form and
substance acceptable to the Holder, and (iii) execute and/or deliver, and/or cause such newly formed or acquired Subsidiary or Surviving
Entity and any other applicable Subsidiary to execute and/or deliver, such other agreements or documents as are determined by the Holder
to be necessary or advisable in order for all of the capital shares in such newly formed or acquired Subsidiary or Surviving Entity to
be pledged as additional collateral for the obligations of the Company under the Debentures and for such newly formed or acquired Subsidiary
or Surviving Entity to pledge all of its assets as additional collateral for the obligations of the Company under the Debentures, and
(iv) deliver to the Holder an opinion of counsel in form and substance acceptable to the Holder addressing, among other things, the due
authorization, due execution and delivery and enforceability of the foregoing documents with respect to such Subsidiary or Surviving Entity.
Section 11. Disclosure.
Upon receipt or delivery by the Company or any Subsidiary of any notice in accordance with the terms of this Debenture, unless the Company
has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the
Company or its Subsidiaries, the Company shall within two (2) Business Days after such receipt or delivery publicly disclose such material,
nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material,
non-public information relating to the Company or its Subsidiaries, the Company so shall indicate to the Holder contemporaneously with
delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to
such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries.
*********************
(Signature Page Follows)
IN WITNESS WHEREOF,
the Company has caused this 10% Original Issue Discount Secured Convertible Debenture to be duly executed by a duly authorized officer
as of the date first above indicated.
| |
INCANNEX HEALTHCARE INC. |
| |
|
| |
By: |
/s/ Joel Latham |
| |
Name: |
Joel Latham |
| |
Title: |
Chief Executive Officer, President and Director |
ANNEX A NOTICE OF CONVERSION
The undersigned hereby elects
to convert principal under the 10% Original Issue Discount Secured Convertible Debenture issued on October 14, 2024 and due April 14,
2026 of Incannex Healthcare Inc., a Delaware corporation (together with its successors and assigns, the “Company”),
into common stock, par value $0.0001 per share (the “Common Stock”), of the Company according to the conditions hereof, as
of the date written below. If the Common Stock is to be issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested
by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.
By the delivery of this Notice
of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts
specified under Section 4 of this Debenture, as determined in accordance with Section 13(d) of the Exchange Act.
The undersigned agrees to
comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid
Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debenture to be Converted:
Number of shares of Common Stock to be
issued:
Signature:
Name:
Address for Delivery of Certificates
for Common Stock:
Or
DWAC Instructions:
Broker No: ____________
Account No: ___________
Exhibit 10.3
NEITHER THIS SECURITY NOR THE
SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
INCANNEX HEALTHCARE INC.
Warrant Shares: 453,749
Date of Issuance: October 14, 2024 (“Issuance
Date”)
This COMMON
STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received (in connection with the issuance of the convertible
debenture in the principal amount of $3,333,333.00 to the Holder (as defined below) of even date) (as amended, restated, amended and restated,
supplemented or otherwise modified from time to time, the “Debenture”), ARENA SPECIAL OPPORTUNITIES (OFFSHORE) MASTER
II LP, a Cayman Island limited partnership (including any permitted and registered assigns, the “Holder”), is entitled,
upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of
issuance hereof until 5:00 p.m. (New York City time) on October 14, 2029, to purchase from INCANNEX HEALTHCARE INC., a Delaware corporation
(the “Company”), 453,749 shares of Common Stock (the “Common Stock”) (whereby such number may be
adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect. This
Warrant is issued by the Company as of the date hereof in connection with that certain securities purchase agreement dated September 6,
2024, by and among the Company, the Holder, and certain other purchasers party thereto (as amended, restated, amended and restated, supplemented
or otherwise modified from time to time, the “Purchase Agreement”). Capitalized terms used in this Warrant shall have
the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section 15 below.
For purposes
of this Warrant, the term “Exercise Price” shall mean a price per share that is equal to 115% of the Closing Sale Price
of the Common Stock on the Issuance Date, subject to adjustment as provided herein.
Section 1. Exercise of Warrant.
(a) Mechanics
of Exercise. Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part
at any time or times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the
“Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver
the original Warrant in order to effect an exercise hereunder. Partial exercises of this Warrant resulting in purchases of a portion of
the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant Shares purchased. On or before the second Trading Day (the “Warrant
Share Delivery Date”) following the date on which the Holder sent the Exercise Notice to the Company or the Company’s
transfer agent, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied
by the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price”
and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately
available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct
its transfer agent to) either (i) cause the Warrant Shares purchased hereunder to be transmitted by its transfer agent to the Holder by
crediting the account of the Holder’s or its designee’s balance account with the Depository Trust Company through its Deposit
or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (x) there
is an effective registration statement permitting the issuance of the Warrant Shares to, or resale of the Warrant Shares by, the Holder,
or (y) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 (assuming
cashless exercise of the Warrants), or otherwise issue and deliver by overnight courier to the address as specified in the Exercise Notice,
a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of
Common Stock to which the Holder is entitled pursuant to such exercise (or deliver such Common Stock in electronic format if requested
by the Holder). Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate (but not Rule 144) purposes
to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date
of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise and the number
of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon
an exercise, then the Company shall as soon as practicable and in no event later than three (3) business days after any exercise and at
its own expense, issue a new Warrant (in accordance with Section 5) representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant
is exercised.
If the Company fails to cause
its transfer agent to issue to the Holder the respective Common Stock by the respective Warrant Share Delivery Date, then the Holder
will have the right to rescind such exercise in Holder’s sole discretion in addition to all other rights and remedies at law, under
this Warrant, or otherwise, and such failure shall also be deemed an event of default under the Debenture, a material breach under this
Warrant, and a material breach under the Purchase Agreement. In addition, if the Company fails for any reason to deliver to the Holder
the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash,
as partial liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of
the Common Stock on the date of the applicable Exercise Notice), $10 per Trading Day (increasing to $20 per Trading Day on the third
(3rd) Trading Day following the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until
such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant
in the FAST program so long as this Warrant remains outstanding and exercisable.
(b) Cashless
Exercise. If at any time after 180 days following the First Closing Date (“Registration Deadline”), there is no
effective registration statement registering, or no currently prospectus available for, the resale of the Warrant Shares by the Holder
(a “Registration Default”), then this Warrant may also be exercised, in whole or in part, at such time by means of
a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained
by dividing [(A-B) (X)] by (A), where:
| (A) |
= | as applicable: (i) the VWAP on the Trading Day immediately
preceding the date of the applicable Exercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section
1(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(a) on a Trading Day
prior to the opening of “regular trading hours” (as defined in Rule 600(b)(77) of Regulation NMS promulgated under the federal
securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding
the date of the applicable Exercise Notice or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg
L.P. as of the time of the Holder’s execution of the applicable Exercise Notice if such Exercise Notice is executed during “regular
trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close
of “regular trading hours” on a Trading Day) pursuant to Section 1(a) or (iii) the VWAP on the date of
the applicable Exercise Notice if the date of such Exercise Notice is a Trading Day and such Exercise Notice is both executed and delivered
pursuant to Section 1(a) after the close of “regular trading hours” on such Trading Day; |
| | |
| |
| | (B) |
= | the Exercise
Price of this Warrant, as adjusted hereunder; and |
| | |
| |
| | (X) |
= | the
number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise
were by means of a cash exercise rather than a cashless exercise. |
If Warrant Shares
are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act,
the Warrant Shares shall take on the characteristics of the Warrant being exercised, and the holding period of the Warrant Shares being
issued may be tacked on to the holding period of this Warrant. The Company agrees not to take any position contrary to this Section
1(b).
“Bid Price”
means, for any date, the price determined by the first of the following clauses that applies: (a) the bid price of the Common Stock for
the time in question (or the nearest preceding date) on the Principal Market on which the Common Stock is then listed or quoted as reported
by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX
is not a Principal Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB
or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common
Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases,
the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and the
Company, the fees and expenses of which shall be paid by the Company.
Notwithstanding
anything herein to the contrary, on the date that is sixty (60) months following the Issuance Date, this Warrant shall be automatically
exercised via cashless exercise pursuant to this Section 1(b).
(c) No
Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant
hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining
whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance
of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction
a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.
(d) Holder’s
Exercise Limitations. Notwithstanding anything to the contrary contained herein, the Company shall not effect any exercise of this
Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to
the extent that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, the Holder (together
with the Holder’s affiliates (the “Affiliates”), and any other Persons acting as a group together with the Holder
or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of
the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially
owned by the Holder and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant
with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable
upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or
Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the
preceding sentence, for purposes of this Section 1(d), beneficial ownership shall be calculated in accordance with Section 13(d)
of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Holder is solely
responsible for any schedules required to be filed in accordance therewith. In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For
purposes of this Section 1(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Securities
and Exchange Commission (the “Commission”), as the case may be, (B) a more recent public announcement by the Company
or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two (2) Trading Days confirm orally and in writing
to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or
its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of Common Stock outstanding at the time of the respective calculation
hereunder. Notwithstanding anything to the contrary contained in this Warrant or the other Transaction Documents, while the Company is
listed on the Trading Market and prior to the receipt of the Shareholder Approval, the Holder and the Company agree that nothing in the
Transaction Documents shall require the Company to issue any Common Stock to Lender to the extent such issuance would result in the aggregate
number of Underlying Shares issued by the Company pursuant to the Transaction Documents to exceed the Conversion Cap. The limitations
contained in this paragraph shall apply to a successor holder of this Warrant.
(e) Compensation
for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if
the Company fails to cause the Company’s transfer agent to transmit to the Holder the Warrant Shares in accordance with the provisions
of this Warrant (including but not limited to Section 1(a) above pursuant to an exercise on or before the respective Warrant Share
Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or
the Holder’s brokerage firm otherwise purchases, Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash
to the Holder, within one (1) business day of Holder’s request, the amount, if any, by which (x) the Holder’s total purchase
price (including brokerage commissions and other out-of-pocket expenses, if any) for the Common Stock so purchased exceeds (y) the product
of (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue multiplied
by (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either
reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such
exercise shall be deemed rescinded) or deliver to the Holder within one (1) business day of Holder’s request the number of shares
of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For
example, if the Holder purchases, or effectuates a cashless exercise hereunder for, Common Stock having a total purchase price of $11,000
to cover a Buy-In with respect to an attempted exercise of Common Stock with an aggregate sale price giving rise to such purchase obligation
of $10,000, under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the
Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available
to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect
to the Company’s failure to timely deliver Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
(f) Charges,
Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant
Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however,
that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for
exercise shall be accompanied by an Assignment Form, in a form that is reasonably acceptable to Holder and the Company, duly executed
by the Holder. The Company shall pay all Transfer Agent fees required for same-day processing of any Exercise Notice and all fees to the
Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery
of the Warrant Shares. The Company shall pay all attorney fees required for the issuance of attorney legal opinions for removal of restrictive
legends on Warrant Shares.
(g) Closing
of Books. The Company will not close its shareholder books or records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.
Section 2. Certain Adjustments.
(a) Share
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a share dividend or otherwise makes
a distribution or distributions of its Common Stock or any other equity or equity equivalent securities payable in Common Stock (which,
for avoidance of doubt, shall not include any Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding
Common Stock into a larger number of shares, (iii) combines (including by way of reverse share split) outstanding Common Stock into a
smaller number of shares or (iv) issues by reclassification of Common Stock any shares of share capital of the Company, then in each case
(excluding a reverse share split, in which event this Section shall only be applicable one-time) the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately
before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event,
and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price
of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 2(a) shall become effective immediately after
the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or reclassification. This proportional adjustment shall continue until
such time as the Warrant is fully exercised.
(b) Subsequent
Equity Sales. If at any time while this Warrant is outstanding, the Company issues or sells, announces any offer, sale, or other disposition
of, or in accordance with this Section 2 is deemed to have issued, sold or granted (or makes an announcement regarding the same),
any Common Stock and/or Common Stock Equivalents (including the issuance or sale of Common Stock owned or held by or for the account of
the Company, but excluding any securities issued or sold or deemed to have been issued or sold solely in connection with an Exempt Issuance)
for a consideration per share (the “New Issuance Price”) less than a price equal to the Exercise Price in effect immediately
prior to such issuance or sale or deemed issuance or sale (such Exercise Price then in effect is referred to herein as the “Applicable
Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Exercise
Price then in effect shall be reduced to an amount equal to the New Issuance Price; provided, however, that notwithstanding
anything contained herein, if at the time the Holder elects to exercise the Warrant the New Issuance Price is higher than the Exercise
Price determined pursuant to the second paragraph of this Warrant, the Exercise Price shall be as determined by such second paragraph.
For all purposes of the foregoing (including, without limitation, determining the adjusted Exercise Price and the New Issuance Price under
this Section 2(b)), the following shall be applicable:
(i) If
the Company in any manner grants, issues or sells (or enters into any agreement to grant, issue or sell) any Options (as defined below)
and the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option (as defined
below) or upon conversion, exercise or exchange of any Common Stock Equivalents issuable upon exercise of any such Option (as defined
below) or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to
be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option (as defined below) for
such price per share. For purposes of this Section 2(b)(i), the “lowest price per share for which one share of Common Stock
is at any time issuable upon the exercise of any such Option (as defined below) or upon conversion, exercise or exchange of any Common
Stock Equivalents issuable upon exercise of any such Option (as defined below) or otherwise pursuant to the terms thereof” shall
be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect
to any one share of Common Stock upon the granting, issuance or sale of such Option (as defined below), upon exercise of such Option (as
defined below) and upon conversion, exercise or exchange of any Common Stock Equivalents issuable upon exercise of such Option (as defined
below) or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such Option (as defined below) for which
one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exercise of any such Options
(as defined below) or upon conversion, exercise or exchange of any Common Stock Equivalents issuable upon exercise of any such Option
(as defined below) or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Option
(or any other Person) upon the granting, issuance or sale of such Option (as defined below), upon exercise of such Option (as defined
below) and upon conversion, exercise or exchange of any Common Stock Equivalents issuable upon exercise of such Option (as defined below)
or otherwise pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on,
the holder of such Option (as defined below) (or any other Person). Except as contemplated below, no further adjustment of the Exercise
Price shall be made upon the actual issuance of such Common Stock or of such Common Stock Equivalents upon the exercise of such Options
(as defined below) or otherwise pursuant to the terms of or upon the actual issuance of such Common Stock upon conversion, exercise or
exchange of such Common Stock Equivalents. “Option” means any rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities. “Convertible Securities” means any shares or other security (other than Options)
that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise
entitles the holder thereof to acquire, any Common Stock.
(ii) If
the Company in any manner issues or sells (or enters into any agreement to issue or sell) any Common Stock Equivalents and the lowest
price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise
pursuant to the terms thereof is less than the Applicable Price, then such Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the issuance or sale of such Common Stock Equivalents for such price per share. For
the purposes of this Section 2(b)(ii), the “lowest price per share for which one share of Common Stock is at any time issuable
upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of
(x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common
Stock upon the issuance or sale of the Common Stock Equivalents and upon conversion, exercise or exchange of such Common Stock Equivalents
or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Common Stock Equivalents for which one
share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange
thereof or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Common Stock
Equivalents (or any other Person) upon the issuance or sale of such Common Stock Equivalents plus the value of any other consideration
received or receivable by, or benefit conferred on, the holder of such Common Stock Equivalents (or any other Person). Except as contemplated
below, no further adjustment of the Exercise Price shall be made upon the actual issuance of such Common Stock upon conversion, exercise
or exchange of such Common Stock Equivalents or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Common
Stock Equivalents is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(b), except as contemplated below, no further adjustment of the Exercise Price shall be made by reason
of such issuance or sale.
(iii) If
the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion,
exercise or exchange of any Common Stock Equivalents, or the rate at which any Common Stock Equivalents are convertible into or exercisable
or exchangeable for Common Stock increases or decreases at any time (other than proportional changes in conversion or exercise prices,
as applicable, in connection with an event referred to in Section 2(a)), the Exercise Price in effect at the time of such increase
or decrease shall be adjusted to the Exercise Price which would have been in effect at such time had such Options or Common Stock Equivalents
provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case
may be, at the time initially granted, issued or sold. For purposes of this Section 2(b)(iii), if the terms of any Option or Common
Stock Equivalents that were outstanding as of the date this Warrant was issued are increased or decreased in the manner described in the
immediately preceding sentence, then such Option or Common Stock Equivalents and the Common Stock deemed issuable upon exercise, conversion
or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section
2(b) shall be made if such adjustment would result in an increase of the Exercise Price then in effect.
(iv) If
any Option and/or Common Stock Equivalents and/or Adjustment Right (as defined below) is issued in connection with the issuance or sale
or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary Security”,
and such Option and/or Common Stock Equivalents and/or Adjustment Right (as defined below), the “Secondary Securities”),
together comprising one integrated transaction, (or one or more transactions if such issuances or sales or deemed issuances or sales of
securities of the Company either (A) have at least one investor or purchaser in common, (B) are consummated in reasonable proximity to
each other and/or (C) are consummated under the same plan of financing) the aggregate consideration per share of Common Stock with respect
to such Primary Security shall be deemed to be equal to the difference of (x) the lowest price per share for which one share of Common
Stock was issued (or was deemed to be issued pursuant to Section 2(b)(i) or 2(b)(ii) above, as applicable) in such integrated
transaction solely with respect to such Primary Security, minus (y) with respect to such Secondary Securities, the sum of (I) the Black
Scholes Value (as defined below) of each such Option, if any, (II) the fair market value (as determined by the Holder in good faith) or
the Black Scholes Value (as defined below), as applicable, of such Adjustment Right (as defined below), if any, and (III) the fair market
value (as determined by the Holder) of such Common Stock Equivalents, if any, in each case, as determined on a per share basis in accordance
with this Section 2(b)(iv). If any Common Stock, Options or Common Stock Equivalents are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor (for the purpose of determining the consideration paid for such Common Stock,
Option or Common Stock Equivalents, but not for the purpose of the calculation of the Black Scholes Value (as defined below)) will be
deemed to be the net amount of consideration received by the Company therefor. If any Common Stock, Options or Common Stock Equivalents
are issued or sold for a consideration other than cash, the amount of such consideration received by the Company (for the purpose of determining
the consideration paid for such Common Stock, Option or Common Stock Equivalents, but not for the purpose of the calculation of the Black
Scholes Value (as defined below)) will be the fair value of such consideration, except where such consideration consists of publicly traded
securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the
VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any Common Stock, Options or
Common Stock Equivalents are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the
surviving entity, the amount of consideration therefor (for the purpose of determining the consideration paid for such Common Stock, Option
or Common Stock Equivalents, but not for the purpose of the calculation of the Black Scholes Value (as defined below)) will be deemed
to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock,
Options or Common Stock Equivalents (as the case may be). The fair value of any consideration other than cash or publicly traded securities
will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined
within five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest
error and the fees and expenses of such appraiser shall be borne by the Company). “Adjustment Right” means any right
granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (or deemed issuance or sale
hereunder) of Common Stock (other than rights of the type described in Sections 2(c) and 2(d) hereof) that could result
in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without
limitation, any cash settlement rights, cash adjustment or other similar rights).
(v) If
the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution
payable in Common Stock, Options or in Common Stock Equivalents or (B) to subscribe for or purchase Common Stock, Options or Common Stock
Equivalents, then such record date will be deemed to be the date of the issuance or sale of the Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription
or purchase (as the case may be).
(c) Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 2(a) above, if at any time the Company grants, issues
or sells any Common Stock Equivalents or rights to purchase shares, warrants, securities or other property pro rata to the record holders
of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Common
Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation,
the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in
any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled
to participate in such Purchase Right to such extent (or beneficial ownership of such Common Stock as a result of such Purchase Right
to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(d) Pro
Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution
of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, shares or other securities, property or options by way of a dividend, spin off, reclassification,
corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after
the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent
that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation)
immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the participation in such Distribution (provided, however, that,
to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of
any Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the
benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation).
(e) Fundamental
Transaction. If, at any time while this Warrant is outstanding,
| (i) | the Company or any Subsidiary, directly or indirectly, in one or more related transactions effects any merger or consolidation of
the Company with or into another Person; |
| (ii) | the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all
or substantially all of its assets in one or a series of related transactions; |
| (iii) | any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has
been accepted by the holders of 50% or more of the outstanding Common Stock; |
| (iv) | the Company, directly or indirectly, in one or more related transactions, effects any reclassification, reorganization or recapitalization
of the Common Stock or any compulsory share exchange pursuant to which the Common Stock are effectively converted into or exchanged for
other securities, cash or property; or |
| (v) | the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other
business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with
another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding Common Stock (not including
any Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without
regard to any Beneficial Ownership Limitation on the exercise of this Warrant), the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any Beneficial Ownership Limitation
on the exercise of this Warrant). |
For purposes of
any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon
any exercise of this Warrant following such Fundamental Transaction.
Notwithstanding
anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at
the Holder’s option, exercisable at any time concurrently with, or within thirty (30) days after, the consummation of the Fundamental
Transaction (or, if later, the date of the public announcement of the applicable Fundamental Transaction), purchase this Warrant from
the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised
portion of this Warrant on the date of the consummation of such Fundamental Transaction; provided, however, that, if the
Fundamental Transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, the
Holder shall only be entitled to receive from the Company or any Successor Entity, as of the date of consummation of such Fundamental
Transaction, the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion
of this Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the Fundamental Transaction,
whether that consideration is in the form of cash, shares or any combination thereof, or whether the holders of Common Stock are given
the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided, further,
that if holders of Common Stock of the Company are not offered or paid any consideration in such Fundamental Transaction, such holders
of Common Stock will be deemed to have received common stock, as applicable, of the Successor Entity (which entity may be the Company
following such Fundamental Transaction) in such Fundamental Transaction.
“Black Scholes Value” means the value
of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg determined as
of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting:
| (A) | a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement
of the applicable contemplated Fundamental Transaction and the date that is sixty (60) months following the Issuance Date; |
| (B) | an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined
utilizing a 365 day annualization factor) as of the Trading Day immediately following the public announcement of the applicable contemplated
Fundamental Transaction; |
| (C) | the underlying price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in
cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the highest
VWAP during the period beginning on the Trading Day immediately preceding the public announcement of the applicable contemplated Fundamental
Transaction (or the consummation of the applicable Fundamental Transaction, if earlier) and ending on the Trading Day of the Holder’s
request pursuant to this Section 2(e); |
| (D) | a remaining option time equal to the time between the date of the public announcement of the applicable contemplated Fundamental Transaction
and the date that is sixty (60) months following the Issuance Date; and |
| (E) | a zero cost of borrow. |
The payment of the Black Scholes Value will be made by
wire transfer of immediately available funds (or such other consideration) within the later of:
| (i) | five (5) Business Days of the Holder’s election and |
| (ii) | the date of consummation of the Fundamental Transaction. |
The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in
writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions
of this Section 2(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by
the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder,
in exchange for this Warrant, a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance
to this Warrant which is exercisable for a corresponding number of shares of share capital or capital stock, as applicable, of such Successor
Entity (or its parent entity) equivalent to the Common Stock acquirable and receivable upon exercise of this Warrant (without regard to
any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise
price hereunder to such shares of share capital or capital stock, as applicable (but taking into account the relative value of the Common
Stock pursuant to such Fundamental Transaction and the value of such shares of share capital or capital stock, as applicable, such number
of shares of share capital or capital stock, as applicable, and such exercise price being for the purpose of protecting the economic value
of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and
substance to the Holder.
Upon the occurrence of any such Fundamental
Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction,
the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant
and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
(f) Calculations.
All calculations under this Section 2 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 2, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
(g) Notice
to Holder.
(i) Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 2, the Company shall promptly
deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
(ii) Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common
Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of share capital
of any class or of any rights, (D) the approval of any shareholders of the Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of
the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property,
or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company,
then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email
address as it shall appear upon the records of the Company, at least twenty (20) calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice
or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such
notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the
Company or any of its Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
Section 3. Non-Circumvention.
The Company covenants and agrees that it will not, by amendment of its Organizational Documents 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 Warrant, and will at all times in good faith carry out all
the provisions of this Warrant and take all action as may be required to protect the rights of the Holder as set forth in this Warrant.
Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and non-assessable Common Stock upon the exercise of this Warrant,
(iii) shall use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory
body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant, and (iii)
shall, for so long as this Warrant is outstanding, have authorized and reserved, free from preemptive rights, one (1) times the number
of shares of Common Stock into which the Warrants are then exercisable into to provide for the exercise of the rights represented by
this Warrant (without regard to any limitations on exercise).
Section 4. Warrant Holder
Not Deemed a Shareholder. Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle the
Holder to any voting rights or other rights as a shareholder of the Company. In addition, nothing contained in this Warrant shall be
construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a shareholder
of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
Section 5. Reissuance.
(a) Lost,
Stolen or Mutilated Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity
or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance
of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall
be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as
the Issuance Date.
Section 6. Transfer.
This Warrant shall be binding upon the Company and its successors and assigns, and shall inure to the benefit of the Holder and its successors
and assigns. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be
assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior signed written consent of the Holder,
which consent may be withheld at the sole discretion of the Holder (any such assignment or transfer shall be null and void if the Company
does not obtain the prior signed written consent of the Holder). This Warrant or any of the severable rights and obligations inuring
to the benefit of or to be performed by Holder hereunder may be assigned by Holder to a third party, in whole or in part, without the
need to obtain the Company’s consent thereto.
Section 7. Authorized
Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights
under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who
are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the Principal Market upon which the Common Stock may be listed.
The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be
duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect
of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Before taking any action which
would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company
shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
Section 8. Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of
this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which
results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
Section 9. Limitation
of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase
price of any Common Stock or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the
Company.
Section 10. Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any
action for specific performance that a remedy at law would be adequate.
Section 11. Notices.
Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance
with the notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately
upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20
days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon
the Common Stock, (B) with respect to any grants, issuances or sales of any shares or other securities directly or indirectly convertible
into or exercisable or exchangeable for Common Stock or other property, pro rata to the holders of Common Stock or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall
be made known to the public prior to or in conjunction with such notice being provided to the Holder.
Section 12. Amendment
and Waiver. The terms of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively
or prospectively) only with the written consent of the Company and the Holder.
Section 13. Governing
Law and Venue. This Warrant shall be governed by and construed in accordance with the laws of the State of New York without regard
to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by
this Warrant shall be brought only in the state court of the State of New York sitting in the City of New York, Borough of Manhattan
or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the Southern District of
New York. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder
and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY 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
UNDER ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT, OR ANY TRANSACTION CONTEMPLATED
HEREBY OR THEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.
In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform 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 Warrant or
any other transaction document entered into in connection with this Warrant 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 the Purchase 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.
Section 14. Acceptance.
Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
Section 15. Certain
Definitions. For purposes of this Warrant, the following terms shall have the following meanings:
(a) “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to
the issuance of Common Stock issuable upon exercise of this Warrant.
(b) “Closing
Sale Price” means, for any security as of any date, (i) the last closing trade price for such security on the Principal Market,
or (ii) if the foregoing does not apply, the last trade price of such security in the over-the-counter market for such security, or (iii)
if neither clause (i) or (ii) apply to such security, the average of the bid and ask prices of any market makers for such security. If
the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price
of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations
to be appropriately adjusted for any share dividend, share split, share combination or other similar transaction during the applicable
calculation period.
(c) “Exercise
Period” means the period commencing on the Issuance Date and ending on 5:00 p.m. eastern standard time on the date that is sixty
(60) months after the Issuance Date.
(d) “Common
Stock” means the Company’s common stock, par value $0.001 per share, and any other class of securities into which such
securities may hereafter be reclassified or changed.
(e) “Common
Stock Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Stock,
including without limitation any debt, preference shares, rights, options, warrants or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
(f) “Principal
Market” means the principal securities exchange or trading market where such Common Stock is listed or quoted, including but
not limited to any tier of the OTC Markets, any tier of The Nasdaq Stock Market (including The Nasdaq Capital Market), the New York Stock
Exchange or the NYSE American, or any successor to such markets.
(g) “Trading
Day” means any day on which the Common Stock is listed or quoted on its Principal Market, provided, however, that if the Common
Stock is not then listed or quoted on any Principal Market, then any calendar day.
(h) “Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date
in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock
Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).
(i) “VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (i) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date)
on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)), (ii) if OTCQB or OTCQX is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (iii) if the Common Stock is
not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Open Market (or
a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock
so reported, or (iv) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected
in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
(Signature Page Follows)
IN WITNESS WHEREOF, the Company has caused
this Warrant to be duly executed as of the Issuance Date set forth above.
| |
INCANNEX HEALTHCARE INC. |
| |
|
| |
By: |
/s/ Joel Latham |
| |
Name: |
Joel Latham |
| |
Title: |
Chief Executive Officer, President and Director |
EXHIBIT A
EXERCISE NOTICE
(To be executed by the registered holder
to exercise this Common Stock Purchase Warrant)
THE
UNDERSIGNED holder hereby exercises the right to purchase
of Common Stock (“Warrant Shares”) of INCANNEX HEALTHCARE, INC., a Delaware corporation (the “Company”),
evidenced by the attached copy of the Common Stock Purchase Warrant (the “Warrant”). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
| 1. | Form of Exercise Price. The Holder intends that payment
of the Exercise Price shall be made as (check one): |
| ☐ | a
cash exercise with respect to
Warrant Shares; or |
| ☐ | by cashless exercise pursuant to the Warrant. |
| 2. | Payment
of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable
Aggregate Exercise Price in the sum of $
to the Company in accordance with the terms of the Warrant. |
| 3. | Delivery
of Warrant Shares. The Company shall deliver to the holder
Warrant Shares in accordance with the terms of the Warrant. |
| Dated: |
|
| |
|
| |
ARENA SPECIAL OPPORTUNITIES
(OFFSHORE) MASTER II LP |
| |
|
| |
|
| |
By: |
|
| |
Name: |
|
| |
Title: |
|
EXHIBIT B
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer
of the Warrant)
FOR VALUE RECEIVED, the undersigned
hereby sells, assigns, and transfers unto the
right to purchase common
stock of INCANNEX HEALTHCARE, INC. to which the within Common Stock Purchase Warrant relates and appoints ,
as attorney-in-fact, to transfer said right on the books of INCANNEX HEALTHCARE, INC. with full power of substitution and re-substitution
in the premises. By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the
within Warrant.
| Dated: |
|
| |
|
| |
|
| |
(Signature)
* |
| |
|
| |
|
| |
(Name) |
| |
|
| |
|
| |
(Address) |
| |
|
| |
|
| |
(Social Security or Tax Identification No.) |
| * | The signature on this Assignment of Warrant must correspond
to the name as written upon the face of the Common Stock Purchase Warrant in every particular without alteration or enlargement or any
change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and
title(s) with such entity. |
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- DefinitionA unique 10-digit SEC-issued value to identify entities that have filed disclosures with the SEC. It is commonly abbreviated as CIK. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityCentralIndexKey |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:centralIndexKeyItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionIndicate if registrant meets the emerging growth company criteria. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityEmergingGrowthCompany |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionCommission file number. The field allows up to 17 characters. The prefix may contain 1-3 digits, the sequence number may contain 1-8 digits, the optional suffix may contain 1-4 characters, and the fields are separated with a hyphen.
| Name: |
dei_EntityFileNumber |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:fileNumberItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionTwo-character EDGAR code representing the state or country of incorporation.
| Name: |
dei_EntityIncorporationStateCountryCode |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:edgarStateCountryItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionThe exact name of the entity filing the report as specified in its charter, which is required by forms filed with the SEC. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityRegistrantName |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionThe Tax Identification Number (TIN), also known as an Employer Identification Number (EIN), is a unique 9-digit value assigned by the IRS. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityTaxIdentificationNumber |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:employerIdItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionLocal phone number for entity.
| Name: |
dei_LocalPhoneNumber |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 13e
-Subsection 4c
| Name: |
dei_PreCommencementIssuerTenderOffer |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 14d
-Subsection 2b
| Name: |
dei_PreCommencementTenderOffer |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionTitle of a 12(b) registered security. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b
| Name: |
dei_Security12bTitle |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:securityTitleItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionName of the Exchange on which a security is registered. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection d1-1
| Name: |
dei_SecurityExchangeName |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:edgarExchangeCodeItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as soliciting material pursuant to Rule 14a-12 under the Exchange Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 14a
-Subsection 12
| Name: |
dei_SolicitingMaterial |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionTrading symbol of an instrument as listed on an exchange.
| Name: |
dei_TradingSymbol |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:tradingSymbolItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as written communications pursuant to Rule 425 under the Securities Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Securities Act
-Number 230
-Section 425
| Name: |
dei_WrittenCommunications |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
Incannex Healthcare (NASDAQ:IXHL)
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