LUXH LuxUrban Hotels Inc

 

 

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): August 13, 2024

 

LuxUrban Hotels Inc.

(Exact Name of Registrant as Specified in Charter)

 

Delaware		001-41473		82-3334945
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

2125 Biscayne Blvd, Suite 253, Miami, Florida		33137
(Address of Principal Executive Offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (877) 269-5952

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

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 (see General Instruction A.2. below):

 

☐

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))

 

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. ☐

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Ticker symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.00001 per share		LUXH		The Nasdaq Stock Market LLC
13.00% Series A Cumulative Redeemable Preferred Stock $0.00001		LUXHP		The Nasdaq Stock Market LLC

 

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On August 13, 2023, LuxUrban Hotels Inc. (the “Company”) commenced an offering (the “Debt Placement”) under the terms of a securities purchase agreement (“SPA”) pursuant to which it may sell senior secured convertible promissory notes (the “Notes”) in an aggregate principal amount of up to $10,000,000, together with common stock purchase warrants (“Note Warrants”), in one or more closings on subscriptions received through August 30, 2024 (unless the Debt Placement is ended earlier at the discretion of the Company). The Company intends to use the net cash proceeds from the Debt Placement for working capital and other general corporate purposes as prescribed by the SPA. Among these corporate purposes is the continued advancement of Lux 2.0, the Company’s previously announced series of initiatives focused on identifying and curing various financial and operational issues, and to create a platform that can deliver long-term shareholder value.

 

The first tranche of the Debt Placement closed on August 13, 2024 and generated gross cash proceeds of $2.1 million, resulting in net proceeds to the Company of $1,920,040 after payment of placement agent fees. Under the terms of the Notes Offering, certain equity investors and holders of promissory notes evidencing existing borrowed money obligations of the Company were entitled to convert such equity and debt into the offering. As a result of these conversions to date, the Company will issue an additional aggregate of $2.8 million principal amount of Notes and corresponding Note Warrants and may issue additional Notes and Note Warrants upon additional conversions as described above.

 

The Notes bear interest at 18%, are secured by substantially all of the assets of the Company under the terms of a guarantee and security agreement dated as of August 13, 2024 (“Security Agreement”), and are being sold to certain accredited investors in a private offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). The principal of the Notes shall be repaid in twenty-four (24) equal monthly installments commencing on August 13, 2025 and continuing on the same day of each month thereafter until the principal amount is paid in full, with all principal and interest due thereon to be paid on or prior to August 13, 2027, unless the Notes are previously converted into common stock or preferred stock as described below. The Notes are senior debt of the Company, and subject to the terms and conditions of the Notes, the Company shall not issue any debt senior to the Notes while any Notes remain outstanding without the consent of a majority of the then outstanding principal amount of the Notes.

 

The Note Warrants have a five-year term from the date of the initial closing of the Debt Placement and shall become exercisable commencing on the date of the earliest to occur of (a) shareholder approval of the Reverse Split (as defined below) and the Nasdaq Compliance Waiver (as defined below) and (b) the 91^st day after the initial closing of the Debt Placement. The Note Warrants shall entitle. the purchaser to purchase up to that number of shares of common Sstock determined by dividing the principal amount of the Note purchased by the purchaser by 110% of the average VWAP of the common stock for the three consecutive trading days immediately following the date the Company files its Quarterly Report on Form 10-Q for the six months ended June 30, 2024, not to exceed $0.15 (“Three-Day VWAP”). The per-share exercise price of the Note Warrants shall be equal to the Three-Day VWAP (as may be adjusted from time to time in accordance with the terms of the Notes, including as a result of the Reverse Split).

 

Under the terms of the SPA, the Company is obligated to file a preliminary proxy statement for purposes of calling a special meeting of the Company’s shareholders to seek approval of certain prescribed proposals. These proposals include an amendment to the Company’s certificate of incorporation to effect a reverse stock split (“Reverse Split”) of the Company’s outstanding common stock in the range of one share-for-30 shares to one share-for-70 shares, the specific split ratio to be determined within such range in the discretion of the Company’s board of directors (based on market conditions, Nasdaq requirements and advice of counsel and investment banker). In connection with the Reverse Split, the number of authorized shares of the Company’s common stock would be maintained at 200,000,000 shares, preferred stock would be maintained at 20,000,0000 shares, and the shares authorized under the Company’s existing 2022 incentive plan would remain at 8,000,000 shares. The proposals also will include approval of the transactions under the SPA (“Nasdaq Compliance Waiver”) with respect to issuances or deemed issuances of common stock (including upon exercise of the Note Warrants or conversion of the Notes) in aggregate excess of 19.99% of the outstanding Common Stock at less than the Minimum Price (as defined in applicable Nasdaq regulations) as required to comply with Nasdaq regulations. The Company is obligated to use commercially reasonable efforts to respond to any SEC comments to the preliminary proxy statement as filed and clear same with the SEC and then promptly file a definitive proxy statement and mail same to stockholders and hold such special meeting as soon as practicable.

 

 

Under the terms of the SPA, promptly following the end of the Debt Placement, the Company will use commercially reasonable efforts to commence and consummate an underwritten initial public offering of a newly created series of preferred stock (the “New Preferred Stock”) the final terms of which are not yet determined and shall be based on requirements under the SPA and market conditions for the sale of such preferred stock (the “New Preferred Stock Public Offering”). The Company, working with one or more underwriters, will use commercially reasonable efforts to consummate the offering and obtain approval of listing of the New Preferred Stock on the Nasdaq Capital Market within 90 days of the date the Debt Placement ends.

 

The Company is obligated to file with the SEC a registration statement on Form S-3 or Form S-1 (or, if Form S-3 or Form S-1 is not available, on another appropriate form) covering the resale of the New Preferred Stock issuable upon automatic conversion of the Notes as provided for in the Notes and the shares of Common Stock underlying the Note Warrants (the “Registrable Securities”) as soon as practicable following the Company’s completion of the New Preferred Stock Public Offering, but in no event later than thirty (30) days thereafter. The Company shall use its commercially reasonable efforts to cause the registration statement to be declared effective by the SEC as soon as practicable following the filing, but in no event later than ninety (90) days after the filing date.

 

The outstanding principal of the Notes (and at the Company’s election, any accrued and unpaid Interest thereon) shall automatically convert into shares of validly issued, fully paid and non-assessable New Preferred Stock at a conversion price of $25.00 per share, upon the latest to occur of the following events: (a) the completion of the New Preferred Stock Public Offering, (b) the approval of the New Preferred Stock for listing on Nasdaq or other national exchange, (c) the effectiveness of a resale registration statement covering the resale of the New Preferred Stock issuable upon conversion of the Notes, and (d) the approval by the Company’s shareholders of the Reverse Split and Nasdaq Compliance Waiver.

 

From time to time, on and after the earlier of (a) both the completion of the Reverse Split and shareholder approval of the Nasdaq Compliance Waiver and (b) the 91^st day after the initial Closing of the Debt Placement, and prior to conversion of the Notes into New Preferred Stock, the holders of the Notes have the right to convert, in whole or in part, principal and interest thereunder into shares of common stock. The per-share conversion price shall be equal to 110% of the average VWAP of the Company’s common stock for the three consecutive trading days immediately following the date the Company files its Quarterly Report on Form 10-Q for the six months ended June 30, 2024, not to exceed $0.15 (as may be adjusted from time to time in accordance with the terms of the Notes, including as a result of the Reverse Split).

 

From the date hereof until the date that is the later of (a) the date on which no Notes are outstanding and (b) the 18-month anniversary of the initial closing of the Debt Placement, upon any issuance by the Company or any of its subsidiaries of (1) common stock or common stock equivalents, (2) indebtedness or (3) a combination of units thereof, in each case for cash and not as part of any ordinary course of business operations or as part of any underwritten public offering or other exempt issuance (a “Subsequent Private Financing”), each Purchaser shall have the right to participate in such Subsequent Private Financing in an amount up to an amount equal to the principal of the Notes purchased by such Purchaser in the Debt Placement or if the amount of the Subsequent Private Financing is less than the aggregate principal amounts of all Notes purchased in the Debt Placement by all purchasers, such purchaser’s pro rata portion based on such purchaser’s principal amount of the Notes originally purchased in the Debt Placement as compared to the principal amount of all Notes purchased in the Debt Placement by all purchasers, on the same terms, conditions and price provided for in the Subsequent Private Financing.

 

The Notes and Note Warrants will not be registered under the Securities Act and may not be offered or sold absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws. The purchasers in the Debt Placement have customary registration rights with respect to the shares of Common Stock into which the Notes and Note Warrants are convertible or exercisable. The information in this Current Report on Form 8-K shall not constitute an offer to sell or a solicitation of an offer to buy any of these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the applicable securities laws of such state or jurisdiction.

 

The foregoing summary description of the terms of the Debt Placement, the Notes, the Note Warrants, the Security Agreement, and other agreements is qualified in its entirety by reference to the definitive transaction documents, which are attached as exhibits to this Current Report on Form 8-K and incorporated herein by reference. The Company will report the final principal amount of Notes and number of Note Warrants sold in all closings of the Debt Placement upon conclusion of the Debt Placement by amendment to this Current Report on Form 8-K.

 

 

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

See Section 1.01 of this Current Report on Form 8-K, which item is hereby incorporated by reference herein.

 

Item 3.02. Unregistered Sales of Equity Securities.

 

See Section 1.01 of this Current Report on Form 8-K, which item is hereby incorporated by reference herein.

 

Alexander Capital L.P., a FINRA registered broker-dealer serves as placement agent (the “Placement Agent”) in connection with the Debt Placement. In connection with the Debt Placement, the Company has agreed to pay the Placement Agent a commission of 8% of the gross proceeds of the sales of the Notes and Note Warrants in the Debt Placement and to reimburse the Placement Agent for $50,000 of its expenses incurred in connection with the Debt Placement.

 

Item 7.01 Regulation FD Disclosure.

 

The information contained in the exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended and shall not be deemed incorporated by reference in any filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended or the Securities Act of 1933, as amended whether made before or after the date hereof and irrespective of any general incorporation language in such filings.

 

Item 8.01 Other Events

 

On August 13, 2024, the Company issued a press release announcing the Debt Placement. The press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by this reference.

 

Item 9.01. Financial Statements and Exhibits.

 

(c)

Exhibits

 

4.1		Form of Senior Secured Convertible Note
4.2		Form of Note Warrant
10.1		Form of Securities Purchase Agreement
10.2		Form of Security Agreement
99.1		Press release issued August 13, 2024

 

 

Forward Looking Statements

 

The following is a Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

 

This press release includes forward-looking statements. As a general matter, forward-looking statements reflect our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements may be identified by the use of forward looking terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of those words or other comparable words, but the absence of these words does not necessarily mean that a statement is not forward-looking. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for the disclosure of forward-looking statements.

 

The forward-looking statements contained in this press release are based upon our historical performance, current plans, estimates, expectations and other factors we believe are appropriate under the circumstances. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved since these forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these statements. Some of the key uncertainties and factors that could affect our future performance and cause actual results to differ materially from those expressed or implied by forward-looking statements are: our ability to submit periodic filings before regulatory deadlines; our expectations regarding our revenues, expenses and operations and our ability to sustain profitability; our ability to recruit and retain qualified executive search consultants to staff our operations appropriately; our ability to expand our customer base and relationships, especially given the off-limit arrangements we are required to enter into with certain of our clients; further declines in the global economy and our ability to execute successfully through business cycles; our anticipated cash needs; our anticipated growth strategies and sources of new revenues; unanticipated trends and challenges in our business and the markets in which we operate; social or political instability in markets where we operate; the impact of foreign currency exchange rate fluctuations; price competition; the ability to forecast, on a quarterly basis, variable compensation accruals that ultimately are determined based on the achievement of annual results; and the mix of profit and loss by country in which we operate.

 

The above list should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in our annual report on Form 10-K filed with the SEC on April 15, 2024. The forward looking statements included in this press release are made only as of the date hereof. We do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC.

 

 

SIGNATURE

 

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.

 

Dated: August 14, 2024	LUXURBAN HOTELS INC.
	By:	/s/ Michael James
		Michael James, Chief Financial Officer

 

 

Exhibit 4.1

 

NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH SUCH SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

 

LUXURBAN HOTELS INC.

 

SENIOR SECURED CONVERTIBLE NOTE

 

(Discretionary Conversion into Common Stock)

 

(Automatic Conversion into Cumulative Redeemable Preferred Stock)

 

Principal Amount: US$ [_________]

Issue Date: August [__], 2024

 

FOR VALUE RECEIVED, LuxUrban Hotels Inc., a Delaware corporation (hereinafter called the “Borrower” or the “Company”), hereby promises to pay to the order of [NAME OF LENDER] or its registered assigns (the “Holder”), the principal sum of US $[PRINCIPAL AMOUNT] (the “Principal Amount”), together with interest thereon, as set forth in this Senior Secured Convertible Note together with interest on the unpaid principal amount, under the terms and conditions provided for herein. This Senior Secured Convertible Note (including all Senior Secured Convertible Notes issued in exchange, transfer or replacement hereof, this “Note”) is one of several Senior Secured Convertible Notes issued pursuant to the Securities Purchase Agreement (as defined below) (collectively, the “Notes” and such other Senior Secured Convertible Notes, the “Other Notes”). Certain capitalized terms used herein are defined in Section 5.1. Other capitalized terms used herein but not defined shall have the meaning given to such terms in the Securities Purchase Agreement, dated as of August 13, 2024, between the Borrower and the purchaser(s) identified on the signature pages thereto (the “Securities Purchase Agreement”).

 

ARTICLE I. PRINCIPAL TERMS

 

1.1 Principal Repayment. Repayment of the principal amount of this Note shall commence twelve (12) months from the date of issuance hereof (the “Issue Date”). The principal shall be repaid in twenty-four (24) equal monthly installments commencing on August 13, 2025 and continuing on the same day of each month thereafter until the principal amount is paid in full (“Principal Payments”), with all principal and interest due thereon to be paid on or prior to August 13, 2027 (the “Maturity Date”), unless this Note is previously converted in its entirety as provided in Article III or Article IV below.

 

1.2 Interest Rate and Payments. The outstanding Principal Amount of this Note shall accrue interest at the rate of eighteen percent (18%) per annum (subject to default adjustment as provided in Article V hereof) commencing on the date that this Note is issued and shall be payable monthly in arrears beginning on December 1, 2024 and continuing on the first day of each month thereafter until the principal amount is paid in full (“Interest. Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. Notwithstanding the foregoing, the Company may elect to accrue such interest and same shall be converted into New Preferred Stock under Article III below.

 

 

1.3 Application of Payments. Except as otherwise required by law or by the provisions of this Note, payments received by the Holder hereunder shall be applied first against interest accrued on this Note and next in reduction of the outstanding Principal Amount of this Note.

 

1.4 Waiver and Consent. To the fullest extent permitted by law, the Borrower waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Borrower liable with respect to this Note.

 

1.5 Prepayment. This Note may be prepaid in whole or in part at any time without penalty to the Borrower.

 

ARTICLE II. CERTAIN COVENANTS

 

2.1 Ranking. The payments due under this Note (a) shall rank pari passu with all Other Notes and (b) shall be senior to all other Indebtedness other than Permitted Indebtedness.

 

2.2 Other Indebtedness. So long as the Borrower shall have any obligation under this Note, without the prior written consent of the holders of a majority of the then outstanding principal amount of the Notes, the Borrower shall not (directly or indirectly through any Subsidiary or Affiliate) incur or suffer to exist any Indebtedness other than Permitted Indebtedness.

 

2.3 Existence of Liens. So long as this Note is outstanding, the Borrower shall not, and the Borrower shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other similar encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Borrower or any of its Subsidiaries (collectively “Liens”) other than Permitted Liens.

 

2.4 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the prior written consent of the holders of a majority of the then outstanding principal amount of the Notes, (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of its capital stock other than dividends on shares of its common stock solely in the form of additional shares of common stock or (b) as required under agreements existing as of the date hereof or (c) directly or indirectly or through any Subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors; provided, however, that nothing herein shall prohibit or limit the payment of regular monthly dividends under the Borrower’s Series A preferred stock or New Preferred Stock or any redemption of same that is mandatorily required to be made under the currently existing terms of the Series A Preferred Stock or terms of the New Preferred Stock.

 

 

ARTICLE III. AUTOMATIC CONVERSION (NEW PREFERRED STOCK)

 

The outstanding Principal Amount of this Note (and at the Borrower’s election, any accrued and unpaid Interest thereon) shall automatically convert into shares of validly issued, fully paid and non-assessable New Preferred Stock at a conversion price of $25.00 per share (the “Preferred Conversion Price”), upon the latest to occur of the following events (collectively, the “Automatic Conversion Events”): (a) the completion of an underwritten offering of the New Preferred Stock, (b) the New Preferred Stock has been approved for listing on the Principal Exchange, (c) a resale registration statement covering the resale of the New Preferred Stock issuable upon conversion of the Notes is declared effective (the “Resale Registration Statement”), and (d) the Company’s shareholders have approved (i) the Reverse Split and the Company has filed an amendment to the Company’s certificate of incorporation as necessary to effect same (the “Reverse Split Completion”) and (ii) the Nasdaq Compliance Waiver.

 

3.1 Conversion Mechanics. Upon the latest to occur of the Automatic Conversion Events:

 

(a) Within three (3) Business Days, the Company shall deliver a written notice (the “Preferred Conversion Notice”) to the Holder, specifying (A) the occurrence of all of the Automatic Conversion Events, (B) the effective date of conversion (the “Preferred Conversion Date”), (C) the outstanding Principal Amount (and if applicable, accrued and unpaid Interest) as of the Conversion Date, and (D) the Conversion Price.

 

(b) The number of shares of New Preferred Stock to be issued upon conversion of this Note shall be determined by dividing the outstanding Principal Amount (and if applicable, accrued and unpaid Interest) by the Preferred Conversion Price.

 

(c) The shares of New Preferred Stock to be issued upon conversion of this Note will be issued pursuant to an exemption from registration under the Securities Act and the resale thereof will be registered with the U.S. Securities and Exchange Commission under the Resale Registration Statement.

 

(d) The Company shall, as soon as practicable after the Preferred Conversion Date, issue and deliver to the Holder a certificate representing the number of shares of New Preferred Stock to which the Holder is entitled. Such conversion shall be deemed to have been made immediately prior to the close of business on the Preferred Conversion Date, and the Holder shall be treated for all purposes as the record holder of such shares of New Preferred Stock as of such date.

 

(e) Upon conversion of this Note pursuant to this Article III, the Holder shall surrender this Note to the Company for cancellation. In the event of any dispute as to the number of shares of New Preferred Stock issuable to the Holder upon conversion, the Company’s determination shall be conclusive and binding, absent manifest error.

 

3.2 Accrued Interest Payment. Any accrued but unpaid interest on the outstanding Principal Amount as of the Preferred Conversion Date (not otherwise converted as prescribed above) shall be paid in cash to the Holder within five (5) business days following the Conversion Date.

 

3.3 No Fractional Shares. No fractional shares of New Preferred Stock shall be issued upon conversion of this Note. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall pay to the Holder an amount in cash equal to the product of such fraction and the fair market value of one share of New Preferred Stock on the Preferred Conversion Date, as determined in good faith by the Company’s Board of Directors.

 

 

3.4 Reservation of Shares. The Company shall reserve and keep available out of its authorized but unissued shares of New Preferred Stock, solely for the purpose of effecting the conversion of this Note, such number of shares of New Preferred Stock as shall be sufficient to effect the conversion of this Note in full.

 

3.5 Termination of Rights. Upon the conversion of this Note in full in accordance with the terms of this Article III, this Note shall be automatically cancelled and shall no longer be outstanding, and all rights with respect to the Note, whether arising hereunder or otherwise, shall terminate, except for the rights of the Holder to receive shares of New Preferred Stock in exchange for the outstanding Principal Amount and the right to receive cash payment for any accrued interest as provided herein.

 

ARTICLE IV. DISCRETIONARY CONVERSION (COMMON STOCK)

 

4.1 Voluntary Conversion. From time to time, on and after the earlier of (a) both the Reverse Split Completion and Shareholder Approval of the Nasdaq Compliance Waiver and (b) the 91^st day after the initial Closing of the sale of Notes under the Securities Purchase Agreement, and prior to conversion of this Note into New Preferred Stock pursuant to Article III, above, this Note shall be convertible, in whole or in part, into shares of Common Stock (the “Common Stock Conversion Shares”). The Holder shall effect conversions by delivering to the Company a Notice of Common Stock Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Common Stock Conversion”), specifying therein the principal amount of this Note to be converted, accrued and unpaid interest outstanding under this Note to be converted, and the date on which such conversion shall be effected (such date, the “Common Stock Conversion Date”). If no Common Stock Conversion Date is specified in a Notice of Common Stock Conversion, the Common Stock Conversion Date shall be the date that such Notice of Common Stock Conversion is deemed delivered hereunder. No ink-original Notice of Common Stock Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Common Stock Conversion form be required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion. The Holder and the Company shall maintain a Common Stock Conversion Schedule showing the principal amount(s) converted, the corresponding paydown of interest and the date of such conversion(s). 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 Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

 

4.2 Conversion Price. The per-share conversion price with respect to the conversion of this Note into Common Stock shall initially be equal to 110% of the average VWAP for the three consecutive trading days immediately following the date the Company files its Quarterly Report on Form 10-Q for the six months ended June 30, 2024, not to exceed $0.15 (as may be adjusted from time to time in accordance with this Notes, including as a result of the Reverse Split).

 

4.3 Mechanics of Conversion.

 

(a) Conversion Shares Issuable Upon Conversion of Principal Amount, Interest and Mandatory Default Amount. The number of Common Stock Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted and any accrued and unpaid interest to be converted, which amount may include the Mandatory Default Amount, by (y) the Conversion Price.

 

 

(b) Delivery of Shares Upon Conversion. Not later than three (3) trading days after each Voluntary Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) the Common Stock Conversion Shares which, on or after the date on which such Common Stock Conversion Shares are eligible to be sold under Rule 144 without the need for current public information and the Company has received an opinion of counsel to such effect reasonably acceptable to the Company, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) and (B) a bank check in the amount of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash). All shares required to be delivered by the Company under this Section 4.3 shall be delivered electronically through the Depository Trust Company or another established clearing corporation performing similar functions, if available, or physical certificates if not available. If the Common Stock Conversion Date is prior to the date on which such Common Stock Conversion Shares are eligible to be sold under Rule 144 without the need for current public information, the Common Stock Conversion Shares shall bear a restrictive legend in the following form, as appropriate:

 

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

 

(c) Failure to Deliver Shares. If, in the case of any Notice of Common Stock Conversion, such 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 shares, to rescind such conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company any Common Stock issued to such Holder pursuant to the rescinded Conversion Notice. Notwithstanding the obligations of the Company contained in Section 4.3(b) to deliver shares, any requirement to deliver shares shall be satisfied by recording share issuances in favor of the Holder in book entry form and delivery to the Holder of written evidence of such share issuances.

 

(d) Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Common Stock Conversion Shares upon conversion of this Note 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 Common Stock 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. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Article V hereof for the Company’s failure to deliver Common Stock 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.

 

 

(e) Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times commencing three trading days following earlier of (a) the Reverse Split Completion and (b) the 91^st day following the initial Closing of the sale of Notes under the Securities Purchase Agreement reserve and keep available out of its authorized and unissued shares a number of shares of Common Stock at least equal to that number of shares of Common Stock determined by dividing 200% of the then aggregate outstanding principal amount of the Notes by the then applicable Conversion Price for the sole purpose of issuance upon conversion of this Note, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes). The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

 

(f) Legend Provisions. Certificates evidencing the Common Stock Conversion Shares shall not contain any legend (including the legend set forth in Section 4.3(b) hereof): (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Common Stock Conversion Shares pursuant to Rule 144, (iii) if such Common Stock Conversion Shares are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Common Stock Conversion Shares and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the events described in clauses (i) - (iv) in the immediately preceding sentence if required by the Company’s transfer agent to effect the removal of the legend hereunder. If all or any Notes are converted at a time when there is an effective registration statement to cover the resale of the Common Stock Conversion Shares, or if such Common Stock Conversion Shares may be sold under Rule 144 and the Company is then in compliance with the current public information required under Rule 144, or if the Common Stock Conversion Shares may be sold under Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Common Stock Conversion Shares and without volume or manner-of-sale restrictions or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Common Stock Conversion Shares shall be issued free of all legends. The Company agrees that following such time as such legend is no longer required under this Section 4.3(b), it will, no later than three Business Days following the delivery by a Purchaser to the Company or the transfer agent of a certificate representing Common Stock Conversion Shares issued with a restrictive legend (such third Business Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the transfer agent that enlarge the restrictions on transfer set forth in this Section 4. Common Stock Conversion Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser.

 

 

(g) Penalty. In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Common Stock Conversion Shares (based on the VWAP of the Common Stock on the date such securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.3(b), $10 per Business Day (increasing to $20 per Business Day five (5) Business Days after such damages have begun to accrue) for each Business Day after the Legend Removal Date until such certificate is delivered without a legend. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any securities as required by tis Note, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

(h) Fractional Shares. No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of this Note. 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.

 

(i) Transfer Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Note 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 certificates, 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 certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates 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 Common Stock Conversion.

 

(j) Holder’s Conversion Limitations. The Company shall not effect any conversion of principal and/or interest of this Note into Common Stock, and a Holder shall not have the right to convert any principal and/or interest of this Note into Common Stock, 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 Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates 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 Notes or the Warrants) beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4.3(j), 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 4.3(j) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note 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 Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph 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 4.3(j), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) 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 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 Note, 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 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder. The Holder, upon not less than 61 days’ prior 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 the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4.3(j) shall continue to apply. Any such increase or decrease will not be effective until the 61^st 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 4.3(j) 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. The limitations contained in this paragraph shall apply to a successor holder of this Note.

 

4.4 Primary Market Limitation. Unless the approval of the Company’s stockholders is not required by the applicable rules of the applicable Trading Market for issuances of Common Stock in excess of the Primary Market Limitation (as defined below), or the Company has obtained such approval, the Company shall not effect any conversion of this Note into Common Stock and the Holder shall not have the right to convert any portion of this Note into Common Stock to the extent that, after giving effect to such exercise, alone or in combination with other holders of Notes and Note Warrants or any related securities would result in the issuance of shares of Common Stock the Holder would have received in respect of its share of Common Stock in excess of its pro rata share of the Primary Market Limitation (as defined below). For purposes of the foregoing sentence, the Holder’s pro rata share of the Primary Market Limitation shall be equal to (i) the original principal amount of the Note purchased by the Holder in the Offering (and not subsequently disposed except through conversion into New Preferred Stock (as defined in such Note), divided by (ii) the aggregate original principal amount of all Notes sold in the Offering and the purchaser price of all other securities aggregated with the Notes for the purposes of the applicable rules of the applicable Primary Market. The “Primary Market Limitation” shall be 19.99% of the number of shares of the Common Stock outstanding immediately before the first sale of the Notes (or the first sale of any other securities aggregated with the Notes or the Note Warrants for the purposes of the applicable rules of the applicable Primary Market, if earlier). The limitations contained in this paragraph shall apply to a successor holder of these Notes.

 

4.5 Termination of Rights. Upon the conversion of this Note in full in accordance with the terms of this Article IV, this Note shall be automatically cancelled and shall no longer be outstanding, and all rights with respect to the Note, whether arising hereunder or otherwise, shall terminate, except for the rights of the Holder to receive shares of Common Stock in exchange for the Note as provided herein.

 

 

4.6 Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding and prior to conversion into New Preferred Stock under Article III, above,: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Notes or if issued, upon conversion of New Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Common Stock 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 stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

4.7 Subsequent Equity Sales. If, at any time while this Note is outstanding, the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock in any transaction at an effective price per share that is lower than the then Common Stock Conversion Price (such lower price, the “Base Common Stock Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Common Stock Conversion Price, such issuance shall be deemed to have occurred for less than the Common Stock Conversion Price on such date of the Dilutive Issuance), then the Common Stock Conversion Price shall be reduced to equal the Base Common Stock Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 4.7 in respect of an Exempt Issuance. 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 4.7, 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 4.7, upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Common Stock Conversion Shares based upon the Base Common Stock Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Common Stock Conversion Price in the Notice of Common Stock Conversion.

 

4.8 Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 4.7 above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”) other than in an Exempt Issuance, 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 Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, 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 or Primary Market Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation or Primary Market Limitation).

 

 

4.9 Pro Rata Distributions. During such time as this Note is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Note, then, in each such case, upon conversion of this Note, 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 Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, 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 or Primary Market Limitation).

 

4.10 Fundamental Transaction. If, at any time while this Note 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, 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, (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 or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Note under Article IV, 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 Note), 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 Note is convertible immediately prior to such Fundamental Transaction (without regard to any Beneficial Ownership Limitation or Primary Market Limitation on the conversion of this Note). 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 Note 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 this Note in accordance with the provisions of this Section 4.10 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 Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note 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 Note 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 Note with the same effect as if such Successor Entity had been named as the Company herein.

 

4.11 Calculations. All calculations under this Article IV shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Article IV, 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.

 

4.12 Notice to the Holder.

 

(a) Adjustment to Conversion Price. Whenever the Common Stock Conversion Price is adjusted pursuant to any provision of this Article IV, the Company shall promptly deliver to each Holder a notice setting forth the Common Stock Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(b) Notice to Allow Conversion by Holder. If (i) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (iii) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (iv) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company 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 (v) 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 Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note 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 shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided 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 Note 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.

 

ARTICLE V. EVENTS OF DEFAULT

 

The occurrence of any of the following events of default shall each be an “Event of Default”, with no right to notice or the right to cure except as specifically stated:

 

5.1 Failure to Pay Principal or Interest. The Borrower fails to pay the Principal Payments or Interest thereon when due on this Note and such failure continues for a period of at least five (5) Business Days.

 

5.2 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note or in the Securities Purchase Agreement or the Security Agreement (as defined below) and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

 

5.3 Receiver or Trustee. The Borrower or any subsidiary of the Borrower makes an assignment for the benefit of creditors or applies for or consents to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee is otherwise appointed.

 

5.4 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors are instituted by or against the Borrower or any subsidiary of the Borrower.

 

5.5 Liquidation. The Borrower commences any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

5.6 Failure of Common Stock Delivery. The Borrower shall fail for any reason to deliver the required number of shares of Common Stock to a Holder prior to the third trading day after a Common Stock Conversion Date pursuant to Section 4.3(b) or the Borrower 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 Notes in accordance with the terms hereof.

 

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

 

 

5.8 Other Defaults. The Company or any Subsidiary shall default on any of its obligations under any mortgage(s), credit agreement(s) or other facility(ies), indenture agreement(s), debt agreement(s), factoring agreement(s), or other instrument(s) 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) involve(s) obligations greater than $1,500,000 in the aggregate, 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.

 

5.9 Delisting Events. The (a) Common Stock shall be delisted for listing or quotation on the Nasdaq Capital Markets and shall thereafter not be eligible to resume listing or quotation for trading thereon within twenty-one Business Days or (b) transfer of shares of Common Stock through the Depository Trust Company System (the “DTC”) is no longer available as a result of any action or default by the Company after any applicable cure period provided by DTC;

 

5.10 Failure on Reserve. The Company shall fail to maintain sufficient reserved shares pursuant to Section 4.3(e) of this Note.

 

5.11 Judgments. Any monetary judgement, writ or similar final process shall be entered or filed after the date hereof against the Company, any subsidiary or any of their respective property or assets for more than $500,000, and such judgement, writ or similar process shall remain unvacated, unbonded, or unstayed for a period of 45 calendar days thereafter.

 

5.12 Exchange Act Reports Failure. The Company fails to file with the Securities and Exchange Commission any required reports under Section 13 or 15(d) of the Exchange Act, in all cases subject top available filing extensions as provided under the rules and regulations of the Exchange Act, other than as required to restate its financial statements in the Q1-24 10-Q as described in the Securities Purchase Agreement.

 

Upon the occurrence of any Event of Default specified in this Article IV, this Note shall become immediately due and payable in an amount equal to the Mandatory Default Amount (as defined below) upon written notice of declaration of default by holders of at least a majority of the principal of the then outstanding Notes, and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the then outstanding entire balance of this Note (including principal and accrued and unpaid interest) without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity. Additionally, upon any such Event of Default, the applicable interest rate on amounts due under this Note shall be immediately increased to 22%. Mandatory Default Amount” means the payment of 110% of the outstanding principal amount of this Note and accrued and unpaid interest hereon, in addition to the payment of all other amounts, costs, expenses and liquidated damages due in respect of this Note.

 

ARTICLE VI. MISCELLANEOUS

 

6.1 Certain Definitions.

 

(a) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

 

 

(b) “Indebtedness” means (1) all indebtedness for borrowed money, (2) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with GAAP) (other than trade payables entered into in the ordinary course of business, including payables under the terms of leases in the ordinary course of business), (3) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (4) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (5) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (6) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease, (7) all indebtedness referred to in clauses (1) through (6) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (8) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (1) through (7) above.

 

(c) “New Preferred Stock” means a new series of cumulative redeemable preferred stock of the Company substantially reflecting the rights, preferences, privileges and voting power set forth on the term sheet attached as Exhibit A hereto.

 

(d) “Permitted Indebtedness” means (1) the Indebtedness evidenced by this Note and the Other Notes, (2) Indebtedness incurred by the Company that is made expressly subordinate in right of payment to the Indebtedness evidenced by this Note, (3) Purchase Money Indebtedness, (4) Indebtedness to trade creditors incurred in the ordinary course of business, including Indebtedness under the terms of leases in the ordinary course of business, and (5) extensions, refinancings and renewals of any items of Permitted Indebtedness in clause (3) above.

 

(e) “Permitted Liens” means (1) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (2) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (3) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (4) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, (5) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (1) through (4) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (6) leases, subleases, licenses and sublicenses granted to others in the ordinary course of the Company’s business, not interfering in any material respect with the business of the Company and its Subsidiaries taken as a whole, (7) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods, and (8) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 4.4.

 

 

(f) “Principal Exchange” means the Nasdaq Capital Market or such other exchange or market as may be designated by the Company’s Board of Directors if the Company’s securities are subsequently listed or traded on a different exchange or market.

 

(g) “Purchase Money Indebtedness” means Indebtedness (including capital lease obligations as defined under GAAP), incurred at the time of, or within 20 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof.

 

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

 

6.3 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be given in accordance with Section 5.3 of the Securities Purchase Agreement.

 

6.4 Amendments. This Note and any provision hereof may only be amended or waived by an instrument in writing signed by the Borrower and the holders of a majority of the then outstanding principal under the Notes.

 

6.5 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Borrower hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Borrower 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 Borrower does not obtain the prior signed written consent of the Holder). This Note 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 Borrower’s consent thereto. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

 

6.6 Security Agreement. The Company and ______, as collateral agent for itself and all other holders of the Notes (the “Collateral Agent”) shall execute the Security Agreement in the form attached hereto as Exhibit A. The undersigned Holder hereby grants the Collateral Agent all necessary authority to act in the interests of all holders of the Notes under the terms of the Security Agreement and any enforcement of rights thereunder and agrees to hold the Collateral Agent harmless for all actions taken by the Collateral with respect thereto other than through gross negligence and fraud.

 

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

 

6.8 Governing Law. This Note shall be governed by and interpreted in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law (whether of the State of Delaware or any other jurisdiction).

 

 

6.9 Exclusive Jurisdiction. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Note (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall only be commenced in the state and federal courts sitting in New Castle County, State of Delaware (the “Delaware Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Delaware 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 the Note), 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 Delaware Courts, or such Delaware 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 Note 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 Note or the transactions contemplated hereby.

 

6.10 JURY TRIAL WAIVER. THE BORROWER AND THE HOLDER HEREBY WAIVE A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS NOTE.

 

6.11 Usury. 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 Borrower 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 Borrower from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Borrower (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 power as though no such law has been enacted.

 

 

** signature page follows **

 

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer on the Issue Date.

 

	LUXURBAN HOTELS, INC.
	By:
		Name:	Michael James
		Title:	Chief Financial Officer

 

 

EXHIBIT A

 

LuxUrban Hotels Inc.

 

New Preferred Stock

 

Term Sheet

 

Issuer:		LuxUrban Hotels Inc. (the “Company”)
Book running manager:		Alexander Capital, L.P. a licensed broker-dealer with FINRA
Security:		13.00% to 18.00% cumulative redeemable preferred stock (“New Preferred Stock”)
Proposed Nasdaq Listing Symbol:		LUXHB (Nasdaq)
Dividend Rate:		13.00 to 18.00% per annum, subject to marketing.
Liquidation Preference:		$25.00 per share
Term/Maturity Date:		No maturity
Redemption:		Customary redemption rights, subject to marketing, similar to the Company’s Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”).
Voting Rights:		Holders of Preferred Stock will have no voting rights, except in certain limited circumstances, similar to the Company’s Series A Preferred Stock.
Convertible:		The New Preferred Stock shall be convertible at the option of the holder into shares of Common Stock at an initial conversion price equal to the Common Stock Conversion Price under the Notes in effect at the time of the consummation of the public offering of the New Preferred Stock.
Other Provisions:		The New Preferred Stock shall contain similar conversion provisions and “down-round” protection provisions as set forth in the Notes as permitted by Nasdaq regulations.

 

 

Exhibit 4.2

 

WARRANT

 

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE ACT, AND ANY APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THIS WARRANT MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE, TRANSFER, PLEDGE OR HYPOTHECATION OF ANY INTEREST IN ANY OF THE SECURITIES REPRESENTED HEREBY.

 

NUMBER NW-___________________

ISSUANCE DATE: August ____, 2024

 

THIS WARRANT WILL BE VOID IF NOT EXERCISED PRIOR TO THE EXPIRATION DATE

(DEFINED BELOW)

 

LUXURBAN HOTELS INC.

 

WARRANT

 

THIS WARRANT CERTIFIES THAT, for value received _______________, is the registered holder (the “Holder”) of a warrant or warrants (the “Warrant(s)”) and is entitled to purchase up to ________________ fully paid and non-assessable shares of common stock, par value $0.00001 per share (“Shares”), of LUXURBAN HOTELS INC., a Delaware corporation (the “Company”) at a purchase price per Share (the “Exercise Price”) equal to 110% of the average VWAP for the three consecutive trading days immediately following the date the Company files its Quarterly Report on Form 10-Q for the six months ended June 30, 2024, not to exceed $0.15 (as may be adjusted from time to time in accordance with this Warrant, including as a result of the Reverse Split). This Warrant is issued pursuant to that certain securities purchase agreement, dated as of August 13, 2024 (“Issuance Date”), between the Company and the Holder (the “Securities Purchase Agreement”) and other investors in a private placement (the “Offering”) relating to the sale of senor promissory notes (the “Notes”). Capitalized terms not defined herein shall have the meanings ascribed to them in the Securities Purchase Agreement. This certificate (“Warrant Certificate”) represents the Warrant(s) referred to herein.

 

1.

Term and Exercise of Warrants

 

(a)

Subject to the terms and conditions set forth herein, this Warrant shall be exercisable, in whole or in part, commencing the date of the earliest of (a) Shareholder Approval of both the Reverse Split and Nasdaq Compliance Waiver (and the filing of an amendment to the certificate of incorporation of the Company to effect the Reverse Split as required under the General Delaware Corporation Law) and (b) the 91st day after the initial Closing of the sale of the Notes under the Securities Purchase Agreement (the “Exercisable Date”) and ending on the five-year anniversary of the Issuance Date (the “Expiration Date”). Within two business days of the filing of such amendment to its certificate of incorporation, the Company shall deliver written instruction to its common stock transfer agent to reserve all shares of common stock issuable upon exercise of this Warrant.

 

(b)

The Warrant entitles the holder thereof to purchase Shares from the Company, commencing on the Exercisable Date upon surrender of this Warrant, delivery of the Notice of Exercise form attached hereto (the “Notice of Exercise”) duly executed to the office of the Company, LUXURBAN HOTELS INC., Attention: Chief Financial Officer, 2125 Biscayne Blvd, Suite 253, Miami, FL 33137 mikej@luxurbanhotels.com (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company) and payment of the Exercise Price (by cash or by check or bank draft payable to the order of the Company) whereupon the Holder shall be entitled to receive from the Company a stock certificate representing the number of Shares so purchased. In no event will the Company be required to net cash settle any warrant exercise.

 

 

2.

Issuance of Shares; Holder’s Exercise Limitations; No Fractional Shares.

 

(a)

Within three business days after the exercise of this Warrant and the clearance of the funds in payment of the applicable Exercise Price (the “Delivery Deadline”), the Company, at its expense, shall issue to the registered holder of such Warrant a certificate or certificates, or book entry position, for the number of Shares to which he, she or it is entitled, registered in such name or names as may be directed by him, her or it. Upon any exercise of the Warrant for less than the total number of full Shares provided for herein, there shall be issued to the registered holder hereof or the registered holder’s assignee a new Warrant Certificate covering the number of Shares for which the Warrant has not been exercised.

 

(b)

If, at the time of exercise, the Company has a transfer agent (the “Transfer Agent”), then upon the exercise of this Warrant in whole or in part, the Company shall, at its expense, take all necessary action, including (if necessary) obtaining and delivering an opinion from its counsel, to ensure that the Transfer Agent shall issue Shares in the name of the Holder (or its nominee) or such other persons as designated by the Holder and in such denominations to be specified in the applicable Notice of Exercise.

 

(c)

If the Transfer Agent is participating in the DTC Fast Automated Securities Transfer (“FAST”) program, and subject to shares being issuable without legend as prescribed by Sections 6 and 7, below, upon written request of the Holder and in lieu of delivering physical certificates representing Shares to be delivered under or in connection with this Warrant Certificate, the Company shall use its commercially reasonable efforts to cause the Transfer Agent to electronically transmit the Shares to the Holder by crediting the account of the Holder’s prime broker with the DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system. The time periods for delivery and penalties described herein shall apply to the electronic transmittals described herein. Any delivery not effected by electronic transmission shall be effected by delivery of physical certificates.

 

(d)

The Company shall not affect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with each person or other entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Holder (the “Affiliates”), and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Company common stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Company 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 Company 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 and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Company 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. Except as set forth in the preceding sentence, for purposes of this Section 1(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 1(e) applies, the determination of whether this Warrant is

 

 

exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(d), in determining the number of outstanding shares of Company common stock, a Holder may rely on the number of outstanding shares of Company common stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Company common stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Company common stock then outstanding. In any case, the number of outstanding shares of Company 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 since the date as of which such number of outstanding shares of Company common stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Company common stock outstanding immediately after giving effect to the issuance of shares of Company common stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Company common stock outstanding immediately after giving effect to the issuance of shares of Company common stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(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 provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

(e)

Primary Market Limitation. Unless the approval of the Company’s stockholders is not required by the applicable rules of the applicable Trading Market for issuances of Common Stock in excess of the Primary Market Limitation (as defined below), or the Company has obtained such approval, the Company shall not effect any exercise of this Warrant and the Holder shall not have the right to exercise any portion of this Warrant to the extent that, after giving effect to such exercise, alone or in combination with other holders of Warrants of like tenor or any related securities would result in the issuance of shares of Common Stock the Holder would have received in respect of its share of Common Stock in excess of its pro rata share of the Primary Market Limitation (as defined below). For purposes of the foregoing sentence, the Holder’s pro rata share of the Primary Market Limitation shall be equal to (i) the original principal amount of the Note purchased by the Holder in the Offering (and not subsequently disposed except through conversion into New Preferred Stock (as defined in such Note), divided by (ii) the aggregate original principal amount of all Notes sold in the Offering and the purchaser price of all other securities aggregated with the Notes and these Warrants for the purposes of the applicable rules of the applicable Primary Market. The “Primary Market Limitation” shall be 19.99% of the number of shares of the Common Stock outstanding immediately before the first sale of the Notes (or the first sale of any other securities aggregated with the Notes or these Warrants for the purposes of the applicable rules of the applicable Primary Market, if earlier). The limitations contained in this paragraph shall apply to a successor holder of these Warrants.

 

(f)

No fraction of a Share will be issued upon any exercise of a Warrant. If the holder of a Warrant would be entitled to receive a fraction of a Share upon any exercise of a Warrant, the Company shall, upon such exercise, issue or cause to be issued only the largest whole number of Shares issuable on such exercise (and such fraction of a Share will be disregarded).

 

 

3.

Exchange and Registry of Warrant.

 

(a)

Warrant Certificates, when surrendered at the office of the Company by the Holder in person or by attorney duly authorized in writing, may be exchanged without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants.

 

(b)

Upon due presentment for registration of transfer of the Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee in exchange for this Warrant Certificate, without charge except for any applicable tax or other governmental charge.

 

(c)

The Company shall keep and properly maintain at its principal executive offices a register for the registration of this Warrant and any transfers thereof. The Company may deem and treat the person in whose name this Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of this Warrant effected in accordance with the provisions of this Warrant.

 

4.

Anti-Dilution Adjustments.

 

(a)

Adjustments for Change in Shares.

 

(i)

In the event that, after the Issuance Date and prior to the exercise in full of this Warrant, the outstanding the number of Shares shall be subdivided (by distribution, subdivision or otherwise), into a greater number of Shares, the number of Shares issuable on the exercise of each Warrant then in effect shall, concurrently with the effectiveness of such subdivision, be equally, ratably and proportionally increased, as determined in good faith by the Board, which determination shall be final and binding on the Holders absent manifest error. In the event the outstanding Shares shall be combined or consolidated, by reclassification or otherwise, into a lesser number of Shares, the number of Shares issuable on the exercise of each Warrant then in effect shall, concurrently with the effectiveness of such subdivision, be equally, ratably and proportionally decreased, as determined in good faith by the Board, which determination shall be final and binding on the Holders absent manifest error.

 

(ii)

In the event that, after the Issuance Date and prior to the exercise in full of this Warrant, the Shares are exchanged for, or converted into, another form of equity security of the Company or of any other entity, this Warrant shall be exercisable for an equivalent number of such equity securities, at an equivalent Exercise Price, in each case as determined by the Board acting reasonably, so as to provide the Holder with rights equitably equivalent to the rights held by the Holder by virtue of this Warrant in effect immediately prior to such exchange or conversion, and each reference herein to the Shares issuable on exercise of this Warrant shall be deemed to be a reference to such other equity securities.

 

(iii)

Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrants is adjusted, as provided in this Section, the Exercise Price shall be adjusted (to the nearest cent) by multiplying such Exercise Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.

 

 

(b)

Other Dividends and Distributions. If the Company shall make or declare, or fix a record date for the determination of holders of equity securities entitled to receive, a dividend or any other distribution payable in cash, securities of the Company or other property, then, and in each such event, the Company shall ensure that provisions are made so that the Holder shall receive upon exercise of this Warrant, in addition to the number of the Shares receivable thereupon, the kind and amount of cash, securities of the Company or other property which the Holder would have been entitled to receive had this Warrant been exercised in full into the Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the date this Warrant is exercised, retained such cash, securities or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of equity securities, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if this Warrant had been exercised in full into the Shares on the date of such event.

 

(c)

Fundamental Transactions. If, at any time while the Warrant 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 or any Subsidiary, 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 or 50% or more of the voting power of the common equity of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock or 50% or more of the voting power of the common equity of the Company (each a “Fundamental Transaction”), then, upon any subsequent exercise of the Warrant, the Holder shall have the right to receive, for each Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in this Warrant 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 the Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) of the Warrant on the exercise of the 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 Warrant 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 the Warrant 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 Warrant in accordance with the provisions of Section 3(e) of the Warrant pursuant to written agreements prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for the Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and

 

 

receivable upon exercise of the Warrant (without regard to any limitations on the exercise of the Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of the 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 be added to the term “Company” under the Warrant (so that from and after the occurrence or consummation of such Fundamental Transaction, each and every provision of the Warrant and the other Transaction Documents referring to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Successor Entity or Successor Entities, jointly and severally with the Company, may exercise every right and power of the Company prior thereto and the Successor Entity or Successor Entities shall assume all of the obligations of the Company prior thereto under the Warrant and the other Transaction Documents with the same effect as if the Company and such Successor Entity or Successor Entities, jointly and severally, had been named as the Company herein.

 

(d)

Certain Events. If any event of the type contemplated by the provisions of this Section but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features) occurs, then the Board shall make an appropriate adjustment in the number of the Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section; provided, that no such adjustment pursuant to this Section 4(c) shall increase the Exercise Price or decrease the number of the Shares issuable hereunder.

 

(e)

Notice of Adjustment. Upon the occurrence of each adjustment or readjustment of the number of Shares issuable on the exercise of each Warrant, the Company (at its expense) shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Holder a notice setting forth (1) such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based and (2) the number of Shares issuable on the exercise of each Warrant at the time in effect.

 

(f)

Closing of Books. The Company will not close its stockholder books or records, other than in the ordinary course, in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

(g)

Miscellaneous. All calculations hereunder shall be made to the nearest cent or to the nearest twentieth decimal place of a fractional Share, as the case may be.

 

5.

Adjustment as required for Stock Exchange Compliance. This Warrant shall be automatically adjusted as required to maintain compliance by the Company with the listing rules and other regulations of the stock exchange upon which the Company’s securities are listed (the “Primary Market”). The Primary Market is presently the Nasdaq Stock Market, LLC.

 

6.

Transferability; Compliance with Securities Laws.

 

(a)

This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable United States, state, and foreign securities laws by the transferor and transferee (including the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, if requested by the Company). Subject to such restrictions, prior to the Expiration Date, this Warrant and all rights hereunder are transferable by the Holder hereof, in whole or in part, at the office or agency of the Company referred to in Section 1(b) above. Any such transfer shall be made in person or by the Holder’s duly authorized attorney, upon surrender of this Warrant together with the Form of Transfer attached hereto properly endorsed.

 

 

(b)

The Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the Shares issuable upon exercise hereof are being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell, or otherwise dispose of this Warrant or any Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act or any state or foreign securities laws. Upon exercise of this Warrant, the Holder shall, if reasonably requested by the Company and if required by applicable law or regulation, confirm in writing, in a form satisfactory to the Company, that the Shares so purchased are being acquired solely for Holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale.

 

(c)

The Shares have not been registered under the Securities Act, and this Warrant may not be exercised except by (1) the original purchaser of this Warrant from the Company or (2) an “accredited investor” as defined in Rule 501(a) under the Securities Act. Each certificate representing Shares issued on exercise of this Warrant or other securities issued in respect of such Shares upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any other legend required under applicable securities laws):

 

THE SHARES OF COMMON STOCK EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR UNLESS THE COMPANY SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SHARES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

 

7.

Removal of Restrictive Legends. Neither this Warrant nor any certificates evidencing the Shares or any other equity securities issuable or deliverable under or in connection with this Warrant shall contain any legend restricting the transfer thereof in any of the following circumstances: (i) while a registration statement covering the sale or resale of the Shares is effective under the Securities Act; (ii) following any sale of this Warrant, any of the Shares or any other equity securities issued or delivered to the Holder under or in connection herewith pursuant to Rule 144; (iii) if this Warrant, the Shares or any other equity securities are eligible for sale under Rule 144(b)(1); or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) (collectively, the “Unrestricted Conditions”). If the Unrestricted Conditions are met at the time of the issuance of the Shares, the Company shall cause its counsel, at its expense, to issue a legal opinion to the Transfer Agent, if required by such Transfer Agent to effect the issuance of the Shares or any other shares of equity securities issuable or deliverable under or in connection with this Warrant, as applicable, without a restrictive legend or removal of the legend hereunder. If the Unrestricted Conditions are met at the time of issuance of the Shares, then the Shares shall be issued free of all legends.

 

8.

Redemption.

 

(a)

Warrants to purchase that number of shares of Common Stock equal to the Four-Week Average Weekly Trading Volume may redeemed (a “Redemption”), at the option of the Company, at any time commencing December 1, 2024 and prior to the Warrants’ expiration, at the office of the Company, upon the notice referred to in subsection 8(b), below, at the price of $.01 per Warrant (“Redemption Price”), provided that the volume weighted average closing price of the Common Stock has been at least $0.50 per share (subject to adjustment in accordance with Section 4 hereof), for seven (7) trading days out of ten (10) consecutive trading days ending on the third Business Day prior to the date on which notice of redemption is given. The “Four-Week Average Weekly Trading Volume” shall mean that average number of shares traded on the Primary Market each week over the last 20 consecutive trading days immediately prior to the date on which notice of redemption is given. Warrants shall be redeemed pro ratably among all holders of the Warrants. The Company may effect additional redemptions from time to time beginning no earlier than five trading days after the consummation of any prior redemption of Warrants (provided that the conditions for redemption continue to be fulfilled or are fulfilled again thereafter).

 

 

(b)

In the event the Company shall elect to redeem Warrants, the Company shall fix a date for each such redemption (the “Redemption Date”). Notice of redemption (“Redemption Notice”) shall be mailed by first class mail, postage prepaid, by the Company not less than ten days prior to the Redemption Date to the registered holders of the Warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the registered holder received such notice.

 

(c)

The Warrants may be exercised, for cash at any time after notice of redemption shall have been given by the Company and prior to the Redemption Date. On and after the Redemption Date, the record holder of the Warrants shall have no further rights except to receive, upon surrender of the Warrants, the Redemption Price.

 

(d)

Notwithstanding the foregoing, if the exercise of Warrants subject to Redemption would, at the time of the Redemption Date, result in the Holder exceeding the Beneficial Ownership Limitation, then only that number of Warrants shall be subject to redemption at the Redemption Date by the Company in the Redemption such that if same were exercised by the Holder on the Redemption Date such Holder’s then ownership of the Company’s common stock would remain one share below the Beneficial Ownership Limitation. In the event of a Redemption, the Holder shall notify the Company in writing of any potential breach of the Beneficial Ownership Limitation (based on the number of Warrants to be redeemed as set forth in the Redemption Notice) at least two business days prior to the Redemption Date. The remaining Warrants that were otherwise subject to the Redemption (but for the Beneficial Ownership Limitation) shall be deemed irrevocably exercised as of the Redemption Date and issuance of the Share therefor (the “Abeyance Shares”) shall be made from time to time as when such issuance would not breach the Beneficial Ownership Limitation and as long as the weighted average closing price conditions for Redemption prescribed by Section 8(a), above, are then being met. The Holder shall notify the Company in writing within ten business days of the date any such Abeyance Shares may be issued, providing in such notice the number of Abeyance Shares that may be issued and payment for the Exercise Price for such Abeyance Shares. If the Holder fails to timely provide such notice and Exercise Price payment, the number of Abeyance Shares that should have been issuable at such time shall be deemed terminated and forfeited.

 

9.

Payment of Taxes. The Company will from time to time promptly pay all taxes and charges that may be imposed in respect of the issuance or delivery of shares upon the exercise of Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares.

 

10.

Representations and Warranties. The Company represents and warrants to, and agrees with, the Holder as follows:

 

(a)

Due Organization. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the state of its formation and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.

 

(b)

Authorization; Binding Obligation. This Warrant has been duly executed by the Company and constitutes its legal, valid and binding obligation, enforceable against it in accordance with the terms of this Warrant. Except as may be limited by applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights, all corporate action has been taken on the part of the Company, its officers, directors, and stockholders necessary for the authorization, execution and delivery of this Warrant. The Company has taken all corporate action required to make all the obligations of the Company reflected in the provisions of this Warrant the valid and enforceable obligations they purport to be. The issuance of this Warrant and the Shares issuable upon exercise of this Warrant will not be subject to preemptive rights of any stockholders of the Company. No consent, waiver, approval, authorization, exemption, registration, license or declaration is required to be made or obtained by the Company, other than those which have been made or obtained, in connection with (i) the execution or enforceability of this Warrant or (ii) the consummation of any of the transactions contemplated hereby, including the issuance of the Shares upon exercise of this Warrant.

 

 

(c)

Compliance with Other Instruments. The authorization, execution and delivery of the Warrant will not constitute or result in a default or violation of any law or regulation applicable to the Company or any term or provision of the Company’s Certificate of Incorporation or bylaws, or any material agreement or instrument by which it is bound or to which its properties or assets are subject.

 

(d)

Valid Issuance. This Warrant, and all the Shares which may be issued upon the exercise of this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances (including preemptive or similar rights) except for restrictions on transfer provided for (i) in this Warrant, (ii) under applicable federal and state securities laws, or (iii) in the Charter. Based in part upon the representations and warranties of the Holder in this Warrant, this Warrant and all the Shares issuable upon exercise of this Warrant will be issued in compliance with all applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of the Shares and other securities for which this Warrant may be exercisable or for which the Shares may be convertible as will be sufficient to permit the exercise in full of this Warrant.

 

(e)

No Violation; Registration. The Company shall take all such actions as may be necessary to ensure that all the Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any trading market or securities exchange upon which shares of the Company’s common stock or other securities constituting the Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance). If the Unrestricted Conditions are satisfied at the time of exercise of this Warrant, the Company shall cause the Shares, immediately upon such exercise, to be listed on any such trading market or securities exchange upon which shares of common stock or other securities constituting the Shares are listed at the time of such exercise.

 

11.

No Rights as a Stockholder; No Liability. Except as specifically set forth herein, this Warrant, by itself, does not entitle the registered holder thereof to any of the rights of a stockholder of the Company, including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase the 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 Shares or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

12.

No Impairment.

 

(a)

Notwithstanding anything herein to the contrary, nothing contained in this Warrant shall affect, limit or impair the rights and remedies of the Holder or its affiliates (x) in their capacity as a lender, creditor, or similar, as applicable, to the Company or any of its subsidiaries or affiliates, or (y) pursuant to any other agreements or instruments entered into by the Holder (or its affiliates) and the Company or any of its subsidiaries or affiliates. Without limiting the generality of the foregoing, neither the Administrative Agent (as defined in the Loan Agreement) nor any of its affiliates, in exercising their rights as lenders will have any duty to consider (i) its (or its affiliates’) status as a direct or indirect shareholder of the Company and its subsidiaries, (ii) its (or its affiliates’) direct or indirect ownership of the Shares of the Company or any of its subsidiaries, or (iii) any duty it (or its affiliates) may have to any other direct or indirect shareholders of the Company and its subsidiaries, except as may be required under the applicable loan documents.

 

 

(b)

The Company shall not, by amendment of its Charter or bylaws, through any shareholders, voting or similar agreement, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (x) will not increase the par value of any the Shares above the then-applicable Exercise Price, (y) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Shares upon the exercise of this Warrant, and (z) will 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.

 

13.

Effect of Headings. The section headings herein are for convenience only and are not part of this Warrant and shall not affect the interpretation thereof.

 

14.

Modification and Waiver. Subject to Section 5, this Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Company, one the one hand, and the holders of a majority of the then outstanding Warrants of like tenor, on the other hand.

 

15.

Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder or the Company shall be delivered through email, or shall be sent by certified or registered mail, postage prepaid, to the Holder at its address as shown on the books of the Company or to the Company at the address indicated therefor in the first paragraph of this Warrant.

 

16.

Governing Law. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Delaware.

 

17.

Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies provided herein. 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.

 

18.

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

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer.

 

Dated: August _____, 2024
	LUXURBAN HOTELS INC.
	By:
	Name:	Michael James
	Title:	Chief Financial Officer

 

Accepted and Acknowledged by:
[INVESTOR]
By:
Name:
Title:

 

 

[Signature Page to Penny Warrant]

 

 

NOTICE OF EXERCISE

 

To Be Executed by the Registered Holder in Order to Exercise Warrants

 

The undersigned Registered Holder irrevocably elects to exercise ____________ Warrants represented by this Warrant Certificate, and to purchase the Shares issuable upon the exercise of such Warrants, and requests that Certificates for such shares shall be issued in the name of

 

(PLEASE TYPE OR PRINT NAME AND ADDRESS)
(SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER)
and be delivered to
	(PLEASE PRINT OR TYPE NAME AND ADDRESS)

 

and, if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder at the address stated below:

 

Dated:
			(SIGNATURE)
			(ADDRESS)
			(TAX IDENTIFICATION NUMBER)
			(EMAIL ADDRESS)

 

 

NOTICE OF EXERCISE

 

To Be Executed by the Registered Holder in Order to Exercise Warrants

 

The undersigned Registered Holder irrevocably elects to exercise ____________ Warrants represented by this Warrant Certificate, and to purchase the Shares issuable upon the exercise of such Warrants

 

The undersigned requests that Certificates for such shares shall be issued in the name of

 

and be delivered to

(PLEASE PRINT OR TYPE NAME AND ADDRESS)

 

and, if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder at the address stated below.

 

Dated:
			[                              ]
			By:
			Name:
			Title:

 

	(ADDRESS AND EMAIL)
	(TAX IDENTIFICATION NUMBER)

 

 

FORM OF TRANSFER

 

To Be Executed by the Registered Holder in Order to Transfer Warrants

 

For Value Received, ___________________ hereby sell, assign, and transfer unto

 

(PLEASE TYPE OR PRINT NAME AND ADDRESS)

 

(SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER)

 

and be delivered to
	(PLEASE PRINT OR TYPE NAME AND ADDRESS)

 

_______________________________ of the Warrants represented by this Warrant Certificate, and hereby irrevocably constitute and appoint _______________________________ Attorney to transfer this Warrant Certificate on the books of the Company, with full power of substitution in the premises.

 

Dated:

 

 

THE SIGNATURE TO THE ASSIGNMENT OF THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE NASDAQ, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE, OR CHICAGO STOCK EXCHANGE.

 

 

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of August 13, 2024, between LuxUrban Hotels Inc., a Delaware corporation (the “Company”), and the purchaser(s) identified on the signature page hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase Notes (as defined) from the Company.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE I.
DEFINITIONS

 

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement the following terms have the meanings set forth in this Section 1.1:

 

“Action” shall have the meaning ascribed to such term in Section 3.1(i).

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Board of Directors” means the board of directors of the Company.

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Closing Date” with respect to each Closing, the Business Day on which this Agreement has been executed by the Company and the Purchaser and all conditions precedent to (i) a Purchaser’s obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Note (and Note Warrants (as defined) to such Purchaser have been satisfied or waived.

 

“Closing” means each closing of the purchase and sale of Notes (and Note Warrants) pursuant to Section 2.1.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock, par value $0.00001 per share, of the Company 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 that would entitle the holder thereof to acquire at any time shares of Common Stock, including, without limitation, any debt, preferred stock, 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, shares of Common Stock.

 

 

“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.

 

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

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors or consultants of the Company pursuant to the Company’s existing stock option and/or restricted stock plans or stock option and/or restricted stock plans or employment or consulting agreement or amendments or modifications thereto which come into effect following the date hereof, (b) securities exercisable or exchangeable for or convertible into shares of Common Stock, issued and outstanding on the date of this Agreement, or pursuant to other agreements, options or awards of the Company existing prior to the date hereof, or upon exercise of other securities issued in Exempt Issuances hereafter, or (c) shares of Common Stock issued as part of or as a result of the transactions prescribed by this Agreement (including, but not limited to, under the Note Warrants or Notes or, if issued, the New Preferred Stock).

 

“Existing Notes” shall have the meaning ascribed to such term in Section 2.3(b)(iii).

 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

“GAAP” shall have the meaning ascribed to such term in Section 3.1(g).

 

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(n).

 

“Material Adverse Effect” means (a) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (b) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”). Notwithstanding the foregoing, for purposes of this Agreement, “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (A) general economic or political conditions; (B) conditions generally affecting the industries in which the Company operates; (C) any changes in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security or any market index or any change in prevailing interest rates; (D) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (E) any action required or permitted by this Agreement or any action taken (or omitted to be taken) with the written consent of or at the written request of the Purchasers; (F) any changes in applicable laws or accounting rules (including GAAP) or the enforcement, implementation or interpretation thereof; (G) the announcement, pendency or completion of the transactions contemplated by this Agreement; (H) any natural or man-made disaster or acts of God; (I) any circumstances or events reported in the Company’s SEC Reports on or prior to the date hereof; or (J) any failure by the Company to meet any internal or published projections, forecasts or revenue or earnings predictions (provided that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded).

 

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(l).

 

“Money Laundering Laws” shall have the meaning ascribed to such term in Section 3.1(ee).

 

 

“New Preferred Stock” shall have the meaning ascribed to it in the form of Note, as same may be modified as a result of market conditions in connection with the proposed New Preferred Stock underwritten offering described herein or as required by applicable rules and regulations including those promulgated by the SEC and the Nasdaq Capital Market.

 

“Notes” means the Senior Convertible Term Notes of the Company issued by the Company to the Purchasers hereunder in the form attached hereto of Exhibit A.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Placement Agency Agreement” means that Placement Agency Agreement entered into as of the date of this Agreement by and between the Company and the Placement Agent.

 

“Placement Agent” means Alexander Capital L.P.,

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.2.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“SEC” means the United States Securities and Exchange Commission.

 

“SEC Reports” has the meaning ascribed to it in Section 3.1(g).

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Series A Preferred Stock” means the Company’s Series A Preferred Stock, par value $0.00001 per share.

 

“Subscription Amount” shall mean, as to each Purchaser, the aggregate amount to be paid for and the original principal amount of the Notes as specified below such Purchaser’s name under the heading “Subscription Amount,” on the signature page hereto executed by such Purchaser, which amount in United States dollars and in immediately available funds.

 

“Subsidiary” means any subsidiary of the Company and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

“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, the OTC Bulletin Board or the OTC Markets (or any successors to any of the foregoing).

 

 

“Transaction Documents” means this Agreement, the Notes, the Note Warrants, the Security Agreement, and the Placement Agency Agreement and all exhibits and schedules hereto and thereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, 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 Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

ARTICLE II.
PURCHASE AND SALE OF NOTES

 

2.1 Purchase and Sale of Notes; Closing. Each Purchaser shall purchase, and the Company shall issue to such Purchaser its respective Note in an original principal amount equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser. The first closing of the Notes shall occur on the date the Company has received valid subscriptions and good and cleared funds in cash for at least an aggregate of $2,000,000 in principal amount of the Notes. Each Purchaser shall also be issued the Note Warrants in accordance with Section 5.15 hereof. The Company in its discretion may hold additional closings from time to time thereafter and may sell up to an aggregate of $10,000,000 in principal amount of the Notes in such closings through August 30, 2024 (such date, or such earlier date after an initial Closing has occurred that the offering of the Notes hereunder is terminated without prior notice in the sole discretion of the Company, being the “Offering End Date”). It is acknowledged and agreed by the parties that the ongoing nature of the offering prescribed hereby will limit the content of press releases that can be made by the Company and that all press released during any time the offerings is in progress shall be drafted to comply with the safe harbor provisions of Rule 135(c) promulgated under the Securities Act of 1933, as amended. It is further acknowledged and agreed by the parties that the (a) certain amended and restated promissory note, dated July 11, 2024 between the Company and THA Family II LLC and Elana Fiore and (b) and certain amended and restated promissory note, dated July 11, 2024 between the Company and THA Family II LLC and Andrea Romanello Ferdinand (together, the “Existing Notes”) shall convert into Notes at the initial Closing based on the entire principal amount of the Existing Notes then outstanding and interest accrued thereon.

 

2.2 Closing Deliveries.

 

(a) On or prior to each Closing Date (or as otherwise indicated below), the Company shall deliver to each Purchaser the following:

 

(i) this Agreement duly executed by the Company;

 

(ii) a Note with a principal amount equal to such Purchaser’s Subscription Amount, registered in the Company’s books and records in the name of the Purchaser;

 

 

(iii) a Note Warrant as prescribed by Section 5.15, below;

 

(iv) a transaction legal opinion of Graubard Miller in form and substance substantially in the form attached hereto as Exhibit B;

 

(v) the Company shall have provided the Purchaser in writing the Company’s wire transfer instructions.

 

(b) On or prior to the initial Closing Date (or as otherwise indicated below), the Company shall execute and deliver to the Collateral Agent (as defined in the Security Agreement) an executed copy of the security agreement in form attached as an exhibit to the form of Note (“Security Agreement”).

 

(c) On or prior to initial Closing Date (or as otherwise indicated below), the Collateral Agent shall execute and deliver to the Company the Security Agreement.

 

(d) On or prior to the initial Closing Date, the Placement Agent shall deliver to the Company all necessary consents required under any underwriting agreement between such agent and the Company allowing the Company to engage in the Reverse Split.

 

(e) On or prior to each Closing Date, each Purchaser shall deliver to the Company the following:

 

(i) this Agreement duly executed by such Purchaser;

 

(ii) the Purchaser’s Subscription Amount for such Closing as set forth on the signature page hereto executed by such Purchaser, by wire transfer of immediately available funds to the account specified in writing by the Company.

 

2.3 Closing Conditions.

 

(a) The obligations of the Company hereunder in connection with each Closing are subject to the following conditions:

 

(i) the accuracy in all material respects on the applicable Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

 

(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the applicable Closing Date shall have been performed; and

 

(iii) the delivery by each Purchaser of the required items set forth in Section 2.2(b) of this Agreement.

 

(b) The respective obligations of the Purchasers hereunder in connection with each Closing are subject to the following conditions:

 

(i) the accuracy in all material respects when made and on the applicable Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein);

 

 

(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the applicable Closing Date shall have been performed; and

 

(iii) the delivery by the Company of the required items set forth in Section 2.2(a) and 2.2(b) of this Agreement.

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company. Except as set forth in the SEC Reports or the disclosure schedules of the Company attached to this Agreement (the “Disclosure Schedules”), which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not reasonably be expected to result in a Material Adverse Effect

 

(b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

 

(c) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Notes (and Note Warrants) and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(d) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than the filing of a Form D with the Commission and such filings as are required to be made under applicable state securities laws or as provided in Section 2 hereof.

 

(e) [RESERVED]

 

(f) [RESERVED].

 

(g) SEC Reports; Financial Statements. Except as set forth on Schedule 3.1(h), the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. Except as set forth on Schedule 3.1(h), as of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company is not and since its incorporation never has been a “shell” company as defined in Section 405 of the Securities Act. The financial statements of the Company (the “Financial Statements”) included in the SEC Reports have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

 

(h) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest balance sheet included in the Financial Statements, except as specifically disclosed in SEC Reports filed thereafter and prior to the Closing, or Schedule 3(h) hereto: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables, letters of credit relating to accommodation unit properties, and accrued expenses incurred in the ordinary course of business consistent with past practice and liabilities in connection with existing litigations that have been generally described in the SEC Reports and for which he Company has made estimated reserves on its balance sheet, (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP and (C) the Existing Notes, (iii) the Company has not altered its method of accounting, and (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, except with respect to its Series A Preferred Stock. Except for the transactions prescribed by this Agreement and the other agreements and documents delivered in connection therewith, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by an issuer subject to the reporting obligations of the Exchange Act at the time this representation is made or deemed made that has not been included in the SEC Reports, the Company’s registration statement on Form S-3, as amended and supplemented by the prospectus supplement, dated July 26, 2024 (“Prospectus Supplement”)(as amended by the Prospectus Supplement, the “Registration Statement”), the Financial Statements or the Disclosure Schedules.

 

(i) Litigation. Except as set forth in the SEC Reports or on Schedule 3.1(h) hereto, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Notes or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Except as disclosed in the SEC Reports or Schedule 3.1(h) hereto, neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

(j) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. Except as described in the SEC Reports, none of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and except as set forth in the SEC Reports, neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

 

(k) Compliance. Except as set forth in Schedule 3.1(h), neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority, or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(l) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

(m) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries, (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties and (iii) judgement liens and garnishments with respect to certain concluded litigations. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

 

(n) Intellectual Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as necessary or required for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(o) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

 

 

(p) Transactions With Affiliates and Employees. Except as disclosed in the SEC Reports, none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company, and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.

 

(q) Sarbanes-Oxley; Internal Accounting Controls. The Company is in compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. Except as disclosed in the SEC Reports, the Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(c) and 15d-15(c)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.

 

(r) Certain Fees. Other than the compensation payable to the Placement Agent pursuant to the terms of the Placement Agency Agreement or as set forth on Schedule 3.1(r) hereto, no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(s) Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Notes (and Note Warrants) by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

 

 

(t) No “Bad Actor” Disqualification. The Company has exercised reasonable care to determine whether any Company Covered Person (as defined below) is subject to any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under the Securities Act (“Disqualification Events”). To the Company’s knowledge, no Company Covered Person is subject to a Disqualification Event. The Company has complied, to the extent required, with any disclosure obligations under Rule 506(c) under the Securities Act. For purposes of this Agreement, “Company Covered Persons” are those persons specified in Rule 506(d)(1) under the Securities Act; provided, however, that Company Covered Persons do not include (a) any Purchaser, or (b) any person or entity that is deemed to be an affiliated issuer of the Company solely as a result of the relationship between the Company and any Purchaser.

 

(u) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Notes, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

(v) Registration Rights. Except as disclosed in the Company’s SEC Reports, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.

 

(w) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each of its Subsidiaries (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject as and when due subject to any applicable extensions, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, whether or not shown or determined to be due on such returns, reports and declarations, and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes on any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.

 

(x) No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Notes (or any Note Warrants) by any form of general solicitation or general advertising. The Company has offered the Notes (and Note Warrants) for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(y) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor any agent or other Person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any Person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA.

 

(z) Stock Option Plans. Except as set forth in the SEC Reports, the Company does not currently have or maintain any stock option or other equity incentive plan for its directors, employees or consultants.

 

 

(aa) Regulation M Compliance. The Company has not, and no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Notes (or other securities), (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Notes, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Placement Agent in connection with the placement of the Notes (and Note Warrants).

 

(bb) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

 

(cc) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.

 

(dd) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”), and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

(ee) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.

 

3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of each Closing Date to the Company as follows (unless as of a specific date therein):

 

(a) Own Account. Such Purchaser understands that the Notes (and Note Warrants and shares underlying the Note Warrants and the Notes) are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Notes (and Note Warrants) as principal for its own account and not with a view to or for distributing or reselling such securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the securities in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the securities hereunder in the ordinary course of its business.

 

 

(b) Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(c) Purchaser Status. At the time such Purchaser was offered the Notes (or Note Warrants), it was, and as of the date hereof it is, either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.

 

(d) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Notes (and Note Warrants and the shares of Common Stock underlying the Note Warrants and Notes), and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the securities and, at the present time, is able to afford a complete loss of such investment.

 

(e) General Solicitation. Such Purchaser is not purchasing the Notes (or note Warrants or the shares of Common Stock underlying the Note Warrants or Notes) as a result of any advertisement, article, notice or other communication regarding the securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

(f) No “Bad Actor” Disqualification. Neither (A) such Purchaser nor (B) any entity that controls such Purchaser or is under the control of, or under common control with, such Person, is subject to any Disqualification Event. Such Purchaser has exercised reasonable care to determine the accuracy of the representation made by such Purchaser in this paragraph and agrees to notify the Company if such Purchaser becomes aware of any fact that makes the representation given by such Purchaser hereunder inaccurate.

 

(g) Disclosure of Information. Purchaser acknowledges that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the sale of the securities offered hereby and the business, properties, prospects and financial condition of the Company and its Subsidiaries. Purchaser acknowledges and agrees that neither the Placement Agent nor any Affiliate of the Placement Agent has provided such Purchaser with any information or advice with respect to the Notes or the Note Warrants nor is such information or advice necessary or desired. Such Purchaser further acknowledges and agrees that neither the Placement Agent nor any Affiliate of the Placement Agent has made or makes any representation as to the Company or the quality of the Notes or the Note Warrants and that the Placement Agent and any Affiliate of the Placement Agent may have acquired non-public information with respect to the Company which such Purchaser agrees need not be provided to it. In connection with the issuance of the Notes and the Note Warrants to such Purchaser, neither the Placement Agent nor any of its Affiliates has acted as a financial advisor or fiduciary to such Purchaser. Any questions raised by the Purchaser concerning the Company and its subsidiaries or the Notes have been answered to the satisfaction of Purchaser. The Purchaser’s decision to purchase the Purchaser’s securities hereunder is based solely on the information obtained during the Purchaser’s due diligence review and on the response to such questions as Purchaser has raised concerning the securities or the Company and its Subsidiaries. The Purchaser understands that the Shareholder Approval and/or New Preferred Stock Public Offering may not be obtained or consummated despite the Company’s use of its commercially reasonable efforts to achieve same.

 

 

(h) Unlawful Activities. (i) No part of the funds used by Purchaser to acquire any securities under this Agreement has been, or shall be, directly or indirectly derived from, or related to, any activity that may contravene United States federal or state or non-United States laws or regulations, including, without limitation, laws and regulations relating to anti-money laundering, terrorist financing and other illegal activities; (ii) no capital commitment, contribution or payment to the Company by Purchaser and no distribution to Purchaser shall cause the Company to be in violation of any applicable anti-money laundering laws or regulations, including, without limitation, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 and the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) regulations (the “Sanction Regulations”); and (iii) none of the funds of Purchaser have been derived from any unlawful activity. Without limiting the foregoing: (1) Purchaser is in compliance with Executive Order 13224 (September 23, 2001), the rules and regulations of OFAC and any enabling legislation or other executive orders in respect thereof; (2) at all times, (I) none of the funds or other assets of Purchaser constitutes property of, or are beneficially owned, directly or indirectly, by any Person, entity or government subject to trade restrictions under U.S. law (including, without limitation, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any executive orders or regulations promulgated thereunder) (any such Person, an “Embargoed Person”); (II) no Embargoed Person has any interest of any nature whatsoever in Investor; and (III) if applicable to Investor, Investor has implemented a corporate anti-money laundering plan that is reasonably designed to ensure compliance with applicable foreign and U.S. anti-money laundering law; and (4) none of the investors, officers, directors, managers, members or partners of Purchaser appear on any lists published by OFAC with respect to Persons that have been designated by executive order or by the Sanction Regulations as Persons with whom U.S. Persons may not transact business or must limit their interactions to types approved by OFAC or otherwise. Investor shall promptly notify the Company if any of these representations in this paragraph ceases to be true and accurate regarding Investor.

 

The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

 

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

 

4.1 Transfer Restrictions; Pledges.

 

(a) The Notes (and the Note Warrants and the shares of Common Stock underlying the Note Warrants and Notes) may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.

 

 

(b) The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Notes (or the Note Warrants or the securities issuable under the Note and Note Warrants) to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of the Transaction Agreements and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of such securities may reasonably request in connection with a pledge or transfer of the securities, including, if the securities are registered under a registration statement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.

 

4.2 Indemnification of Purchasers. Subject to the provisions of this Section 4.2, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent, that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.2 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.

 

 

4.3 Ranking. The Notes are senior debt of the Company, and subject to the terms and conditions of the Notes, the Company shall not issue any debt senior to the Notes while any Notes remain outstanding without the consent of a majority of the then outstanding principal amount of the Notes.

 

4.4 Press Release. Within one (1) Business Day after the first Closing, the Company will issue the press release in form and substance substantially as attached as Exhibit C hereto.

 

4.5 Proxy Statement and Meeting. The Company shall promptly file a preliminary proxy statement for purposes of calling a special meeting of the Company’s shareholders to seek approval (the “Shareholder Approval”) of, among other items, (a) an amendment to the Company’s certificate of incorporation to effect a reverse stock split (“Reverse Split”) of the Company’s outstanding common stock in the range of one share-for-30 shares to one share-for-70 shares, the specific split ratio to be determined within such range in the discretion of the Company’s board of directors (based on market conditions, Nasdaq requirements and advice of counsel and investment banker), while maintaining the number of authorized shares of the Company’s common stock at 200,000,000 shares, preferred stock at 20,000,0000 shares, and the shares authorized under the Company’s existing 2022 incentive plan at 8,000,000 shares and (b) to approve the transactions under this Agreement (“Nasdaq Compliance Waiver”), including any issuances or deemed issuances of Common Stock (including upon exercise of the Note Warrants or conversion of the Notes) in aggregate excess of 19.99% of the outstanding Common Stock at less than the Minimum Price (as defined in applicable Nasdaq regulations) as required to comply with Nasdaq regulations and allow exercises from time to time of the Note Warrants and conversion of the Notes into common stock, in aggregate excess of such percentage, and thereafter use its commercially reasonable efforts to respond to any SEC comments and clear same with the SEC and then promptly file a definitive proxy statement and mail same to stockholders and hold such meeting as soon as practicable.

 

4.6 Creation of New Preferred Stock. The Company shall file a certificate of designation with the Secretary of State of the State of Delaware authorizing and creating the New Preferred Stock prior to the commencement of the underwritten public offering prescribed by Section 4.8 below.

 

4.7 Underwritten Offering of New Preferred Stock; Nasdaq Listing. Promptly following consummation of the sale and issuance of the Notes and the Offering End Date, the Company will use commercially reasonable efforts to commence and consummate an underwritten initial public offering of its New Preferred Stock (“New Preferred Stock Public Offering”) and to obtain approval of listing of the New Preferred Stock on the Nasdaq Capital Market within 90 days of the Offer End Date (the 91^st day after such Offering End Date being the “New Preferred Stock Public Offering Target Date”).

 

 

4.8 Registration of New Preferred Stock; Shares Underlying Note Warrants. The Company agrees to file with the SEC a registration statement on Form S-3 or Form S-1 (or, if Form S-3 or Form S-1 is not available, on another appropriate form) covering the resale of the New Preferred Stock issuable upon automatic conversion of the Notes as provided for in the Notes and the shares of Common Stock underlying the Note Warrants (the “Registrable Securities”) as soon as practicable following the Company’s completion of the underwritten public offering of New Preferred Stock referred to in the Notes, but in no event later than thirty (30) days thereafter. The Company shall use its commercially reasonable efforts to cause the registration statement to be declared effective by the SEC as soon as practicable following the filing, but in no event later than ninety (90) days after the filing date. The Company shall also use commercially reasonable efforts to ensure that the registration statement remains effective until the earlier of (i) the date on which all Registrable Securities have been sold pursuant to the registration statement or (ii) the date on which all Registrable Securities may be sold without restriction under Rule 144 of the Securities Act. Each Purchaser shall furnish to the Company such information as shall be required to effect the registration of the Registrable Securities. The Company may exclude from the registration statement the Registrable Securities of any holder who fails to furnish such information within a reasonable time after receiving such request.

 

4.9 Use of Proceeds. The Company shall use 50% of the net proceeds received at each Closing hereunder (after payment of Placement Agent fees and professional expenses prescribed hereby) to pay down existing obligations due and owing under the leases relating to its current hotel portfolio, and shall use the remaining net proceeds for working capital.

 

4.10 Participation in Future Private Financings.

 

(a) From the date hereof until the date that is the later of (i) the date on which no Notes are outstanding and (ii) the 18-month anniversary of the Closing Date, upon any issuance by the Company or any of its Subsidiaries of (1) Common Stock or Common Stock Equivalents, (2) indebtedness or (3) a combination of units thereof, in each case for cash and not as part of any ordinary course of business operations or as part of any underwritten public offering or Exempt Issuance (a “Subsequent Private Financing”), each Purchaser shall have the right to participate in such Subsequent Private Financing in an amount up to an amount equal to the principal of the Notes purchased by such Purchaser hereunder or if the amount of the Subsequent Private Financing is less than the aggregate principal amounts of all Notes purchased hereunder by all Purchasers, such Purchaser’s pro rata portion (“Pro Rata Portion”) based on such Purchaser’s principal amount of the Notes originally purchased hereunder as compared to the principal amount of all Notes purchased hereunder (such limited amount, the “Participation Maximum”), on the same terms, conditions and price provided for in the Subsequent Private Financing. For purposes of clarity, this provision would not be triggered by any exercise or conversion of securities owned by a Purchaser (or contractual rights to acquire any securities of the Company to which such Purchaser or its Affiliates is a party).

 

(b) At least five (5) Business Days prior to the closing of the Subsequent Private Financing, the Company shall deliver to each Purchaser a written notice of its intention to effect a Subsequent Private Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it wants to review the details of such financing (such additional notice, a “Subsequent Private Financing Notice”). Upon the request of a Purchaser (which must be made within one (1) Business Day of receipt by such Purchaser of the Pre-Notice), and only upon a request by such Purchaser, the Company shall promptly, but no later than one (1) Business Day after such request, deliver a Subsequent Private Financing Notice to such Purchaser. The Subsequent Private Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Private Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Private Financing is proposed to be effected (subject to confidentiality obligations of the Company) and shall include a term sheet or similar document relating thereto as an attachment.

 

 

(c) Any Purchaser desiring to participate in such Subsequent Private Financing must provide written notice to the Company by not later than 5:30 p.m. (New York City time) on the third (3rd) Business Day after its receipt of the Pre-Notice that such Purchaser is willing to participate in the Subsequent Private Financing, the amount of such Purchaser’s participation, and representing and warranting that such Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Private Financing Notice. If the Company receives no such notice from a Purchaser as of such third (3rd) Business Day, such Purchaser shall be deemed to have notified the Company that it does not elect to participate.

 

(d) If by 5:30 p.m. (New York City time) on the third (3rd) Business Day after all of the Purchasers have received the Pre-Notice, notifications by the Purchasers or their failure to timely deliver notice) of their willingness to participate in the Subsequent Private Financing (or to cause their designees to participate) is, in the aggregate, less than the total amount of the Subsequent Private Financing, then the Company may consummate the remaining portion of such Subsequent Private Financing on the terms and with the other investors proposing the Subsequent Private Financing. In the event a Purchaser notifies the Company that it will participate in the Subsequent Private Financing and fails to fully fund its portion of the financing, such Purchaser shall thereafter lose the rights prescribed by this Section 4.10.

 

(e) If by 5:30 p.m. (New York City time) on the third (3rd) Business Day after all of the Purchasers have received the Pre-Notices, the Company receives responses to a Subsequent Private Financing Notice from Purchasers seeking to purchase more than the aggregate amount of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined above) of the Participation Maximum.

 

(f) The Company must provide the Purchaser with a second Subsequent Private Financing Notice, and the Purchasers will again have the right of participation set forth above in this Section 4.10, if the Subsequent Private Financing subject to the initial Subsequent Private Financing Notice is not consummated for any reason on the material terms set forth in such Subsequent Private Financing Notice within thirty (30) Business Days after the date of the initial Subsequent Private Financing Notice.

 

(g) The Company and each Purchaser agree that if any Purchaser elects to participate in the Subsequent Private Financing, the transaction documents related to the Subsequent Private Financing shall not include any term or provision whereby such Purchaser shall be required to agree to any restrictions on trading as to any of the Securities purchased under the terms of this Agreement, the Note or Note Warrants, or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, this Agreement (or such other agreements and instruments), without the prior written consent of such Purchaser.

 

(h) Notwithstanding anything to the contrary in this Section 4.10 and unless otherwise agreed to by such Purchaser, the Company shall either confirm in writing to such Purchaser that the transaction with respect to the Subsequent Private Financing has been abandoned or shall publicly disclose its intention to issue the securities in the Subsequent Private Financing, in either case in such a manner such that such Purchaser will not be in possession of any material, non-public information, by the tenth (10th) Business Day following delivery of the Subsequent Private Financing Notice. If by such tenth (10th) Business Day, no public disclosure regarding a transaction with respect to the Subsequent Private Financing has been made, and no notice regarding the abandonment of such transaction has been received by such Purchaser, such transaction shall be deemed to have been abandoned and such Purchaser shall not be deemed to be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries.

 

 

ARTICLE V.
MISCELLANEOUS

 

5.1 Fees and Expenses. Each party shall pay the fees and expenses of its advisers, counsel, accountants, and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. Counsel to the Company (Graubard Miller) shall be paid $160,000 at the initial Closing of the transactions prescribed hereby from the proceeds of the transaction and as part of the flow of funds of such initial Closing, and shall be paid an additional $25,000 in connection with each additional Closing form the proceeds thereof and as part of the flow of funds of such Closing, and shall be paid $75,000 at the time of filing of the initial registration statement relating to the public offering of the New Preferred Stock to be applied against amounts invoiced for services rendered to the Company, with any amounts not satisfied by such payments thereafter paid in the ordinary course by the Company as invoiced.

 

5.2 Entire Agreement. The Transaction Documents, together with the exhibits and schedules hereto and thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.3 Notices. Any and all notices or other communications or deliveries to be provided by a party hereunder shall be in writing and delivered personally, by email (with a copy by a nationally recognized overnight courier, signature required), or sent by a nationally recognized overnight courier service, signature required, addressed to the receiving party at the email or physical address set forth on the Signature Page hereto. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via email at the email address set forth on the signature pages to the Exchange Agreement prior to 12:00 p.m. (New York City time) on any date, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via email at the email address set forth on the signature pages to the Exchange Agreement on a day that is not a Business Day or later than 12:00 p.m. (New York City time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, signature required or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

5.4 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and Purchasers which purchased at least 51% in interest of the Notes based on the initial Subscription Amounts hereunder or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought, provided that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in accordance with this Section 5.4 shall be binding upon each Purchaser and holder of Notes and the Company.

 

 

5.5 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Notes, provided that such transferee agrees in writing to be bound, with respect to the transferred Notes, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

5.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

5.8 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in New Castle County, State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in New Castle County, State of Delaware 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 any such court, that such suit, action or proceeding is improper or is an 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 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. If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.2, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

5.9 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Notes for a period of twenty-four (24) months thereafter.

 

5.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

 

5.11 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.12 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.13 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. For reasons of administrative convenience only, each Purchaser and its respective counsel have chosen to communicate with the Company through the Placement Agent. The Placement Agent’s legal counsel does not represent any of the Purchasers and only represents the Placement Agent. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers.

 

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

 

5.15 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

 

5.16 Issuance of Note Warrants. At each Closing, each Purchaser therein shall be issued by the Company cash-exercise common stock purchase warrants in the form of Exhibit D hereto (the “Note Warrants”) entitling such Purchaser to purchase that number of shares of Common Stock determined by dividing the principal amount of the Note purchased by the Purchaser at the Closing by 110% of the average VWAP for the three consecutive trading days immediately following the date the Company files its Quarterly Report on Form 10-Q for the six months ended June 30, 2024, not to exceed $0.15. The Note Warrants shall contain customary Nasdaq issuance blockers pending Shareholder Approval being obtained and shall be redeemable by the Company for $0.01, as prescribed by the Note Warrants.

 

5.17 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

 

(Signature Pages Follow)

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

	LUXURBAN HOTELS INC.
	By:
		Michael James
		Chief Financial Officer

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

 

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

 

 

Purchaser Name:
Signature:
Title:
Purchaser Address:
Email:
Purchaser EIN:
Subscription Amount:	$

 

 

COMPANY DISCLOSURE SCHEDULES

 

Schedule 3.1(h)

 

The Company’s independent accounting firm has issued a going concern opinion in the Company’s most recent Annual Report on Form 10-K. As noted in the Company’s recent prospectus supplement, dated July 25, 2024, and in its SEC Reports, the Company has substantial liabilities and current obligations for which the Company’s current capital resources are insufficient. The Company actively manages available cash and negotiates payment schedules with vendors and others and has recently undertaken and will continue to undertake capital raising initiatives, including underwritten and private placements of equity and debt, of which the debt issuance and sale prescribed by this Agreement is a part. Subject to the provisions and restrictions of this Agreement, the Company will seek to consummate additional offerings hereafter which may serve to dilute existing stockholders’ equity ownership percentage, increase the indebtedness of the Company, and encumber the Company’s assets. There can be no assurance the Company will be able to raise all required capital on commercially reasonable terms or at all. An investment in the Company should be viewed in all respects as an investment in a distressed situation. The Company’s existing capital position difficulties have been exacerbated by recent shutdown of services and payments by its credit card processors and third-party reservation platforms.

 

The Company has elected to terminate various agreements and relationships during the quarter ending June 30, 2024, as an integral part of the Company’s cost cutting plan. This has included the termination of numerous employees, hotel leases, and the Company’s franchise relationship with Wyndham Hotels and Resorts. This has resulted in a lawsuit brought by Wyndham against the Company. Although the Company believes it has viable counterclaims against Wyndham and certain landlords respecting terminated hotel leases, and has made reserves on its balance sheet for potential liabilities arising from active and potential claims, there can be no assurance these reserves will prove sufficient or that the Company will have the financial resources to satisfy any judgement rendered against it, that the Company will be able to negotiate settlements on any claims on economically viable terms, or successfully prosecute its own claims and counterclaims. As previously disclosed in the SEC Reports, the Company is a party to other litigations. The Company is in technical or declared default under the majority of its hotel leases and other material agreements. Although the Company has made reserves on its balance sheet for litigation actions, there can be no assurance that the Company’s defense and counterclaims in any such litigations will be successful or that such litigations will not result in material liabilities to the Company or that the Company will have the required resources to satisfy any judgement or settlement. The Company was recently subjected to a garnishment as a result of unpaid liabilities arising from an adverse judgement entered in September 2023. The Company is currently a defendant in numerous other lawsuits that could result in liabilities in the near term. The Company has also failed to pay certain sales and use taxes and while it is endeavoring to rectify this delinquency, it has not been able to do fully and may not have the capital resources to timely rectify same.

 

The Company’s capital position has resulted from time to time, including recently, in the cessation of certain services that are material to the Company’s operations, including reservation platform services and credit card processing and advance services. The Company will be required to manage these relationships and obtain and utilize capital to continue to access these required services.

 

The Company has determined that it will need to restate its financial statements as previously filed with its Quarterly Report on Form 10-Q for the three months ended March 31, 2024 (“Q1-24 10-Q”) to correct a material overstatement of revenues in the amount of approximately $13.8 million. The Company will file a Current Report on Form 8-K during the week of August 12, 2024 and file an amendment to the Q1-24 10-Q. Based on SEC regulations, the Q1-24 10-Q shall be deemed retroactively to have been filed late and the Company will have its ability to utilize Form S-3 suspended as prescribed by SEC regulations. The above-described restatement could trigger legal actions by stockholders and regulatory actions by the SEC or action by Nasdaq. There can be no certainty as to whether such actions will arise or the scope or breadth of such actions or the potential liabilities that would result for the Company.

 

 

Schedule 3(r)

 

The Company is obligated to issue shares of common stock to certain holders upon the issuance of common stock under certain prescribed prices.

 

 

Exhibit B

 

Form of Opinion

 

We have acted as counsel to LuxUrban Hotels Inc., a Delaware corporation (the “Company”), in connection with the issuance and sale by the Company of the Notes and Note Warrants as described in the Securities Purchase Agreement of even date herewith (“SPA”). This opinion is being delivered to the Placement Agent pursuant to Section 2.2 (a)(iv) of the SPA. Unless otherwise defined herein, each capitalized term used herein has the meaning given such term in the SPA.

 

In reaching the opinions set forth herein, we have reviewed copies of the SPA (and the corresponding Disclosure Schedule), the form of Note, the form of Warrant, the Security Agreement, and the Placement Agent Agreement (collectively, the “Debt Placement Documents”) and such other agreements, certificates of public officials and officers of the Company, records, documents, and matters of law that we have deemed relevant. We have also examined, among other documents, copies of the Company’s certificate of incorporation and bylaws, as amended, and copies of resolutions adopted by the Company’s Board of Directors relating to, among other things, the authorization and sale of the Notes and Note Warrants and the execution of the SPA, the Security Agreement, and the Placement Agent Agreement.

 

As to questions of fact material to such opinions, we have, where relevant facts were not independently verified or established, relied upon the representations and warranties made by the Company in the Underwriting Agreement and certificates of officers of the Company, including the officers certificate attached hereto as Exhibit A. In reaching the opinions set forth herein, we have, with your consent, relied only upon our examination of the foregoing documents and certificates and we have made no independent verification of the factual matters set forth in such documents or certificates.

 

With respect to the opinion set forth in Paragraph 1 relating to valid existence and due qualification of the Company, we have relied solely on certificates of good standing from the Secretary of State of Delaware.

 

Based on the foregoing, and subject to the assumptions and qualifications set forth herein, we are of the opinion that:

 

1. The Company is a corporation validly existing under the laws of Delaware, with corporate power and authority to own, lease and operate its properties and conduct its business as described in the most recent prospectus supplement, dated July 26, 2024 (“Prospectus Supplement”), filed with respect to its registration statement on Form S-3 (No. 333-788883)(as amended by the Prospectus Supplement, the “Registration Statement”).

 

2. The authorized capital stock of the Company on the date hereof is comprised of 220,000,000 shares, of which 200,000,000 shares are common stock and 20,000,000 of which are preferred stock, of which 322,000 are designated as Series A preferred stock. The Board of Directors of the Company has the authority to create one or more additional series of preferred stock that is pari passu or junior to the Series A preferred stock.

 

 

3. Each of the Debt Placement Documents has been duly and validly authorized by all requisite corporate action, and when delivered shall be executed and delivered by the Company. Each of the Debt Placement Documents constitutes the legally valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms.

 

4. The execution, delivery and performance of each of the Debt Placement Documents, the compliance of the Company with the terms thereof, and the issuance and sale by the Company of the Notes and Note Warrants, does not (a) violate, constitute a breach of any of the terms or provisions of, or default or event (or constitute any event that with notice, lapse of time, or both could constitute a breach of any of the terms or provisions of, or default or event) that could result in or permit the termination or modification of, or lead to automatic acceleration of any indebtedness, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries under or pursuant to, any Contract filed as an exhibit to the Registration Statement or any report filed by the Company with the Securities and Exchange Commission, (b) assuming Shareholder Approval and effectiveness of the Reverse Split, result in the violation of the provisions of the Certificate of Incorporation or Bylaws or similar organizational documents of the Company or any of its Subsidiaries, or (c) violate any order, writ, injunction or decree specifically naming the Company or any subsidiary known to us, provided, however, that we do not express any opinion as to any antifraud laws or securities laws.

 

5. The Company is not, and after giving effect to the offering and sale of the Notes and Warrants will not be, an “investment company,” as such term is defined in the Investment Company Act of 1940.

 

6. To our knowledge, except as described in the Registration Statement, set forth in the Company’s other reports filed with the Securities and Exchange Commission, or described in the schedules included as part of the Debt Placement Documents (including the Disclosure Schedules), there are no legal, governmental or regulatory investigations, actions suits or proceedings pending to which the Company or any of its officers, directors or employees (in connection with the discharge of their duties as officers, directors and employees), of the Company, is or may be a party or to which any property of the Company is or may be the subject which, individually or in the aggregate, if determined adversely to the Company, could reasonably be expected to have a Material Adverse Effect; and to our knowledge, no such investigations, actions, suits or proceedings are threatened or contemplated by any governmental or regulatory authority or threatened by others.

 

The foregoing opinions are subject to the effect of rules of law relating to the following: (i) applicable bankruptcy, reorganization, insolvency, moratorium and/or similar laws relating to or affecting the rights of creditors generally, including, without limitation, fraudulent conveyance provisions under applicable laws, (ii) the enforceability of any indemnification or contribution provisions as they may be limited under federal or state laws, (iii) equitable, constitutional and public policy limitations (regardless of whether considered in a proceeding or at equity or at law), (iv) the enforceability of provisions of a contract that purport to waive, or require waiver of, the obligations of good faith, fair dealing, diligence and reasonableness, (v) the availability of a remedy under certain circumstances where another remedy has been elected, (vi) limitation on the time after which a remedy may not be enforced, (vii) the enforceability of provisions releasing, exculpating or exempting a party from, or requiring indemnification of a party for, liability for its own action or inaction, to the extent the action or inaction involves gross negligence, recklessness, willful misconduct, unlawful conduct, violation of law or public policy or litigation against another party determined adversely to such party, (viii) provisions that, if less than all of the contract is unenforceable, limit the enforceability of the remainder of the contract to circumstances in which the unenforceable portion is not an essential part of the agreed exchange, and (ix) provisions that govern and afford judicial discretion regarding the determination of damages and entitlement to attorneys’ fees and other costs, and (x) provisions that permit a party that has materially failed to render or offer performance required by the contract to cure that failure unless (a) permitting a cure would unreasonably hinder the aggrieved party from making substitute arrangements for performance or (b) it was important in the circumstances to the aggrieved party that performance occur by the date stated in the contract.

 

 

Notwithstanding our opinions expressed herein, no opinion is expressed with respect to the following kinds of provisions in any agreements or with respect to the effect of: (i) choice of law provisions, (ii) bankruptcy laws or creditor rights laws or contract provisions; (iii) provisions mandating contribution towards judgments or settlements among various parties, (iv) waivers of (a) legal or equitable defenses, (b) rights to damages, (c) rights to counter claim or set off, (d) statutes of limitations, (e) rights to notice, (f) the benefits of statutory, regulatory or constitutional rights, unless and to the extent the statute, regulation or constitution explicitly allows waiver, and (g) other benefits to the extent they cannot be waived under applicable law, (v) provisions providing for forfeitures or the recovery of amounts deemed to constitute penalties or for liquidated damages, (vi) provisions to submit to the jurisdiction of any process requirements which would otherwise be applicable, and provisions otherwise purporting to affect the jurisdiction and venue of courts, or (vii) provisions that attempt to change or waive rules of evidence or fix the method or quantum of proof to be applied in litigation or similar proceedings.

 

No opinion is expressed herein other than as to the law of the State of New York, the corporate law of the State of Delaware, and the federal law of the United States of America. Specifically, we express no opinion with respect to (i) the law of any other state of the United States, (ii) the law of any foreign jurisdiction or (iii) any law relating to the environment, antitrust, patents and trademarks and intellectual property generally, and telecommunications.

 

The term “knowledge” as used in this opinion shall mean the actual knowledge of attorneys within our firm based on work performed on substantive aspects of this transaction or other matters which have come to our attention in the course of our representation of the Company.

 

This opinion is addressed solely to the addressee, and is being delivered only to the addressee. This opinion is solely for the benefit of the addressee and may not be relied upon in any manner by any other person. This opinion is furnished in accordance with the Guidelines for the Preparation of Closing Opinions promulgated by the Section of Business Law of the American Bar Association (February 2002) and is to be interpreted in accordance therewith. This opinion is limited to the matters stated herein, and no opinion is implied or may be inferred beyond the matters expressly stated. This opinion is rendered as of the date first written above, and we disclaim any obligation to advise you of facts, circumstances, events, or developments which hereafter may be brought to our attention and which may alter, affect, or modify the opinion expressed herein.

 

	Very truly yours,

 

 

OFFICER’S CERTIFICATE TO GRAUBARD MILLER

 

The undersigned Chief Financial Officer of LuxUrban Hotels Inc, a Delaware corporation (the “Company), does hereby certify that:

 

1. This Certificate is made with the knowledge that Graubard Miller, counsel to the Company, will rely on it in rendering an opinion.

 

2. All of the representations and warranties made by the Company in the SPA, Security Agreement and/or the Placement Agent Agreement were true and correct on and as of the date of the SPA and are true and correct on and as of the date hereof.

 

3. Each of the officers of the Company who executed the SPA, and each other Debt Placement Documents, or any document or instrument executed and delivered on behalf of the Company pursuant thereto was, at the time of such execution, and is on the date hereof, a duly elected, qualified acting officer of the Company.

 

4. The Company has reviewed all active litigation and regulatory proceedings involving the Company or its assets or operations and believes that its Annual Report on Form 10-K for the year ended December 31, 2023, the Registration Statement and the schedules to the Debt Placement Documents describe such litigations and regulatory proceedings, specifically identifies any such action or proceedings that could be materially adverse to the Company if adjudicated or settled against the Company and has undertaken reasonable steps to quantify aggregate exposure from all such actions and proceedings and has adequately reserved in is judgment liabilities with respect to same on its most recent balance sheet as filed with the SEC.

 

	Michael James
	Chief Financial Officer

 

 

Exhibit 10.2

 

GUARANTY AND SECURITY AGREEMENT

 

This GUARANTY AND SECURITY AGREEMENT (this “Security Agreement”) is made as of August ____, 2024, by and among LuxUrban Hotels Inc., a Delaware corporation (the “Company”), the subsidiaries of the Company named on the signature pages hereto (the “Guarantors” and individually a “Guarantor”), and ________, as the collateral agent (the “Collateral Agent”) on behalf of itself and the other purchasers of the Notes (collectively, the “Purchasers”) under the securities purchase agreement of even date herewith by and the Company and the Purchasers(the “SPA”). The Company and the Guarantors are collectively referred to in this Security Agreement as the “Grantors” and the Grantors and the Collateral Agent are collectively referred to in this Security Agreement as the “Parties.” Capitalized terms not defined herein shall have the meanings ascribed to them in the SPA.

 

WHEREAS, the Purchasers have purchased Notes, and additional purchasers may, through the Offering End Date, purchase additional Notes pursuant to the SPA (the “Note Placement”);

 

WHEREAS, as a condition precedent to the Note Placement and as security for repayment of the Notes upon the terms set forth therein and the guarantees of the Guarantors hereunder, the Guarantors agree to guaranty all obligations of the Company under the Notes, and the Grantors agree to execute and deliver this Security Agreement to the Collateral Agent (on behalf of all Purchasers) and hereby to pledge and grant to the Purchasers a lien on and security interest in all of Grantors’ rights and interest the Pledged Collateral (as defined below), whether now owned or hereafter acquired.

 

NOW, THEREFORE, in consideration of the premises and in order to induce the Collateral Agent and other purchasers accept the Notes, the Parties hereby agree as follows:

 

SECTION 1. Pledge. Each Grantor hereby pledges and delivers to the Collateral Agent (for the benefit of all Purchasers), and hereby grants to the Purchasers, a lien on and security interest in all of each Grantor’s right, title, and interest in and with respect to each of the following, whether now owned or hereafter acquired (collectively, the “Pledged Collateral”):

 

(a) the properties, assets, and rights of the Grantor described in Attachment 1 hereto, wherever located, whether such Grantor now has or hereafter acquires an ownership or other interest or power to transfer; and

 

(b) to the extent not covered by subsection (a) above, all general intangibles (including causes of action) relating to, and all proceeds of, any or all of the foregoing Pledged Collateral;

 

provided, however, that if a Document or Instrument (each as defined in Attachment 1 hereto) or other agreement or lease of a Grantor may not be pledged by such Grantor hereunder without the consent or approval of a counterparty thereto, such Document, Instrument, agreement or lease shall not be deemed pledged to the Purchasers, and the Purchasers shall not be deemed to have a lien on or a security interest therein, until such consent or approval of such counterparty is obtained, and the Grantors shall use commercially reasonable best efforts to obtain such consent or approval as soon as practicable following the first date on which such Document, Instrument, agreement or lease would otherwise be pledged to the Purchasers as Pledged Collateral hereunder.

 

For purposes of this Agreement, “proceeds” includes whatever is receivable or received when Pledged Collateral or proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes proceeds of any indemnity or guaranty payable to Grantor or the Company from time to time with respect to any of the Pledged Collateral.

 

 

SECTION 2. Security for Obligations. This Security Agreement secures the prompt and complete (a) payment of all obligations of the Grantors to the Purchasers now or hereafter existing under this Security Agreement or the Notes; and (b) performance and observance by the Grantors of all of their respective covenants and conditions contained in the Security Agreement or the Notes. All such obligations, covenants and conditions described in the immediately preceding clauses (a) and (b), whether for principal, interest, fees, expenses, or otherwise, are hereinafter collectively referred to as the “Obligations.” Upon repayment in full of the principal and interest due and owing under the Notes (or conversion thereof in its entirety as provided under Article III or Article IV of the Notes), the Company shall provide the Collateral Agent with such UCC termination statements and other documentation necessary to terminate (the “UCC Terminations”) any UCC Financing Statements filed with respect to any and all Pledged Collateral and Collateral Agent (on behalf of all Purchasers) shall promptly execute and return same to the Company (and in no event less than five business days following receipt of such UCC Terminations); provided, that if such UCC Terminations are not executed by the Collateral Agent and delivered to the Company within such five-day period, the Company shall be entitled to prepare, execute and file same.

 

SECTION 3. UCC Financing Statements on Pledged Collateral. Grantors agree that at any time and from time to time each Grantor will promptly execute and deliver all further instruments, UCC financing statements, and documents, and take all further action that may be reasonably desirable, or that the Collateral Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce the Purchasers’ rights and remedies hereunder with respect to any of the Pledged Collateral. Each Grantor shall deliver to Collateral Agent within three (3) Business Days of the date of execution of this Security Agreement a form of UCC financing statement(s) with respect to the Pledged Collateral, to be filed and recorded by the Collateral Agent at its own discretion. Collateral Agent may, at any time and from time to time, upon the occurrence and during the continuance of an Event of Default, subject to grace and cure periods under the Notes and a cure period hereunder of fourteen (14) days for the Company or any Guarantor to correct any Default, in order to facilitate the Collateral Agent’s exercise of its rights and remedies hereunder, in its discretion and without notice to any Grantor, to transfer to or to register in the name of the Collateral Agent or any of its nominees, part or all of the Pledged Collateral.

 

SECTION 4. Further Assurances; Information; Legending the Certificates. Each Grantor shall cooperate in the completion of, and execute and deliver, any and all notices, forms, schedules or other documents which may be filed by the Collateral Agent on its own behalf or on behalf of Grantor, including any and all required notices or statements, and do or cause to be done all such other acts and things, necessary or, in the opinion of the Collateral Agent, advisable, for the disposition of any part of the Pledged Collateral pursuant to applicable law.

 

SECTION 5. Representations and Warranties. Each Grantor represents and warrants to the Collateral Agent that:

 

(a) Except as may have been granted to Purchasers or affiliates thereof previously, to the knowledge of the Company, no currently effective UCC financing statement covering any of the Pledged Collateral is on file in any public office other than financing statements, if any, related to Permitted Liens (for purposes of this Agreement, “Permitted Liens” means (A) statutory liens of landlords and liens of carriers, warehousemen, bailees, mechanics, materialmen and other like liens imposed by law, created in the ordinary course of business and securing amounts not yet due (or which are being contested in good faith, by appropriate proceedings or other appropriate actions which are sufficient to prevent imminent foreclosure of such liens), and with respect to which adequate reserves or other appropriate provisions are being maintained by a Grantor, (B) deposits made (and the liens thereon) in the ordinary course of business of a Grantor (including, without limitation, security deposits for leases, indemnity bonds, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, contracts (other than for the repayment or guarantee of borrowed money or purchase money obligations), statutory obligations and other similar obligations arising as a result of progress payments under government contracts, (C) liens for taxes not yet due and payable or which are being contested in good faith and with respect to which adequate reserves are being maintained by a Grantor, and (D) purchase money liens relating to the acquisition of equipment, machinery or other goods of a Grantor;

 

 

(b) Such Grantor is and will remain the legal and beneficial owner of the Pledged Collateral, free of all liens and claims whatsoever, other than Permitted Liens, and with full power and authority to execute this Security Agreement and perform its obligations hereunder, and to subject the Pledged Collateral to the security interest hereunder;

 

(c) All information with respect to the Pledged Collateral set forth in any schedule, certificate or other writing at any time hereafter furnished by Grantors to the Collateral Agent, and all other written information hereafter furnished by Grantors to the Collateral Agent, is and will be true and correct in all material respects as of the date furnished;

 

(d) The execution and delivery of this Security Agreement and the performance by each Grantor of its obligations hereunder do not and will not contravene or conflict with any provision of presently effective law or of any agreement binding upon such Grantor, and this Security Agreement is a legal, valid and binding obligation of each Grantor, enforceable in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency or similar laws and by general principles of equity; and

 

(e) For the purposes of notices under this Agreement, the Company and each of the Grantors shall accept notice at the address for notices set forth with the Company’s signature hereto.

 

SECTION 6. Covenants. During the term of this Security Agreement, each Grantor covenants and agrees with the Collateral Agent as follows:

 

(a) Such Grantor shall give the Collateral Agent written notice of any change to the address referenced in Section 5(e);

 

(b) Such Grantor shall duly fulfill in all material respects all obligations on its part to be fulfilled under or in connection with the Pledged Collateral and shall do nothing to impair in any material respect the rights of the Collateral Agent therein;

 

(c) Following the occurrence and during the continuance of an Event of Default, any proceeds of Pledged Collateral that is not subject to a prior lien, when first received by or on behalf of such Grantor, if so requested by the Collateral Agent, shall be deposited by or on behalf of Grantor in the form so received in such account as the Collateral Agent shall specify, and until so deposited shall be held in trust for and as the Collateral Agent’s property and shall not be commingled with such Grantor’s or any other Person’s other funds or properties;

 

(d) Such Grantor shall (i) comply in all material respects with all applicable laws with respect to the Pledged Collateral or any part thereof, (ii) pay promptly when due all taxes, assessments and governmental charges or levies imposed upon the Pledged Collateral or in respect of its income or profits therefrom and all claims of any kind which, if unpaid, might by law become a lien upon the Pledged Collateral or in respect of its income or profits therefrom, except that such Grantor shall not be required to pay or discharge any such tax, assessment, charge, or claim which is being contested in good faith and by proper proceedings, and (iii) advise the Collateral Agent promptly, in reasonable detail, of any lien or claim made or asserted against any of the Pledged Collateral other than Permitted Liens;

 

 

(e) If the validity or priority of this Security Agreement or of any right, title, security interest, or other interest created or evidenced hereby shall be attacked, endangered, or questioned or if any legal proceedings are instituted against such Grantor with respect thereto, such Grantor will give prompt written notice thereof to the Collateral Agent and will diligently endeavor to cure any defect that may be developed or claimed, and will take all necessary and proper steps for the defense of such legal proceedings, and the Collateral Agent (whether or not named as a party to legal proceedings with respect thereto) is hereby authorized and empowered to take such additional steps as in its judgment and discretion may be necessary or proper for the defense of any such legal proceedings or the protection of the validity or priority of this Security Agreement and the right, title, security interest, and other interests created or evidenced hereby, and all expenses so incurred of every kind and character shall be a demand obligation owing by such Grantor, and the Person incurring such expenses shall be subrogated to all rights of the Person receiving such payment;

 

(f) Such Grantor will, on request of the Collateral Agent, (i) promptly correct any defect, error or omission which may be discovered in the contents of this Security Agreement or in any other instrument executed in connection herewith or in the execution or acknowledgment thereof; (ii) execute, acknowledge, deliver and record or file such further instruments (including further security agreements, financing statements and continuation statements) and do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Security Agreement and such other instruments and to subject to the security interests hereof and thereof any property intended by the terms hereof and thereof to be covered hereby and thereby, including any renewals, additions, substitutions, replacements or appurtenances to the Pledged Collateral; and (iii) execute, acknowledge, deliver, procure and record or file any document or instrument (including any financing statement) deemed advisable by the Collateral Agent to protect the security interest hereunder against the rights or interests of third persons;

 

(g) Such Grantor shall account fully and faithfully for and, if the Collateral Agent so elects, shall promptly pay or turn over to the Collateral Agent the proceeds in whatever form received from disposition in any manner of any of the Pledged Collateral. Such Grantor shall at all times keep the Pledged Collateral and its proceeds separate and distinct from other property of such Grantor and shall keep accurate and complete records of the Pledged Collateral and its proceeds;

 

(h) From time to time, upon demand of the Collateral Agent, such Grantor will keep and stamp or otherwise mark any and all instruments, documents and chattel paper and its individual books and records relating to any of the Pledged Collateral in such a manner as the Collateral Agent may reasonably require; and

 

(i) Such Grantor shall furnish the Collateral Agent all such information as the Collateral Agent may reasonably request with respect to the Pledged Collateral.

 

 

SECTION 7. Voting Rights; Dividends; Etc.

 

(a) So long as no Event of Default shall have occurred and be continuing:

 

(i) Each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Security Agreement or any other Transaction Document; provided, however, that each Grantor shall give the Collateral Agent at least five (5) days’ written notice of the manner in which he intends to exercise, or the reasons for refraining from exercising, any voting or other consensual rights pertaining to the Pledged Collateral or any part thereof which may have a material adverse effect on the value of the Pledged Collateral or any part thereof.

 

(ii) Any and all of the following shall be delivered in the ordinary course and pursuant to the Company’s Operating Agreement:

 

(A) dividends or interest paid or payable other than in cash in respect of, and instruments and other property received, receivable, or otherwise distributed in respect of, or in exchange for, any Pledged Collateral; and

 

(B) dividends and other distributions hereafter paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus.

 

(iii) Any cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Pledged Collateral, shall be delivered to Collateral Agent with the exception of cash distributions received to satisfy Grantor’s tax obligations due to Company profits and to fulfill Grantor’s covenant of Section 6(d) hereof to hold as, Pledged Collateral and shall, if received by Grantor, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of Grantor and be forthwith delivered to the Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsements).

 

(b) Upon the occurrence and during the continuance of an Event of Default:

 

(i) All rights of each Grantor to exercise the voting and other consensual rights which he would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to exercise such voting and other consensual rights.

 

(ii) Each Grantor shall execute and deliver (or cause to be executed and delivered to the Collateral Agent) all such proxies and other instruments as the Collateral Agent may reasonably request for the purpose of enabling the Collateral Agent to exercise the voting and other rights which it is entitled to exercise pursuant to Section 7(b)(i) and to receive the dividends or interest payments which it is entitled to receive and retain pursuant to this Section 7.

 

(iii) Dividends or any other cash distributions received by any Grantor in respect of the Pledged Collateral with the exception of cash distributions received from the Company to satisfy Grantor’s tax obligations due to Company profits and to fulfill Grantor’s covenant of Section 6(d) hereof prior to payment in full of all amounts due and owing under or in connection with the Obligations (including principal, premium, if any, interest, fees and expenses on or in connection with the Obligations) shall be received and held in trust for the Collateral Agent, and will be promptly paid over to the Collateral Agent in the form received for application to the payment of such obligations until all such Obligations have been paid in full in such manner and order and at such time as the Collateral Agent shall select.

 

 

SECTION 8. No Transfers and Other Liens. Each Grantor shall not sell, exchange or otherwise dispose of, or grant any option, warrant, or other right with respect to or any interest in, any of the Pledged Collateral or create or permit to exist any lien upon or with respect to any of the Pledged Collateral (other than (A) the lien created hereby, (B) Permitted Liens, (C) the transfer of goods, inventory and Collateral in the ordinary course of a Grantor’s business, or termination of leases as determined in good faith by the Company and (D) transfers to the Company or other subsidiaries of the Company or a Grantor which have pledged their assets as collateral to secure payment of the Secured Obligations).

 

SECTION 9. The Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints the Collateral Agent to be Grantor’s attorney-in-fact, with full authority in the place and stead of Grantor and in the name of Grantor, from time to time in the Collateral Agent’s discretion, to take any action and to execute any instrument which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Security Agreement, including:

 

(a) to ask, demand, collect, sue for, recover, compound, receive, and give acquittance and receipts for moneys due and to become due under or in respect of any of the Pledged Collateral;

 

(b) to receive, endorse and collect any drafts or other instruments, documents, and chattel paper in connection with Section 9(a); and

 

(c) to file any claims or take any action or institute any proceedings which the Collateral Agent may deem necessary or desirable for the collection of any of the Pledged Collateral or otherwise to enforce the rights of the Collateral Agent with respect to any of the Pledged Collateral.

 

SECTION 10. The Collateral Agent May Perform. If any Grantor fails to perform any covenant or agreement herein, the Collateral Agent may itself perform, or cause performance of, such covenant or agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by Grantor.

 

SECTION 11. Reasonable Care. The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property, it being understood that the Collateral Agent shall not have any responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders, or other matters relative to any Pledged Collateral, whether or not the Collateral Agent has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against any Persons with respect to any Pledged Collateral.

 

 

SECTION 12. Remedies upon an Event of Default; Recourse Nature of Grantor’s Obligations. If any Event of Default shall have occurred:

 

(a) The Collateral Agent may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a Collateral Agent on default under the UCC, or under the laws of any other applicable jurisdiction, at that time, and the Collateral Agent may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker’s board or at any of the Collateral Agent’s offices or elsewhere, for cash, on credit, or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ notice to Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Pledged Collateral, regardless of whether notice of sale has been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Collateral Agent is authorized to conduct any private sale of the Pledged Collateral or any part thereof in a manner that will not require the Pledged Collateral or any part thereof to be registered under the Securities Act or any other applicable securities laws. In this regard, each Grantor acknowledges and agrees that the Collateral Agent may, in its discretion, approach a restricted number of potential purchasers and that a sale under those circumstances may yield a lower price for the Pledged Collateral or any part thereof then would otherwise be obtainable if the sale of the Pledged Collateral or any part thereof were registered under the Securities Act and applicable state securities laws. Each Grantor agrees that (i) if the Collateral Agent shall so sell the Pledged Collateral or any part thereof at such a private sale or sales, the Collateral Agent shall have the right to rely upon the advice or opinion of any federally registered securities broker or dealer as to the best price reasonably obtainable upon such a private sale and (ii) such reliance shall be conclusive evidence that the Collateral Agent handled such matter in a commercially reasonable manner.

 

(b) In addition to the rights of the Collateral Agent under Section 7, any cash held by the Collateral Agent as Pledged Collateral and all cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral may, in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral for, and then or at any time thereafter applied in whole or in part by the Collateral Agent against, the Obligations in such order as the Collateral Agent shall select. Any surplus of such cash or cash proceeds and interest accrued thereon, if any, held by the Collateral Agent and remaining after payment in full of all the Obligations shall be paid over to Grantors, or to whomsoever may be lawfully entitled to receive such surplus, within a reasonable period of time; provided, that the Collateral Agent shall have no obligation to invest or otherwise pay interest on any amounts held by it in connection with or pursuant to this Security Agreement.

 

(c) Without limiting in any manner any of any Grantor’s obligations or any of the Collateral Agent’s rights under any of the other terms and provisions of this Security Agreement or under any of the terms of the Notes, each Grantor’s liability, and the Collateral Agent’s recourse to any assets of Grantor other than the Pledged Collateral, upon the occurrence of any Event of Default shall be per the Guaranty between the Collateral Agent and Grantors set forth herein.

 

SECTION 13. Security Interest Absolute. All rights of the Collateral Agent hereunder and all obligations of Grantors hereunder, and the security interest created hereunder shall, to the extent permitted by applicable law, be absolute and unconditional, irrespective of:

 

(a) any lack of validity or enforceability of any of the Transaction Documents;

 

(b) any change in the time, manner, or place of payment of, or in any other term of, all or any of the Obligations or any other amendment or waiver of or any consent to any departure from any of the Transaction Documents;

 

 

(c) any exchange, release, or non-perfection of any collateral standing as security for the Obligations or any liabilities incurred directly or indirectly hereunder or any set-off against any of such liabilities, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations; or

 

(d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, Grantor, or any other Person that is obligated in respect of any of the Obligations.

 

SECTION 14. Continuing Security Interest; Assignment. This Security Agreement shall create a continuing security interest in the Pledged Collateral and shall (a) be binding upon each Grantor and its executors, trustees, receivers, successors and permitted assigns; and (b) inure to the benefit of and be enforceable by the Collateral Agent, and its trustees, receivers, successors and assigns. No Grantor may assign any of its rights or obligations under this Security Agreement without the Collateral Agent’s prior written consent; and any such purported assignment without such consent shall be void and ineffective.

 

SECTION 15. Waiver of Marshalling. All rights of marshalling of assets of each Grantor, including any such right with respect to the Pledged Collateral, are hereby waived by Grantors.

 

SECTION 16. No Waiver; Remedies. No failure on the part of The Collateral Agent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

SECTION 17. GOVERNING LAW. THIS SECURITY AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS AND AGREEMENTS EXECUTED BY THE PARTIES HERETO UNDER THE LAWS OF THE STATE OF DELAWARE, AND SHALL BE GOVERNED BY, ENFORCED UNDER, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND APPLICABLE FEDERAL LAW.

 

SECTION 18. Notices: Notices, reports, and other communications hereunder shall be in writing, shall be given by personal or courier service or by mail, and shall be deemed to be given and received (i) upon the addressee’s receipt if delivered in person or by courier or (ii) upon the earlier of the addressee’s receipt and three Business Days following the date such notices, reports, and payments are placed in the United States mail, if properly posted with postage prepaid, by certified mail in an envelope properly addressed, to the addresses denoted under the signatures of the Grantors and the Collateral Agent hereto or to such other address as any Party may specify in a written notice to the other Parties in accordance with this Section 18.

 

SECTION 19. Headings; Certain Terms. The headings in this Security Agreement are for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent, or intent of this Security Agreement or any provision hereof. In this Security Agreement, (a) “include” and “including” do not signify or imply any limitation, (b) “Section” refers to a Section of this Security Agreement, unless otherwise stated, (c) “hereunder,” “hereof,” “hereto,” and similar terms are references to this Security Agreement as a whole, and not to any particular provision of this Security Agreement, and (d) “UCC” refers to the Uniform Commercial Code in effect in the State of Delaware.

 

SECTION 20. FINAL AGREEMENT OF THE PARTIES: THIS SECURITY AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, CONSTITUTES THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

 

 

SECTION 21. Guaranty. The Guarantors hereby, jointly and severally, absolutely, irrevocably and unconditionally guarantee the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of the Obligations and the performance of all agreements of the Company now or hereafter existing under the Transaction Documents, whether for principal, interest, fees, expenses or otherwise. In the event of any failure of the Company to pay or perform when due the Obligations under the Transaction Documents, the Guarantors will, jointly and severally, immediately pay and perform the same at the time and place, and in the funds and manner, provided for in the Transaction Documents, without set-off, counterclaim or deduction of any kind.

 

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Parties have caused this Security Agreement to be duly executed and delivered as of the date first above written.

 

	COLLATERAL AGENT:
	_______________________
	By:
		Managing Member
		[address]

 

THE COMPANY:
LuxUrban Hotels Inc.
By:
	Michael James Chief Financial Officer 2125 Biscayne Blvd., Suite 253 Miami, Florida 33137
LuxUrban LLC, a Delaware limited liability company
By:
	Michael James Chief Financial Officer 2125 Biscayne Blvd., Suite 253 Miami, Florida 33137
S-Be Rentals, LLC, a Florida limited liability company
By:
	Michael James Chief Financial Officer 2125 Biscayne Blvd., Suite 253 Miami, Florida 33137

 

 

ATTACHMENT 1

 

All right, title, interest, claims and demands of each Grantor in and to the following property:

 

1.

All Accounts;

 

2.

All Chattel Paper;

 

3.

All Deposit Accounts and cash;

 

4.

All Documents;

 

5.

All General Intangibles;

 

6.

All Goods;

 

7.

All Instruments;

 

8.

All Intellectual Property;

 

9.

All Inventory;

 

10.

All Investment Property;

 

11.

All Unencumbered Equipment; and

 

12.

All Letter-of-Credit Rights.

 

To the extent not otherwise included, all proceeds and products of any and all of the foregoing, and all accessions to, substitutions and replacements for, and rents and profits of each of the foregoing.

 

All capitalized terms used in this Attachment 1 and not otherwise defined herein, shall have the respective meanings given to such terms in the Uniform Commercial Code of the State of Delaware as in effect from time to time.

 

The term “Intellectual Property” means all intellectual and similar property of every kind and nature hereafter acquired or developed by any Grantor, including inventions, designs, patents (whether registered or unregistered), copyrights (whether registered or unregistered), trademarks (whether registered or unregistered), trade secrets, domain names, confidential or proprietary technical and business information, know‑how, methods, processes, drawings, specifications or other data or information and all memoranda, notes and records with respect to any research and development, software and databases and all embodiments or fixations thereof whether in tangible or intangible form or contained on magnetic media readable by machine together with all such magnetic media and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.

 

 

Exhibit 99.1

 

 

LuxUrban Hotels Closes First Tranche of Private Placement of Senior Secured Convertible Notes
Due 2027 and Common Stock Purchase Warrants

 

MIAMI, FL, - August 13, 2024 - LuxUrban Hotels Inc. (“LuxUrban” or the “Company”) (Nasdaq: LUXH), which secures long-term operating rights for entire hotels through Master Lease Agreements (MLA) under which it manages the hotel and rents out, on a short-term basis, rooms to business and vacation travelers, today announced that it has closed the first tranche of a private offering (the “Notes Offering”) to sell up to $10 million aggregate principal amount of new senior secured convertible notes due 2027 (the “Notes”) and common stock purchase warrants (“Note Warrants”) in one or more closings through August 30, 2024.

 

The first tranche closing occurred on August 13, 2024 and generated gross cash proceeds of $2.1 million. The Company intends to use the net cash proceeds from the Notes Offering for working capital and other general corporate purposes. Among these corporate purposes is the continued advancement of Lux 2.0, the Company’s previously announced series of initiatives focused on identifying and curing various financial and operational issues, and to create a platform that can deliver long-term shareholder value.

 

The Notes bear interest at 18%, are secured by substantially all of the assets of the Company, and are being sold to certain accredited investors in a private offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”).

 

ADDITIONAL INFORMATION REGARDING THE OFFERING

 

Under the terms of the Notes Offering, certain equity investors and holders of promissory notes evidencing existing borrowed money obligations of the Company were entitled to convert such equity and debt into the offering. As a result of these conversions, the Company will issue an additional aggregate of $2.8 million principal amount of Notes and corresponding Note Warrants to purchase shares of common stock as part of the initial closing.

 

Repayment of the principal amount of the Notes commences twelve (12) months from the date of issuance. The principal shall be repaid in twenty-four (24) equal monthly installments commencing on August 13, 2025 and continuing on the same day of each month thereafter until the principal amount is paid in full (“Principal Payments”), with all principal and interest due thereon to be paid on or prior to August 13, 2027 (the “Maturity Date”), unless the Notes are previously converted into common stock or preferred stock as prescribed under the terms of the offering.

 

Subject to the occurrence of certain events as outlined in the definitive agreements, the Note Warrants shall become exercisable and the Notes: a.) will be convertible from time to time at the election of the holders into shares of common stock of the Company; and b.) will mandatorily convert into a newly created series of preferred stock.

 

The Notes and Note Warrants will not be registered under the Securities Act and may not be offered or sold absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws. The purchasers in the Offering have customary registration rights with respect to the shares of Common Stock into which the Notes and Note Warrants are convertible or exercisable.

 

This press release shall not constitute an offer to sell or a solicitation of an offer to buy any of these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the applicable securities laws of such state or jurisdiction.

 

 

LuxUrban Hotels Inc.

LuxUrban Hotels Inc. secures long-term operating rights for entire hotels through Master Lease Agreements (MLA) and rents out, on a short-term basis, hotel rooms to business and vacation travelers. The Company is strategically building a portfolio of hotel properties in destination cities by capitalizing on the dislocation in commercial real estate markets and the large amount of debt maturity obligations on those assets coming due with a lack of available options for owners of those assets. LuxUrban’s MLA allows owners to hold onto their assets and retain their equity value while LuxUrban operates and owns the cash flows of the operating business for the life of the MLA.

 

Forward Looking Statements

This press release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). The statements contained in this release that are not purely historical are forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Generally, the words “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this release may include, for example, statements with respect to the Company’s ability to successfully de-platform its properties from its former franchise partner and operate independently, its ability to improve its working capital and cash flow profiles, enhance its balance sheet and deliver organic revenue growth, scheduled property openings, expected closing of noted lease transactions, the Company’s ability to continue closing on additional leases for properties in the Company’s pipeline, as well the Company’s anticipated ability to commercialize efficiently and profitably the properties it leases and will lease in the future. The forward-looking statements contained in this release are based on current expectations and belief concerning future developments and their potential effect on the Company. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements are subject to a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results of performance to be materially different from those expressed or implied by these forward-looking statements, including those set forth under the caption “Risk Factors” in our public filings with the SEC, including in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 15, 2024, and any updates to those factors as set forth in subsequent Quarterly Reports on Form 10-Q or other public filings with the SEC, the base prospectus comprising part of the Registration Statement and when filed, the prospectus supplement filed with respect thereto. The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws. The Company will file the definitive agreements governing the Notes Offering as exhibits to a Current Report on Form 8-K to be filed with the SEC.

 

Contact

 

Devin Sullivan

Managing Director

The Equity Group Inc.

dsullivan@equityny.com

 

Conor Rodriguez, Analyst

crodriguez@equityny.com

 

v3.24.2.u1

Cover	Aug. 13, 2024
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 13, 2024
Entity File Number	001-41473
Entity Registrant Name	LuxUrban Hotels Inc.
Entity Central Index Key	0001893311
Entity Tax Identification Number	82-3334945
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	2125 Biscayne Blvd
Entity Address, Address Line Two	Suite 253
Entity Address, City or Town	Miami
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33137
City Area Code	(877)
Local Phone Number	269-5952
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false
Common Stock 0. 00001 Par Value Per Share [Member]
Title of 12(b) Security	Common Stock, par value $0.00001 per share
Trading Symbol	LUXH
Security Exchange Name	NASDAQ
Series A Cumulative Redeemable Preferred [Member]
Title of 12(b) Security	13.00% Series A Cumulative Redeemable Preferred Stock $0.00001
Trading Symbol	LUXHP
Security Exchange Name	NASDAQ

---