Exhibit 10.1
KARTOON STUDIOS, INC.
June 26, 2023
Holder of Common Stock Purchase Warrant
Re: Inducement Offer to Exercise Common Stock Purchase Warrants
Dear Holder:
Kartoon Studios, Inc. (formerly known as Genius
Brands International, Inc.) (the “Company”) is pleased to offer to you the opportunity to exercise all of the Common Stock
Purchase Warrants set forth on the signature page hereto (the “Existing Warrants”) currently held by you (the “Holder”).
The Existing Warrants and the shares underlying the Existing Warrants (“Warrant Shares”) have been registered pursuant to
registration statement Form S-3 (File No. 333-252670) (the “Registration Statement”). The Registration Statement is currently
effective and, upon exercise of the Existing Warrants pursuant to this letter agreement, will be effective for the issuance or sale, as
the case may be, of the Warrant Shares. Capitalized terms not otherwise defined herein shall have the meanings set forth in the New Warrant
(as defined below).
In consideration for exercising in full all of
the Existing Warrants held by you and as set forth on the signature page hereto (the “Warrant Exercise”), the Company hereby
offers to issue you or your designee a new Common Stock Purchase Warrant (the “New Warrant”) pursuant to Regulation D under
the Securities Act of 1933, as amended (the “Securities Act”) to purchase up to a number of shares of common stock (“Common
Stock”) of the Company, par value $0.001 per share (“New Warrant Shares”) equal to 200% of the number of Warrant Shares
issued pursuant to the Warrant Exercise hereunder with respect to New Warrant, which shall be in the form attached hereto as Annex C.
The original New Warrants will be delivered within three (3) Business Days following the date hereof. Notwithstanding anything herein
to the contrary, in the event the Warrant Exercise would otherwise cause the Holder to exceed the beneficial ownership limitations (“Beneficial
Ownership Limitation”) set forth in Section 1(e) of the Existing Warrants, the Company shall only issue such number of Warrant Shares
to the Holder that would not cause the Holder to exceed the maximum number of Warrant Shares permitted thereunder with the balance to
be held in abeyance until notice from the Holder that the balance (or portion thereof) may be issued in compliance with such limitations,
which abeyance shall be evidenced through the Existing Warrant which shall be deemed prepaid thereafter, and exercised pursuant to a Notice
of Exercise in the Existing Warrant (provided no additional exercise price shall be due and payable).
To induce the Warrant Exercise by you, pursuant
to Section 3(h) of the Existing Warrants, the Company is hereby amending the exercise price of the Existing Warrants from $23.70 to $2.50,
and by signing this letter below, you are deemed to have consented to such amendment. You and the Company agree that this letter shall
also serve as a notice for the adjustment of the exercise price of the Existing Warrants as required under Section 3(g)(i) of the Existing
Warrants.
Expressly subject to the paragraph immediately
following this paragraph below, Holder may accept this offer by signing this letter below, with such acceptance constituting Holder's
exercise in full of the Existing Warrants for an aggregate exercise price set forth on the Holder’s signature page hereto (the “Warrant
Exercise Price”).
Additionally, the Company agrees to the representations,
warranties and covenants set forth on Annex A attached hereto and the Holder agrees to the representations, warranties and covenants set
forth on Annex B attached hereto.
The Holder understands that the New Warrant and
the New Warrant Shares are not, and may never be, registered under the Securities Act, or the securities laws of any state and, accordingly,
each certificate, if any, representing such securities shall bear a legend substantially similar to the following:
“THIS SECURITY HAS NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT
IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.”
Certificates evidencing the New Warrant Shares
shall not contain any legend (including the legend set forth above), (i) while a registration statement covering the resale of such New
Warrant Shares is effective under the Securities Act, (ii) following any sale of such New Warrant Shares pursuant to Rule 144 under the
Securities Act, (iii) if such New Warrant 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 and without volume or manner-of-sale restrictions, (iv) if such
New Warrant Shares are eligible for sale under Rule 144 and the Company is then in compliance with the current public information required
under Rule 144 as to such New Warrant Shares, or (v) if such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of the Securities and Exchange Commission (the “Commission”)
and the earliest of clauses (i) through (v), the “Delegend Date”)). The Company shall cause its counsel to issue a legal opinion
to the Transfer Agent promptly after the Delegend Date if required by the Company and/or the Transfer Agent to effect the removal of the
legend hereunder or if requested by the Holder, which opinion shall be in form and substance reasonably acceptable to the Holder. Upon
the occurrence of any of the events set forth in any of clauses (i) through (v) above, upon the exercise of the New Warrant, then the
New Warrant Shares shall be issued free of all legends. The Company agrees that following the Delegend Date or at such time as such legend
is no longer required under this paragraph, it will, no later than two (2) Trading Days following the delivery by the Holder to the Company
or the Transfer Agent of a certificate representing the New Warrant Shares issued with a restrictive legend (such second Trading Day,
the “Legend Removal Date”), deliver or cause to be delivered to the Holder a certificate representing such shares that is
free from all restrictive and other legends or, at the request of the Holder shall credit the account of the Holder’s prime broker
with the Depository Trust Company System as directed by the Holder.
In addition to the Holder’s other available
remedies, the Company shall pay to a Holder, in cash, (i) as partial liquidated damages and not as a penalty, for each $1,000 of New Warrant
Shares (based on the VWAP of the Common Stock on the date such New Warrant Shares are submitted to the Transfer Agent) delivered for removal
of the restrictive legend, $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun
to accrue) for each Trading Day after the Legend Removal Date until such certificate is delivered without a restrictive legend and (ii)
if the Company fails to (a) issue and deliver (or cause to be delivered) to the Holder by the Legend Removal Date a certificate representing
the New Warrant Shares that is free from all restrictive and other legends and (b) if after the Legend Removal Date the Holder purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of all or any portion
of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of
shares of Common Stock that the Holder anticipated receiving from the Company without any restrictive legend, then, an amount equal to
the excess of the Holder’s total purchase price for the shares of Common Stock so purchased (including brokerage commissions and
other reasonable and documented out-of-pocket expenses, if any) (the “Buy-In Price”) over the product of (A) such number of
New Warrant Shares that the Company was required to deliver to the Holder by the Legend Removal Date multiplied by (B) the lowest closing
sale price of the Common Stock on any Trading Day during the period commencing on the date of the delivery by the Holder to the Company
of the applicable New Warrant Shares (as the case may be) and ending on the date of such delivery and payment under this clause (ii).
As soon as practicable (and in any event within 30 calendar days of the date hereof), the Company shall file a registration statement
on Form S-3 (or other appropriate form if the Company is not then S-3 eligible) providing for the resale by the Holder of the New Warrant
Shares issued and issuable upon exercise of the New Warrant. The Company shall use commercially reasonable efforts to cause such registration
statement to become effective within 45 days following the date of filing of such registration statement and to keep such registration
statement effective at all times until the Holder no longer owns the New Warrant or New Warrant Shares issuable upon exercise thereof.
As soon as practicable after the date of this letter agreement, the Company shall also file a prospectus supplement to the Registration
Statement relating to the reduction of the exercise price of the Existing Warrants.
From the date hereof until the end of the sixtieth
(60th) Trading Day following the date hereof , neither the Company nor any subsidiary of the Company shall issue, enter into
any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or any securities of the Company or
any subsidiaries which would entitle the holder thereof to acquire at any time 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, Common Stock, other than (i) the issuance of the New Warrants, (ii) the issuance of
shares of Common Stock upon exercise of the Existing Warrants, (iii) the issuance of any common stock purchase warrants of the Company
and any shares of Common Stock upon exercise of such warrants to any adviser of the Company acting as the placement agent in connection
with the transactions contemplated by this letter agreement, (iv) on or following the date of the receipt of Stockholder Approvals, the
issuance of shares of Common Stock upon exercise of the New Warrants, (v) the filing of a registration statement with respect to the resale
of the New Warrant Shares, (vi) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion
of a security outstanding on the date hereof; provided that such securities have not been amended since the date of this letter agreement
to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other
than in connection with stock splits or combinations) or to extend the term of such securities, (vii) any shares of Common Stock issued
by the Company (including upon exercise of options) or options to purchase Common Stock or other equity awards covering Common Stock,
in any case, granted pursuant to existing employee benefit plans, including any equity incentive plans and employee stock purchase plans,
of the Company, duly adopted for such purpose, by a majority of the non-employee members of the board of directors of the Company or a
majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Company; (viii)
the issuance of shares of Common Stock to certain consultants and service providers of the Company for services rendered, approved by
a majority of disinterested directors of the Company, provided that such shares of Common Stock are issued as “restricted securities”
(as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection
therewith during such sixty (60) Trading Day period.
If this offer is accepted and the transaction documents
are executed on or before 5:00 p.m. Eastern on June 26, 2023, then on or before 8:30 a.m. Eastern on the following Trading Day, the Company
shall file a Current Report on Form 8-K with the SEC disclosing all material terms of the transactions contemplated hereunder. From and
after the filing of such 8-K, the Company represents to the Holders that it shall have publicly disclosed all material, non-public information
delivered to any of the Holders by the Company in connection with the transactions contemplated by this letter agreement. In addition,
effective upon the filing of such 8-K, the Company acknowledges and agrees that any and all confidentiality or similar obligations under
any agreement, whether written or oral, between the Company, on the one hand, and any of the Holders, on the other hand, shall terminate
and be of no further force or effect. The Company represents, warrants and covenants that, upon acceptance of this offer, the shares underlying
the Existing Warrants shall be issued free of any legends or restrictions on resale by Holder and all of the Warrant Shares shall be delivered
electronically through the Depository Trust Company within one (1) Business Day of the date the Company receives the Warrant Exercise
Price (or, with respect to Warrant Shares that would otherwise be in excess of the Beneficial Ownership Limitation, within two (2) Business
Days of the date the Company is notified by Holder that its ownership is less than the Beneficial Ownership Limitation). The terms of
the Existing Warrants, including but not limited to the obligations to deliver the Warrant Shares, shall otherwise remain in effect as
if the acceptance of this offer were a formal Notice of Exercise (including but not limited to any liquidated damages and compensation
in the event of late delivery of the Warrant Shares).
The Company acknowledges and agrees that the obligations
of the Holders under this letter agreement are several and not joint with the obligations of any other holder or any other holders of
warrants to purchase Common Stock of the Company (each, an “Other Holder”) under any other agreement related to the exercise
of such warrants (“Other Warrant Exercise Agreement”), and the Holder shall not be responsible in any way for the performance
of the obligations of any Other Holder or under any such Other Warrant Exercise Agreement. Nothing contained in this letter agreement,
and no action taken by the Holders pursuant hereto, shall be deemed to constitute the Holder and the Other Holders as a partnership, an
association, a joint venture or any other kind of entity, or create a presumption that the Holder and the Other Holders are in any way
acting in concert or as a group with respect to such obligations or the transactions contemplated by this letter agreement and the Company
acknowledges that the Holder and the Other Holders are not acting in concert or as a group with respect to such obligations or the transactions
contemplated by this letter agreement or any Other Warrant Exercise Agreement. The Company and the Holder confirm that the Holder has
independently participated in the negotiation of the transactions contemplated hereby with the advice of its own counsel and advisors.
The Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of
this letter agreement, and it shall not be necessary for any Other Holder to be joined as an additional party in any proceeding for such
purpose.
The Company covenants that it shall use commercially
reasonable efforts to hold a special meeting of stockholders (which may also be at the annual meeting of stockholders) at the earliest
practical date after the date hereof, and in any event on or before August 25, 2023, with the recommendation of the Company’s Board
of Directors that (a) a proposal allowing for the exercise of the New Warrants be approved pursuant to NYSE American Rule 713 (the “NYSE Proposal”) and (b) a proposal to amend the Company's articles of
incorporation to increase the authorized share capital of the Company to an amount sufficient to cover the Warrant Shares issuable upon
exercise of the New Warrants be approved (the "Charter Proposal,” and together with the NYSE Proposal, the “Proposals”)
be approved, and the Company shall solicit proxies from its stockholders in connection therewith in the same manner as all other management
proposals in such proxy statement and all management-appointed proxyholders shall vote their proxies in favor of the Proposals. Holder
covenants that at the next such meeting of stockholders of the Company, it will vote all eligible shares of Common Stock that Holder owns
or owned as of the record date of such meeting and for which it is entitled to vote, on all matters presented for a vote at such meeting.
If the Company does not obtain the requisite stockholder
approval for each of the Proposals (the “Stockholder Approvals”) at the first meeting, the Company shall use commercially
reasonable efforts to call a meeting every 90 days thereafter to seek the Stockholder Approvals until the earlier of the date the Stockholder
Approvals are obtained or the New Warrant are no longer outstanding.
From the date hereof until
such time as the Holder no longer holds the New Warrant, the Company shall be prohibited from effecting or entering into an agreement
to effect any issuance by the Company or any of its direct or indirect subsidiaries of Common Stock or Common Stock Equivalents (or a
combination of units thereof) involving a Variable Rate Transaction. As used herein, “Variable Rate Transaction” means a transaction
in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or
include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the
initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset
at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into, or effects a transaction
under, any agreement, including, but not limited to, an equity line of credit or an “at-the-market offering,” whereby the
Company may issue securities at a future determined price. The Holder shall be entitled to obtain injunctive relief against the Company
to preclude any such issuance, which remedy shall be in addition to any right to collect damages.
The Company hereby covenants
and agrees that none of the terms offered to any Other Holder with respect to any Other Warrant Exercise Agreement (or any amendment,
modification or waiver thereof), is, on the date of this letter agreement, or will, on any date following the date of this letter agreement,
be more favorable to such Other Holder than those of the Holder and this letter agreement.
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Within one business day from the Holder’s
execution of this letter, the Holder shall make available for wire to the Company immediately available funds equal to the number of Existing
Warrants being exercised multiplied by $2.50 and the Company shall deliver the Warrant Shares via DWAC to the Holder and shall deliver
the New Warrant registered in the name of the Holder.
To accept this offer, Holder must counter execute
this letter agreement and return the fully executed agreement to the Company by e-mail at: bdenton@kartoonstudios.com.
Please do not hesitate to call me if you have any
questions.
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Sincerely yours, |
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KARTOON STUDIOS, INC. |
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By: _______________________ |
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Name: |
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Title: |
Accepted and Agreed to:
Name of Holder: __________________________
Signature of Authorized Signatory of Holder: _____________________________________
Name of Authorized Signatory: ________________________________________________
Title of Authorized Signatory: _________________________________________________
Existing Warrant Shares: ______________
Aggregate Exercise Price: _____________
New Warrant: ___________
DWAC Instructions:
Annex A
Representations, Warranties and Covenants of the Company. The
Company hereby makes the following representations and warranties to the Holder:
(a)
Affirmation of Prior Representations, Warranties and Covenants. The Company hereby represents and warrants to the Holder
that the Company’s representations and warranties as set forth in Section 3.1 and the Company’s covenants listed in Article
IV of that certain Securities Purchase Agreement, dated October 28, 2020, between the Company and the investors listed thereto (the “SPA”),
together with any amendments in the Company’s public reports filed with the SEC subsequent to the SPA, are true and correct as of
the date hereof and have been fully performed as of the date hereof, except as otherwise described or noted herein.
(b)
Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate
the transactions contemplated by this letter agreement and otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of this letter agreement by the Company and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, its board of
directors or its stockholders in connection therewith. This letter agreement has been duly executed by the Company and, when delivered
in accordance with the terms hereof, 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 of this letter agreement by the Company and the consummation by the
Company of the transactions contemplated hereby do not and will not: (i) conflict with or violate any provision of the Company’s
certificate or articles of incorporation, bylaws or other organizational or charter documents; or (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 liens, claims,
security interests, other encumbrances or defects upon any of the properties or assets of the Company in connection with, or give to others
any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement,
credit facility, debt or other material instrument (evidencing Company debt or otherwise) or other material understanding to which such
Company is a party or by which any property or asset of the Company 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 is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company
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 upon the business, prospects, properties, operations, condition (financial or otherwise) or results of operations
of the Company, taken as a whole, or in its ability to perform its obligations under this letter agreement.
(d)
Stock Exchange Corporate Governance. The transactions contemplated under this letter agreement, comply with all rules of
the stock exchange exchanges on which the Common Stock is listed or quoted for trading.
Annex B
Representations, Warranties and Covenants of the Holder. The
Holder hereby makes the following representations and warranties to the Holder:
(a)
Affirmation of Prior Representations, Warranties and Covenants. The Holder hereby represents and warrants to the Holder
that the Holder’s representations and warranties as set forth in Section 3.1 and the Holder’s covenants listed in Article
IV of the SPA, are true and correct as of the date hereof and have been fully performed as of the date hereof.
(b)
Accredited Investor Status. The Holder (i) is an “accredited investor” (within the meaning of Rule 501 under
the Securities Act) satisfying the applicable requirements set forth on Schedule A, (ii) is acquiring the New Warrant only for its own
account and not for the account of others, or if the Holder is subscribing for the New Warrant as a fiduciary or agent for one or more
investor accounts, each owner of such account is an “accredited investor” (within the meaning of Rule 501 under the Securities
Act) and the Holder has full investment discretion with respect to each such account, and the full power and authority to make the acknowledgements,
representations and agreements herein on behalf of each owner of each such account, and (iii) is not acquiring the New Warrant with a
view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act (and shall provide the requested
information on Schedule A following the signature page hereto). The Holder is not an entity formed for the specific purpose of acquiring
the New Warrant, unless such newly formed entity is an entity in which all of the equity owners are “accredited investors”
(within the meaning of Rule 501 under the Securities Act).
(c)
Limitation on Transfer. The Holder understands that the New Warrant are being offered in a transaction not involving any public
offering within the meaning of the Securities Act and that neither the New Warrant nor the New Warrant Shares have not been registered
under the Securities Act. The Holder understands that neither the New Warrant nor the New Warrant Shares may be resold, transferred, pledged
or otherwise disposed of by the Holder absent an effective registration statement under the Securities Act, except (i) to the Company
or a subsidiary thereof, (ii) to non-U.S. persons pursuant to offers and sales that occur outside the United States within the meaning
of Regulation S under the Securities Act or (iii) pursuant to another applicable exemption from the registration requirements of the Securities
Act, and, in each of cases (i) and (iii), in accordance with any applicable securities laws of the states and other jurisdictions of the
United States, and that any certificates or book entry notation representing the New Warrant and New Warrant Shares shall contain a legend
to such effect. The Holder understands and agrees that the New Warrant and the New Warrant Shares will be subject to transfer restrictions
and, as a result of these transfer restrictions, the Holder may not be able to readily resell the New Warrant and the New Warrant Shares,
and may be required to bear the financial risk of an investment in the New Warrant and the New Warrant Shares for an indefinite period
of time. The Holder understands that it has been advised to consult legal counsel prior to making any offer, resale, pledge or transfer
the New Warrant and the New Warrant Shares.
ANNEX C
FORM OF NEW WARRANT
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH
THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
KARTOON STUDIOS, INC.
| Warrant Shares: ______ |
Issue Date: ____________________ |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, _____________ or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations
on exercise and the conditions hereinafter set forth, at any time on or after the date of the Company’s receipt of Stockholder Approvals
(as defined herein) (such date, the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on the date
that is a five (5) year anniversary of the Initial Exercise Date (provided that, if such date is not a Trading Day, the immediately following
Trading Day) (the “Termination Date”) but not thereafter, to subscribe for and purchase from Kartoon Studios, Inc., a Nevada
corporation (formerly known as Genius Brands International, Inc.) (the “Company”), up to ______ shares (as subject to adjustment
hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall
be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. In addition to the terms defined
elsewhere in this Warrant or the Purchase Agreement, the following terms have the meanings indicated in this Section 1:
“Bid Price” means, for any date,
the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading
Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P. (“Bloomberg”) (based on a Trading Day from 9:30 a.m. (New
York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of
the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed
or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization
or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d)
in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith
by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“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; provided, however, for clarification, commercial
banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”,
“non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the
direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of banking institutions
in The City of New York generally are open for use by customers on such day.
“Commission” means
the United States Securities and Exchange Commission.
“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, restricted stock units or other equity-based awards to employees, officers, directors
or consultants of the Company or its subsidiaries pursuant to any compensation plan duly adopted for such purpose, by a majority of the
non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such
purpose for services rendered to the Company, (b) securities upon the exercise of the Warrant and/or other securities exercisable or exchangeable
for or convertible into shares of Common Stock issued and outstanding on the date of the Warrant, provided that such securities have not
been amended since the date of the Warrant to increase the number of such securities or to decrease the exercise price, exchange price
or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities,
and (c) securities issued pursuant to acquisitions or strategic transactions (including, without limitation, joint venture, co-marketing,
co-development or other collaboration agreements) approved by a majority of the disinterested directors of the Company, provided that
any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating
company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional
benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is investing in securities.
“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.
“Purchase Agreement” means that
certain Securities Purchase Agreement, dated October 28, 2020, by and among the Company and the purchasers signatory thereto pursuant
to which this Warrant is issued.
“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.
“Securities Act” means the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Stockholder Approvals” approval
by stockholders of the Company at a special meeting of stockholders (which may also be at the annual meeting of stockholders) of (a) a
proposal allowing for the exercise of all of the Warrants following the effectiveness of the price adjustment provisions be approved pursuant
to NYSE American Rule 713, and (b) a proposal to amend the Company's articles of incorporation to increase the authorized share capital
of the Company to an amount sufficient to cover the Warrant Shares issuable upon exercise of the Warrants be approved.
“Trading Day” means a day on which
the principal Trading Market is open for trading.
“Trading Market” means any of
the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX (or
any successors to any of the foregoing).
“Transfer Agent” means vStock
Transfer LLC, the current transfer agent of the Company, with a mailing address of 18 Lafayette Place, Woodmere, New York 11598 and a
facsimile number of (646) 536-3179, and any successor transfer agent of the Company.
“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 (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02
p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such
date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading
on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases,
the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the Company.
Section 2. Exercise.
a)
Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any
time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice
of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement
Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise
Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States
bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original
Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of
Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant
to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full,
in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which
the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the
total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable
hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing
the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise
within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree
that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of
Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
b)
Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $2.50, subject to adjustment hereunder
(the “Exercise Price”).
c)
Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus
contained therein is not available for the resale of the Warrant Shares by the Holder, then this Warrant may also be exercised, in whole
or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section
2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior
to the opening of “regular trading hours” (as defined in Rule 600(b)(68) of Regulation NMS promulgated under the federal securities
laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of
the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P.
as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular
trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close
of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable
Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered
pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;
(B) = the Exercise Price of this Warrant,
as adjusted hereunder; and
(X) = the number of Warrant Shares that would
be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise
rather than a cashless exercise.
If Warrant Shares are issued in such a cashless
exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take
on the characteristics of the Warrants being exercised, and the holding period of the Warrant Shares being issued may be tacked on to
the holding period of this Warrant. The Company agrees not to take any position contrary to this Section 2(c).
Notwithstanding anything herein to the contrary,
on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
d)
Mechanics of Exercise.
i.
Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted
by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository
Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such
system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant
Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitation pursuant
to Rule 144 (assuming cashless exercise of the Warrants), and otherwise by physical delivery of a certificate, registered in the Company’s
share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to
such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading
Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price
to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the
Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall
be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other
than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days
comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver
to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder,
in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of
the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth
Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant
Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST
program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the
standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common
Stock as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing, with respect to any Notice(s) of
Exercise delivered on or prior to 12:00 p.m. (New York City time) on the Initial Exercise Date, the Company agrees to deliver the Warrant
Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date and the Initial Exercise Date shall be
the Warrant Share Delivery Date for purposes hereunder.
ii.
Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request
of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new
Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.
iii.
Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant
to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv.
Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available
to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions
of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares
of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise
at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the
Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in
which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with
an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the
Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit
a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms hereof.
v.
No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company
shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.
vi.
Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer
tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder;
provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require,
as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay
all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another
established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii.
Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise
of this Warrant, pursuant to the terms hereof.
e)
Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have
the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such
issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and
any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution
Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include
the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but
shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of
this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised
or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject
to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its
Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d)
of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent
that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates and Attribution Parties) 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 Attribution
Parties) 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(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the
number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company
or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.
In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of
securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such
number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be [4.99%] [9.99%]
of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable
upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions
of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be
effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented
in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor
holder of this Warrant.
Section 3. Certain Adjustments.
a)
Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable
in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise
of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way
of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares
of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this
Warrant shall remain unchanged, subject to the limitation on fractional shares in Section 2(d)(v). Any adjustment made pursuant to this
Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b)
Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding,
shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer,
sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share
less than the Exercise Price then in effect (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive
Issuance”) (it being understood and agreed that 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 less than the Exercise Price, such issuance shall be deemed to have occurred for less than
the Exercise Price on such date of the Dilutive Issuance at such effective price), then simultaneously with the consummation of each Dilutive
Issuance, the Exercise Price shall be reduced and only reduced to equal the Base Share Price. Notwithstanding the foregoing, no adjustments
shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance. The Company shall notify the Holder, in writing,
no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this
Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other
pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides
a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive
a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price
in the Notice of Exercise. If the Company enters into a Variable Rate Transaction, the Company shall be deemed to have issued Common Stock
or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.
For the avoidance of doubt, if any Dilutive Issuance is consummated prior to the receipt of such Stockholder Approvals, and the Stockholder
Approvals are received thereafter, such Dilutive Issuance will have the same effect as if consummated after the receipt of such Stockholder
Approvals and the Exercise Price shall be reduced to the corresponding Base Share Price.
c) Subsequent Rights Offerings. In
addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock
Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of
shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of
shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof,
including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent
that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent
shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
d)
Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to holders of 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) (other than dividends or distributions
subject to Section 3(a) herein) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case,
the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations
on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is
taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to
be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder's right to participate
in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled
to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution
to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever,
as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d)
Fundamental Transaction. If, at any time while this 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 (and
all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance
or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders
of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects
any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly,
in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any
subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable
upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to
any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable
as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant).
For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction,
and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash
or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the
event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable
at any time concurrently with, or within 30 days after the later of (x) the date of consummation of the Fundamental Transaction and (y)
the date of the public announcement of the applicable Fundamental Transaction, purchase this Warrant from the Holder by paying to the
Holder an amount of cash equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on
the date of the consummation of such Fundamental Transaction; provided, however, that, if the Fundamental Transaction is not within the
Company's control, including not approved by the Company's Board of Directors, Holder shall only be entitled to receive from the Company
or any Successor Entity, as of the date of consummation of such Fundamental Transaction, the same type or form of consideration (and
in the same proportion), at the Black Scholes Value of the unexercised portion of this Warrant, that is being offered and paid to the
holders of Common Stock of the Company in connection with the Fundamental Transaction, whether that consideration be in the form of cash,
stock or any combination thereof, or whether the holders of Common Stock are given the choice to receive from among alternative forms
of consideration in connection with the Fundamental Transaction; provided, further, that if holders of Common Stock of the Company are
not offered or paid any consideration in such Fundamental Transaction, such holder of Common Stock will be deemed to have received common
stock of the Successor Entity (which entity may be the Company following such Fundamental Transaction) in such Fundamental Transaction.
“Black Scholes Value” means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg, L.P., determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes
and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date
of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the
greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization
factor) as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying
price per share used in such calculation shall be the greater of (i) the sum of the price per share being offered in cash, if any, plus
the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (ii) the greater of (x) the last VWAP
immediately prior to the public announcement of such Fundamental Transaction and (y) the last VWAP immediately prior to the consummation
of such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the
applicable Fundamental Transaction and the Termination Date and (E) a zero cost of borrow. The payment of the Black Scholes Value will
be made by wire transfer of immediately available funds (or such other consideration) within five Business Days of the Holder’s
election (or, if later, on the effective date of the Fundamental Transaction). The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations
of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant
to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay)
prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security
of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable
for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common
Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior
to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock
(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such
shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic
value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in
form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and
be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction
Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the
same effect as if such Successor Entity had been named as the Company herein.
e)
Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share,
as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given
date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
f)
Notice to Holder.
i.
Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company
shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting
adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii.
Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form)
on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the
Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole)
is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email
to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar
days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of
which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale,
transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not
affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant
constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously
file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant
during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise
be expressly set forth herein.
g)
Voluntary Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time
during the term of this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the board of directors of the Company.
Section 4. Transfer of Warrant.
a)
Transferability. Subject to compliance with any applicable securities laws, including Regulation D under the Securities
Act, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part,
upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required
to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for
the purchase of Warrant Shares without having a new Warrant issued.
b)
New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office
of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by
the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division
or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Issue Date and shall be identical
with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c)
Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose
(the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for
all other purposes, absent actual notice to the contrary.
Section 5. Miscellaneous.
a)
No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights,
dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly
set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant
to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in no event shall the Company be
required to net cash settle an exercise of this Warrant.
b)
Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares,
and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant,
shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the
Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant
or stock certificate.
c)
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right
required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding
Business Day.
d)
Authorized Shares.
The Company covenants that, upon obtaining the
Stockholder Approvals, and during the period the Warrant is outstanding thereafter, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights
under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who
are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation
of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company
covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon
exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented
to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder
as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the
par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value,
(ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant and (iii) 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.
Before taking any action which would result in
an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain
all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
e)
Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall
be determined in accordance with the provisions of the Purchase Agreement.
f)
Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered,
and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g)
Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the fact
that all rights hereunder terminate on the Termination Date. Without limiting any other provision of this Warrant , 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.
h)
Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company
shall be delivered in accordance with the notice provisions of the Purchase Agreement.
i)
Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant
to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the
Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company
or by creditors of the Company.
j)
Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to
assert the defense in any action for specific performance that a remedy at law would be adequate.
k)
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 Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and
shall be enforceable by the Holder or holder of Warrant Shares.
l)
Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company
and the Holder.
m)
Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
n)
Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.
********************
(Signature Page Follows)
IN WITNESS WHEREOF, the Company has caused this
Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
KARTOON STUDIOS, INC.
By:__________________________________________
Name:
Title:
NOTICE OF EXERCISE
TO: KARTOON STUDIOS, INC.
(1)
The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes,
if any.
(2)
Payment shall take the form of (check applicable box):
[_] in lawful money of the United States; or
[_] if permitted the cancellation of such number of Warrant
Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum
number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3)
Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
(4)
Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities
Act of 1933, as amended.
The Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
[SIGNATURE OF HOLDER]
| Name of Investing Entity: |
_______________________________ |
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| Signature of Authorized Signatory of Investing Entity: |
_______________________________ |
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| Name of Authorized Signatory: |
_______________________________ |
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| Title of Authorized Signatory: |
_______________________________ |
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| Date: |
_______________________________ |
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required
information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
| Name: |
______________________________ |
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(Please Print) |
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| Address: |
_______________________________ |
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(Please Print) |
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| Phone Number: |
_______________________________ |
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| Email Address: |
_______________________________ |
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Dated: _______________ __, ______
Holder’s Signature: ______________________________
Holder’s Address: _______________________________
SCHEDULE A
ELIGIBILITY REPRESENTATIONS OF HOLDER
This Schedule A should be completed and signed by each Holder
and constitutes a part of the letter agreement.
The undersigned purchaser hereby certifies that it is an “accredited
investor” as that term is defined in Regulation D adopted pursuant to the Securities Act of 1933, as amended (the “Securities
Act”). The specific category(ies) of accredited investor applicable to the undersigned is/are initialed below:
| _____ | any natural person whose individual net worth, or joint net worth with that person's spouse, or spousal equivalent, exceeds $1,000,000; |
| | |
| | For purposes of this questionnaire, "net worth"
means the excess of total assets at fair market value (including personal and real property, but excluding the estimated fair market value
of a person's primary home) over total liabilities. "Total liabilities" excludes any mortgage on the primary home in an amount
of up to the home's estimated fair market value as long as the mortgage was incurred more than 60 days before the securities are purchased,
but includes (i) any mortgage amount in excess of the home's fair market value and (ii) any mortgage amount that was borrowed during the
60-day period before the closing date for the sale of the securities for the purpose of investing in the securities. "Spousal equivalent"
means a cohabitant occupying a relationship generally equivalent to that of a spouse. "Joint net worth" can be the aggregate
net worth of a person and spouse or spousal equivalent; assets do not need to be held jointly to be included in the calculation. |
| | |
| _____ | any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that
person's spouse or spousal equivalent in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same
income level in the current year; |
| | |
| | For purposes of this questionnaire, "income" means
annual adjusted gross income, as reported for federal income tax purposes, plus (i) the amount of any tax-exempt interest income received;
(ii) the amount of losses claimed as a limited partner in a limited partnership; (iii) any deduction claimed for depletion; (iv) amounts
contributed to an IRA or Keogh retirement plan; (v) alimony paid; and (vi) any gains excluded from the calculation of adjusted gross income
pursuant to the Internal Revenue Code of 1986, as amended (the “Code”). |
| | |
| _____ | any director, executive officer, or general partner of the issuer, or any director, executive officer, or general partner of a general
partner of the issuer; |
| | |
| | For purposes of this questionnaire, "executive
officer" means the president; any vice president in charge of a principal business unit, division or function, such as sales, administration
or finance; or any other person or persons who perform(s) similar policymaking functions for the issuer. |
| | |
| _____ | any natural person who holds, in good standing, one of the following professional licenses: the General Securities Representative
license (Series 7), the Private Securities Offerings Representative license (Series 82), or the Investment Adviser Representative license
(Series 65); |
| | |
| _____ | any natural person who is a "knowledgeable employee," as defined in Rule 3c-5(a)(4) under the Investment Company Act of
1940, of the issuer; |
| | |
| _____ | any bank as defined in section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined
in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; |
| | |
| _____ | any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934, as amended; |
| _____ | any investment adviser registered pursuant to Section 203 of the Investment Advisers Act of 1940 or registered pursuant to the laws
of a state; |
| | |
| _____ | any investment adviser relying on the exemption from registering with the SEC under Section 203(l) or (m) of the Investment Advisers
Act of 1940; |
| | |
| _____ | any insurance company as defined in section 2(a)(13) of the Securities Act; |
| | |
| _____ | any investment company registered under the Investment Company Act of 1940, as amended, or a business development company as defined
in section 2(a)(48) of such act; |
| | |
| _____ | any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958, as amended; |
| | |
| _____ | any Rural Business Investment Company as defined in Section 384A of the Consolidated Farm and Rural Development Act; |
| | |
| _____ | any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; |
| | |
| _____ | any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended, if the investment
decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed
plan, with investment decisions made solely by persons that are accredited investors; |
| | |
| _____ | any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940; |
| | |
| _____ | any corporation, Massachusetts or similar business trust, or partnership, or any organization described in section 501(c)(3) of the
Code, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; |
| | |
| _____ | any trust with total assets in excess of $5,000,000 not formed for the specific purpose of acquiring the securities, whose purchase
is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the Securities Act; |
| | |
| _____ | any entity in which all of the equity owners (whether entities themselves or natural persons) are accredited investors and meet the
criteria listed in this questionnaire; |
| | |
| _____ | any entity of a type not listed above, that is not formed for the specific purpose of acquiring the securities and owns investments
in excess of $5,000,000. For purposes of this clause, "investments" means investments as defined in Rule 2a51-1(b) under the
Investment Company Act of 1940; |
| | |
| _____ | any family office, as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940, that (i) has assets under management
in excess of $5,000,000; (ii) is not formed for the specific purpose of acquiring the securities and (iii) has a person directing the
prospective investment who has such knowledge and experience in financial and business matters so that the family office is capable of
evaluating the merits and risks of the prospective investment; |
| | |
| _____ | any family client, as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940, of a family office meeting the requirements
of clause above and whose prospective investment in the issuer is directed by that family office pursuant to clause above. |
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Holder |
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Print Name: |
_______________________ |
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By: |
_______________________ |
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Name: |
_______________________ |
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Title: |
_______________________ |
