As
filed with the Securities and Exchange Commission on May 23, 2018
Registration
No. 333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
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HyreCar
Inc.
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(Exact
name of registrant as specified in its charter)
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Delaware
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7510
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47-248087
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(State
or other jurisdiction of
incorporation or organization)
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(Primary
Standard Industrial
Classification Code Number)
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(I.R.S.
Employer
Identification Number)
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355
South Grand Avenue, Suite 1650
Los
Angeles, California 90071
(888) 688-6769
(Address,
including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Joseph
Furnari
Chief
Executive Officer and Chief Financial Officer
355
South Grand Avenue, Suite 1650
Los
Angeles, California 90071
(888) 688-6769
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Copies
to:
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Nimish
Patel, Esq.
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Philip
Magri, Esq.
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Blake
J. Baron, Esq.
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Magri
Law, LLC
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Mitchell
Silberberg & Knupp LLP
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2642
NE 9th Avenue
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11377
W. Olympic Boulevard
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Fort
Lauderdale, Florida 33334
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Los
Angeles, CA 90064
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(646)
502-5900
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(310)
312-2000
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Approximate
date of commencement of proposed sale to the public:
As
soon as practicable after the effective date of this registration statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box: ☒
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the
same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,
“smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large
accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
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☐
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Smaller
reporting company
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☒
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Emerging
growth company
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☒
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If
an emerging growth company, check indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION
OF REGISTRATION FEE
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Title of Each Class of Securities to be
Registered
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Amount to be
Registered
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Proposed
Maximum
Offering
Price per
Share
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Proposed
Maximum
Aggregate
Offering Price
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Amount of
Registration
Fee
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Common
stock, par value $0.00001 per share
(1)(2)(3)
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2,300,000
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6.00
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(1)
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$
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13,800,000
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(2)
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$
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1,718.10
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Underwriters’
warrants
(4)
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—
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—
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—
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—
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Shares
of common stock underlying underwriters’ warrants
(2)(3)(5)
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138,000
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7.50
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$
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1,035,000
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$
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128.86
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Common
stock underlying outstanding
13%
senior secured convertible promissory
notes held by selling stockholders
(3)(6)
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1,299,199
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$
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6.00
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(1)
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$
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7,795,194
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$
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970.50
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Common
stock underlying common stock purchase warrants held by selling stockholders
(3)(7)
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649,602
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$
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6.00
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(1)
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$
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3,897,612
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$
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485.25
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Total:
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—
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—
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$
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26,527,806
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$
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3,302.71
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(1)
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There
is no current market for the securities or price at which the shares are being offered. Estimated solely for the purpose of
calculating the amount of the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended (the “Securities
Act”).
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(2)
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Includes the offering
price of any additional shares of common stock that the underwriters have the option to purchase to cover over-allotments,
if any.
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(3)
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Pursuant to Rule
416 under the Securities Act, there is also being registered hereby such indeterminate number of additional shares of common
stock of the Registrant as may be issued or issuable because of stock splits, stock dividends, stock distributions, and similar
transactions.
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(4)
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No fee required
pursuant to Rule 457(g) of the Securities Act.
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(5)
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Represents
underwriters’ warrants to purchase up to an aggregate of 6% of the shares of common stock sold in the primary offering,
at an exercise price equal to 125% of the public offering price. As estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(g) under the Securities Act, the proposed maximum aggregate offering price of the underwriters’
warrants is $
1,035,000
(which is equal to 125% of $
828,000
(6%
of $
13,800,000
)).
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(6)
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Represents shares
of common stock issuable to selling stockholders upon the conversion of senior secured convertible promissory notes,
including interest payable thereon through each note’s maturity date, issued by the Registrant in a private placement
offering.
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(7)
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Represents shares
of common stock issuable to selling stockholders upon the exercise of common stock purchase warrants issued by the Registrant
in a private placement offering.
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The
Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective
on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY
NOTE
This Registration Statement
contains two forms of prospectuses: one to be used in connection with the initial public offering of 2,300,000 shares of our
common stock (including 300,000 shares which may be sold upon exercise of the underwriters’ overallotment option to cover
over-allotments, if any) through the underwriters named on the cover page of this prospectus (the “IPO Prospectus”)
and one to be used in connection with the potential resale by certain selling stockholders of an aggregate amount up to 1,948,801
shares of our common stock (the “Selling Stockholder Prospectus”), consisting of up to (i) 1,299,199 shares of our
common stock issuable upon conversion of 13% senior secured convertible promissory notes (the “Notes”) held by the
selling stockholders and (ii) 649,602 shares of our common stock issuable upon exercise of outstanding warrants held by the selling
stockholders, assuming the conversion of all the Notes held by the selling stockholders at each Note’s respective maturity
date at a conversion price of $2.5480. The IPO Prospectus and the Selling Stockholder Prospectus will be identical in all respects
except for the alternate pages for the Selling Stockholder Prospectus included herein which are labeled “Alternate Page for
Selling Stockholder Prospectus.”
The Selling Stockholder
Prospectus is substantively identical to the IPO Prospectus, except for the following principal points:
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they
contain different outside and inside front covers;
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they
contain different Offering sections in the Prospectus Summary section;
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they
contain different Use of Proceeds sections;
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the
Capitalization section is deleted from the Selling Stockholder Prospectus;
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the
Dilution section is deleted from the Selling Stockholder Prospectus;
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a
Selling Stockholder section is included in the Selling Stockholder Prospectus;
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the
Underwriting section from the IPO Prospectus is deleted from the Selling Stockholder Prospectus and a Plan of Distribution
is inserted in its place; and
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the
Legal Matters section in the Selling Stockholder Prospectus deletes the reference to counsel for the underwriters.
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The
registrant has included in this Registration Statement, after the financial statements, a set of alternate pages to reflect the
foregoing differences of the Selling Stockholder Prospectus as compared to the Prospectus.
Sales
of the shares of our common stock registered in the IPO Prospectus and the Selling Stockholder Prospectus will result in two offerings
taking place concurrently which might affect price, demand, and liquidity. This risk and other risks are included in “Risk
Factors” beginning on page 11 of the Prospectus.
The
information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is
not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.
Subject
to Completion, dated May 23,
2018
PROSPECTUS
2,000,000 Shares
of Common Stock
This is an initial public
offering of shares of common stock of HyreCar Inc. We are offering 2,000,000 shares
of our common stock.
Prior to this primary offering, there has
been no public market for our common stock. We anticipate that the public offering price of the shares will be between $5.00 and
$6.00. We have applied to list our common stock on the Nasdaq Capital Market (“Nasdaq”) under the symbol “HYRE.”
If our application is not approved or we otherwise determine that we will not be able to secure the listing of our common stock
on the Nasdaq, we will not complete this primary offering.
We intend to use the proceeds from this primary
offering to be used for working capital or general corporate purposes. See “Use of Proceeds.”
Investing
in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 11 of this prospectus for
a discussion of information that should be considered in connection with an investment in our common stock.
Neither
the Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved of
these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
We
are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012, and we have
elected to comply with certain reduced public company reporting requirements.
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Per Share
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Total
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Initial public offering price
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$
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$
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Underwriting discounts and commissions (1)
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$
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$
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Proceeds, before expenses, to us
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$
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$
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(1)
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See
“Underwriting” beginning on page 58 of this prospectus for additional information regarding underwriting compensation.
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We have granted the underwriters an option
for a period of 45 days to purchase up to 300,000 additional shares on the same terms and conditions set forth above.
The underwriters expect to deliver the shares
against payment in New York, New York on , 2018.
Prospectus
dated , 2018
Dealer
Prospectus Delivery Obligation
Through
and including , 2018 (the 25th day after the date of this prospectus), all dealers that
effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriter and with respect to their
unsold allotments or subscriptions.
You
should rely only on the information contained in this prospectus or any prospectus supplement or amendment. Neither we, nor the
underwriters, have authorized any other person to provide you with information that is different from, or adds to, that contained
in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We take no responsibility
for, and can provide no assurance as to the reliability of, any other information that others may give you. The selling stockholders
are offering to sell and seeking offers to buy our common stock only in jurisdictions where offers and sales are permitted. You
should assume that the information contained in this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations
and prospects may have changed since that date. We are not making an offer of any securities in any jurisdiction in which such
offer is unlawful.
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
Throughout
this prospectus, unless otherwise designated or the context suggests otherwise,
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all
references to the “company,” the “registrant,” “HyreCar,” “we,” “our,”
or “us” in this prospectus mean HyreCar Inc.;
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assumes
an initial public offering price of our common stock of $5.50 per share,
the midpoint of the estimated range of $5.00 to $6.00 per
share;
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all
references to the “primary offering” refer to the offering contemplated by the IPO Prospectus;
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“year”
or “fiscal year” mean the year ending December 31
st
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all
dollar or $ references when used in this prospectus refer to United States dollars; and
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all
share and per share information relating to our common stock in this prospectus has been adjusted to reflect a 1 for 1.8404
reverse stock split implemented by the company on May 17, 2017.
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Concurrent with the primary offering, the
company is registering shares of common stock in connection with the potential resale by certain selling stockholders of an aggregate
amount up to 1,948,801 shares of our common stock (the “Selling Stockholder Prospectus”), consisting of (i) 1,299,199
shares of our common stock issuable upon conversion of the Notes held by selling stockholders and (ii) 649,602 shares of our common
stock issuable upon exercise of outstanding warrants held by the selling stockholders, both calculated using the midpoint of the
price range listed on the cover page of this prospectus and assuming the conversion of all the Notes at each Note’s respective
maturity date held by the selling stockholders. Please read the risk factors, including the risk factor titled “
Sales
of our common stock in the primary offering will be taking place concurrently with common stock registered by selling stockholders
which might affect the price, demand, and liquidity of our common stock”
on page 16.
MARKET
DATA
Market data and certain industry data and
forecasts used throughout this prospectus were obtained from internal company surveys, market research, consultant surveys, publicly
available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications,
consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed
to be reliable, but the accuracy and completeness of such information is not guaranteed. We have not independently verified any
of the data from third party sources, nor have we ascertained the underlying economic assumptions relied upon therein. Similarly,
internal surveys, industry forecasts and market research, which we believe to be reliable based on our management’s knowledge
of the industry, have not been independently verified. Forecasts are particularly likely to be inaccurate, especially over long
periods of time. Statements as to our market position are based on the most currently available data. While we are not aware of
any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and
are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this
prospectus.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains “forward-looking statements.” Forward-looking statements reflect the current view about future
events. When used in this prospectus, the words “anticipate,” “believe,” “estimate,” “expect,”
“future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they
relate to us or our management, identify forward-looking statements. Such statements, include, but are not limited to, statements
contained in this prospectus relating to our business strategy, our future operating results and liquidity and capital resources
outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy
and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated
by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance.
We caution you therefore against relying on any of these forward-looking statements. Important factors that could cause actual
results to differ materially from those in the forward-looking statements include, without limitation:
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our services will be adversely affected by competitive products, technologies and/or
pricing;
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we will be able to protect our intellectual property;
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we will be able to raise funds, as and when we need to, for our operations; and
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we will be successful at managing the risks involved in the foregoing.
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Should
one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results
may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Factors
or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict
all of them. We cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable
law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform
these statements to actual results.
PROSPECTUS
SUMMARY
This
summary provides a brief overview of the key aspects of our business and our securities. The reader should read the entire prospectus
carefully, especially the risks of investing in our common stock discussed under “Risk Factors.” Some of the statements
contained in this prospectus, including statements under this section and “Risk Factors”, are forward-looking statements
and may involve a number of risks and uncertainties. Our actual results and future events may differ significantly based upon
a number of factors. The reader should not put undue reliance on the forward-looking statements in this document, which speak
only as of the date on the cover of this prospectus.
Overview
HyreCar
Inc. was formed as a corporation in the State of Delaware on November 24, 2014. Our founders identified the need for a car-sharing
platform for individuals who wanted to drive for ride-sharing companies such as Uber Technologies, Inc. (“Uber”) and
Lyft Inc. (“Lyft”), but whose automobiles could not meet the standards imposed by such ride-sharing companies. For
example, Uber maintains strict guidelines regarding the types of cars a driver can use. Although guidelines relating to cars can
differ by state, in general the use of two door coupes, motorcycles and cars that are 12 years or older are excluded. Our founders,
before deciding to purchase qualifying sedans that met Uber’s strict guidelines, first inquired as to whether there were
any rental options available from Uber that would allow them to drive for the ride-sharing platform. To their surprise, there
were no rental options available, other than a shadow industry of individuals renting cars to one another.
HyreCar
is a unique peer-to-peer car-sharing marketplace that allows car owners (collectively, “Owners”) to rent their idle
cars to ride-sharing service drivers (collectively, “Drivers”). By conveniently sourcing vehicles from individual
Owners, part-time Drivers may easily enter and exit the market. Accordingly, the company’s business model provides us with
the opportunity to satisfy fluctuating transportation demand in cities around the United States by matching Owners and Drivers.
Our
business is based on a proprietary car-sharing marketplace developed to (i) enroll Owners and Drivers, (ii) facilitate the matching
of Owners and Drivers and (iii) log rental activity for Owners and Drivers. All transactions related to the rental (including,
but not limited to, background checks, rentals, deposits and insurance costs) are run securely through the HyreCar platform. Drivers
and Owners access their rental or car dashboards through a unique login. Drivers can easily initiate, terminate or extend a rental
through the platform while Owners can manage their car or fleet of cars through the platform.
We believe we have a competitive
advantage with our commercial automobile policy that covers both Owners and Drivers. The policy is specifically designed to cover
the period of time in which a Driver is operating an Owner’s vehicle while not actively operating a vehicle on a ride-sharing
platform, such as Uber or Lyft. During the periods when Drivers are actively operating on a ride-sharing platform, the insurance
defaults to the state mandated insurance provided by the applicable ride-sharing company. To our knowledge, we are the only provider
of this car-matching service which is made possible by this unique insurance product.
In 2015, our first
full year of operations, we earned revenues of $29,292 with an operating loss of $108,371. In 2016, our second full year of operations,
we earned revenues of $515,437 with an operating loss of $838,560. In 2017, our third full year of operations, we earned revenues
of $3,223,874 with an operating loss of $4,066,950. In 2017, revenues grew 525% and our operating loss grew 385% as compared to
operations in 2016.
To date, the majority
of our sales growth has been through organic search traffic. During the three months ended March 31, 2018, we spent $407,538 on
advertising. During the years ended December 31, 2017 and 2016, we spent $433,506 and $123,479, respectively, on marketing. Going
forward however, we intend to significantly increase our spending on marketing because we believe that on-line channels and off-line
brand awareness advertising will provide substantial opportunities for growth.
Industry
and Market Opportunities
Our company was founded
to capitalize on a combination of two growth markets: ride-sharing (an industry led by Uber and Lyft) and car-sharing (an industry
led by companies such as Car2go N.A., LLC, ZipCar, Inc. and Turo, Inc. Our customers are the Drivers that use our car-sharing
platform to rent a car and then use that car to make money driving for either Uber or Lyft. Finding enough cars and drivers to
meet demand has been a problem for ride-sharing companies. In an online post dated November 24, 2013, TechCrunch.com stated:
“
In
some more established markets, Uber is struggling to keep enough cars on the road to meet the demand — and that’s
a problem. It means cars either aren’t available, or if they are, there are longer wait times, and lower overall satisfaction
with the service. Uber has tried to deal with this in the past by instituting surge pricing — which both curbs demand and
ensures that drivers are more likely to continue driving at peak times.
But ultimately, the company knows that
the only way to deal with that demand is to sign up more drivers. And one way to do that is by ensuring that they’ll have
a car to drive if they’ve been approved for the Uber platform.”
We believe that
we are the only peer-to-peer car-sharing platform focused on the ride-sharing industry in the United States. We have added
over 5,490 new Drivers, matching them with Owner vehicles that have been used on the Uber and Lyft platforms over the past
several years. During the years ended December 31, 2017 and 2016, we added approximately 4,430 and 1,060 new Drivers,
respectively, into cars so that they could drive for Uber and Lyft. These numbers represent an equivalent 318% growth rate in
new Drivers onto the HyreCar platform year over year.
Our Relationship with Lyft
On
May 17, 2017, we announced an arrangement with Lyft that allows us to activate our Drivers through Lyft’s sign-up portal.
This sign-up process allows drivers to begin providing services on Lyft’s platform within one business day. The majority
of cars on our platform come pre-certified for ride-sharing under Lyft's vehicle requirements, enabling new and existing drivers
to find a car and get on the road. The Lyft arrangement has not been formalized in a written agreement. We are also in talks with
other ride-sharing companies to establish similar partnerships; however, no formal arrangements have been entered into to date.
Our Strengths
Using our platform,
vehicle Owners can post their cars to our marketplace and Drivers can browse car inventory prior to rental. Once a Driver finds
a car, he or she creates a profile, enters his or her personal information and credentials (including, address, city, state, copy
of applicable state issued driver’s license, Uber or Lyft credentials and SSN) and submits a credit card or debit card for
payment. We then perform a criminal background check, DMV driving record check, Homeland Security Watch-list and Sex Offender
database check. HyreCar’s screening criteria is stricter than Uber and Lyft’s background check. We are focused on
maintaining a safe user experience and ensuring that all transactions between Owners and Drivers are processed through a secure
web platform.
Why
Drivers Use Our Service
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Attractive
Market
: Drivers’ ability to earn income by driving for a ride-sharing business.
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Pay-As-You-Go
:
Drivers are not locked into long-term lease agreements, long-term monthly payments or
subscription fees.
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Convenience
:
Drivers can pick up the car from someone close by. Time from registration to getting
behind the wheel currently averages under 48 hours.
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Transparency
and Trust
: There are no hidden fees and only Owners that have been properly screened
are permitted to use the platform.
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Customer
Experience
: Application of game-design elements (i.e. gamification) of the platform
keeps Drivers engaged.
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Why
Owners Use Our Service
Data from a national
survey of driving behavior indicates that private vehicles are in use 5% or less during any given day, or about one hour per day.
Given the excess capacity of vehicle hours, higher vehicle utilization rates, and lower vehicle ownership rates, we expect a consumer
shift towards acceptance of car-sharing. Based on the results of the survey, we believe our platform is advantageous for the following
reasons:
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Passive
Income
: We often match Owners with long term Drivers, which provides the Owners with
a steady source of passive income resulting from our seamless re-booking process.
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Insurance
:
Liability policy fills the gaps left by personal and ride-sharing policies.
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Review
of Drivers
: Drivers must pass our extensive background checks and most Drivers have
also passed the Uber and Lyft background checks.
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Insurance
Coverage
A key component to
our business is our commercial auto policy. The two sided nature of our platform means that we need to insure both the Driver and
the Owner. Prior to any rental, the Driver and Owner are provided an insurance ID card that lists the driver’s name and the
vehicle identification number. Insurance is typically generated twenty-four hours in advance of the commencement of the rental
through to when the Owner confirms drop-off of the rented vehicle by the Driver. The vehicle pick-up and drop-off is all managed
through our platform. An owner takes pictures of his or her vehicle prior to pressing the “Confirm Pick-up” button
on the HyreCar mobile app. (If pictures are not taken and the button is not pressed, it provides grounds for a claim denial; subsequent
liability and/or physical damage rests solely on the Driver and Owner.) After the rental is completed, the Owner presses the “Confirm
Drop-off” button on the HyreCar mobile app and the rental ends.
American Business
Insurance Services (“ABI”) is our managing general underwriter (“MGU”). ABI handles all of our back-end
insurance generation and processing through a seamless application programming interface connection with the HyreCar databases.
For insurance purposes
a vehicle rental is broken into four distinct driving periods. Period 0 is when the Driver has picked a vehicle up from the Owner
and is driving with the Uber or Lyft app turned-off. Period 1 is when the Driver has the Uber or Lyft app turned-on, but has not
yet accepted a fare. Period 2 is when the Driver has accepted a fare and is on the way to pick-up a passenger. Period 3 is when
a passenger is in the vehicle. The HyreCar policy is specifically written to cover Period 0 (periods in which the Drivers are operating
HyreCar vehicles OFF the Uber or Lyft platform). During the periods when Drivers are operating ON the Uber or Lyft platform (Periods
1, 2 and 3), the HyreCar insurance subordinates to state mandated insurance provided by Uber and Lyft. This enables us to keep
insurance costs and liability low by leveraging state mandated insurance policies provided by the transportation network companies
(“TNCs”).
Business
Structure and Strategy
We operate out of
our corporate office in Los Angeles, California. Our technology platform allows for a relatively small staff compared to the size
and reach of our business. For example, we operate in 34 states plus the District of Columbia with no physical presence in those
states, with the exception of California. Our expansion into new states is currently only limited by specific insurance considerations.
Sales and marketing
are vital to our future profitability and growth because most potential customers are initially reluctant to pay upfront fees.
Early interactions with our customers indicated that if customers were walked through the process once by a member of our sales
and marketing team, the customers were more inclined to use and continue to use our services for a longer period of time. Accordingly,
we implemented a one-man sales team in May 2016, and our revenue rose 193% that month from the prior month. Since then, building
a strong sales team has become a priority.
We have expanded the
sales team, which is now divided into a Driver team and an Owner team. The Driver team has a total of 15 sales contractors, which
are split into three sub-teams. Driver team members make approximately 30 calls a day to new customer leads with a mandate to
facilitate drivers into cars via the HyreCar platform. The Owner team has a total of six sales contractors split evenly into the
following three regions: west coast states, central states and east coast states. The Owner sales team’s primary objective
is to get Owners to list their cars on the HyreCar platform.
The sales team headcount
has reached critical mass and we expect to maintain current headcount through 2018 to hit a forecast growth rate of 14% month
over month. Capping headcount is a key assumption that we believe will drive profitability. The ability to grow topline revenue
while capping sales expense is achieved through a combination of marketing and technology. Organic bookings, defined as a rental
without sales agent contact, have jumped from 7.5% of revenue in 2016 to an estimated 14.5% in 2017. Attribution of organic bookings
is directly related to the quality of marketing leads generated and user experience / user interphase enhancements (UI/UX) per
technology development. The company’s expectation is that both aspects contribute to low operating expense growth in relation
to revenue, which in-turn, the company believes, will lead to higher gross profit in 2018.
Technology contractors
are the second largest planned use of proceeds from the primary offering. We currently operate with three overseas development
teams (two in Vietnam and one in India) and two teams in the United States, including multiple full-time developers based out
of our home office in Los Angeles. These teams are tasked with maintaining the current site, addressing bugs in the current code
base and small improvements to the Owner and Driver user experience and user interphase. Maintenance of the current site includes
transitioning back-end legacy code to graphOL, applications and proprietary software, with the goal of increasing organic bookings
and automating processes for scale.
Support
and operations underpin the company. Insurance claims management, Owner payment resolutions,
Driver payment resolutions, collections, chat support, email support, phone support,
late rentals, car recovery, Driver verifications, insurance generation and insurance
verification all work together to create what we believe is a “best in class”
customer service experience. Currently, we have 13 in-house support staff and three team
members in India. Our plan is to build a domestic support team that is client-facing
and use the team in India for special projects and administrative tasks. We believe that
customer service is critical to our goal of bringing new Drivers/Owners onto the platform
and retaining those customers who have already utilized our services.
Revenue
Model
We generate revenue
by taking a fee out of each rental processed on our platform. Each rental transaction represents a Driver renting a car from an
Owner. Drivers pay a weekly rental rate,
plus
direct insurance costs and a 10% HyreCar fee. Owners receive their weekly
rental rate
minus
a 15% HyreCar fee. For example, the average weekly rental rate of a HyreCar vehicle is $200 (“Weekly
Rental”), plus direct insurance costs, plus a 10% HyreCar fee ($20), totaling $290 in total gross billings. This gross billing
amount is charged to the Driver’s account in one lump sum. $170 or 85% of the weekly rental is subsequently transferred
to the Owner. HyreCar earns revenues from the transaction fee of $50 and gross fees from the insurance of $70. Accordingly, the
GAAP reportable revenue recognized by HyreCar is $120 in this transaction (as detailed in the table below).
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Weekly Rental
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$
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200.00
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|
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Direct Insurance
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$
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70.00
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|
|
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HyreCar Driver Fee
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$
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20.00
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(10% of weekly rental)
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HyreCar Gross Billings
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$
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290.00
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Owner Payment
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$
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170.00
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(85% of weekly rental)
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HyreCar Revenue
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$
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120.00
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Gross billings is
an important measure by which we evaluate and manage our business. We define gross billings as the amount billed to Drivers, without
any adjustments for amounts paid to Owners, refunds or rebates. Gross billings include transactions from both our revenues recorded
on a net and a gross basis. It is important to note that gross billings is a non-GAAP measure and as such, is not recorded in
our financial statements as revenue. However, we use gross billings to asses our business growth, scale of operations and our
ability to generate gross billings is strongly correlated to our ability to generate revenues. Gross
billings
may also be used to calculate net revenue margin, defined as the company’s GAAP reportable revenue over gross billings.
Using the definition of net revenue margin and the example above, HyreCar’s net revenue margin is equal to approximately
41% ($120 HyreCar’s GAAP revenue over $290 Total Gross Billings). A breakout of revenue components is provided in MD&A
and the financial footnotes.
The table below sets
forth a reconciliation of our GAAP reported revenues to gross billings for the three months ended March 31, 2018 and 2017 and
the years ended December 31, 2017 and 2016:
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|
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(Unaudited) Three Months ended March 31, 2018
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|
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(Unaudited) Three Months ended March 31, 2017
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Year
ended December 31, 2017
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Year
ended December 31, 2016
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Revenues (GAAP reported revenue)
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$
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1,714,183
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$
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505,325
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$
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3,223,874
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$
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515,437
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Add: Refunds, rebates and deferred revenue
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384,187
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136,166
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766,487
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|
|
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125,720
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Add: Owner payments (not recorded in financial statements)
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2,347,760
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749,900
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5,030,933
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|
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831,731
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Gross billings (non-GAAP measure not recorded in financial statements)
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$
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4,446,130
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$
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1,391,391
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|
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$
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9,021,294
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|
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$
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1,472,888
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Marketing
Plan
In November 2016, our
marketing team completed an in-depth study of keyword searches using Google Analytics. Thirty keywords and phrases were chosen
and analyzed, allowing the team to determine in which cities the persons searching for the keywords and phrases were located. For
example, 400,000 people in Los Angeles googled key words like, “rent a car for Uber”, “Uber”, and “Uber
Leasing.” Overlaying our customer demographics with the Google search results created a Driver/Owner affinity population
of over 25 million potential customers, with the bulk of the 25 million concentrated in 16 core geographic locations. Core geographies
represent the top 16 metropolitan statistical areas, or MSAs, in the country based off population count. The 34 states we operate
in encompass all 16 MSAs with additional secondary and tertiary cities contributing as well.
Insurance Opportunity
A large percentage
of our cost of revenues is direct insurance expense, which we pay to the insurance company. The premiums are broken into two categories,
liability insurance and physical damage. The unique nature of our insurance enables us to keep insurance costs and liability low
by leveraging state mandated insurance policies provided by the TNCs. Our insurance premiums have exceeded liability and physical
damage claims throughout 2017, and we intend to examine self-insurance options in 2018.
Current estimates are
that in excess of 35% of all commercial property and casualty premiums are in some form of alternative risk structure. The company
has explored many forms of alternative risk structures including self-insurance through captive insurance programs and policies.
Specifically, cell captives are entities consisting of a core and an indefinite number of cell entities which are kept legally
separate from each other. A captive or protected cell is an ideal mechanism to deal with a large number of self-insured retention(s).
The benefits of having a cell captive include:
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●
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generating
a financial return through participating in the risk;
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●
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increased
control over potential insurance coverage and costs;
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●
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illustrating
to a carrier the willingness to share in the risk, and
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●
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creating
more stability in the insurance program.
|
Pending a Q2 2018 feasibility
study into the benefits of cell captives, the company believes it will be able to cut direct insurance costs by approximately 30%
from 2017 premium levels. A potential 30% reduction in annualized premiums is a significant cost savings that increases the company’s
gross profit margin, and we believe it will contribute to company profitability in 2018. The company estimates some form of insurance
cost savings will be in-place by the end of Q2 2018. To the extent the company offers insurance directly, then the company will
disclose any related revenues on the face of its income statements, in related notes and in the MD&A section of the company’s
periodic reports.
In addition to self-insurance,
the company is also working with our Managing General Agent (“MGA”) to develop new and innovative insurance products.
The company has proposed a new type of owner “lay-up” insurance for vehicle owners on the HyreCar platform. Lay-up
insurance replaces the need for an owner’s personal auto insurance policy and would represent significant cost savings when
compared to other insurance options available in the market today. Offering this type of insurance product benefits the company
in multiple verticals, including reduced insurance claim expense, greater customer retention and stickiness to the HyreCar platform.
Our MGA has begun piloting lay-up insurance to vehicle owners.
Company and Other Information
HyreCar Inc. was incorporated
in the State of Delaware on November 24, 2014. Our principal executive offices and mailing address are 355 South Grand Avenue,
Suite 1650, Los Angeles, California 90071. Our main telephone number is (888) 688-6769. Our corporate website address is: www.hyrecar.com.
The information contained on, or that can be accessed through, our website is not a part of this prospectus and should not be relied
upon with respect to this offering.
HyreCar, the HyreCar
logo and any other current or future trademarks, service marks and trade names appearing in this prospectus are the property of
HyreCar Inc. Other trademarks and trade names referred to in this prospectus are the property of their respective owners. Solely
for convenience, the trademarks and trade names in this prospectus are referred to without the symbols ® and ™, but such
references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable
law, their rights thereto.
This Prospectus Summary
highlights information contained elsewhere and does not contain all of the information that you should consider in making your
investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial
statements and the related notes included elsewhere in this prospectus. You should also consider, among other things, the matters
described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in each case appearing elsewhere in this prospectus.
Nasdaq Listing Application and Proposed
Symbol
We have filed an application
to have our common stock listed on the Nasdaq under the symbol “HYRE.” No assurance can be given that our application
will be approved. If our application is not approved or we otherwise determine that we will not be able to secure the listing
of our common stock on the Nasdaq, we will not complete the primary offering.
Summary
Risk Factors
An
investment in our common stock involves a high degree of risk. You should carefully consider the risks summarized below. These
risks are discussed more fully in the “Risk Factors” section immediately following this Prospectus Summary. These
risks include, but are not limited to, the following:
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●
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Our
limited operating history makes it difficult to evaluate our current business and prospects
and may increase the risks associated with your investment.
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●
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If
we do not effectively expand and train our sales team, we may be unable to add new customers
or increase listings or rentals on our platform, and our business will be adversely affected.
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●
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Fluctuating
economic conditions make it difficult to predict revenue for a particular period, and
a shortfall in revenue may harm our operating results.
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●
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We
do not have written contracts with either Uber or Lyft and our current relationships
with either of these companies could change in the future, which could adversely affect
our revenues.
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●
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The
ride-sharing model may not continue to grow, which would adversely affect our business.
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●
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Our
unique peer to peer structure could be duplicated and our inability to accurately predict
user behavior could negatively impact our sales projections.
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●
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The
market forecasts included in this prospectus may prove to be inaccurate, and even if
the markets in which we operate achieve growth, we cannot assure you our business will
grow at similar rates, if at all.
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●
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Our
insurance coverage program is unique to our business, but it may not continue to be cost
effective in the future.
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●
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Our
operations are dependent on our current management. The loss of any member of our management
team could adversely affect our operations and financial results.
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●
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Our
results of operations are likely to vary significantly from period to period, which could
cause the price of our common stock to decline.
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●
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We
have had operating losses each year since our inception, and may not achieve or maintain
profitability in the future.
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●
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Our
independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as
a going concern in its report on our audited financial statements included in this prospectus.
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●
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We
face intense competition and could lose market share to our competitors, which could
adversely affect our business, financial condition and results of operations.
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●
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Changes
in government regulations could have an adverse impact on our business.
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●
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Any
material limitation in the fuel supply could adversely affect our business.
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●
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There
can be no assurance of any return on your investment.
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●
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Because
the public offering price of our common stock will be substantially higher than the pro forma net tangible book value per
share of our outstanding common stock following the primary offering, new investors will experience immediate and substantial
dilution.
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●
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We
are an emerging growth company and we cannot be certain if the reduced disclosure requirements
applicable to emerging growth companies will make our common stock less attractive to
investors.
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●
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We
have not conducted an evaluation of the effectiveness of our internal control over financial
reporting and will not be required to do so until 2018. If we are unable to implement
and maintain effective internal control over financial reporting investors may lose confidence
in the accuracy and completeness of our financial reports and the market price of our
common stock may be negatively affected.
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●
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There
is presently no trading market for our common stock and no assurance can be given that
a trading market will exist in the future, even if our listing application is approved
by the Nasdaq Stock Market LLC. Accordingly, you may be unable to liquidate your investment.
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●
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Because
we do not anticipate paying any cash dividends on our capital stock in the foreseeable
future, capital appreciation of our common stock, if any, will be your sole source of
gain.
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●
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We
may require additional capital to support business growth, and this capital might not
be available on acceptable terms, if at all.
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●
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Future sales and issuances of our common stock or rights to purchase common stock pursuant to our 2016 Equity Incentive Plan (the “2016 Equity Incentive Plan”) or 2018 Equity Incentive Plan (the “2018 Equity Incentive Plan”) could result in additional dilution of the percentage ownership of our stockholders.
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●
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We
will incur increased costs as a result of being a public company.
|
Implications
of Being an Emerging Growth Company
We
qualify as an “emerging growth company” as defined in the JOBS Act. As an emerging growth company, we have elected
to take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies.
These provisions include:
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●
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the
requirement that we provide only two years of audited financial statements in addition
to any required unaudited interim financial statements with correspondingly reduced “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
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●
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reduced
disclosure about our executive compensation arrangements;
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●
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an
exemption from the requirement that we hold a non-binding advisory vote on executive
compensation or golden parachute arrangements; and
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●
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an
exemption from the auditor attestation requirement in the assessment of our internal
control over financial reporting.
|
We
may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company.
We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which
we have total annual gross revenues of $1 billion or more; (ii) the last day of our fiscal year following the fifth anniversary
of the date of the completion of this offering; (iii) the date on which we have issued more than $1 billion in nonconvertible
debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules
of the SEC. We may choose to take advantage of some but not all of these exemptions. We have taken advantage of reduced reporting
requirements in this prospectus. Accordingly, the information contained herein may be different from the information you receive
from other public companies in which you hold securities.
Reverse
Stock Split
On May 17, 2017, we effected
a 1-for-1.8404 reverse stock split of our issued and outstanding shares of common stock. All shares of our common stock referred
to in this prospectus reflect the reverse split.
Going
Concern
Our financial statements
appearing elsewhere in this prospectus have been prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. During the year ended December 31, 2017, we generated revenues
of $3,223,874 and incurred a net loss of $4,271,732. During the year ended December 31, 2016, we earned revenues of $515,437 and
incurred a net loss of $866,676.
We intend to rely on
debt and equity financing for working capital until positive cash flows from operations can be achieved, which may never occur.
We have incurred operating losses since inception. These matters raise substantial doubt about our ability to continue as a going
concern. Throughout the next twelve months, we expect to fund our operations from additional debt and/or equity offerings, and
increased revenue from our operations. If we cannot raise additional short-term capital, we may consume all of our cash reserved
for operations. There are no assurances that we will be able to raise capital on terms acceptable to us. If we are unable to obtain
sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our
business, financial condition and operating results. The balance sheet does not include any adjustments that might result from
these uncertainties. As a result, our independent registered public accounting firm included an explanatory paragraph in its report
on our financial statements as of and for the years ended December 31, 2017 and 2016 with respect to this uncertainty.
THE
OFFERING
|
Common stock offered by us
|
2,000,000 shares.
|
|
|
|
|
Common stock outstanding prior to the primary offering (1)
|
7,946,876 shares common stock
|
|
|
|
|
Common stock to be outstanding after the primary offering (2)
|
9,946,876 shares (10,246,876 shares if the underwriters exercise their option to purchase additional shares in full).
|
|
|
|
|
Over-allotment option of common stock offered by us
|
The underwriters have a 45-day option to purchase up to 300,000 additional shares of common stock.
|
|
|
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Use of proceeds
|
We currently intend to use the net proceeds to us from this primary offering for general corporate purposes, including the prepayment of outstanding amounts payable to the holders of the Notes, working capital, sales and marketing activities and general and administrative matters. See the section of this prospectus titled “Use of Proceeds” beginning on page 19.
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Proposed Nasdaq ticker symbol
|
“HYRE.” The listing of our common stock on the Nasdaq is a condition to consummating the primary offering.
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Risk factors
|
Investing in our securities is highly speculative. See the section of this prospectus titled “Risk Factors” beginning on page 11.
|
|
(1)
|
The number of shares of common stock outstanding prior to the primary offering, as set forth in the table above, includes 494,851 shares of issued but unvested restricted stock subject to forfeiture and assumes the conversion of all outstanding shares of our convertible preferred stock as of April 30, 2018 into 2,429,638 shares of our common stock.
|
|
(2)
|
The number of shares of common stock outstanding after this primary offering, as set forth in the table above, is based on 7,946,876 shares of our common stock outstanding as of April 30, 2018, which includes (i) 494,851 shares of issued but unvested restricted stock subject to forfeiture and (ii) the conversion of all outstanding shares of our convertible preferred stock and excludes, as of that date, the following:
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●
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warrants to purchase up to 200,000 shares of our common stock at a price of $2.10 per share;
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●
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warrants to purchase up to 123,659 shares of our common stock at a price of $2.00 per share;
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●
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stock options to purchase 991,891 shares of our common stock at exercise prices between $0.71 and $1.75 per share;
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●
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3,000,000 shares of our common stock available for future issuance under our 2018 Equity Incentive Plan;
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●
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up to 1,299,199 shares issuable upon the conversion of $3,046,281 in principal and $264,057 of accrued but unpaid interest of the Notes as of the maturity date of each Note, assuming we have not made any interest payments in cash and each Note is initially convertible on its maturity date, which number of shares was determined by dividing the total of the aggregate principal and the estimated accrued interest amounts by $2.5480; and
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●
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warrants to purchase up to 649,602 shares of our common stock at a price of $3.185 per share issuable to the holders of the Notes;
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●
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warrants to purchase up to 129,920 shares of our common stock at a price of $2.80 per share issued to the placement agent for the Notes, assuming such Notes are initially convertible into 1,299,199 shares of our common stock;
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●
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warrants to purchase up to 138,000 shares of our common stock issuable to the underwriters in connection with this primary offering.
|
Unless
expressly indicated or the context requires otherwise, all information in this prospectus assumes:
|
|
●
|
the
conversion of all outstanding shares of our convertible preferred stock as of April 30,
2018 into 2,429,638 shares of our common stock in connection with this primary offering;
and
|
|
|
●
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the filing
of our restated certificate of incorporation and the effectiveness of our restated bylaws
in connection with this primary offering.
|
RISK
FACTORS
Our
business is subject to many risks and uncertainties, which may affect our future financial performance. If any of the events or
circumstances described below occur, our business and financial performance could be adversely affected, our actual results could
differ materially from our expectations, and the price of our stock could decline. The risks and uncertainties discussed below
are not the only ones we face. There may be additional risks and uncertainties not currently known to us or that we currently
do not believe are material that may adversely affect our business and financial performance. You should carefully consider the
risks described below, together with all other information included in this prospectus including our financial statements and
related notes, before making an investment decision. The statements contained in this prospectus that are not historic facts are
forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from
those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial
condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and investors
in our securities may lose all or part of their investment.
Risks
Related to Our Business and Our Industry
Our
limited operating history makes it difficult to evaluate our current business and prospects and may increase the risks associated
with your investment.
We
were founded in 2014. Our limited operating history makes it difficult to evaluate our current business and prospects and plan
for and model our future growth. We have encountered and will continue to encounter risks and uncertainties frequently encountered
by rapidly growing companies in developing markets. If our assumptions regarding these risks and uncertainties are incorrect or
change in response to changes in the ride-sharing or car-sharing market, our results of operations and financial results could
differ materially from our plans and forecasts. Although we have experienced rapid growth since our inception, there is no assurance
that such growth will continue. Any success we may experience in the future will depend in large part on our ability to, among
other things:
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●
|
maintain
and expand our customer base and the ways in which customers use our platform;
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●
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expand
revenue from existing customers through increased or broader use of our platform;
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●
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improve
the performance and capabilities of our platform through research and development;
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●
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effectively
expand our business domestically and internationally, which will require that we rapidly expand our sales force and fill key
management positions; and
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●
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successfully
compete with other companies that currently provide, or may in the future provide, solutions like ours.
|
If
we are unable to achieve our key objectives, including the objectives listed above, our business and results of operations will
be adversely affected and the fair market value of our securities could decline.
If
we do not respond appropriately, the evolution of the automotive industry towards autonomous vehicles and mobility on demand services
could adversely affect our business.
The
automotive industry is increasingly focused on the development of advanced driver assistance technologies, with the goal of developing
and introducing a commercially-viable, fully automated driving experience. The high development cost of active safety and autonomous
driving technologies may result in a higher risk of exposure to the success of new or disruptive technologies different than those
being developed by us. There has also been an increase in consumer preferences for mobility on demand services, such as car- and
ride-sharing, as opposed to automobile ownership, which may result in a long-term reduction in the number of vehicles per capita.
These evolving areas have also attracted increased competition from entrants outside the traditional automotive industry. If we
do not continue to innovate to develop or acquire new and compelling products that capitalize upon new technologies in response
to OEM and consumer preferences, this could have an adverse impact on our results of operations.
If
we do not effectively expand and train our direct sales force, we may be unable to add new customers or increase sales to our
existing customers, and our business will be adversely affected.
We
continue to be substantially dependent on our direct sales force to obtain new customers and increase sales with existing customers.
There is significant competition for sales personnel with the skills and technical knowledge that we require. Our ability to achieve
significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers
of sales personnel to support our growth. New hires require significant training and may take significant time before they achieve
full productivity. Our recent hires and planned hires may not become productive as quickly as we expect, and we may be unable
to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. In addition,
because we continue to grow rapidly, a large percentage of our sales force is new to our company. If we are unable to hire and
train a sufficient number of effective sales personnel, or the sales personnel we hire are not successful in obtaining new customers
or increasing sales to our existing customer base, our business will be adversely affected.
Fluctuating
economic conditions make it difficult to predict revenue for a particular period, and a shortfall in revenue may harm our operating
results.
Our
revenue depends significantly on general economic conditions and the demand for products in the ride-sharing and car-sharing market.
Economic weakness, customer financial difficulties, and constrained spending on ride-sharing may result in decreased revenue and
earnings. Such factors could make it difficult to accurately forecast our sales and operating results.
We
have no formal contracts with either Uber or Lyft and our current relationships with either of these companies could change in
the future, which could adversely affect our revenues.
Although we have deployed
drivers and cars to the systems of both Uber and Lyft since our operations began in 2015, there is currently no formal contractual
relationship in place with either company. On May 17, 2017, we announced an arrangement with Lyft that allows us to activate our
Drivers through Lyft’s sign-up portal; however, this is an oral arrangement that has not been memorialized in a written
agreement. Consequently, each of these relationships could be discontinued at any time. In addition, virtually all of our revenue
is generated by cars and drivers operating on both the Uber or Lyft platform and therefore this concentration represents a high
degree of risk to us and to potential investors.
The
ride-sharing model may not continue to grow, which would adversely affect our business.
Our
business and future growth is significantly dependent on the continued success of each of Uber, Lyft, and other software-based
systems that have come into the marketplace to compete with standard taxicab transportation organizations.
While
the effect of those companies has been to decrease the cost and therefore increase the utilization of ride-sharing, there can
be no assurance that consumer utilization of these systems will continue to grow, or that competition and the resulting price
pressure will not undermine the viability of these types of systems, thereby adversely affecting our business.
Our
unique peer to peer structure could be duplicated and our inability to accurately predict user behavior could negatively impact
our sales business.
Although
to date neither Uber nor Lyft have endeavored to develop a peer-to-peer system to match drivers and car owners as we are doing,
there can be no assurance that either one of these companies or other competitors subsequently entering the marketplace will not
endeavor to do so, and there can be no assurance that such competition will not have a negative impact on our business.
Furthermore,
although several attempts to match up fleets of cars owned by operators with Uber and Lyft drivers have failed, there can be no
assurance that other entities will not enter the marketplace on this basis with economic and logistical models that solve the
problems that caused this failure.
The
market forecasts included in this prospectus may prove to be inaccurate, and even if the markets in which we operate achieve growth,
we cannot assure you our business will grow at similar rates, if at all.
Growth
forecasts are subject to significant uncertainty and are based on assumptions and estimates, which may not prove to be accurate.
Forecasts relating to the expected growth in the ride-sharing market, including the forecasts or projections referenced in this
prospectus, may prove to be inaccurate. Even if the ride-sharing market experiences the forecasted growth, we may not grow our
business at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business
strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this prospectus
should not be taken as indicative of our future growth.
Our
insurance coverage program is unique to our business, but it may not continue to be cost effective in the future.
We
are currently the only company in the ride-sharing sector that has succeeded in structuring a cost-effective insurance program
to provide for our liability when a driver and a car are carrying passengers. However, we have a short history in assessing the
correlation between personal injury and property damage risks and the cost of insurance premiums, and there can be no assurance
that our current projections will continue to be cost effective in the future.
Our
operations are dependent on our current management. The loss of any member of our management team could adversely affect our operations
and financial results.
We
are highly dependent upon the retention of the services of our current management, specifically Joseph Furnari, Michael Furnari,
Anshu “Andy” Bansal and Abhi Arora. The loss of any one of these individuals could adversely affect our operations
and financial results. Our business also depends on our ability to attract and retain additional highly qualified management,
technical, operating, and sales and marketing personnel. We do not currently maintain key person life insurance policies on any
of our employees. We do not have fixed term employment agreements with any of our management employees, all of whom could terminate
their relationship with us at any time.
Our
results of operations are likely to vary significantly from period to period, which could cause the price of our common stock
to decline.
Our
results of operations have varied significantly from period to period. For example, the months of January, February and March
are traditionally very slow for transportation demand. We expect that our results of operations will continue to vary as a result
of a number of factors, many of which are outside of our control and may be difficult to predict, including:
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our
ability to attract and retain new customers;
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the
budgeting cycles and purchasing practices of customers;
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the
timing and success of new service introductions by us or our competitors or any other change in the competitive landscape
of the ride-sharing or car-sharing market, including consolidation among our competitors;
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our
ability to successfully expand our business domestically and internationally;
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changes
in our pricing policies or those of our competitors;
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any
disruption in, or termination of, our relationship with our insurance carriers or ride sharing companies with which we do
business;
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the
cost and potential outcomes of future litigation, if any;
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seasonality
in our business;
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general
economic conditions, both domestic and foreign, assuming we expand into foreign markets;
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future
accounting pronouncements or changes in our accounting policies or practices; and
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the
amount and timing of operating costs and capital expenditures related to the expansion of our business.
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Any
of the above factors, individually or in the aggregate, may result in significant fluctuations in our financial and other operating
results from period to period. As a result of this variability, our historical results of operations should not be relied upon
as an indication of future performance. Moreover, this variability and unpredictability could result in our failure to meet our
operating plan or the expectations of investors or analysts for any period. If we fail to meet such expectations for these or
other reasons, the price of our common stock could fall substantially, and we could face costly lawsuits, including securities
class action suits.
We
have had operating losses each year and quarterly period since our inception, and may not achieve or maintain profitability in
the future.
We
have incurred operating losses each year and every quarterly period since inception. For the three months ended March 31, 2018
and 2017, our operating loss was $1,574,057 and $680,156, respectively. For the years ended December 31, 2017 and 2016, our operating
loss was $4,066,950 and $838,560. We expect our operating expenses to increase in the future as we expand our sales and marketing
efforts and continue to invest in research and development of our technologies. These efforts may be costlier than we expect,
and we may not be able to increase our revenue to offset our increased operating expenses. Our revenue growth may slow or our
revenue may decline for a number of other reasons, including reduced demand for our services, increased competition, a decrease
in the growth or size of the ride-sharing or car-sharing market or any failure to capitalize on growth opportunities. Any failure
to increase our revenue as we grow our business could prevent us from achieving or maintaining profitability. If we are unable
to meet these risks and challenges as we encounter them, our business, financial condition and results of operations may suffer.
Our independent
registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern
in its report on our audited financial statements included in this prospectus.
Our audited financial
statements at December 31, 2017 and 2016 and for the years then ended were prepared assuming that we will continue as a going
concern.
Primarily as a result
of our losses, limited working capital, and significant operating costs expected to be incurred in the next twelve months, the
report of our independent registered public accounting firm included elsewhere in this prospectus contains an explanatory paragraph
on our financial statements stating there is substantial doubt about our ability to continue as a going concern due to recurring
losses from operations and deficiencies in working capital and net capital. Such an opinion could materially limit our ability
to raise additional funds through the issuance of new debt or equity securities or otherwise. There is no assurance that sufficient
financing will be available when needed to allow us to continue as a going concern. The perception that we may not be able to
continue as a going concern may also make it more difficult to operate our business due to concerns about our ability to meet
our contractual obligations. Our ability to continue as a going concern is contingent upon, among other factors, the sale of the
shares of our common stock in this primary offering or obtaining alternate financing. We cannot provide any assurance that we
will be able to raise additional capital.
If we are unable to
secure additional capital, we may be required to curtail our business initiatives and take additional measures to reduce costs
in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause
a significant reduction in the scope of our planned development, which could harm our business, financial condition and operating
results. The accompanying financial statements do not include any adjustments that may be necessary should we be unable to continue
as a going concern. It is not possible for us to predict at this time the potential success of our business. The revenue and income
potential of our proposed business and operations are currently unknown. If we cannot continue as a viable entity, you may lose
some or all of your investment.
Our obligations to the holders of
the Notes, are secured by a security interest in substantially all of our assets, so if we default on those obligations, the holders
of the Notes could foreclose on, liquidate and/or take possession of our assets. If that were to happen, we could be forced to
curtail, or even to cease, our operations.
All amounts due under
the Notes are secured by our assets. As a result, if we default on our obligations under the Notes, the holders could foreclose
on their security interest and liquidate or take possession of some or all of these assets, which would harm our business, financial
condition and results of operations and could require us to curtail, or even to cease our operations.
We are subject to certain covenants
set forth in the Notes. Upon an event of default, including a breach of a covenant, we may not be able to make such accelerated
payments under the Notes.
Under the Notes, so
long as the Notes remains outstanding, we are subject to the following covenants, which we refer to as the covenants: we cannot
pay cash dividends or distributions upon any of our equity securities, enter into a transaction with an affiliate of our company,
or enter into an agreement with respect to any of the foregoing. These covenants could limit the operation of our business.
In addition, under
the Notes, an event of default occurs upon any of the following: (i) any default in the payment of the principal amount of any
Note or of interest or other amounts owed to such holder when due and not cured within five business days, (ii) our failure to
perform a material covenant or agreement, which failure is not cured in five business days, (iii) a material representation or
warranty made in the Notes or related transaction document is untrue in any material respect when made, (iv) we become subject
to a bankruptcy event, (v) our default on other indebtedness in excess of $50,000, which default is not cured within ten business
days, (vi) we are a party to a change of control transaction not approved by the holders of the Notes or (vii) we incur additional
indebtedness or create any liens without the consent of the holders of the Notes.
Upon an event of default
under the Notes, the outstanding principal amount of the Notes plus any other amounts owed to such holder will become immediately
due and payable. Under the Notes, upon an event of default, (i) we will be required to use 25% of our future revenue and capital
raised to pay down the Notes, (ii) Warrant coverage of the Notes will automatically increase from 50% to 100% of the shares of
common stock issued upon the initial conversion of the Notes, and (iii) we will grant the holders the right to appoint one director
to our board of directors until the event of default is cured. We expect that all of the Notes will convert upon the completion
of this offering; however, we cannot make any assurance that such Notes will convert. As a result, we may be required to pay the
Notes in cash per their terms.
We
face intense competition and could lose market share to our competitors, which could adversely affect our business, financial
condition and results of operations.
The
market for ride-sharing and car-sharing services is intensely competitive and characterized by rapid changes in technology, customer
requirements, industry standards and frequent new service introductions and improvements. We anticipate continued challenges from
current competitors, as well as by new entrants into the industry. If we are unable to anticipate or effectively react to these
competitive challenges, our competitive position could weaken, and we could experience a decline in our growth rate or revenue
that could adversely affect our business and results of operations.
Changes
in government regulations could have an adverse impact on our business.
Currently,
there are few laws regulating our business, however, as our business matures, this may change. Changes in government regulation
of our business have the potential to materially alter our business practices, or our operational results. Depending on the jurisdiction,
those changes may come about through the issuance of new laws and regulations or changes in the interpretation of existing laws
and regulations by a court, regulatory body or governmental official. Sometimes those changes may have not just prospective but
also retroactive effect; this is particularly true when a change is made through reinterpretation of laws or regulations that
have been in effect for some time. Moreover, changes in regulation that may seem neutral on their face may have either more or
less impact on us than on ride-sharing businesses, depending on the circumstances. Potential changes in law or regulation that
may affect us relate to insurance intermediaries, customer privacy, data security and rate regulation.
Any
material limitation in the fuel supply could adversely affect our business.
Our
operations could be adversely affected by any limitation in the fuel supply or by any imposition of mandatory allocation or rationing
regulations. We are not aware of any current proposal to impose such a regime in the U.S. or internationally. Such a regime could,
however, be quickly imposed if there was a serious disruption in the fuel supply for any reason, including an act of war, terrorist
incident or other problem, such as the devastation caused by hurricane Harvey, affecting the petroleum supply, refining, distribution
or pricing.
If our security is compromised or
if our platform is subjected to attacks that frustrate or thwart our users’ ability to access our products and services,
our users, and partners may cut back on or stop using our products and services altogether, which could seriously harm our business.
Our
efforts to protect the information that our users have shared with us may be unsuccessful due to the actions of third parties,
software bugs, or other technical malfunctions, employee error or malfeasance, or other factors. In addition, third parties may
attempt to fraudulently induce employees or users to disclose information to gain access to our data or our users’ data.
If any of these events occur, our or our users’ information could be accessed or disclosed improperly. Our privacy policy
governs how we may use and share the information that our users have provided us. Some partners may store information that we
share with them. If these third parties fail to implement adequate data-security practices or fail to comply with our terms and
policies, our users’ data may be improperly accessed or disclosed. And even if these third parties take all these steps,
their networks may still suffer a breach, which could compromise our users’ data. Any incidents where our users’ information
is accessed without authorization, or is improperly used, or incidents that violate our terms of service or policies, could damage
our reputation and our brand and diminish our competitive position. In addition, affected users or government authorities could
initiate legal or regulatory action against us over those incidents, which could cause us to incur significant expense and liability
or result in orders or consent decrees forcing us to modify our business practices. Maintaining the trust of our users is important
to sustain our growth, retention, and user engagement. Concerns over our privacy practices, whether actual or unfounded, could
damage our reputation and brand and deter users, advertisers, and partners from using our products and services. Any of these
occurrences could seriously harm our business.
Risks
Related to Ownership of Our Common Stock and this Offering
There is presently no trading market
for our common stock and no assurance can be given that a trading market will exist in the future, even if our listing application
is approved by the Nasdaq Stock Market LLC. Accordingly, you may be unable to liquidate your investment.
There is currently
no public market for our common stock. We have applied to list our common stock on the Nasdaq Stock Market LLC, but we cannot
assure you that our listing application will be approved. If an active and liquid trading market does not develop or continue,
you may have difficulty selling any of our common stock that you purchase. The initial public offering price for the shares
was determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open
market following this primary offering. The market price of our common stock may decline below the initial offering price, and
you may not be able to sell your shares of our common stock at or above the price you paid in this offering, or at all.
An
investment in our common stock is extremely speculative and there can be no assurance of any return on your investment.
An
investment in our common stock is extremely speculative and there is no assurance that investors will obtain any return on their
investment. Investors will be subject to substantial risks involved in an investment in the company, including the risk of losing
their entire investment.
Because the public offering price
of our common stock will be substantially higher than the pro forma net tangible book value per share of our outstanding common
stock following the primary offering, new investors will experience immediate and substantial dilution.
The public offering
price of our common stock is substantially higher than the pro forma net tangible book value per share of our common stock immediately
following the primary offering based on the total value of our tangible assets less our total liabilities. Therefore, if you purchase
our common stock, based on the assumed initial public offering price of $5.50 per share, the mid-point of the price range, you
will experience immediate dilution of $4.82 per share, the difference between the price per share you pay for our common stock
and the pro forma net tangible book value per share as of March 31, 2018, after giving effect to the issuance of our common stock
in the primary offering.
Sales of our common stock in the
primary offering will be taking place concurrently with common stock registered by selling stockholders which might affect the
price, demand, and liquidity of our common stock.
We are registering
shares of common stock to certain securityholders (the “Selling Stockholders”) concurrently with the primary offering.
Between January 2018 and April 2018, we issued the Notes and warrants to the Selling Stockholders. The Notes are convertible into
our common stock at the lower of $2.5480 per share or a discount of 30% to the price of the stock issued in our initial public
offering. The warrants have an exercise price equal to 125% of the price of the conversion price of the Notes as of the date of
exercise. The amount of common stock issued to the Selling Stockholders shall be 50% of the shares of our common stock that the
Selling Stockholders are entitled to receive in connection with the conversion of the Selling Stockholders’ Notes when such
Notes first become convertible. Sales by Selling Stockholders may reduce the price of our common stock, demand for the shares
sold in the offering and, as a result, the liquidity of your investment.
We
are an emerging growth company and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies
will make our common stock less attractive to investors.
For
as long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We
cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors
find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock
price may be more volatile.
We
will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our common
stock that is held by non-affiliates exceeds $700 million as of June 30, (ii) the end of the fiscal year in which we have total
annual gross revenue of $1.07 billion or more during such fiscal year, (iii) the date on which we issue more than $1 billion in non-convertible
debt in a three-year period or (iv) five years from the date of this prospectus.
We
have not conducted an evaluation of the effectiveness of our internal control over financial reporting and will not be required
to do so until 2018. If we are unable to implement and maintain effective internal control over financial reporting investors
may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be
negatively affected.
As
a public company, we will be required to maintain internal control over financial reporting for the year ending December 31, 2018
and to report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley
Act”) requires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning
with our annual report for the fiscal year ending December 31, 2018, provide a management report on the internal control over
financial reporting, which must be attested to by our independent registered public accounting firm to the extent we decide not
to avail ourselves of the exemption provided to an emerging growth company, as defined by the JOBS Act. As we have not conducted
an evaluation of the effectiveness of our internal control over financial reporting, we may have undiscovered material weaknesses.
If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and
our financial statements may be materially misstated. We are in the process of designing and implementing the internal control
over financial reporting required to comply with this obligation, which process may be time consuming, costly, and complicated.
If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements
of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to assert that our internal control over financial
reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness
of our internal control over financial reporting, if and when required, investors may lose confidence in the accuracy and completeness
of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to
investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could
require additional financial and management resources.
Because
we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation of our common
stock, if any, will be your sole source of gain.
We
have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if
any, to finance the growth and development of our business. In addition, the terms of any future financing agreements may preclude
us from paying dividends. As a result, capital appreciation, if any, of our common stock will be an investor’s sole source
of gain for the foreseeable future.
We
may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at
all.
We
need sufficient capital to fund our ongoing operations and continue our development. We intend to continue to make investments
to support our business growth and may require additional funds to respond to business challenges, such as keeping pace with technological
developments in order to remain competitive in our evolving industry, improve our operating infrastructure or acquire complementary
businesses and technologies. As a result, we may need to engage in equity or debt financings to secure additional funds. If we
raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer
significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of
holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our
capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional
capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional
financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory
to us, when and if we require it, our ability to continue to support our business growth, and to respond to business challenges
could be significantly impaired.
Future sales and issuances of our
common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution
of the percentage ownership of our stockholders.
We
expect that significant additional capital will be needed in the future to continue our planned operations. To raise capital,
we may sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. These future
issuances of common stock or common stock-related securities, together with the exercise of outstanding options and any additional
shares issued in connection with acquisitions, if any, may result in material dilution to our investors. Such sales may also result
in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to those
of holders of our common stock.
Pursuant to our 2018
Equity Incentive Plan, the plan administrator is authorized to grant equity-based incentive awards to our directors, executive
officers and other employees and service providers. Future issuances of common stock under awards outstanding under our 2016 Equity
Incentive Plan and future equity incentive grants and issuances of common stock under our 2018 Equity Incentive Plan may result
in dilution to our stockholders.
We
will incur increased costs as a result of being a public company.
Assuming
we complete this initial public offering, we will face increased legal, accounting, administrative and other costs and expenses
as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, including the requirements of
Section 404, as well as new rules and regulations subsequently implemented by the SEC and the Public Company Accounting Oversight
Board (the “PCAOB”), impose additional reporting and other obligations on public companies. We expect that compliance
with these public company requirements will increase our costs and make some activities more time-consuming. A number of those
requirements will require us to carry out activities we have not done previously. For example, we will adopt new internal controls
and disclosure controls and procedures. In addition, we will incur additional expense associated with our SEC reporting requirements.
Furthermore, if we identify an issue in complying with those requirements (for example, if we or our accountants identify a material
weakness or significant deficiency in our internal control over financial reporting), we could incur additional costs rectifying
those issues, and the existence of those issues could adversely affect us, our reputation or investor perceptions of us. We also
expect that it will be difficult and expensive to obtain director officer liability insurance, and we may be required to accept
reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it
may be more difficult for us to attract and train qualified persons to serve on our board of directors or as executive officers.
Advocacy efforts by stockholders and third parties may also prompt even more changes in corporate governance and reporting requirements.
We expect that the additional reporting and other obligations imposed on us by these rules and regulations will increase our legal
and financial compliance costs and administrative fees significantly. These increased costs will require us to divert a significant
amount of money that we could otherwise use to expand our business and achieve our strategic objectives.
We have
filed an application to have our common stock listed on the Nasdaq. We can provide no assurance that our common stock will be listed,
and if listed, that our common stock will continue to meet Nasdaq listing requirements. If we fail to comply with the
continuing listing standards of the Nasdaq, our common stock could be delisted.
We
have applied to list our common stock on Nasdaq under the symbol “HYRE.” Listing of our common stock on the Nasdaq is
a condition to consummating the primary offering. We anticipate that our common stock will be eligible to be listed
on the Nasdaq, subject to actions which may be required to meet the exchange’s listing requirements. However,
we can provide no assurance that our application will receive approval, and, if approved, that an active trading market for
our common stock will develop and continue. As a result, you may find it more difficult to purchase and dispose of our common
stock and to obtain accurate quotations as to the value of our common stock. For our common stock to be listed on the Nasdaq,
we must meet the current Nasdaq initial and continued listing requirements. If we were unable to meet these requirements, our
common stock could be delisted from the Nasdaq. Any such delisting of our common stock could have an adverse effect on the market
price of, and the efficiency of the trading market for, our common stock, not only in terms of the number of shares that can be
bought and sold at a given price, but also through delays in the timing of transactions and less coverage of us by securities
analysts, if any. Also, if in the future we were to determine that we need to seek additional equity capital, it could have an
adverse effect on our ability to raise capital in the public or private equity markets.
USE
OF PROCEEDS
We estimate that we
will receive net proceeds of approximately $9,400,500 (or approximately $11,920,500 if the underwriters’ option to purchase
additional shares is exercised in full) from the sale of the common stock offered by us in this primary offering, based on an assumed
public offering price of $5.50 per share (the midpoint of the range set forth on the cover page of this prospectus), and after
deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
A $1.00 increase or
decrease in the assumed public offering price of $5.50 per share (the midpoint of the range set forth on the cover page of this
prospectus), would increase or decrease the net proceeds to us from this primary offering by $1,800,000, assuming the number of
shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 100,000 shares of common stock
offered by us, as set forth on the cover page of this prospectus, would increase or decrease net proceeds to us from this primary
offering by $495,000, assuming no change in the assumed public offering price of $ 5.50 per share (the midpoint of the range set
forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated
offering expenses payable by us.
The principal purposes
of this primary offering are to increase our capitalization and financial flexibility, increase our visibility in the marketplace
and create a public market for our common stock. As of the date of this prospectus, we cannot specify with certainty all of the
particular uses for the net proceeds to us from this primary offering. However, we currently intend to use the net proceeds to
us from this primary offering for general corporate purposes, including working capital, sales and marketing activities and general
and administrative matters, as more fully described in the table below. In addition, we may utilize the net proceeds to pay outstanding
principal of $3,046,281 plus accrued but unpaid interest to the holders of the Notes, which bear interest at the rate of 13% per
annum and are due eight months from the issuance date with the earliest maturity in September 2018. We may also use a portion of
the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement our business,
although we have no present commitments or agreements to enter into any acquisitions or investments.
We will retain broad discretion
in the allocation of the net proceeds from this primary offering and could utilize the proceeds in ways that do not necessarily
improve our results of operations or enhance the value of our common stock.
The table below sets forth
the manner in which we expect to use the net proceeds we receive from this primary offering. All amounts included in the table
below are estimates.
|
Description
|
|
Amount
|
|
|
General and Administrative
|
|
$
|
3,619,011
|
|
|
Sales and Marketing
|
|
$
|
4,895,826
|
|
|
Research and Development
|
|
$
|
885,663
|
|
|
Total
|
|
$
|
9,400,500
|
|
The
foregoing information is an estimate based on our current business plan. We may find it necessary or advisable to re-allocate
portions of the net proceeds reserved for one category to another, and we will have broad discretion in doing so. Pending these
uses, we intend to invest the net proceeds of this primary offering in a money market or other interest-bearing account.
Dividend
Policy
We
have never declared or paid any dividends on our common stock and do not anticipate that we will pay any dividends to holders
of our common stock in the foreseeable future. Instead, we currently plan to retain any earnings to finance the growth of our
business. Any future determination relating to dividend policy will be made at the discretion of our board of directors and will
depend on our financial condition, results of operations and capital requirements as well as other factors deemed relevant by
our board of directors.
CAPITALIZATION
The following table
sets forth our cash and capitalization, as of March 31, 2018 on:
|
|
●
|
an
actual basis;
|
|
|
|
|
|
|
●
|
on a pro forma basis to give effect to (i) the automatic conversion
of all of our outstanding shares convertible preferred stock into common stock and (ii) the amendment and restatement
of our certificate of incorporation in connection with our primary offering; and
|
|
|
|
|
|
|
●
|
a pro forma as-adjusted basis, giving effect to the issuance and sale of 2,000,000 shares of our
common stock in this primary offering, at the assumed public offering price of $5.50 per share, the midpoint of the range set forth
on the cover of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses
payable by us.
|
You
should read the following table in conjunction with “Use of Proceeds,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and our financial statements and related notes included in this prospectus.
|
|
|
As of March 31, 2018
|
|
|
|
|
Actual
|
|
|
Pro Forma (1)
|
|
|
Pro Forma As Adjusted (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current note payable, net of discount
|
|
$
|
48,972
|
|
|
$
|
48,972
|
|
|
$
|
48,972
|
|
|
Current notes payable – related party, net of discount
|
|
|
297,011
|
|
|
|
297,011
|
|
|
|
297,011
|
|
|
Total notes payable, net of discounts
|
|
|
345,983
|
|
|
|
345,983
|
|
|
|
345,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ (deficit) equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, 15,000,000 shares authorized, par value $0.00001, 2,429,638 issued and outstanding as of March 31, 2018
|
|
|
1,591,886
|
|
|
|
-
|
|
|
|
-
|
|
|
Common stock, 50,000,000 shares authorized, par value $0.00001, 5,252,953 issued and outstanding as of March 31, 2018
|
|
|
52
|
|
|
|
76
|
|
|
|
96
|
|
|
Subscription receivable - related party
|
|
|
(140,434
|
)
|
|
|
(140,434
|
)
|
|
|
(140,434
|
)
|
|
Additional paid-in capital
|
|
|
2,764,394
|
|
|
|
4,356,256
|
|
|
|
13,756,756
|
|
|
Accumulated deficit
|
|
|
(7,019,885
|
)
|
|
|
(7,019,885
|
)
|
|
|
(7,019,885
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ (deficit) equity
|
|
|
(2,803,987
|
)
|
|
|
(2,803,987
|
)
|
|
|
6,596,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
(2,458,004
|
)
|
|
$
|
(2,458,004
|
)
|
|
$
|
6,942,516
|
|
|
(1)
|
Assumes that all of the company’s outstanding shares of preferred stock will convert into 2,429,638 shares of common stock in connection with the primary offering. Each share of the company’s outstanding preferred stock is convertible into such number of shares of common stock as is determined by dividing $0.71, the original issue price, divided by $0.71, the initial conversion price, subject to adjustment in accordance with anti-dilution provisions contained in the certificate of designation for the preferred stock.
|
|
|
|
|
(2)
|
A $1.00 increase (decrease) in the assumed initial public offering price of $5.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of additional paid-in capital, total stockholders’ (deficit) equity and total capitalization on a pro forma as adjusted basis by approximately $1,800,000, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 100,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) each of additional paid-in capital, total stockholders’ (deficit) equity and total capitalization on a pro forma as adjusted basis by approximately $495,000, assuming the assumed initial public offering price of $5.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
|
The actual, pro forma and pro forma as adjusted information
set forth in the table excludes:
|
|
●
|
warrants to purchase up to 200,000 shares of our common stock at a price of $2.10 per share;
|
|
|
|
|
|
|
●
|
warrants to purchase up to 123,659 shares of our common stock at a price of $2.00 per share;
|
|
|
|
|
|
|
●
|
stock options to
purchase 991,891 shares of our common stock at exercise prices between $0.71 and $1.75 per share;
|
|
|
|
|
|
|
●
|
3,000,000 shares of our common stock available for future issuance under our 2018 Equity Incentive Plan;
|
|
|
|
|
|
|
●
|
up to 1,299,199 shares issuable upon the conversion of $3,046,281 in principal and $264,057 of accrued but unpaid interest of the Notes as of the maturity date of each Note, assuming we have not made any interest payments in cash and each Note is initially convertible on its maturity date, which number of shares was determined by dividing the total of the aggregate principal and the estimated accrued interest amounts by $2.5480; and
|
|
|
|
|
|
|
●
|
warrants to purchase up to 649,602 shares of our common stock at a price of $3.185 per share issuable to the holders of the Notes;
|
|
|
|
|
|
|
●
|
warrants to purchase up to 129,920 shares of our common stock at a price of $2.80 per share issued to the placement agent for the Notes, assuming such Notes are initially convertible into 1,299,199 shares of our common stock;
|
|
|
|
|
|
|
●
|
warrants to purchase up to 138,000 shares of our common stock issuable to the underwriters in connection with this primary offering.
|
DILUTION
If you invest in our common
stock in this primary offering, your ownership interest will be diluted immediately to the extent of the difference between the
initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of
our common stock immediately after this primary offering.
Our historical net
tangible book value (deficit) as of March 31, 2018 was $(4,395,873), or $(0.84) per share of our common stock. Our historical net
tangible book value (deficit) is the amount of our total tangible assets less our total liabilities and convertible preferred stock,
which is not included within our stockholders’ (deficit) equity, without giving effect to the conversion of our outstanding
convertible preferred stock into common stock. Historical net tangible book value per share represents historical net tangible
book value (deficit) divided by the number of shares of our common stock issued as of March 31, 2018. This data is solely based
on the historical amounts as shown in our balance sheet as of March 31, 2018, without giving effect to the automatic conversion
of our convertible preferred stock or the vesting of 264,285 shares of restricted stock granted to consultants, which were not
accounted for as issued and outstanding per ASC 505-50-s99-1 as they are unvested and forfeitable based on a future contingent
event.
Our pro forma net tangible
book value (deficit) as of March 31, 2018 was $(2,803,987), or $(0.35) per share of our common stock. Pro forma net tangible book
value (deficit) represents the amount of our total tangible assets less our total liabilities, after giving effect to the automatic
conversion of all outstanding shares of our convertible preferred stock into an aggregate of 2,429,638 shares of common stock upon
the completion of this primary offering, and the vesting of 264,285 shares of restricted stock held by consultants upon the completion
of this primary offering.
After giving further
effect to our sale of shares of common stock in this primary offering at an assumed initial public offering price of $5.50 per
share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of
March 31, 2018 would have been approximately $6,596,533, or approximately $0.67 per share. This represents an immediate increase
in pro forma as adjusted net tangible book value per share of $1.02 to our existing stockholders and an immediate dilution in pro
forma as adjusted net tangible book value per share of approximately $4.83 to new investors purchasing common stock in this primary
offering. Dilution per share to new investors purchasing common stock in this primary offering is determined by subtracting pro
forma as adjusted net tangible book value per share after this primary offering from the assumed initial public offering price
per share paid by new investors. The following table illustrates this dilution on a per share basis:
|
Assumed initial public offering price per share
|
|
|
|
|
|
$
|
5.50
|
|
|
Historical net tangible book value (deficit) per share as of March 31, 2018
|
|
$
|
(0.84)
|
|
|
|
|
|
|
Increase in price per share attributable to the conversion of all outstanding shares of convertible preferred stock and restricted stock grants
|
|
|
0.49
|
|
|
|
|
|
|
Pro forma net tangible book value (deficit) per share as of March 31, 2018
|
|
$
|
(0.35
|
)
|
|
|
|
|
|
Increase in pro forma as adjusted net tangible book value per share attributable to new investors purchasing shares in this primary offering
|
|
|
1.02
|
|
|
|
|
|
|
Pro forma as adjusted net tangible book value per share after this primary offering
|
|
|
0.676
|
|
|
|
|
|
|
Dilution per share to new investors purchasing shares in this primary offering
|
|
|
|
|
|
$
|
4.83
|
|
A $1.00 increase (decrease)
in the assumed initial public offering price of $5.50 per share would increase (decrease) our pro forma as-adjusted net tangible
book value by $1,800,000, the pro forma as-adjusted net tangible book value per share after this primary offering by $0.84 and
the dilution per share to new investors by $4.66, assuming the number of shares offered by us, as set forth on the cover page
of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering
expenses payable by us. Similarly, each increase (decrease) of 100,000 shares in the number of shares offered by us would increase
(decrease) our pro forma as-adjusted net tangible book value by $495,000, the pro forma as-adjusted net tangible book value per
share after this primary offering by $0.71 and the dilution per share to new investors by $4.79, assuming the assumed public offering
price remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable
by us.
If the underwriters
exercise their option to purchase additional shares of common stock in this primary offering in full at the assumed initial public
offering price of $5.50 per share, the midpoint of the price range set forth on the cover of this prospectus and assuming the
number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable by us, the pro forma as adjusted net tangible book
value per share after this primary offering would be $0.89 per share, and the dilution in pro forma as adjusted net tangible book
value per share to new investors purchasing common stock in this primary offering would be $4.61 per share.
The following table
summarizes, on a pro forma as adjusted basis, as of March 31, 2018, the number of shares of common stock purchased from us on an
as converted to common stock basis, the total consideration paid, or to be paid, and the average price per share paid, or to be
paid, by existing stockholders and by new investors in this offering at an assumed initial public offering price of $5.50 per share,
the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts
and commissions and estimated offering expenses payable by us.
|
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
Average Price
|
|
|
|
|
Number
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Per Share
|
|
|
|
|
(in thousands)
|
|
|
Existing stockholders
|
|
|
7,946,876
|
|
|
|
79.9
|
%
|
|
$
|
6,210,310
|
|
|
|
36.1
|
%
|
|
$
|
0.78
|
|
|
New investors
|
|
|
2,000,000
|
|
|
|
20.1
|
%
|
|
$
|
11,000,000
|
|
|
|
63.9
|
%
|
|
$
|
5.50
|
|
|
Total
|
|
|
9,946,876
|
|
|
|
100.0
|
%
|
|
$
|
17,210,310
|
|
|
|
100.0
|
%
|
|
|
|
|
The table above assumes
no exercise of the underwriters’ option to purchase additional shares in this primary offering. If the underwriters’
option to purchase additional shares is exercised in full, the number of shares of our common stock held by existing stockholders
would be reduced to 77.6% of the total number of shares of our common stock outstanding after this primary offering, and the number
of shares of common stock held by new investors participating in the primary offering would be increased to 22.4% of the total
number of shares outstanding after this primary offering.
A $1.00 increase (decrease)
in the assumed initial public offering price of $5.50 per share, the midpoint of the price range set forth on the cover page of
this prospectus, would increase (decrease) the total consideration paid by new investors by $2,000,000 and, in the case of an
increase, would increase the percentage of total consideration paid by new investors by 4.8 percentage points and, in the case
of a decrease, would decrease the percentage of total consideration paid by new investors by 4.7 percentage points.
The tables above do not
include:
|
|
●
|
warrants to purchase up to 200,000 shares of our common stock at a price of $2.10 per share;
|
|
|
|
|
|
|
●
|
warrants to purchase up to 123,659 shares of our common stock at a price of $2.00 per share;
|
|
|
|
|
|
|
●
|
stock options to purchase 991,891 shares of our common stock at exercise prices between $0.71 and $1.75 per share;
|
|
|
|
|
|
|
●
|
3,000,000 shares of our common stock available for future issuance under our 2018 Equity Incentive Plan;
|
|
|
|
|
|
|
●
|
up to 1,299,199 shares issuable upon the conversion of $3,046,281 in principal and $264,057 of accrued but unpaid interest of the Notes as of the maturity date of each Note, assuming we have not made any interest payments in cash and each Note is initially convertible on its maturity date, which number of shares was determined by dividing the total of the aggregate principal and the estimated accrued interest amounts by $2.5480; and
|
|
|
|
|
|
|
●
|
warrants to purchase up to 649,602 shares of our common stock at a price of $3.185 per share issuable to the holders of the Notes;
|
|
|
|
|
|
|
●
|
warrants to purchase up to 129,920 shares of our common stock at a price of $2.80 per share issued to the placement agent for the Notes, assuming such Notes are initially convertible into 1,299,199 shares of our common stock;
|
|
|
|
|
|
|
●
|
warrants to purchase up to 138,000 shares of our common stock issuable to the underwriters in connection with this primary offering.
|
To the extent that
outstanding options and warrants are exercised or shares are issued under our 2016 Equity Incentive Plan or our 2018 Equity Incentive
Plan, you will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or
strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that
additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities may result
in further dilution to our stockholders.
Management’s
Discussion and Analysis of
Financial Condition and
Results of Operations
You
should read the following discussion and analysis of our financial condition and results of operations together with our audited
and unaudited financial statements and the related notes and other financial information included elsewhere in this prospectus.
Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information
with respect to our plans and strategy for our business, include forward-looking statements that involve risks and uncertainties.
You should review “Risk Factors” for a discussion of important factors that could cause our actual results to differ
materially from the results described in or implied by the forward-looking statements contained in the following discussion and
analysis.
Overview
We
were formed in November 2014 to match the owners of idle cars to drivers who provide services to ride-sharing businesses such
as Uber and Lyft. We are based in Los Angeles, California. As described below, we have funded our business through the sale of
preferred stock and convertible promissory notes, through short-term advances provided to us by related parties and from the limited
revenues we have earned:
Series Seed 1 Convertible
Preferred Stock.
In August 2016, our board of directors authorized 15,000,000 shares of preferred stock with a par value $0.00001.
Of these, our board designated 4,471,489 shares as Series Seed 1 Convertible Preferred Stock (“Series Seed 1”). During
2016, we issued 985,369 shares of Series Seed 1 at a price of $0.71 per share for aggregate proceeds of $700,000. During 2017,
we issued 422,302 shares of Series Seed 1 in exchange for $300,000.
Convertible
Promissory Notes.
During 2016, we issued convertible promissory notes. The convertible notes accrued interest at the rate
of 12%, with a default rate of 15% and were due three years from the date of issuance. We raised $500,000 from the sale of our
convertible promissory notes. In 2017, the principal amount of the convertible promissory notes and all accrued interest, in the
aggregate amount of $536,434 were converted into 943,908 shares of Series Seed 1.
Short
Term Advances.
During 2016 we received $3,000 in short term advances from related parties.
2017 Debt
. In April and
May 2017, we issued debt (“2017 Debt”) to related parties totaling $300,000 and third parties totaling $50,000 with
the same terms and conditions. The 2017 Debt is due in one year and while it does not bear interest, 200,000 warrants were issued
with the 2017 Debt. The warrants are exercisable at $2.10 and expire in five years.
Private Placement
. Starting
in June 2017, we undertook a private placement for the sale of common stock for $1.75 per share. During the year ended December
31, 2017, 1,236,588 shares of common stock were sold for gross proceeds of $2,164,029. The father and brother of the company’s
Chief Executive Officer and the Chief Business Development Officer purchased an aggregate of 14,800 shares for $25,900 in this
offering. In connection with this offering, we were required to pay our placement agent a cash fee equal to 13% of the gross proceeds
and a warrant to purchase shares of common stock in an amount equal to 10% the aggregate amount of shares old. Accordingly, as
of December 31, 2017, $281,324 in commissions have been paid or are payable along with $38,806 in related legal and related fees,
both of which were netted against gross proceeds of the offering. Based on the amounts raised through the year ended December 31,
2017, we will issue the placement agent warrants to purchase up to 123,659 shares of common stock, exercisable at $2.00. All numbers
are final as of December 31, 2017 and there will be no more common stock issued under this private placement. In addition, this
private placement is separate from the agreement entered in November 2017 as disclosed in Note 3 on page F-14.
Revenue.
We earn revenue
primarily from transaction fees and insurance fees when a car is rented on our website. We also earn revenue from other sources
such as referral fees and motor vehicle record fees (application fees). During the years ended December 31, 2017 and 2016, we
earned $3,223,874 and $515,437 in revenue, respectively.
Our costs include
employee salaries and benefits, compensation paid to consultants, sales and marketing costs including advertising, general and
administrative expenses including facility costs, supplies, legal, accounting and professional service expenses, costs associated
with development activities and other costs associated with an early stage company. We anticipate increasing the number of employees
required to support our activities in the areas of research and development, sales and marketing, and general and administrative
functions. Until we are able to phase out off-shore development and hire developers in-house we expect to incur consulting expenses
related to technology upkeep, maintenance and UI/UX improvements commensurate with our current levels and we expect to incur increasing
expenses to protect our intellectual property.
The
amount that we spend for any specific purpose may vary significantly, and could depend on a number of factors including, but not
limited to, the pace of progress of our commercialization and development efforts, actual needs with respect to development and
research, market conditions, and changes in or revisions to our marketing strategies or to the car-sharing industry.
During the years ended
December 31, 2017 and 2016, we spent $687,039 and $117,059, respectively, on research and development. Research, development,
and commercial acceptance of new business models are, by their nature, unpredictable. Although we will undertake development and
commercialization efforts with reasonable diligence, there can be no assurance that the net proceeds from the primary offering
will be sufficient to enable us to develop our sales team and our technology to the extent needed to sustain operations. If the
net proceeds from the primary offering are insufficient for these purposes, we will consider other options to continue our path
to commercialization, including, but not limited to, additional financing through follow-on equity or debt offerings.
We cannot assure that
our business model will be widely accepted; that we will ever earn revenues sufficient to support our operations, or that we will
ever be profitable. Furthermore, we have no committed source of financing and we cannot assure that we will be able to raise money
as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to scale
back our development plans by reducing expenditures for employees, consultants, business development and marketing efforts or
to otherwise severely curtail, or even to cease, our operations.
Going
Concern
We intend to rely on
debt and equity financing for working capital until positive cash flows from operations can be achieved, which may never occur.
We have incurred operating losses since inception. These matters raise substantial doubt about our ability to continue as a going
concern. Throughout the next twelve months, we expect to fund our operations from additional debt and/or equity offerings, and
increased revenue from our operations. If we cannot raise additional short-term capital, we may consume all of our cash reserved
for operations. There are no assurances that we will be able to raise capital on terms acceptable to us. If we are unable to obtain
sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our
business, financial condition and operating results. The balance sheet does not include any adjustments that might result from
these uncertainties. As a result, our independent registered public accounting firm included an explanatory paragraph in its report
on our financial statements as of and for the years ended December 31, 2017 and 2016 with respect to this uncertainty.
Components of Our Results of Operations
The following describes
the various components that make up our results of operations, discussed below.
Revenue is earned from
fees associated with matching Drivers to Owners of idle cars that meet the strict requirements imposed by ride-sharing services
such as Uber and Lyft with Drivers. A Driver will typically rent a car through one transaction via our on-line marketplace. We
recognize GAAP reportable revenue primarily from a transaction fee and an insurance fee when a car is rented on our platform when
(a) persuasive evidence that an agreement exists which occurs when the rental contract is signed electronically between the two
parties involved; (b) the services have been delivered; (c) the prices are fixed and determinable and not subject to refund or
adjustment; and (d) collection of the amounts due is reasonably assured which occurs simultaneously when the booking is accepted
and the credit card or account on file is charged. The company defers revenue where the earnings process is not yet complete.
Cost
of revenues primarily include direct fees paid for driver insurance, merchant processing fees, and motor vehicle record fees incurred
for paid driver applications.
General and administrative
costs include all corporate and administrative functions that support our business. These costs also include stock-based compensation
expense, consulting costs, and other costs that are not included in cost of revenues.
Research
and development costs are related to activities such as user experience and user interphase development, database development
and maintenance and any technology related expense that improves and maintains the functionality of our existing platform.
Other
income/expense includes non-operating income and expenses including interest expense.
Results
of Operations
Three Months Ended March 31, 2018
compared to Three Months Ended March 31, 2017
Revenues and Gross
Profit.
Gross profit of $423,311, or approximately 25%, was realized on revenues totaling $1,714,183 for the three months ended
March 31, 2018, as compared to gross profit of $36,873, or approximately 7%, realized on revenues totaling $505,325 for the three
months ended March 31, 2017. The increase in revenues of $1,208,858, or approximately 239%, was due to the growth of our business,
which resulted from the expansion of our sales team, increased marketing spend and brand awareness.
Operating Expenses.
Operating expenses, consisting of research and development, sales and marketing and general and administrative expenses, increased
by approximately $1,280,339, or approximately 179%, to $1,997,368 for the three months ended March 31, 2018, as compared to operating
expenses of $717,029 for the three months March 31, 2017. The increase in operating expenses related to the expansion of our sales
team which, in turn, resulted in an increase in sales and in our operating expenses. Our general and administrative expenses increased
by $573,370 representing an increase in office space, salaries, contractors, operations and support functions. Our sales and marketing
expenses increased by $563,350 which is attributable to an increase in online advertising, increased sales contractors and compensation.
Remaining difference is attributable to research and development and specifically increased contractors and outside services expense
related to maintenance of the technology platform.
Loss from Operations.
Our loss from operations for the three months ended March 31, 2018 was $1,574,057 as compared to a loss from operations of
$620,156 for the three months ended March 31, 2017. The increase loss during 2017 is a direct result of the increased operating
costs noted above.
Other (Income) Expense.
For the three months ended March 31, 2018, interest expense totaled $161,773 as compared to interest expense of $140,065 for the
three months ended March 31, 2017. The increase was a result of the 2018 period including debt discount accretion of the senior
secured Notes and stated interest rates on such notes thereon as well as the debt discount accretion from Notes payable, as compared
to the 2017 period which had interest related to charges for beneficial conversion features on convertible debt and stated interest
for only a portion of the period for which the convertible debt was outstanding. Other income and expense during the three months
ended March 31, 2018 and 2017 were minor.
Net Loss.
Primarily
as a result of the increased operating expenses noted above, together with the interest expense incurred during the three months
ended March 31, 2018, our net loss for the three months ended March 1, 2018 was $1,767,031, as compared to a net loss for the three
months ended March 31, 2017 of $823,230.
Non-GAAP Financial
Measure – Gross Billings
Gross billings is an
important measure by which we evaluate and manage our business. We define gross billings as the amount billed to Drivers, without
any adjustments for amounts paid to Owners or refunds. Gross billings include transactions from both our revenues recorded on a
net and a gross basis. It is important to note that gross billings is a non-GAAP measure and as such, is not recorded in our financial
statements as revenue. However, we use gross billings to asses our business growth, scale of operations and our ability to generate
gross billings is strongly correlated to our ability to generate revenues. Gross billings may also be used to calculate net revenue
margin, defined as the company’s GAAP reportable revenue over gross billings.
The table below sets
forth a reconciliation of our GAAP reported revenues to gross billings for the three months ended March 31, 2018 and 2017:
|
|
|
(Unaudited) Three Months ended March 31, 2018
|
|
|
(Unaudited) Three Months ended March 31, 2017
|
|
|
Revenues (GAAP reported revenue)
|
|
$
|
1,714,183
|
|
|
$
|
505,325
|
|
|
Add: Refunds, rebates and deferred revenue
|
|
|
384,187
|
|
|
|
136,166
|
|
|
Add: Owner payments (not recorded in financial statements)
|
|
|
2,347,760
|
|
|
|
749,900
|
|
|
Gross billings (non-GAAP measure not recorded in financial statements)
|
|
$
|
4,446,130
|
|
|
$
|
1,391,391
|
|
December 31, 2017 compared to December
31, 2016
Revenues and Gross
Profit.
Gross profit of $311,326, or approximately 10%, was realized on revenues totaling $3,223,874 for the year ended December
31, 2017 as compared to gross profit of $87,501, or approximately 17%, realized on revenues totaling $515,437 for the year ended
December 31, 2016. The increase in revenues of $2,708,437, or approximately 525%, was due to the growth of our business, which
resulted from the expansion of our sales team, increased marketing spend and brand awareness.
Operating Expenses.
Operating expenses, consisting of research and development, sales and marketing and general and administrative expenses, increased
by approximately $3,452,215, or approximately 373%, to $4,378,276 for the year ended December 31, 2017, as compared to operating
expenses of $926,061 for the year ended December 31, 2016. The increase in operating expenses related to the expansion of our
sales team which, in turn, resulted in an increase in sales and in our operating expenses. Our general and administrative expenses
increased by $1,381,533 representing an increase in office space, salaries, contractors, operations and support functions. Our
sales and marketing expenses increased by $1,500,702 which is attributable to an increase in on-line advertising, increased sales
contractors and compensation. Remaining difference is attributable to research and development and specifically increased contractors
and outside services expense related to maintenance of the technology platform.
Loss from Operations.
Our loss from operations for the year ended December 31, 2017 was $4,066,950 as compared to a loss from operations of $838,560
for the year ended December 31, 2016. The increase loss during 2017 is a direct result of the increased operating costs noted
above.
Other (Income) Expense.
For the year ended December 31, 2017, interest expense totaled $202,454 as compared to interest expense of $31,153 for the year
ended December 31, 2016. The increase was a result of interest charges for beneficial conversion features on convertible debt and
the amortization of debt discounts in 2017. In 2016, only the stated rate of interest was incurred on convertible debt outstanding
along with other minor interest charges. Other income and expense during the years ended December 31, 2017 and 2016 were minor.
Net Loss.
Primarily
as a result of the increased operating expenses noted above, together with the interest expense incurred during 2017, our net
loss for the year ended December 31, 2017 was $4,271,732 as compared to a net loss for the year ended December 31, 2016 of $866,676.
Non-GAAP Financial
Measure – Gross Billings
Gross
billings is an important measure by which we evaluate and manage our business. We define gross billings as the amount billed to
Drivers, without any adjustments for amounts paid to Owners or refunds. Gross billings include transactions from both our revenues
recorded on a net and a gross basis. It is important to note that gross billings is a non-GAAP measure and as such, is not recorded
in our financial statements as revenue. However, we use gross billings to asses our business growth, scale of operations and our
ability to generate gross billings is strongly correlated to our ability to generate revenues. Gross billings may also be used
to calculate net revenue margin, defined as the company’s GAAP reportable revenue over gross billings.
The
table below sets forth a reconciliation of our GAAP reported revenues to gross billings for the years ended December 31, 2017
and 2016:
|
|
|
2017
|
|
|
2016
|
|
|
Revenues
(GAAP reported revenue)
|
|
$
|
3,223,874
|
|
|
$
|
515,437
|
|
|
Add:
Refunds, rebates and deferred revenue
|
|
|
766,487
|
|
|
|
125,720
|
|
|
Add:
Owner payments (not recorded in financial statements)
|
|
|
5,030,933
|
|
|
|
831,731
|
|
|
Gross
billings (non-GAAP measure not recorded in financial statements)
|
|
$
|
9,021,294
|
|
|
$
|
1,472,888
|
|
Liquidity
and Capital Resources
At March 31, 2018,
our cash balance totaled $810,119 compared to $213,944 at December 31, 2017. At March 31, 2018, our current assets totaled $1,166,295
and our current liabilities totaled $4,063,859 resulting in negative working capital of $2,897,564 compared to a negative working
capital of $1,337,331 at December 31, 2017. This deficit resulted primarily from a lack of operating capital.
We do not have any
contractual obligations for ongoing capital expenditures at this time.
Operating activities
for the three months ended March 31, 2018 resulted in cash outflows of $1,664,023 which were due primarily to the loss for the
period of $1,767,031, and changes in operating assets and liabilities of $210,963, net of non-cash expenses totaling $313,971.
Operating activities for the three months ended March 31, 2017 resulted in cash used in operating activities of $564,443, which
was due primarily to the loss for the period offset by $134,108 in non-cash expenses and $124,679 in changes to operating assets
and liabilities.
Investing activities
for the three months ended March 31, 2018 resulted in cash outflows of $13,260 consisting of net outflow related to deposits and
other assets, and purchase of property and equipment.
Investing activities
for the three months ended March 31, 2017 resulted in cash outflows of $15,135 consisting of additional deposits for the Company’s
prior office.
Net cash provided by
financing activities for the three months ended March 31, 2018 totaled $2,273,458 and included $2,318,579 in net proceeds from
convertible debt, net of $45,121 in paid offering costs.
Net cash provided by
financing activities for the three months ended March 31, 2017 totaled $300,000 related to the sale of preferred stock.
Critical
Accounting Policies, Judgments and Estimates
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions
that affect the reported amounts of assets and liabilities, and the reported amount of revenues and expenses during the reporting
period. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will
occur in the near term.
Stock
Based Compensation
The company accounts
for stock options issued to employees under ASC 718, Compensation – Stock Compensation. Under ASC 718, share-based compensation
cost to employees is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense
over the employee’s requisite vesting period. The fair value of each stock option or warrant award is estimated on the date
of grant using the Black-Scholes option valuation model.
The company measures
compensation expense for its non-employee stock-based compensation under ASC 505, Equity. The fair value of the option issued
or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received.
The fair value is measured at the value of the company’s common stock or equity award on the date that the commitment for
performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity
instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital.
Revenue Recognition
The company recognizes
revenue primarily from a transaction fee and an insurance fee when a car is rented on the company’s platform when (a) persuasive
evidence that an agreement exists which occurs when the rental contract is signed electronically between the two parties involved;
(b) the services have been delivered; (c) the prices are fixed and determinable and not subject to refund or adjustment; and (d)
collection of the amounts due is reasonably assured which occurs simultaneously when the booking is accepted and the credit card
on file is charged. The company defers revenue where the earnings process is not yet complete.
The company also recognizes
revenue from other sources such as referrals, motor vehicle record fees (application fees), late rental fees, and other fees charged
to Drivers in specific situations.
In limited circumstances,
the company provides contingent consideration in the form of a rebate or refund that is redeemable only if the customer completes
a specific level of transaction over a specific time period. In such cases, the rebate or refund obligation is recognized as a
reduction of revenues. Measurement of the total rebate or refund obligation is based on management estimates using historical
data.
The following is
a breakout of revenue components by subcategory for the three months ended March 31, 2018 and 2017 and the years ended
December 31, 2017 and 2016.
|
|
|
(Unaudited)
Three Months ended March 31, 2018
|
|
|
(Unaudited) Three Months ended March 31, 2017
|
|
|
Year ended December 31, 2017
|
|
|
Year ended December 31, 2016
|
|
|
Insurance fees
|
|
$
|
957,167
|
|
|
$
|
250,062
|
|
|
$
|
1,650,512
|
|
|
$
|
215,028
|
|
|
Transaction fees
|
|
|
694,938
|
|
|
|
222,021
|
|
|
|
1,465,426
|
|
|
|
232,279
|
|
|
Other fees
|
|
|
150,341
|
|
|
|
33,242
|
|
|
|
212,077
|
|
|
|
68,130
|
|
|
Incentives and rebates
|
|
|
(88,263
|
)
|
|
|
-
|
|
|
|
(104,141
|
)
|
|
|
-
|
|
|
Net revenue
|
|
$
|
1,714,183
|
|
|
$
|
505,325
|
|
|
$
|
3,223,874
|
|
|
$
|
515,437
|
|
Transaction fees and insurance
fees are charged to a Driver in a single transaction. Drivers currently do not have an option to decline insurance at any point
during the transaction.
Principal
Agent Considerations
In
accordance with the Accounting Standards Codification (ASC) 605-45, Revenue Recognition: Principal Agent Considerations, we evaluate
our service offerings in order to determine whether or not we are acting as the principal or as an agent, which we consider in
determining if revenue should be reported gross or net. Our primary revenue source is a transaction fee made from a confirmed
booking of a vehicle on our platform. Key indicators that we evaluate in order to reach this determination include:
|
|
●
|
the terms and conditions of our contracts;
|
|
|
|
|
|
|
●
|
whether we are paid a fixed percentage of the arrangement's consideration
or a fixed fee for each transaction;
|
|
|
|
|
|
|
●
|
the party which sets the pricing with the end-user, has the credit
risk and provides customer support; and
|
|
|
|
|
|
|
●
|
the party responsible for delivery/fulfillment of the product
or service to the end consumer
|
We
have determined that we act as the agent in the transaction for vehicle bookings, as we are not the primarily obligor of the arrangement
and receive a fixed percentage of the transaction. Therefore, revenue is recognized on a net basis.
For
other fees such as insurance fees and motor vehicle records (application fees) we have determined that revenue should be recorded
on a gross basis. In such arrangements, the company sets pricing, has risk of economic loss, has certain credit risk, provides
support services related to these transactions, and has decision making ability about service providers used.
Income
Taxes
The company applies
ASC 740 “Income Taxes” (“ASC 740”). Deferred income taxes are recognized for the tax consequences
in future years of differences between the tax bases of assets and liabilities and their financial statement reported amounts
at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period
in deferred tax assets and liabilities. At December 31, 2017 and 2016, the company has established a full allowance against all
deferred tax assets.
ASC
740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. A
tax benefit from an uncertain position is recognized only if it is “more likely than not” that the position is sustainable
upon examination by the relevant taxing authority based on its technical merit.
Internal
Use Software
We
incur software development costs to develop software programs to be used solely to meet our internal needs and cloud-based applications
used to deliver our services. In accordance with ASC 350-40,
Internal-Use Software
, we capitalize development costs related
to these software applications once the preliminary project stage is complete and it is probable that the project will be completed
and the software will be used to perform the function intended. No costs have been capitalized to date.
OUR
BUSINESS
HyreCar
Inc. was formed as a corporation in the State of Delaware on November 24, 2014. Our founders identified the need for a car-sharing
platform for individuals who wanted to drive for ride-sharing companies such as Uber Technologies, Inc. (“Uber”) and
Lyft Inc. (“Lyft”), but whose automobiles could not meet the standards imposed by the ride-sharing companies. For
example, Uber maintains strict guidelines regarding the types of cars a driver can use. Although guidelines relating to cars can
differ by state, in general the use of two door coupes, motorcycles and cars that are 12 years or older are excluded. Our founders,
before deciding to purchase qualifying sedans that met Uber’s strict guidelines, first inquired as to whether there were
any rental options available from Uber that would allow them to drive for the ride-sharing platform. To their surprise, there
were no rental options available, other than a shadow industry of individuals renting cars to one another.
HyreCar
is a unique peer-to-peer car-sharing marketplace that allows car owners (collectively, “Owners”) to rent their idle
cars to ride-sharing service drivers (collectively, “Drivers”). By conveniently sourcing vehicles from individual
Owners, part-time Drivers may easily enter and exit the market. Accordingly, the company’s business model provides us with
the opportunity to satisfy fluctuating transportation demand in cities around the United States by matching Owners and Drivers.
Our
business is based on a proprietary car-sharing marketplace developed to (i) enroll Owners and Drivers, (ii) facilitate the matching
of Owners and Drivers and (iii) log rental activity for Owners and Drivers. All transactions related to the rental (including,
but not limited to, background checks, rentals, deposits and insurance costs) are run securely through the HyreCar platform. Drivers
and Owners access their rental or car dashboards through a unique login. Drivers can easily initiate, terminate or extend a rental
through the platform while Owners can manage their car or fleet of cars through the platform.
We believe we have a competitive
advantage with our commercial automobile insurance policy that covers both Owners and Drivers. The policy is specifically designed
to cover the period of time in which a Driver is operating an Owner’s vehicle while not actively operating a vehicle on
a ride-sharing platform, such as Uber or Lyft. During the periods when Drivers are actively operating on a ride-sharing platform,
the insurance subordinates to the state mandated insurance provided by the ride-sharing business. To our knowledge, we are the
only provider of this car-matching service which is made possible by this unique insurance product.
In 2015, our first
full year of operations, we earned revenues of $29,292 with an operating loss of $108,371. In 2016, our second full year of operations,
we earned revenues of $515,437 with an operating loss of $838,560. In 2017, our third full year of operations, we earned revenues
of $3,223,874 with an operating loss of $4,066,950. In 2017, revenues grew 525% and our operating loss grew 385% as compared to
operations in 2016.
To date, the majority
of our sales growth has been through organic search traffic. During the three months ended March 31, 2018, we spent $407,538 on
advertising. During the years ended December 31, 2017 and 2016, we spent $433,506 and $123,479, respectively, on marketing. Going
forward however, we intend to significantly increase our spending on marketing because we believe that on-line channels and off-line
brand awareness advertising will provide substantial opportunities for growth.
Industry
and Market Opportunities
Our company was founded
to capitalize on a combination of two growth markets: ride-sharing (an industry led by Uber and Lyft) and car-sharing (an industry
led by companies such as Car2go N.A., LLC, ZipCar, Inc. and Turo, Inc. Our customers are the Drivers that use our car-sharing platform
to rent a car and then use that car to make money driving for either Uber or Lyft. Finding enough cars and drivers to meet demand
has been a problem for ride-sharing companies. In an online post dated November 24, 2013, TechCrunch.com stated:
In some more established markets,
Uber is struggling to keep enough cars on the road to meet the demand — and that’s a problem. It means cars either
aren’t available, or if they are, there are longer wait times, and lower overall satisfaction with the service. Uber has
tried to deal with this in the past by instituting surge pricing — which both curbs demand and ensures that drivers are more
likely to continue driving at peak times.
But ultimately, the company knows
that the only way to deal with that demand is to sign up more drivers. And one way to do that is by ensuring that they’ll
have a car to drive if they’ve been approved for the Uber platform.
We believe that
we are the only peer-to-peer car-sharing platform focused on the ride-sharing industry in the United States. We have added
over 5,490 new Drivers, matching them with Owner vehicles that have been used on the Uber and Lyft platforms over the past
several years. During the years ended December 31, 2017 and 2016, we added approximately 4,430 and 1,060 new Drivers,
respectively, into cars so that they could drive for Uber and Lyft. These numbers represent an equivalent 318% growth rate in new drivers onto the HyreCar platform year
over year.
Ride-sharing Industry (Uber and Lyft)
The growth in ride-sharing
over the past few years has kicked off a transportation revolution. Smart phones are now used as ride hailing apps, transactions
are processed seamlessly through online platforms and transportation as a service is becoming more and more personalized. The industry
has experienced tremendous traction. According to a July 2016 post on TechCrunch, it took Uber six years, to December 2015, to
complete a billion rides and just six months later, Uber announced that it had completed its two-billionth ride.
TNCs like
Uber and Lyft have reported high demand from Drivers but many of these would be Drivers do not own a car that qualifies for
their platforms. In 2016, a spokesperson for Uber estimated that approximately 10% to 15% of their potential
drivers/partners do not own a qualifying car. Further, Lyft estimates that there are approximately 60,000 people in the city
of Chicago alone that want to drive for their platform, but do not currently own a qualifying car, and General Motors also
estimates that there are approximately 160,000 potential drivers in the DC Metro area, Baltimore, Chicago and Boston who do
not own a qualifying car.
Accordingly, TNCs are
actively taking steps to satisfy their driver demand by setting up programs designed to get eligible drivers into qualified cars,
including such programs as the Enterprise/Uber partnership, the Lyft/Hertz partnership, and the General Motor’s Maven program.
These programs serve as a validation that there is a healthy market to pair eligible drivers with qualified cars.
Car-sharing Industry
In January 2016, The
Economist reported that the trend to utilize cars during such idle periods is growing and even traditional car clubs are exploring
the car-sharing market, where members of such clubs are allowed to book car usage by mobile app for periods as short as 15 minutes.
Furthermore, such car-sharing usage is currently experiencing growth of over 30% a year, with a projected revenue collection of
more than $16.5 billion by 2024. A study on the scope of the sharing economy published by UBS Global Research – Q Series
titled “What is the Scope of the Sharing Economy” on July 20, 2016 estimates that the Shared Transportation segment,
which they define as digitally enabled non-private transport, will recognize approximately $350 billion market opportunity by
2020, representing a 5-year compound annual growth rate of approximately 54%. We believe will be able to capitalize on this opportunity
as existing demand from traditional taxi and public transportation options is transferred to shared transportation. Further, growth
is expected from this opportunity as the accelerating trend of the mass ease-of-use and availability of shared transportation
permanently shifts driving habits away from personal vehicle ownership. Evidence of this decline, while not yet a national trend,
can be seen in large cities as vehicle ownership is beginning to decline. Longer term, we envision a potential impact on the auto
industry as a whole from a subset of people permanently changing their driving habits and selling their cars entirely in favor
of using shared transportation (UBS estimates that approximately 40 million cars will be replaced by 2020).
Another recent analysis
by Morgan Stanley indicates that the estimated amount of global car miles traveled through shared vehicle usage by 2030 will hit
19.6 billion, or approximately 26% of all miles traveled (up from only 10.2 billion miles travelled in 2015). Given the excess
capacity of vehicle hours, higher vehicle utilization rates, and lower vehicle ownership rates, we expect a consumer shift towards
the acceptance of car-sharing as a part of everyday urban life.
Competition
The key differentiator
between HyreCar and our competitors is that we crowd-source vehicles -- we do not own or manage vehicles. This allows our prices
to be competitive with other vehicle solutions because we do not have the monthly vehicle overhead or infrastructure costs that
our competitors may have. Other advantages include the following:
|
|
1.
|
Pay-As-You-Go
:
Drivers using our platform are not locked into lengthy lease agreements, monthly contracts or subscription fees. Our payment
model is upfront and transparent. While our competitors engage in auto-debiting payment for the rented vehicle from the Drivers’
accounts, regardless of their current account balance, under our platform Drivers
pay
for the term of rental up-front, extend if they are financially able, and return the rented vehicle whenever they need
with
no “strings” attached. We are the only company providing this type of fluid and frictionless car transaction for
Uber and Lyft drivers.
|
|
|
2.
|
Convenience:
In some cases, drivers are renting a car from their neighbors. They walk down the street, take the keys and go. With Hertz or Avis, only one or two retail outlets participate in the Uber and Lyft programs.
|
Among vehicle solutions
for ride-sharing rentals, there are Hertz, Maven (General Motors’ project) and HyreCar. These car rental companies are similar
in one way: they operate in the U.S. and provide cars drivers to rent and drive on the Uber or Lyft platform. However, their terms
of service, specifications, prices and business models vary. A comparative analysis of fees, areas of operation, rental periods
and age requirements follows:
Initial Fees
Every rental company
charges an initial non-refundable fee for the first week’s rental before drivers get into vehicles. Typically, these fees
are in the form of a background or credit check.
|
Company
|
|
Initial Fee
|
|
|
|
|
|
|
|
HyreCar
|
|
$
|
30
|
|
|
Hertz
|
|
$
|
0
|
|
|
Maven
|
|
$
|
20
|
|
Refundable
Deposit Fees
A
driver pays a deposit when he or she makes a reservation. The deposit is refundable.
|
Company
|
|
Refundable Deposit Fee
|
|
|
|
|
|
|
|
HyreCar
|
|
$
|
200
|
|
|
Hertz
|
|
$
|
250
|
|
|
Maven
|
|
$
|
250
|
|
Weekly
Vehicle Rental Fee
Every
driver who rents a car for five days or longer will pay a weekly vehicle rental fee. Prices shown in the table below are contingent
on the car model.
|
Company
|
|
Weekly Rental Fee
|
|
|
|
|
|
HyreCar
|
|
As low as $140
(Fee dependent on owner and market)
|
|
Hertz
|
|
$180
plus
additional taxes and fees
(Fee
dependent on car model)
|
|
Maven
|
|
$189 - $229
(Fee dependent on car model)
|
Eligibility
Comparison
With
HyreCar a driver can drive for any on-demand service, such as Caviar, Postmates, DoorDash, etc. HyreCar Drivers are not limited
to driving for Uber and Lyft.
|
Company
|
|
Platform
Eligibility
|
|
|
|
|
|
HyreCar
|
|
Uber,
Lyft, Caviar, Postmates, DoorDash, etc.
|
|
Hertz
|
|
Lyft,
Uber
|
|
Maven
|
|
Uber,
Lyft, Caviar, Postmates, DoorDash, etc.
|
Areas
of Operation
A
key differentiator between HyreCar and other car-sharing programs is that HyreCar can operate in every city of a state. The other
programs are limited by location, city and available supply.
|
Company
|
|
Location Eligibility
|
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HyreCar
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AL, AZ, CA, CO, CT, DC, FL, GA, IL, IN, KS, KY, LA, MA, MD, MI, MS, MO, NY, NV, NJ, NC, OH, OR, PA, SC, TN, TX, UT, VA, WA, WI
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Hertz
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Austin, Atlanta, Baltimore, Boston, Chicago, Dallas, Denver, Fort Worth, Houston, Las Vegas, Los Angeles, Miami, Nashville, New Orleans, Orange County, Philadelphia, Phoenix, Portland, Sacramento, San Diego, San Francisco, San Jose, Tampa Bay and Washington D.C.
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Maven
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Lyft:
Atlanta, Baltimore, Boston,
Chicago, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Nashville, Orange County, Phoenix, Portland, Sacramento, San Diego, San
Francisco, San Jose, and Washington.
Uber:
Present only in San Francisco.
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Minimum
Rental Periods
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Company
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Minimum
Time Period
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HyreCar
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2
days
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Hertz
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1
week
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Maven
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1
week
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Driver
Minimum Age Requirement
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Company
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Minimum
Age of Driver
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HyreCar
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21
yrs.
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Hertz
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25
yrs.
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Maven
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21
yrs.
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Our
Relationship with Lyft
On
May 17, 2017, we announced an arrangement with Lyft that allows us to activate our Drivers through Lyft’s sign-up portal.
This sign-up process allows drivers to begin providing services on Lyft’s platform within one business day. The majority
of cars on our platform come pre-certified for ride-sharing under Lyft's vehicle requirements, enabling new and existing drivers
to find a car and get on the road. The Lyft arrangement has not been formalized in a written agreement. We are also in talks with
other ride-sharing companies to establish similar partnerships; however, no formal arrangements have been entered into to date.
Our
Strengths
Using
our platform, vehicle Owners can post their cars to our marketplace and Drivers can browse car inventory prior to rental. Once
a Driver finds a car, he or she creates a profile, enters his or her personal information and credentials (including, address,
city, state, copy of applicable state issued driver’s license, Uber or Lyft credentials, and SSN) and submits a credit card
for payment. We then perform a criminal background check, DMV driving record check, Homeland Security Watch-list and Sex Offender
database check. HyreCar’s screening criteria is stricter than Uber and Lyft’s background check. We are focused on
maintaining a safe user experience and ensuring that all transactions between Owners and Drivers are processed through a secure
web platform.
Why
Drivers Use Our Service
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Attractive
Market
: Drivers’ ability to earn income by driving for a ride-sharing business.
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Pay-As-You-Go
:
Drivers are not locked into long-term lease agreements, long-term monthly payments or
subscription fees.
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Convenience
:
Drivers can pick up the car from someone close by. Time from registration to getting
behind the wheel currently averages under 48 hours.
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Transparency
and Trust
: There are no hidden fees and only Owners that have been properly screened
are permitted to use the platform.
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Customer
Experience
: Application of game-design elements (i.e. gamification) of the platform
keeps Drivers engaged.
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Why
Owners Use Our Service
Data from a national
survey of driving behavior indicates that private vehicles are in use 5% or less during any given day, or about one hour per day.
Given the excess capacity of vehicle hours, higher vehicle utilization rates, and lower vehicle ownership rates, we expect a consumer
shift towards acceptance of car-sharing. Based on the results of the survey, we believe our platform is advantageous for the following
reasons:
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Passive
Income
: We often match Owners with long term Drivers, which provides the Owners with
a steady source of passive income resulting from our seamless re-booking process.
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Insurance
:
Liability policy fills the gaps left by personal and ride-sharing policies.
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Review
of Drivers
: Drivers must pass our extensive background checks and most Drivers have
also passed the Uber and Lyft background checks.
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Insurance
Coverage
A key component to
our business is our commercial auto. The two sided nature of our platform means that we need to insure both the Driver and the
Owner. Prior to any rental the Driver and Owner are provided an insurance ID card that lists the driver’s name and the vehicle
identification number. Insurance is typically generated twenty four hours in advance of the commencement of the rental through
to when the Owner confirms drop-off of the rented vehicle by the Driver. The vehicle pick-up and drop-off is all managed through
our platform. An Owner takes pictures of his or her vehicle prior to pressing the “Confirm Pick-up” button on the HyreCar
mobile app. (If pictures are not taken and the button is not pressed, it provides grounds for a claim denial; subsequent liability
and/or physical damage rests solely on the Driver and Owner.) After the rental is completed, the Owner presses the “Confirm
Drop-off” button on the HyreCar mobile app and the rental ends.
American Business
Insurance Services (“ABI”) is our managing general underwriter (“MGU”). ABI handles all of our back-end
insurance generation and processing through a seamless ABI connection with the HyreCar databases. ABI is the number one MGU in
the United States for Taxi and Livery business. David Haley is the president of ABI and sits on our strategic advisory board.
For
insurance purposes a vehicle rental is broken into four distinct driving periods. Period 0 is when the Driver has picked a vehicle
up from the Owner and is driving with the Uber or Lyft app turned-off. Period 1 is when the Driver has the Uber or Lyft app turned-on,
but has not yet accepted a fare. Period 2 is when the Driver has accepted a fare and is on the way to pick-up a passenger. Period
3 is when a passenger is in the vehicle. The HyreCar policy is specifically written to cover periods in which the Drivers are
operating HyreCar vehicles OFF the Uber or Lyft platform (period 0). During the periods when Drivers are operating ON the Uber
or Lyft platform (periods 1, 2 and 3), the HyreCar insurance subordinates to state mandated insurance provided by Uber and Lyft.
This enables us to keep insurance costs and liability low by leveraging state mandated insurance policies provided by the TNCs.
Business
Structure and Strategy
We operate out of
our corporate office in Los Angeles, California. Our technology platform allows for a relatively small staff compared to the size
and reach of our business. For example, we operate in 34 states plus the District of Columbia with no physical presence in those
states, with the exception of California. Our expansion into new states is currently only limited by specific insurance considerations.
Our business structure is divided into three distinct departments: sales and marketing, technology development and support and
operations.
Sales and marketing
are vital to our future profitability and growth. Most of our customers need to be sold into a car because they are initially
reluctant to pay upfront fees. Early interactions with our customers indicated that if customers were walked through the process
once by a member of our sales and marketing team, the customers were more inclined to use and continue to use our services for
a longer period of time. Accordingly, we implemented a one-man sales team in May 2016 and our revenue rose 194% that month from
the prior month. Since then, building a strong sales team has become a priority.
We have expanded the
sales team, which is now divided into a Driver team and an Owner team. The Driver team has a total of 15 sales contractors, which
are split into three sub-teams. Driver team members make approximately 30 calls a day to new customer leads with a mandate to
facilitate drivers into cars via the HyreCar platform. The Owner team has a total of six (6) sales contractors split evenly into
the following three regions: west coast states, central states and east coast states. The Owner sales team’s primary objective
is to get Owners to list their cars on the HyreCar platform.
The sales team headcount
has reached critical mass and we expect to maintain current headcount through 2018 to hit a forecast growth rate of 14% month
over month. Capping headcount is a key assumption that we believe drives profitability. The ability to grow topline revenue while
capping sales expense is achieved through a combination of marketing and technology. Organic bookings, defined as a rental without
sales agent contact, have jumped from 7.5% of revenue in 2016 to an estimated 14.5% in 2017. Attribution of organic bookings is
directly related to the quality of marketing leads generated and user experience / user interphase enhancements (UI/UX) per technology
development. The company’s expectation is that both aspects contribute to low operating expense growth in relation to revenue,
which in-turn, the company believes, will lead to higher gross profit in 2018.
Technology contractors
are the second largest planned use of proceeds from the primary offering. We currently operate with three overseas development
teams (two in Vietnam and one in India) and two teams in the United states, including multiple full-time developers based out
of our home office in Los Angeles. These teams are tasked with maintaining the current site, addressing bugs in the current code
base and small improvements to the Owner and Driver UI/UX.
Support
and operations underpin the company. Insurance claims management, Owner payment resolutions, Driver payment resolutions, collections,
chat support, email support, phone support, late rentals, car recovery, Driver verifications, insurance generation and insurance
verification all work together to create what we believe is a “best in class” customer service experience. Currently,
we have 13 in-house support staff and three team members in India. Our plan is to build a domestic support team that is client-facing
and use the team in India for special projects and administrative tasks. We believe that customer service is critical to our goal
of bringing new Drivers/Owners onto the platform and retaining those customers who have already utilized our services.
Revenue
Model
We generate revenue
by taking a fee out of each rental processed on our platform. Each rental transaction represents a Driver renting a car from an
Owner. Drivers pay a weekly rental rate,
plus
direct insurance costs and a 10% HyreCar fee. Owners receive their weekly
rental rate
minus
a 15% HyreCar fee. For example, the average weekly rental rate of a HyreCar vehicle is $200 (“Weekly
Rental”), plus direct insurance costs, plus a 10% HyreCar fee ($20), totaling $290 in total gross billings. $170 or 85%
of the weekly rental is subsequently transferred to the Owner. HyreCar earns revenues from the transaction fee of $50 and gross
fees from the insurance of $70. Accordingly, the GAAP reportable revenue recognized by HyreCar is $120 in this transaction. (as
detailed in the table below).
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Weekly Rental
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$
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200.00
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Direct Insurance
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$
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70.00
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HyreCar Driver Fee
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$
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20.00
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(10% of weekly rental)
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HyreCar Gross Bookings
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$
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290.00
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Owner Payment
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$
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170.00
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(85% of weekly rental)
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HyreCar Revenue
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$
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120.00
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Gross billings is
an important measure by which we evaluate and manage our business. We define gross billings as the amount billed to Drivers, without
any adjustments for amounts paid to Owners or refunds. It is important to note that gross billings is a non-GAAP measure and as
such, is not recorded in our financial statements as revenue. However, we use gross billings to asses our business growth, scale
of operations and our ability to generate gross billings is strongly correlated to our ability to generate revenues. Gross billings
may also be used to calculate net revenue margin, defined as the company’s GAAP reportable revenue over gross billings.
Using the definition of net revenue margin and the example above, HyreCar’s net revenue margin is equal to approximately
41% ($120 HyreCar’s GAAP revenue over $290 Total Gross Billings). A breakout of revenue components is provided in MD&A
and financial footnotes.
Marketing
Plan
In November 2016, our
marketing team completed an in-depth study of keyword searches using Google Analytics. Thirty keywords and phrases were chosen
and analyzed, allowing the team to determine in which cities the persons searching for the keywords and phrases were located.
For example, 400,000 people in Los Angeles googled key words like, “rent a car for Uber”, “Uber”, and
“Uber Leasing.” Overlaying our customer demographics with the Google search results created a Driver/Owner affinity
population of over 25 million potential customers, with the bulk of the 25 million concentrated in 16 core geographic locations.
Core geographies represent the top 16 metropolitan statistical areas, or MSAs, in the country based off population count. The
34 states we operate in encompass all 16 MSAs with additional secondary and tertiary cities contributing as well.
Insurance
Opportunity
A large percentage
of our cost of revenues is direct insurance expense, which we pay to the insurance company. The premiums are broken into two categories,
liability insurance and physical damage. The unique nature of our insurance enables us to keep insurance costs and liability low
by leveraging state mandated insurance policies provided by the TNCs. Our insurance premiums have exceeded liability and physical
damage claims throughout 2017, and we intend to examine self-insurance options in 2018.
Current estimates are
that in excess of 35% of all commercial property and casualty premiums are in some form of alternative risk structure. The company
has explored many forms of alternative risk structures including self-insurance through captive insurance programs and policies.
Specifically, cell captives are entities consisting of a core and an indefinite number of cell entities which are kept legally
separate from each other. A captive or protected cell is an ideal mechanism to deal with a large number of self-insured retention(s).
The benefits of having a cell captive include:
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g
enerating
a financial return through participating in the risk;
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i
ncreased
control over potential insurance coverage and costs;
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i
llustrating
to a carrier the willingness to share in the risk, and
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creating
more stability in the insurance program.
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Pending a Q2 2018 feasibility
study into the benefits of cell captives, the company believes it will be able to cut direct insurance costs by approximately 30%
from 2017 premium levels. A potential 30% reduction in annualized premiums is a significant cost savings that increases the company’s
gross profit margin and we believe it will contribute to company profitability in 2018. The company estimates some form of insurance
cost savings will be in-place by the end of Q2 2018. To the extent the company offers insurance directly, then the company
will disclosure any related revenues on the face of its income statements, in related notes and in the MD&A section of the
company’s periodic reports.
In addition to self-insurance,
the company is also working with our Managing General Agent (“MGA”) to develop new and innovative insurance products.
The company has proposed a new type of owner “lay-up” insurance for vehicle owners on the HyreCar platform. Lay-up
insurance replaces the need for an owner’s personal auto insurance policy and would represent significant cost savings when
compared to other insurance options available in the market today. Offering this type of insurance product benefits the company
in multiple verticals, including reduced insurance claim expense, greater customer retention and stickiness to the HyreCar platform.
Our MGA has begun piloting lay-up insurance to vehicle owners.
Regulation
The
California Public Utilities Commission (“CPUC”) was the first state regulatory body to impose rules and guidelines
for ride-sharing in the United States. The CPUC designated Uber and Lyft transportation network companies or TNCs. The CPUC guidelines
became the standard for all states across the U.S. Most states have adopted some form of the guidelines. California is one of
the strictest states when it comes to regulating the TNCs. Our insurance works within the California guidelines which makes it
easily adoptable by future state mandates outside of California.
Changes
in government regulation of our business have the potential to materially alter our business practices or our operational results.
Depending on the jurisdiction, those changes may come about through the issuance of new laws and regulations or changes in the
interpretation of existing laws and regulations by a court, regulatory body or governmental official. Sometimes those changes
may have not just prospective but also retroactive effect; this is particularly true when a change is made through reinterpretation
of laws or regulations that have been in effect for some time. Moreover, changes in regulation that may seem neutral on their
face may have either more or less impact on us than on ride-sharing businesses, depending on the circumstances. Potential changes
in law or regulation that may affect us relate to insurance intermediaries, customer privacy, data security and rate regulation.
In
addition, our operations also could be affected by any limitation in the fuel supply or by any imposition of mandatory allocation
or rationing regulations. We are not aware of any current proposal to impose such a regime in the U.S. or internationally. Such
a regime could, however, be quickly imposed if there was a serious disruption in the fuel supply for any reason, including an
act of war, terrorist incident or other problem, such as the devastation caused by hurricane Harvey, affecting the petroleum supply,
refining, distribution or pricing.
Employees
As of the date of
this prospectus, we employ 26 full-time personnel at our executive offices.
Description
of Property
Our corporate offices
are located at 355 South Grand Avenue, Suite 1650, Los Angeles, California 90071. Our lease for this office space expires in 2021.
Legal Proceedings
In September 2015,
a claim was made by certain former founders (the “Claimants”) against the company for violations of the founders’
agreement. The Claimants and the company entered into a confidential settlement agreement and general mutual release on April
25, 2016. The arbitration settlement provided that the Claimants would continue to own 190,177 shares of common stock and return
the remaining shares to the company. Furthermore, the Claimants agreed that the shares, while not in a separate class, would not
have voting rights until they are sold to a non-affiliated third party. The Claimants will be diluted upon capital raising, stock
option offerings and vesting, however any dilution will remain consistent and proportional to the remaining founders’ dilution
ratios and the Claimants will not be diluted more than the founders’ ratios in any capital raising transaction. The Claimants’
also are to receive a total of $110,000 paid out over eighteen (18) months starting November 1, 2016. As of December 31, 2017,
$24,444 of the balance remained outstanding.
In July 2017, an owner
of several vehicles that he was renting through the company’s platform filed arbitration seeking damages for losses associated
with renting his vehicles, specifically losses associated with a claimed stolen vehicle, storage fees, damage/repair fees, an insurance
deductible, and purported loss of income due to his inability to rent the stolen/damaged vehicles. In December 2017, the owner
also filed a lawsuit in Los Angeles Superior Court reasserting the same claims. The company believes that this action is without
merit and is vigorously defending itself, while also exploring whether the dispute can be settled in an expeditious manner. The
company has moved to compel the owner to arbitrate his claims and to stay his Superior Court case. That motion will be heard on
June 19, 2018.
MANAGEMENT
Executive
Officers and Directors
The
following table sets forth the names, ages and positions of our current executive officers and directors:
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Name
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Age
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Position
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Anshu “Andy” Bansal
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39
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Chairman of the Board of Directors
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Joseph Furnari
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36
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Chief Executive Officer, Chief Financial Officer,
and Director
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Abhishek Arora
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35
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Chief Technology Officer and Director
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Michael Furnari
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33
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Chief Business Development Officer and Secretary
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Kit Tran
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41
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Chief Marketing Officer
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Elizabeth Reynolds
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36
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Chief Operating Officer
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Grace Mellis
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46
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Director
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Anshu
“Andy” Bansal – Chairman of the Board of Directors
Anshu “Andy”
Bansal is our co-founder and has served as a member of our board of directors since July 2014 and as chairman since October 2017.
From July 2014 until October 2017, Mr. Bansal served as our Chief Technology Officer. Prior to co-founding HyreCar in July 2014,
from April 2013, Mr. Bansal was a manager for Amazon Corporation. Prior to joining Amazon, Mr. Bansal held various positions in
software companies such as Microsoft Corporation, Expedia, Inc. and H&R Block, Inc. Mr. Bansal co-founded e-commerce
website www.jaadudeals.com in India and has created “Talking Toons” iPhone app. In September 2009, Mr. Bansal
founded Computer Engineering Corporation, an IT strategy consultancy. We believe Mr. Bansal should serve as a member of our board
of directors due to the perspective and experience he brings as our co-founder and Chairman.
Joseph Furnari – Director, Chief
Executive Officer and Chief Financial Officer
Joseph Furnari has
served as our Chief Executive Officer since January 2017. From August 2016 until his appointment as Chief Executive Officer, Mr.
Furnari served as our Chief Financial Officer. From May 2014 to April 2016, Mr. Furnari served as Vice President of Portfolio Management
at The Palisades Group, LLC , where he managed a $5.2 billion portfolio of single family residential whole loan pools. From October
2009 to April 2014, he served as Assistant Vice President of Securitized Products Valuation at Morgan Stanley, where he coordinated
monthly independent valuations of securitized products. From April 2006 to October 2009, Mr. Furnari served as a Senior Analytics
Analyst at JP Morgan Chase & Co. We believe Mr. Furnari should serve as a member of our board of directors due to his extensive
experience in the financial services industry.
Abhishek Arora – Director and
Chief Technology Officer
Abhishek Arora is our
co-founder and has served as our Chief Technology Officer since October 2017. From July 2014 until October 2017, Mr. Arora served
as our Chief Operating Officer. From October 2012 to September 2015, Mr. Arora was self-employed as a software consultant and founded
Fillskills, an online marketplace to improve skills. At Fillskills he developed proprietary self-learning algorithms to search,
parse and analyze national job data. In addition, he has taught a wide variety of programming classes on iOS, C# and databases.
We believe Mr. Arora should serve as a member of our board of directors due to his extensive experience in the technology industry.
Michael Furnari –
Chief Business
Development Officer
and Secretary
Michael Furnari has served as our Director of Sales since May 2016, as our Chief Business Development
Officer since October 2017 and as our Secretary from August 2016. From August 2016 until January 2017 and again from April 2017
until January 10, 2018, Mr. Furnari served as member of our board of directors. From June 2013 to May 2016, Mr. Furnari served
as Sales Manager at Hyatt Residence Group (HRG) Carmel Highlands, the highest volume property in the group’s portfolio. From
December 2010 to June 2013, Mr. Furnari served as Facilities Manager at Target Corporation.
Kit
Tran – Chief Marketing Officer
Kit
Tran has served as our Chief Marketing Officer since November 2016. Prior to joining HyreCar in 2016, from October 2013 to
November 2016, Mr. Tran was Vice President of Marketing and Monetization for Clicksco Group, an ad tech company based out of Dubai.
Before Clicksco Group, Mr. Tran worked for a privately held media organization Market E's, from January 2009 to December 2012.
Between January 2005 to October 2008 Mr. Tran worked as a Digital Marketer on the agency side, for ad agencies, including RPA,
The AOR for Honda, Acura, La-Z-Boy Inc., Bosley Inc., SoyJoy, Pentax and Mandalay Bay.
Elizabeth
Reynolds – Chief Operating Officer
Elizabeth
Reynolds has served as our Chief Operating Officer since October 2017. From May 2015 to February 2017, she was the
Director of Operations at Cross Campus where she led the launch of new co-working locations and operational scaling. From January
2010 to April 2015, she consulted on general management and operations for multiple restauranteurs, including Chefs Mario Batali
and Tony Esnault. Ms. Reynolds studied biology at Reed College and began her career path in research before returning to
school to study education. After leaving academia, she accepted a position as Assistant Director for Body Worlds and traveled
across the country and eventually into Los Angeles with the exhibit. She currently serves as an advisor for BIL Conference and
LA Makerspace.
Grace
Mellis – Director
Grace
Mellis has served as a member of our board of directors since January 2018. Grace is the founder and director of IGA Capital
since August 2016, which is focused on finance and management advisory services. From November 2013 to July 2016, Grace
served in various roles at Greendot Corporation including SVP Corporate Finance and Business Intelligence and Chief Financial
Officer. Prior to that, Ms. Mellis was at JP Morgan from November 2004 to November 2013 in a number of roles, including
Managing Director and Chief Financial Officer in their Corporate and Investment Bank covering Investor Services and Treasury and
Securities Services Businesses and Head of International Strategy and Business Development. Ms. Mellis holds both a Bachelor’s
degree and Masters of Business Administration from Harvard University. We believe Ms. Mellis should serve as a member of our board
of directors due to her extensive background in finance and business management.
Involvement
in Certain Legal Proceedings
To
the best of our knowledge, none of our directors or executive officers have, during the past ten years, been involved in any legal
proceedings described in subparagraph (f) of Item 401 of Regulation S-K.
Staggered Board
Upon the effectiveness
of the registration statement that this prospectus forms a part, pursuant to our amended and restated certificate of incorporation,
our board of directors will be divided into three classes. The members of each class will serve for a staggered, three-year term.
Upon the expiration of the term of a class of directors, directors in that class will be elected for three-year terms at the annual
meeting of stockholders in the year in which their term expires. The classes will be composed as follows:
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Mr. Arora will be a Class I director, whose terms will expire at the fiscal 2018 annual meeting of stockholders;
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Messrs. Furnari and Bansal will be Class II directors, whose term will expire at the fiscal 2019 annual meeting of stockholders; and
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Ms. Mellis will be a Class III director, whose term will expire at the fiscal 2020 annual meeting of stockholders.
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Any additional directorships
resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible,
each class will continue to be apportioned as nearly equal in number as possible. This classification of our board of directors
may have the effect of delaying or preventing changes in control of our company.
Board
of Directors and Corporate Governance
When
considering whether directors have the experience, qualifications, attributes and skills to enable the board of directors to satisfy
its oversight responsibilities effectively in light of our business and structure, the board of directors focuses primarily on
the information discussed in each of the directors’ individual biographies as set forth above.
The
board of directors periodically reviews relationships that directors have with our company to determine whether the directors
are independent. Directors are considered “independent” as long as they do not accept any consulting, advisory
or other compensatory fee (other than director fees) from us, are not an affiliated person of our company or our subsidiaries
(e.g., an officer or a greater than 10% stockholder) and are independent within the meaning of applicable United States laws,
regulations and the Nasdaq Capital Market listing rules. In this latter regard, the board of directors uses the Nasdaq Marketplace
Rules (specifically, Section 5605(a)(2) of such rules) as a benchmark for determining which, if any, of our directors are
independent, solely in order to comply with applicable SEC disclosure rules.
Board
Committees
Our
board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee,
each of which will operate pursuant to a charter to be adopted by our board of directors and will be effective upon the effectiveness
of the registration statement of which this prospectus is a part. The composition of each committee and its respective charter
will be effective upon the listing of our common stock on Nasdaq, and copies of each charter will be posted on the corporate governance
section of our website at www.hyrecar.com. Each committee has the composition and responsibilities described below. Our board
of directors may establish other committees from time to time.
Nasdaq
permits a phase-in period of up to one year for an issuer registering securities in an initial public offering to meet the audit
committee, compensation committee and nominating and corporate governance committee independence requirements. Under the initial
public offering phase-in period, only one member of each committee is required to satisfy the heightened independence requirements
at the time our registration statement becomes effective, a majority of the members of each committee must satisfy the heightened
independence requirements within 90 days following the effectiveness of our registration statement, and all members of each committee
must satisfy the heightened independence requirements within one year from the effectiveness of our registration statement.
Audit
Committee
Grace Mellis, Andy
Bansal and Abhi Arora will serve on the audit committee, which will be chaired by Grace Mellis. Our board of directors has determined
that Ms. Mellis, is “independent” for audit committee purposes as that term is defined in the rules of the SEC and
the applicable Nasdaq rules, and each member has sufficient knowledge in financial and auditing matters to serve on the audit committee.
Our board of directors has designated Ms. Mellis as an “audit committee financial expert,” as defined under the applicable
rules of the SEC. We intend to comply with the applicable independent requirements for all members of the audit committee within
the time periods specified under such rules.
The
audit committee’s responsibilities include:
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appointing,
approving the compensation of, and assessing the independence of our independent registered
public accounting firm;
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pre-approving
auditing and permissible non-audit services, and the terms of such services, to be provided
by our independent registered public accounting firm;
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reviewing
the overall audit plan with our independent registered public accounting firm and members
of management responsible for preparing our financial statements;
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reviewing
and discussing with management and our independent registered public accounting firm
our annual and quarterly financial statements and related disclosures as well as critical
accounting policies and practices used by us;
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●
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coordinating
the oversight and reviewing the adequacy of our internal control over financial reporting;
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●
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establishing
policies and procedures for the receipt and retention of accounting-related complaints
and concerns;
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●
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recommending
based upon the audit committee’s review and discussions with management and our
independent registered public accounting firm whether our audited financial statements
shall be included in our Annual Report on Form 10-K;
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●
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monitoring
the integrity of our financial statements and our compliance with legal and regulatory
requirements as they relate to our financial statements and accounting matters;
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●
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preparing
the audit committee report required by SEC rules to be included in our annual proxy statement;
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●
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reviewing
all related person transactions for potential conflict of interest situations and approving
all such transactions; and
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●
|
reviewing
quarterly earnings releases.
|
Compensation
Committee
Grace Mellis, Andy
Bansal and Joseph Furnari will serve on the nominating and corporate governance committee, which will be chaired by Ms. Mellis.
Our board of directors has determined that Ms. Mellis is “independent” as defined in the applicable Nasdaq rules.
We intend to comply with the applicable independent requirements for all members of the nominating and corporate governance committee
within the time periods specified under such rules.
The
compensation committee’s responsibilities include:
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●
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annually
reviewing and approving corporate goals and objectives relevant to the compensation of
our chief executive officer;
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●
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evaluating
the performance of our chief executive officer in light of such corporate goals and objectives
and determining the compensation of our chief executive officer;
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●
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reviewing
and approving the compensation of our other executive officers;
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●
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reviewing
and establishing our overall management compensation, philosophy and policy;
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●
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overseeing
and administering our compensation and similar plans;
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●
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evaluating
and assessing potential and current compensation advisors in accordance with the independence
standards identified in the applicable Nasdaq rules;
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●
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retaining
and approving the compensation of any compensation advisors;
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●
|
reviewing
and making recommendations to our board of directors about our policies and procedures
for the grant of equity-based awards;
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●
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evaluating
and making recommendations to the board of directors about director compensation;
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●
|
preparing
the compensation committee report required by SEC rules, if and when required, to be
included in our annual proxy statement; and
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●
|
reviewing
and approving the retention or termination of any consulting firm or outside advisor
to assist in the evaluation of compensation matters.
|
Nominating
and Corporate Governance Committee
Grace Mellis, Andy Bansal and Joseph Furnari will serve on the nominating and corporate governance committee,
which will be chaired by Ms. Mellis. Our board of directors has determined that Ms. Mellis is “independent” as defined
in the applicable Nasdaq rules. We intend to comply with the applicable independent requirements for all members of the nominating
and corporate governance committee within the time periods specified under such rules.
The
nominating and corporate governance committee’s responsibilities include:
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●
|
developing
and recommending to the board of directors criteria for board and committee membership;
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●
|
establishing
procedures for identifying and evaluating board of director candidates, including nominees
recommended by stockholders;
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●
|
reviewing
the size and composition of the board of directors to ensure that it is composed of members
containing the appropriate skills and expertise to advise us;
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●
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identifying
individuals qualified to become members of the board of directors;
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●
|
recommending
to the board of directors the persons to be nominated for election as directors and to
each of the board's committees;
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●
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developing
and recommending to the board of directors a code of business conduct and ethics and
a set of corporate governance guidelines; and
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●
|
overseeing
the evaluation of our board of directors and management.
|
Code
of Business Conduct and Ethics
We
have adopted a written code of business conduct and ethics, effective upon the effectiveness of the registration statement of
which this prospectus is a part, that applies to our directors, officers and employees, including our principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing similar functions. Following effectiveness,
we will post a copy of our code of ethics, and intend to post amendments to this code, or any waivers of its requirements, on
our company website.
Corporate
Governance Guidelines
We
have adopted corporate governance guidelines, effective upon the effectiveness of the registration statement of which this prospectus
is a part, that serve as a flexible framework within which our board of directors and its committees operate. These guidelines
will cover a number of areas including the size and composition of the board, board membership criteria and director qualifications,
director responsibilities, board agenda, meetings of independent directors, committee responsibilities and assignments, board
member access to management and independent advisors, director communications with third parties, director compensation, and management
succession planning. A copy of our corporate governance guidelines will be available on our website at www.hyrecar.com upon completion
of this offering.
Conflicts
of Interest
We comply with applicable
state law with respect to transactions (including business opportunities) involving potential conflicts. Applicable state corporate
law requires that all transactions involving our company and any director or executive officer (or other entities with which they
are affiliated) are subject to full disclosure and approval of the majority of the disinterested independent members of our board
of directors, approval of the majority of our stockholders or the determination that the contract or transaction is intrinsically
fair to us. More particularly, our policy is to have any related party transactions (i.e., transactions involving a director,
an officer or an affiliate of our company) be approved solely by a majority of the disinterested independent directors serving
on the board of directors.
Family Relationships
Messrs. Joseph
Furnari and Michael Furnari are brothers.
Executive
Compensation
Our
named executive officers for fiscal 2017 set forth in this prospectus (the “Named Executive Officers”) are:
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|
●
|
Michael
Furnari; and
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|
|
●
|
Abhishek
Arora.
|
Summary
Compensation Table
The
following table summarizes the compensation of our Named Executive Officers during the years ended December 31, 2017 and 2016.
|
Name
and Principal Position
|
|
Year
|
|
|
Salary
($)
(1)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
(2)
|
|
|
Option
Awards
($)
(2)
|
|
|
All
Other Compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Joseph Furnari,
|
|
2017
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
44,200
|
|
|
|
—
|
|
|
|
144,200
|
|
|
CEO and CFO
|
|
2016
|
|
|
|
24,000
|
|
|
|
—
|
|
|
|
65,700
|
(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
89,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Michael Furnari,
|
|
2017
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
44,200
|
|
|
|
—
|
|
|
|
144,200
|
|
|
Director of Sales
|
|
2016
|
|
|
|
24,000
|
|
|
|
—
|
|
|
|
65,700
|
(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
89,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abhishek Arora,
|
|
2017
|
|
|
|
96,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,925
|
|
|
|
—
|
|
|
|
104,925
|
|
|
Chief Technology Officer
|
|
2016
|
|
|
|
96,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
96,000
|
|
|
(1)
|
Reflects
actual earnings for 2017 and 2016, which may differ from approved 2017 and 2016 base salaries due to start dates and effective
dates of salary increases.
|
|
(2)
|
Reflects
the aggregate grant date fair value computed in accordance with ASC Topic 718. The assumptions used in the valuation of these
awards are set forth in the notes to our financial statements, which are included in this prospectus. These amounts do not
necessarily correspond to the actual value that may be recognized by the Named Executive Officers.
|
|
(3)
|
Reflects the aggregate grant date fair value computed in accordance with ASC Topic 718. The assumptions used in the valuation of these awards are set forth in the notes to our financial statements, which are included in this prospectus. These amounts do not necessarily correspond to the actual value that may be recognized by the Named Executive Officers. The consideration paid by the Named Executive Officer for such restricted stock awards was a full recourse secured promissory note in the principal amount of $65,700. On May 23, 2018, we issued a bonus to the Named Executive Officer in the amount of $66,812.40, which was equal to the aggregate principal and any accrued but unpaid interest due under the promissory note, in lieu of the repayment of the outstanding obligations.
|
Employment
Agreements
Named
Executive Officers
Joseph
Furnari
On
September 12, 2016, the company entered into an employment agreement with Mr. Joseph Furnari to act as the company’s Chief
Financial Officer, which may be terminated by the company at any time, for any reason, with or without cause. Compensation under
the agreement includes an annual salary of $48,000. Subject to the discretion of the board, Mr. Furnari will be considered for
an annual incentive bonus. In addition, the agreement also provided for the grant of 489,025 restricted shares of the company’s
common stock under the company’s 2016 Equity Incentive Plan. In October 2016, Mr. Furnari’s annual salary was increased
to $100,000. On April 6, 2017, we granted from the 2016 Equity Incentive Plan options for the purchase of 148,570 shares of our
common stock to Mr. Furnari. The exercise price per share is $0.71.
Michael
Furnari
On September 12, 2016,
the company entered into an employment agreement with Mr. Michael Furnari to act as the company’s Secretary and Director
of Sales, which may be terminated by the company at any time, for any reason, with or without cause. Compensation under the agreement
includes an annual salary of $48,000. Subject to the discretion of the board, Mr. Furnari will be considered for an annual incentive
bonus. In addition, the agreement also provided for the grant of 489,025 restricted shares of the company’s common stock
under the company’s 2016 Equity Incentive Plan. In October 2016, Mr. Furnari’s annual salary was increased to $100,000.
On April 6, 2017, we granted from the 2016 Equity Incentive Plan options for the purchase of 148,570 shares of our common stock
to Mr. Furnari. The exercise price per share is $0.71.
Abhishek Arora
The company has an
oral agreement with Mr. Abhishek Arora pursuant to which he receives an annual salary of $96,000 for his services as Chief Technology
Officer. During the year ended December 31, 2017, Mr. Arora deferred $12,000 of his salary. As a result, Mr. Arora received cash
compensation equal to $84,000 during the year ended December 31, 2017. Subject to the discretion of the board, Mr. Arora will
be considered for an annual incentive bonus.
Other
Executive Officers
Kit
Tran
The
company has a consulting arrangement with Mr. Kit Tran, through an entity, pursuant to which Mr. Tran provides services to the
company as its Chief Marketing Officer and earns consulting fees of $4,000 per month. Subject to the discretion of the board,
Mr. Tran will be considered for an annual incentive bonus.
Elizabeth
Reynolds
On June 16, 2017, the
company entered into an employment agreement with Ms. Elizabeth Reynolds, which may be terminated at any time, for any reason,
with or without cause. Compensation under the agreement includes an annual salary of $75,000. Subject to the discretion of the
board, Ms. Reynolds will be considered for an annual incentive bonus. In addition, the agreement also granted Ms. Reynolds an
option to purchase up to 75,000 shares of the company’s common stock, subject to vesting.
Outstanding
Equity Awards at 2017 Fiscal Year-End
The
following table presents information concerning unexercised options and unvested restricted stock awards for each Named Executive
Officer outstanding as of December 31, 2017.
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Name
|
|
Grant Date
(1)
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(2)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units
of
Stock That
Have Not
Vested
(#)
(3)
|
|
|
Market
Value of
Shares
or
Units of Stock
That Have
Not Vested
($)
(1)(4)
|
|
|
Joseph Furnari
|
|
4/6/2017
|
|
|
55,714
|
|
|
|
92,856
|
|
|
|
—
|
|
|
|
0.71
|
|
|
|
4/6/2027
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
9/12/2016
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
145,621
|
|
|
|
800,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Furnari
|
|
4/6/2017
|
|
|
55,714
|
|
|
|
92,856
|
|
|
|
—
|
|
|
|
0.71
|
|
|
|
4/6/2027
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
9/12/2016
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
145,621
|
|
|
|
800,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abhishek Arora
|
|
10/30/2017
|
|
|
26,979
|
|
|
|
8,021
|
|
|
|
—
|
|
|
|
1.75
|
|
|
|
10/30/2027
|
|
|
|
—
|
|
|
|
—
|
|
|
(1)
|
All
of the outstanding equity awards described in the footnotes below were granted under our 2016 Equity Incentive Plan.
|
|
(2)
|
The
options vest as follows: (i) 25% of the shares vest on the first anniversary of the vesting commencement date (May 1, 2016)
and (ii) the remaining 75% of the shares subject to the options vest and become exercisable in 12 successive equal quarterly
installments.
|
|
(3)
|
The
restricted shares vest as follows: (i) 33% of the shares vest on the consummation of a sale of securities for aggregate gross
proceeds of at least $250,000 in one or more transactions, which was satisfied as of June 14, 2016, and (ii) the remaining
67% of the shares vest in 36 successive equal monthly installments commencing as of May 1, 2016 and vesting in full on April
30, 2019.
|
|
|
|
|
(4)
|
The market price
for our common stock is based upon the assumed initial public offering price of $5.50 per
share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus.
|
Director Compensation
No
compensation was
paid to non-employee directors during 2017. However, Anshu “Andy” Bansal, our Chairman, received compensation of $65,000
and $20,000 during the years ended December 31, 2017 and 2016 for his services as Chief Technology Officer and for business advisory
services after his resignation from such position in October 2017.
Our
2016 Equity Incentive Plan
Our
board of directors and stockholders adopted our 2016 Equity Incentive Plan on August 27, 2016.
Share Reserve.
As
of December 31, 2017, we had 1,021,171 shares of common stock issuable upon exercise of outstanding stock options and no shares
of common stock available for future awards. In connection with the adoption of our 2018 Equity Incentive Plan, no additional awards
will be granted under our 2016 Equity Incentive Plan.
Term.
Our
2016 Equity Incentive Plan will terminate ten years from the date our board of directors approves the plan, unless it is terminated
earlier by our board of directors. In connection with the adoption of our 2018 Equity Incentive Plan, no additional awards will
be granted under our 2016 Equity Incentive Plan.
Eligibility.
Our
2016 Equity Incentive Plan authorizes the award of stock options, stock appreciation rights, restricted stock awards, or restricted
stock units.
Administration.
Our
2016 Equity Incentive Plan is administered by our board of directors; however, in connection with the primary offering, we our
compensation committee, to be effective upon effectiveness of the registration statement in which this prospectus forms a part,
will administer the plan. The administrator has the authority to construe and interpret our 2016 Equity Incentive Plan and make
all other determinations necessary or advisable for the administration of the plan. Awards under the 2016 Equity Incentive Plan
may be made subject to “performance factors” and other terms in order to qualify as performance based compensation
for the purposes of 162(m) of the Code.
Stock Options.
Our
2016 Equity Incentive Plan provided for the grant of incentive stock options that qualify under Section 422 of the Code only
to our employees. All awards other than incentive stock options were available for grant to our employees, directors, consultants
or other service providers. The exercise price of each stock option was at least equal to the fair market value of our common stock
on the date of grant. The exercise price of incentive stock options granted to 10% stockholders was at least equal to 110% of that
value.
Options may be exercised
only as they vest or to be immediately exercisable with any shares issued on exercise being subject to our right of repurchase
that lapses as the shares vest. In general, options vest over a four-year period. The maximum term of options granted under our
2016 Equity Incentive Plan is ten years.
Stock
Appreciation Rights.
Stock appreciation rights provide for a payment, or payments, in cash or shares of our common stock,
to the holder based upon the difference between the fair market value of our common stock on the date of exercise and the stated
exercise price up to a maximum amount of cash or number of shares. Stock appreciation rights may vest based on time or achievement
of performance conditions.
Restricted Stock.
A
restricted stock award is an offer by us to sell shares of our common stock subject to restrictions. The price (if any) of a restricted
stock award is determined by the administrator. Unless otherwise determined by the administrator at the time of award, vesting
will cease on the date the participant no longer provides services to us and unvested shares will be forfeited to or repurchased
by us.
Restricted
Stock Units.
An RSU is an award that covers a number of shares of our common stock that may be settled upon vesting in
cash, by the issuance of the underlying shares or a combination of both. These awards are subject to forfeiture prior to settlement
because of termination of employment or failure to achieve certain performance conditions.
Additional Provisions.
Awards
granted under our 2016 Equity Incentive Plan may not be transferred in any manner other than by will or by the laws of descent
and distribution, or as determined by the administrator. Unless otherwise restricted by the administrator, awards that are nonstatutory
stock options may be exercised during the lifetime of the optionee only by the optionee, the optionee’s guardian or legal
representative, or a family member of the optionee who has acquired the option by a permitted transfer. Awards that are incentive
stock options may be exercised during the lifetime of the optionee only by the optionee or the optionee’s guardian or legal
representative. Options granted under our 2016 Equity Incentive Plan generally may be exercised for a period of three months after
the termination of the optionee’s service to us, except in the case of death or permanent disability, in which case the
options may be exercised for up to 12 months or six months, respectively, following termination of the optionee’s service
to us.
If
we experience a change in control transaction, outstanding awards, including any vesting provisions, may be assumed or substituted
by the successor company. Outstanding awards that are not assumed or substituted will be exercisable for a period of time and
will expire upon the closing of a change in control transaction. In the discretion of our compensation committee, the vesting
of these awards may be accelerated upon the occurrence of these types of transactions.
Our 2018 Equity Incentive Plan
Our board of directors
and stockholders adopted our 2018 Equity Incentive Plan on May 23, 2018 and, 2018, respectively. Our 2018 Equity Incentive Plan
is intended to align the interests of our stockholders and the recipients of awards under the 2018 Equity Incentive Plan, and to
advance our interests by attracting and retaining directors, officers, employees and other service providers and motivating them
to act in our long-term best interests. The material terms of the 2018 Equity Incentive Plan are as follows:
Plan term
.
The 2018 Equity Incentive Plan terminates on the tenth anniversary of May 23, 2018, unless terminated earlier by our board of
directors.
Eligible participants
. All officers,
directors, employees, consultants, agents and independent contractors, and persons expected to become officers, directors, employees,
consultants, agents and independent contractors of our Company or any of our subsidiaries are eligible to receive awards under
the 2018 Equity Incentive Plan. The compensation committee of our board will determine the participants under the 2018 Equity Incentive
Plan.
Shares authorized
.
3,000,000 shares of common stock will be available for awards granted under the 2018 Equity Incentive Plan, subject to adjustment
for stock splits and other similar changes in capitalization. The number of available shares will be reduced by the aggregate number
of shares that become subject to outstanding awards granted under the 2018 Equity Incentive Plan. As of the first day of each calendar
year beginning on or after January 1, 2020, the number of shares available for all awards under the 2018 Equity Incentive Plan
will automatically increase by a number equal to the least of (i) 300,000 shares, (ii) five percent (5%) of the number of shares
that are issued and outstanding as of that date, or (ii) a lesser number of shares as determined by the compensation committee.
To the extent that shares subject to an outstanding award granted under the 2018 Equity Incentive Plan are not issued or delivered
by reason of the expiration, termination, cancellation or forfeiture of such award or by reason of the settlement of an award in
cash, then those shares will again be available under the 2018 Equity Incentive Plan. In addition, any shares covered by an award
that have been surrendered in connection with the payment of the award exercise or purchase price or in satisfaction of tax withholding
obligations incident to the grant, exercise, vesting or settlement of an award will be deemed not to have been issued for purposes
of determining the maximum number of shares which may be issued pursuant to all awards under the 2018 Equity Incentive Plan.
Award types
.
Awards include non-qualified and incentive stock options, stock appreciation rights, bonus shares, restricted stock, restricted
stock units, performance units and cash-based awards.
Administration
.
The compensation committee will interpret and administer the 2018 Equity Incentive Plan. The compensation committee’s interpretation,
construction and administration of the 2018 Equity Incentive Plan and all of its determinations thereunder will be conclusive and
binding on all persons.
The compensation committee
shall have the authority to determine the participants in the 2018 Equity Incentive Plan, the form, amount and timing of any awards,
the performance goals, if any, and all other terms and conditions pertaining to any award. The compensation committee may take
any action such that (i) any outstanding options and stock appreciation rights become exercisable in part or in full, (ii) all
or any portion of a restriction period on any restricted stock or restricted stock units will lapse, (iii) all or a portion of
any performance period applicable to any performance-based award will lapse and (iv) any performance measures applicable to any
outstanding award will be deemed satisfied at the target level or any other level. Subject to the terms of the 2018 Equity Incentive
Plan relating to grants to our executive officers and directors, the compensation committee may delegate some or all of its powers
and authority to the Chief Executive Officer and President or other executive officer as the compensation committee deems appropriate.
Stock options and
stock appreciation rights
. The 2018 Equity Incentive Plan provides for the grant of stock options and stock appreciation rights.
Stock options may be either tax-qualified incentive stock options or non-qualified stock options. The compensation committee will
determine the terms and conditions to the exercisability of each option and stock appreciation right.
The period for the
exercise of a non-qualified stock option or stock appreciation right will be determined by the compensation committee provided
that no option may be exercised later than ten years after its date of grant. The exercise price of a non-qualified stock option
and the base price of a stock appreciation right will not be less than 100% of the fair market value of a share of our common stock
on the date of grant, provided that the base price of a stock appreciation right granted in tandem with an option will be the exercise
price of the related option. A stock appreciation right entitles the holder to receive upon exercise, subject to tax withholding
in respect of an employee, shares of our common stock, which may be restricted stock, with a value equal to the difference between
the fair market value of our common stock on the exercise date and the base price of the stock appreciation right.
Each incentive stock
option will be exercisable for not more than 10 years after its date of grant, unless the optionee owns greater than 10% of the
voting power of all shares of our capital stock, or a “ten percent holder”, in which case the option will be exercisable
for not more than five years after its date of grant. The exercise price of an incentive stock option will not be less than the
fair market value of a share of our common stock on its date of grant, unless the optionee is a ten percent holder, in which case
the option exercise price will be the price required by the Internal Revenue Code of 1986, as amended, or the “Code”,
currently 110% of fair market value.
Upon exercise, the
option exercise price may be paid in cash, by the delivery of previously owned shares of our common stock, share withholding or
through a cashless exercise arrangement, as permitted by the applicable award agreement. All of the terms relating to the exercise,
cancellation or other disposition of an option or stock appreciation right upon a termination of employment, whether by reason
of disability, retirement, death or any other reason, will be determined by the compensation committee.
The compensation committee,
without stockholder approval, may (i) reduce the exercise price of any previously granted option or the base appreciation amount
of any previously granted stock appreciation right, or (ii) cancel any previously granted option or stock appreciation right at
a time when its exercise price or base appreciation amount (as applicable) exceeds the fair market value of the underlying shares,
in exchange for another option, stock appreciation right or other award or for cash.
Stock awards
.
The 2018 Equity Incentive Plan provides for the grant of stock awards. The compensation committee may grant a stock award as a
bonus stock award, a restricted stock award or a restricted stock unit award and, in the case of a restricted stock award or restricted
stock unit award, the compensation committee may determine that such award will be subject to the attainment of performance measures
over an established performance period. All of the terms relating to the satisfaction of performance measures and the termination
of a restriction period, or the forfeiture and cancellation of a stock award upon a termination of employment, whether by reason
of disability, retirement, death or any other reason, will be determined by the compensation committee.
The agreement awarding
restricted stock units will specify whether such award may be settled in shares of our common stock, cash or a combination thereof
and whether the holder will be entitled to receive dividend equivalents, on a current or deferred basis, with respect to such award.
Prior to settlement of a restricted stock unit in shares of our common stock, the holder of a restricted stock unit will have no
rights as our stockholder.
Unless otherwise set
forth in a restricted stock award agreement, the holder of shares of restricted stock will have rights as our stockholder, including
the right to vote and receive dividends with respect to the shares of restricted stock, except that distributions other than regular
cash dividends and regular cash dividends with respect to shares of restricted stock subject to performance-based vesting conditions
will be held by us and will be subject to the same restrictions as the restricted stock.
Performance unit
awards
. The 2018 Equity Incentive Plan provides for the grant of performance unit awards. Each performance unit is a right,
contingent upon the attainment of performance measures within a specified performance period, to receive a specified cash amount,
shares of our common stock or a combination thereof which may be restricted stock, having a fair market value equal to such cash
amount. Prior to the settlement of a performance unit award in shares of our common stock, the holder of such award will have no
rights as our stockholder with respect to such shares. Performance units will be non-transferable and subject to forfeiture if
the specified performance measures are not attained during the specified performance period. All of the terms relating to the satisfaction
of performance measures and the termination of a performance period, or the forfeiture and cancellation of a performance unit award
upon a termination of employment, whether by reason of disability, retirement, death or any other reason, will be determined by
the compensation committee.
Cash-based awards
.
The 2018 Equity Incentive Plan also provides for the grant of cash-based awards. Each cash-based award is an award denominated
in cash that may be settled in cash and/or shares, which may be subject to restrictions, as established by the compensation committee.
Performance goals
.
Under the 2018 Equity Incentive Plan, the vesting or payment of performance-based awards will be subject to the satisfaction of
certain performance goals. The performance goals applicable to a particular award will be determined by the compensation committee
at the time of grant. The performance goals may be one or more of the following corporate-wide or subsidiary, division, operating
unit or individual measures, stated in either absolute terms or relative terms.
Individual Limits
.
With respect to non-employee directors, the maximum grant date fair value of shares that may be granted to an individual non-employee
director during any fiscal year of the Company is $150,000. In connection with a non-employee director’s commencement of
service with the Company, the per person limit set forth in the previous sentence will be $150,000.
Amendment or termination
of the 2018
Equity Incentive
Plan
. The board may amend or terminate the 2018 Equity Incentive Plan as it deems advisable,
subject to any requirement of stockholder approval required by law, rule or regulation.
Change of control
.
In the event of a change of control, our board of directors may, in its discretion, (1) provide that (A) some or all outstanding
options and stock appreciation rights will immediately become exercisable in full or in part, (B) the restriction period applicable
to some or all outstanding stock awards will lapse in full or in part, (C) the performance period applicable to some or all outstanding
awards will lapse in full or in part, and (D) the performance measures applicable to some or all outstanding awards will be deemed
to be satisfied at the target or any other level, (2) provide that some or all outstanding awards will terminate without consideration
as of the date of the change of control, (3) require that shares of stock of the corporation resulting from such change of control,
or a parent corporation thereof, be substituted for some or all of our shares subject to an outstanding award, and/or (4) require
outstanding awards, in whole or in part, to be surrendered by the holder, and to be immediately canceled, and to provide for the
holder to receive (A) a cash payment in an amount equal to (i) in the case of an option or stock appreciation right, the number
of our shares then subject to the portion of such option or stock appreciation right surrendered, whether vested or unvested, multiplied
by the excess, if any, of the fair market value of a share of our common stock as of the date of the change of control, over the
purchase price or base price per share of our common stock subject to such option or stock appreciation right, (ii) in the case
of a stock award, the number of shares of our common stock then subject to the portion of such award surrendered, whether vested
or unvested, multiplied by the fair market value of a share of our common stock as of the date of the change of control, and (iii)
in the case of a performance unit award, the value of the performance units then subject to the portion of such award surrendered;
(B) shares of capital stock of the corporation resulting from such change of control, or a parent corporation thereof, having a
fair market value not less than the amount determined under clause (A) above; or (C) a combination of the payment of cash pursuant
to clause (A) above and the issuance of shares pursuant to clause (B) above.
Under the 2018 Equity Incentive Plan, a
change of control will occur upon: (i) a person’s or entity’s acquisition, other than from us, of beneficial ownership
of 50% or more of either our then outstanding shares or the combined voting power of our then outstanding voting securities, but
excluding certain acquisitions by the company, its subsidiaries or employee benefit plans, or by a corporation in which our stockholders
hold a majority interest; (ii) a reorganization, merger or consolidation of the company if our stockholders do not thereafter beneficially
own more than 50% of the outstanding shares or combined voting power of the resulting company, (iii) certain changes to the incumbent
directors of our Company, or (iv) a complete liquidation or dissolution of the company or of the sale or other disposition of all
or substantially all of our assets; but excluding, in any case, the initial public offering or any bona fide primary or secondary
public offering following the occurrence of the initial public offering.
New plan benefits
.
The benefits that might be received by officers, employees and non-employee directors cannot be determined at this time. All officers,
employees and non-employee directors are eligible for consideration to participate in the 2018 Equity Incentive Plan.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
We have applied for
the listing of our common stock on the Nasdaq Capital Market, therefore, our determination of the independence of directors is
made using the definition of “independent” contained in the listing standards of Nasdaq. On the basis of information
solicited from each director, the board has unanimously determined that only Grace Mellis is independent within the meaning of
such rules.
SEC regulations define
the related person transactions that require disclosure to include any transaction, arrangement or relationship in which the amount
involved exceeds the lesser of $120,000 or one percent of the average of the company’s total assets at year-end for the
last two completed fiscal years ($2,771) in which we were or are to be a participant and in which a related person had or will
have a direct or indirect material interest. A related person is: (i) an executive officer, director or director nominee of the
company, (ii) a beneficial owner of more than 5% of our common stock, (iii) an immediate family member of an executive officer,
director or director nominee or beneficial owner of more than 5% of our common stock, or (iv) any entity that is owned or controlled
by any of the foregoing persons or in which any of the foregoing persons has a substantial ownership interest or control.
In addition to the
executive officer and director compensation arrangements discussed in “Executive Compensation,” the following is a
description of all related person transactions that occurred during the period from January 1, 2014 through the present (the “Reporting
Period”).
Claim based on Founders Agreement
In September 2015,
a claim was made by certain former founders (the “Claimants”) against the company for violations of the founders’
agreement. The Claimants and the company entered into a confidential settlement agreement and general mutual release on April
25, 2016. The arbitration settlement provided that the Claimants would continue to own 190,177 shares of common stock and return
the remaining shares to the company. Furthermore, the Claimants agreed that the shares, while not in a separate class, would not
have voting rights until they are sold to a non-affiliated third party. The Claimants will be diluted upon capital raising, stock
option offerings and vesting, however any dilution will remain consistent and proportional to the remaining founders’ dilution
ratios and the Claimants will not be diluted more than the founders’ ratios in any capital raising transaction. The Claimants’
also are to receive a total of $110,000 paid out over eighteen (18) months starting November 1, 2016. As of December 31, 2017,
$24,444 of the balance remained outstanding.
Sale of Promissory Notes and Warrants
From May 23, 2016
through September 6, 2016, we issued $500,000 in convertible promissory notes to investors pursuant to a Convertible Note Purchase
Agreement. Each of Joseph Furnari, a director and officer, and Michael Furnari, an officer, purchased convertible promissory notes
in the amount of $50,000. The convertible promissory notes bore interest at the rate of 12%, with a default rate of 15%, and were
due three years from the date of issuance. During the Reporting Period, $50,000 was the highest principal amount and $4,093 in
interest was owed to each of Joseph Furnari and Michael Furnari.
On May 1, 2017 we
entered into certain Note and Warrant Purchase Agreements whereby we issued and sold to investors, one of whom was Michael Furnari,
an officer, promissory notes for an aggregate principal amount of $350,000 together with five-year warrants to purchase up to
200,000 shares of common stock at an exercise price of $2.10 per share. The notes bear no interest and have a maturity date of
May 1, 2018. The company issued a promissory note in the principal amount of $100,000 to Mr. Furnari. As of the date of this prospectus,
the promissory notes remain outstanding.
Sale of Series Seed Preferred
Between August 22,
2016 and February 14, 2017, we sold a total of 1,407,671 shares of our Series Seed Preferred to Abdullah Al Dhowayan, a former
director, in exchange for $1,000,000.
Participation in 2017 Private Placement
Offering of Common Stock
Starting in June 2017,
we undertook a private placement for the sale of common stock for $1.75 per share. During the year ended December 31, 2017, 1,236,588
shares of common stock were sold for gross proceeds of $2,164,029. The father and brother of the company’s Chief Executive
Officer and the Chief Business Development Officer purchased an aggregate of 14,800 shares for $25,900 in this offering.
Related Party Advances
From time to time we
receive advances from related parties for short-term working capital. Such advances are considered short-term and noninterest bearing.
As of March 31, 2018, we have received a total of $9,629 in advances.
Note and Stock Pledge Termination
On May 23, 2018, we
issued a bonus to Joseph Furnari and Mike Furnari, each in the amount of $66,812.40, in lieu of the repayment of outstanding indebtedness
equal to such amount. This indebtedness was represented by full recourse secured promissory notes used to pay the purchase price
for restricted stock awards to these individuals. Our board of directors made this decision to comply with the requirements of
Section 402 of the Sarbanes-Oxley Act, which prohibits public companies from extending loans to its executive officers. In connection
with such note termination, any collateral securing the performance of the obligations under the notes, including the shares of
common stock pledged to us, were released.
Review,
Approval or Ratification of Transactions with Related Parties
Our board of directors
reviews and approves transactions with directors, officers and holders of five percent or more of our voting securities and their
affiliates, each a related party. Prior to this offering, the material facts as to the related party's relationship or interest
in the transaction are disclosed to our board of directors prior to their consideration of such transaction, and the transaction
is not considered approved by our board of directors unless a majority of the directors who are not interested in the transaction
approve the transaction. Further, when stockholders are entitled to vote on a transaction with a related party, the material facts
of the related party's relationship or interest in the transaction are disclosed to the stockholders, who must approve the transaction
in good faith.
In connection with this offering, we adopted a written related party transactions policy that such transactions
must be approved by our audit committee or another independent body of our board of directors.
PRINCIPAL
STOCKHOLDERS
The following table
sets forth certain information regarding the beneficial ownership of our common stock as of April 30, 2018 for:
|
|
●
|
each
person, or group of affiliated persons, known to us to beneficially own more than 5%
of our common stock;
|
|
|
●
|
each
of our named executive officers; and
|
|
|
●
|
all
of our directors and executive officers as a group.
|
Beneficial ownership
of our common stock is determined under the rules of the SEC and generally includes any shares over which a person exercises sole
or shared voting or investment power, or of which a person has a right to acquire ownership at any time within 60 days of the
date of this prospectus. Except as indicated by footnote, and subject to applicable community property laws, we believe the persons
identified in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by
them.
In the following table,
percentage ownership prior to this offering is based on 7,946,876 shares of our common stock outstanding as of April 30, 2018,
assuming conversion of all outstanding shares of preferred stock in to an aggregate of 2,429,638 shares of our common stock and
all vested and unvested restricted stock. Percentage ownership after this offering is based on shares of common stock issued and
outstanding immediately after the closing of the primary offering and assumes that none of the beneficial owners named below purchases
shares in this offering. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership
of that person, we deemed to be outstanding all shares of common stock subject to options or other convertible securities held
by that person or entity that are currently exercisable or releasable or that will become exercisable or releasable within 60
days of April 30, 2018. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership
of any other person.
Unless
otherwise indicated, the address of each of the following persons is 355 South Grand Avenue, Suite 1650, Los Angeles, California
90071, and each such person has sole voting and investment power with respect to the shares set forth opposite his, her or its
name.
|
Name of Beneficial Owner
|
|
Shares Beneficially Owned Prior to Offering
|
|
|
Percentage Beneficially Owned Prior to
Offering
|
|
|
Percentage Beneficially Owned After Offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officers and Directors:
|
|
|
|
|
|
|
|
|
|
|
Anshu “Andy” Bansal
(1)
|
|
|
1,080,643
|
|
|
|
13.6
|
%
|
|
|
|
%
|
|
Joseph Furnari
(2)
|
|
|
667,778
|
|
|
|
8.54
|
%
|
|
|
|
%
|
|
Abhishek Arora
(3)
|
|
|
930,743
|
|
|
|
11.7
|
%
|
|
|
|
%
|
|
Michael Furnari
(4)
|
|
|
724,921
|
|
|
|
9.2
|
%
|
|
|
|
%
|
|
Grace Mellis
(5)
|
|
|
86,000
|
|
|
|
1.1
|
%
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group (7 persons)
(6)
|
|
|
3,490,085
|
|
|
|
42.5
|
%
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other 5% Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alyaseen Agricultural Company
(7)
|
|
|
594,286
|
|
|
|
7.5%
|
|
|
|
|
%
|
|
Mohammed Abdullah A Al Baadi
(8)
|
|
|
500,000
|
|
|
|
6.3%
|
|
|
|
|
%
|
|
(1)
|
Consists of 1,080,643 shares of common stock.
|
|
(2)
|
Consists of (i) 489,025 shares of common stock of which 18,203 are unvested restricted stock that will vest within 60 days of April 30, 2018 and 91,013 shares are unvested restricted stock that will not vest within 60 days of April 30, 2018, (ii) 95,182 shares of common stock issuable upon conversion of preferred stock in connection with the primary offering and (iii) 74,285 shares of common stock issuable upon exercise of options exercisable within 60 days of April 30, 2018.
|
|
(3)
|
Consists of (i) 898,254 shares of common stock and (ii) 32,489 shares issuable upon exercise of options exercisable within 60 days of April 30, 2018.
|
|
(4)
|
Consists of (i) 489,025 shares of common stock of which 18,203 are unvested restricted stock that will vest within 60 days of April 30, 2018 and 91,013 shares are unvested restricted stock that will not vest within 60 days of April 30, 2018, (ii) 95,182 shares of common stock issuable upon conversion of preferred stock in connection with the primary offering, (iii) 74,285 shares of common stock issuable upon exercise of options exercisable within 60 days of April 30, 2018 and (iv) 57,143 shares of common stock issuable upon exercise of warrants exercisable within 60 days of April 30, 2018.
|
|
(5)
|
Consists of 86,000 shares of common stock.
|
|
(6)
|
Consists of (i) 3,042,947 shares of common stock of which 36,406 are unvested restricted stock that will vest within 60 days of April 30, 2018 and 182,026 shares are unvested restricted stock that will not vest within 60 days of April 30, 2018, (ii) 190,364 shares of common stock issuable upon conversion of preferred stock in connection with the primary offering, (iii) 199,630 shares of common stock issuable upon exercise of options exercisable within 60 days of April 30, 2018 and (iv) 57,143 shares of common stock issuable upon exercise of warrants exercisable within 60 days of April 30, 2018.
|
|
(7)
|
Consists of 594,286 shares of common stock issuable upon conversion of preferred stock in connection with the primary offering. Mr. Sadek Al-Ramadan is the Chief Executive Officer of Alyaseen Agricultural Company and has voting and dispositive power of the shares. The stockholder’s address is P.O. Box 158, Shahabia Street, Hofuf 31982, Saudi Arabia.
|
|
(8)
|
Consists of 500,000 shares of common stock issuable upon conversion of preferred stock in connection with the primary offering. The stockholder’s address is P.O. Box 7401, Dhahran – Qusoor District 34245, Saudi Arabia.
|
Description
of Securities
The following descriptions
are summaries of the material terms of our amended and restated certificate of incorporation, which will be effective upon the
closing of this offering and amended and restated bylaws, which will be effective upon the effectiveness of the registration statement
of which this prospectus is a part. The descriptions of the common stock and convertible preferred stock give effect to changes
to our capital structure that will occur immediately prior to the completion of this offering. We refer in this section to our
amended and restated certificate of incorporation as our certificate of incorporation, and we refer to our amended and restated
bylaws as our bylaws.
General
Upon completion of
this offering, our authorized capital stock will consist of 50,000,000 shares of common stock, par value $0.00001 per share,
and 15,000,000 shares of preferred stock, par value $0.00001 per share, all of which shares of preferred stock will be undesignated.
As of April 30, 2018,
7,946,876 shares of our common stock were outstanding and held by 95 stockholders of record, which includes 494,851 shares
of issued but unvested restricted stock subject to forfeiture. This amount assumes the conversion of all outstanding shares of
our convertible preferred stock into common stock, which will occur immediately prior to the closing of this offering.
Common Stock
The holders of our
common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. The holders of
our common stock do not have any cumulative voting rights. Holders of our common stock are entitled to receive ratably any dividends
declared by the board of directors out of funds legally available for that purpose, subject to any preferential dividend rights
of any outstanding preferred stock. Our common stock has no preemptive rights, conversion rights or other subscription rights or
redemption or sinking fund provisions.
In the event of our
liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in all assets remaining after
payment of all debts and other liabilities and any liquidation preference of any outstanding preferred stock.
Preferred Stock
Immediately prior to
the completion of this offering, all outstanding shares of our convertible preferred stock will be converted into shares of our
common stock. Upon the consummation of this offering, our board of directors will have the authority, without further action by
our stockholders, to issue up to 15,000,000 shares of preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights,
voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting, or the designation
of, such series, any or all of which may be greater than the rights of our common stock. The issuance of our preferred stock could
adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments
and payments upon our liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or
preventing a change in control of our company or other corporate action. We currently have no plans to issue additional shares
of preferred stock.
Senior Secured Convertible Notes and related Warrants
Between January 2018
and April 2018, pursuant to a securities purchase agreement, the company issued and sold senior secured convertible promissory
notes (the “Notes”) to accredited investors in the aggregate principal amount of $3,046,281. The Notes bear interest
at the rate of 13% per annum and are due eight months from the issuance date (the “Maturity Date”). The Notes provide
that the principal and all accrued and unpaid interest on the Notes are convertible to shares of common stock at a conversion
rate of $2.5480 per share or seventy percent (70%) of the initial public offering (“IPO”) price per share or, if the
IPO has not occurred by the Maturity Date, 70% of the company’s next bona fide sale of its preferred stock or common stock
in excess of $1,000,000 in gross proceeds, in one transaction or a series of related transactions, which offering definitively
sets a price per share of the company’s common stock or preferred stock. The obligations under the Notes are secured by
the company’s assets.
The note holders will
also receive warrants to purchase up to 50% of the shares receivable upon conversion of the Notes at a price of one-hundred and
twenty-five percent (125%) of the conversion price of the of the Notes. Prior to the Notes being convertible, these holders do
not have a right to exercise any number of warrants.
Pursuant
to the terms of the securities purchase agreement, until all of the liabilities under the Notes are paid in full, the company
cannot incur any future indebtedness unless such indebtedness is subordinate to the Notes and trade indebtedness in the ordinary
course of business. In addition, so long as the Notes and the warrants are outstanding, the company cannot effect any Variable
Rate Transaction. “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, (ii) enters into, or effects a transaction under, any
agreement, including, but not limited to, an equity line of credit, whereby the company may issue securities at a future determined
price, (iii) cooperates with any person to effect any exchange of securities and/or indebtedness of the company in connection
with a proposed sale of such securities from an existing holder of such securities to a third party, or (iv) reduces and/or otherwise
changes the exercise price, conversion price and/or exchange price of any common stock equivalent of the company and/or amends
any non-convertible indebtedness of the company to make it convertible into securities of the company.
Upon
any default of the notes for non-payment, any bankruptcy event or breach of the Notes or other transaction documents, the company
may be liable to pay a default redemption amount equal to 130% of the amount due under the Notes and deliver an additional warrant
to purchase 50% of the common stock issuable upon conversion of the Notes.
Other
Notes
On
May 1, 2017, we entered into certain note and warrant purchase agreements whereby we issued and sold to investors promissory notes
for an aggregate principal amount of $350,000 together with five-year warrants to purchase up to 200,000 shares of common stock
at an exercise price of $2.10 per share. The notes bear no interest and have a maturity date of May 1, 2018.
Other
Warrants
As of the date of this
prospectus, we had outstanding warrants to purchase up to (i) 200,000 shares of common stock at an exercise price of $2.10 per
share; (ii) 123,659 shares of common stock at an exercise price of $2.00 per share; (iii) 649,602 shares of common stock at an
exercise price of $3.185 per share, assuming the senior Notes are initially convertible into 1,299,199 shares of common stock;
and (iv) 129,920 shares of common stock at an exercise price of $2.80 per share issuable to the placement agent for the Notes.
2016 Equity Incentive Plan
An aggregate of 2,227,777
shares of common stock were initially reserved for issuance under our 2016 Equity Incentive Plan. As of December 31, 2017, we had
1,021,171 shares of common stock issuable upon exercise of outstanding stock options and no shares of common stock available for
future awards. In connection with the adoption of our 2018 Equity Incentive Plan, no additional awards will be granted under our
2016 Equity Incentive Plan.
2018 Equity Incentive Plan
An aggregate of 3,000,000
shares of common stock are reserved for issuance under our 2018 Equity Incentive Plan. As of May__, 2018, there are 3,000,000
shares of common stock available for future awards under the 2018 Equity Incentive Plan.
Anti-Takeover
Effects of Provisions of Our Charter Documents
Our
certificate of incorporation provides for our board of directors to be divided into three classes serving staggered terms. Approximately one-third of
the board of directors will be elected each year. The provision for a classified board could prevent a party who acquires control
of a majority of our outstanding voting stock from obtaining control of our board of directors until the second annual stockholders
meeting following the date the acquirer obtains the controlling stock interest. The classified board provision could discourage
a potential acquirer from making a tender offer or otherwise attempting to obtain control of us and could increase the likelihood
that incumbent directors will retain their positions. Our certificate of incorporation provides that directors may be removed
with cause by the affirmative vote of the holders of a majority of the voting power of all of our outstanding stock or without
cause by the affirmative vote of the holders of at least 66 and 2/3% of the voting power of all of our outstanding stock.
Our
certificate of incorporation provides that certain amendments of our certificate of incorporation and amendments by our stockholders
of our bylaws require the approval of at least 66 and 2/3% of the voting power of all of our outstanding stock. These provisions
could discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company and
could delay changes in management.
Our
certificate of incorporation also provides that, unless we consent in writing to an alternative forum, the Court of Chancery of
the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any
action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our
stockholders, any action asserting a claim arising pursuant to any provision of the DGCL, our certificate of incorporation or
our bylaws or any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court
of Chancery having personal jurisdiction over the indispensable parties named as defendants therein and the claim not being one
which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery or for which the Court of Chancery
does not have subject matter jurisdiction. This forum selection provision may limit our stockholders’ ability to bring a
claim in a judicial forum that they find favorable for disputes with us or our directors, officers, employees or agents, which
may discourage such lawsuits against us and our directors, officers, employees and agents even though an action, if successful,
might benefit our stockholders.
Our
bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders,
including proposed nominations of persons for election to our board of directors. At an annual meeting, stockholders may only
consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our
board of directors. Stockholders may also consider a proposal or nomination by a person who was a stockholder at the time of giving
notice and at the time of the meeting, who is entitled to vote at the meeting and who has complied with the notice requirements
of our bylaws in all respects. The bylaws do not give our board of directors the power to approve or disapprove stockholder nominations
of candidates or proposals regarding other business to be conducted at a special or annual meeting of our stockholders. However,
our bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed.
These provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s
own slate of directors or otherwise attempting to obtain control of our company.
Our
bylaws provide that a special meeting of our stockholders may be called only by our Secretary and at the direction of our board
of directors by resolution adopted by a majority of our board of directors. Because our stockholders do not have the right to
call a special meeting, a stockholder could not force stockholder consideration of a proposal over the opposition of our board
of directors by calling a special meeting of stockholders prior to such time as a majority of our board of directors, the chairperson
of our board of directors, the president or the chief executive officer believed the matter should be considered or until the
next annual meeting
provided
that the requestor met the notice requirements. The restriction on the ability of
stockholders to call a special meeting means that a proposal to replace our board of directors also could be delayed until the
next annual meeting.
Our
bylaws do not allow our stockholders to act by written consent without a meeting. Without the availability of stockholder action
by written consent, a holder controlling a majority of our capital stock would not be able to amend our bylaws or remove directors
without holding a stockholders’ meeting.
Anti-Takeover
Effects of Delaware Law
We
are subject to the provisions of Section 203 of the DGCL, or Section 203. Under Section 203, we would generally
be prohibited from engaging in any business combination with any interested stockholder for a period of three years following
the time that this stockholder became an interested stockholder unless:
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prior
to this time, our board of directors approved either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder;
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upon
consummation of the transaction that resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of our voting stock outstanding
at the time the transaction commenced, excluding shares owned by persons who are directors
and also officers, and by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer; or
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at
or subsequent to such time, the business combination is approved by our board of directors
and authorized at an annual or special meeting of stockholders, and not by written consent,
by the affirmative vote of at least 66 and 2/3% of the outstanding voting stock that
is not owned by the interested stockholder.
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Under
Section 203, a “business combination” includes:
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any
merger or consolidation involving the corporation and the interested stockholder;
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any
sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation
involving the interested stockholder;
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any
transaction that results in the issuance or transfer by the corporation of any stock
of the corporation to the interested stockholder, subject to limited exceptions;
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any
transaction involving the corporation that has the effect of increasing the proportionate
share of the stock of any class or series of the corporation beneficially owned by the
interested stockholder; or
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the
receipt by the interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation.
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In
general, Section 203 defines an interested stockholder as an entity or person beneficially owning 15% or more of the outstanding
voting stock of the corporation and any entity or person affiliated with or controlling or controlled by such entity or person.
Transfer
Agent and Registrar
Our
transfer agent and registrar will be VStock Transfer, LLC whose address is 18 Lafayette Place, Woodmere, NY 11598.
Listing
We have applied to
list our common stock on the Nasdaq Capital Market under the symbol “HYRE.” There can be no assurance that our application
to list our shares of common stock will be approved by the Nasdaq Capital Market. If our application is not approved or we otherwise
determine that we will not be able to secure the listing of our common stock on the Nasdaq, we will not complete the primary offering.
Shares
Eligible for Future Sale
Prior to this offering,
there has been no market for our common stock. Future sales of substantial amounts of our common stock, or securities or instruments
convertible into shares of our common stock, in the public market, or the perception that such sales may occur, could adversely
affect the market price of our common stock prevailing from time to time. Furthermore, because there will be limits on the number
of shares available for resale shortly after the primary offering concludes, due to the contractual and legal restrictions described
below, there may be resales of substantial amounts of our common stock in the public market after those restrictions lapse. This
could adversely affect the market price of our common stock prevailing at that time.
Upon the completion
of the primary offering, a total of 9,946,876 shares of our common stock (10,246,876 shares if the underwriters exercise their
option to purchase additional shares in full) will be outstanding. This number excludes any issuance of an aggregate of additional
shares of common stock that could occur in connection with the conversion of our outstanding convertible promissory notes, options
and warrants.
All shares of common
stock sold in this offering by us will be freely tradable in the public market without restriction or further registration under
the Securities Act, unless these shares are held by “affiliates,” as that term is defined in Rule 144 under the Securities
Act. Shares of our common stock not sold in this offering are “restricted securities” within the meaning of Rule 144,
and would be tradable only if they are sold pursuant to an effective registration statement filed under the Securities Act, or
if they qualify for an exemption from registration, including under Rule 144.
Rule
144
In
general, a person who has beneficially owned restricted shares of our common stock for at least six months, in the event we have
been a reporting company under the Exchange Act for at least 90 days, would be entitled to sell such securities, provided that
such person is not deemed to be an affiliate of ours at the time of sale or to have been an affiliate of ours at any time during
the three months preceding the sale. A person who is an affiliate of ours at such time would be subject to additional restrictions,
by which such person would be entitled to sell within any three-month period only a number of shares that does not exceed the
greater of the following:
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1%
of the number of shares of our Common Stock then outstanding; or
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the
average weekly trading volume of our Common Stock during the four calendar weeks preceding the filing by such person with
the SEC of a notice on Form 144 with respect to the sale; and
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provided
that, in each case, we have been subject to the periodic reporting requirements of the Exchange Act for at least 90 days before
the sale. Persons relying on Rule 144 to transact in our Common Stock must also comply with the manner of sale, notice and
other provisions of Rule 144, to the extent applicable.
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Rule
701
In
general, Rule 701 allows a stockholder who purchased shares of our capital stock pursuant to a written compensatory plan or contract
and who is not deemed to have been an affiliate of ours during the immediately preceding 90 days to sell those shares in reliance
upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions
of Rule 144. Persons relying on Rule 701 to transact in our Common Stock, however, are required to wait until 90 days after the
date of this prospectus before selling shares pursuant to Rule 701.
Lock-Up
Agreements
We and all of our directors
and officers have entered into lock-up agreements with respect to the disposition of their shares. See “Underwriting”
for additional information.
UNDERWRITING
Prior to this offering,
there has been no public market for our common stock. We have applied to have our common stock approved for listing on the Nasdaq
Capital Market, or Nasdaq, under the symbol “HYRE.” If the application is approved, trading of our common stock on
Nasdaq is expected to begin following this prospectus being declared effective by the SEC. If our application is not approved
or we otherwise determine that we will not be able to secure the listing of our common stock on the Nasdaq, we will not complete
the primary offering.
Under the terms and subject
to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Network
1 Financial Securities, Inc. is acting as the representative, have severally agreed to purchase, and we have agreed to sell to
them, severally, the number of shares indicated below:
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Name
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Number
of
Shares
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Network 1 Financial
Securities, Inc.
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Total:
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2,000,000
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The underwriters and the
representative are collectively referred to as the “underwriters” and the “representative,” respectively.
The underwriters are offering the shares of common stock subject to their acceptance of the shares from us and subject to prior
sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the
shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this
prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the
underwriters’ over-allotment option described below.
The underwriters initially
propose to offer part of the shares of common stock directly to the public at the offering price listed on the cover page of this
prospectus and part to certain dealers. After the initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representative.
Over-Allotment Option
We have
granted to the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase up to 300,000
additional shares of common stock at the public offering price listed on the cover page of this prospectus, less underwriting
discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares of common stock offered by this prospectus. To the extent the option
is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of
the additional shares of common stock as the number listed next to the underwriter’s name in the preceding table bears
to the total number of shares of common stock listed next to the names of all underwriters in the preceding
table.
Pricing of the Offering
Prior to this offering,
there has been no public market for our common stock.
In
determining the initial public offering price, we and the underwriters have considered a number of factors including
:
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the
information set forth in this prospectus and otherwise available to the underwriters;
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our
prospects and the history and prospects for the industry in which we compete;
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an
assessment of our management;
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our
prospects for future earnings;
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the
general condition of the securities markets at the time of this offering;
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the
recent market prices of, and demand for, publicly traded common stock of generally comparable
companies; and
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other
factors deemed relevant by the underwriters and us.
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Neither we nor the underwriters
can assure investors that an active trading market will develop for shares of our common stock, or that the shares will trade
in the public market at or above the initial public offering price.
The obligations of the
underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant
to the underwriting agreement, the underwriters’ obligations are subject to customary conditions, representations and warranties
contained in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.
Discount, Commissions and Expenses
The following table
shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no
exercise or full exercise by the underwriters of their over-allotment option.
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Total
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Per Share
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No Exercise
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Full Exercise
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Public offering price
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$
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$
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$
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Underwriting discounts and commissions to be paid by us (1)
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$
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$
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$
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Proceeds, before expenses, to us
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$
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$
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$
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(1)
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Consists of an underwriting commission of 9.0% and an advisory fee of 1.0% of the gross proceeds raising in the primary offering.
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We will pay all fees,
disbursements and expenses in connection with this proposed offering, including, without limitation: the Company’s legal
and accounting fees and disbursements; the costs of preparing, printing, mailing and delivering the registration statement, the
preliminary and final prospectus contained therein and amendments thereto, post-effective amendments and supplements thereto, the
underwriting agreement and related documents (all in such quantities as the representative may reasonably require); the fees and
expenses of the transfer agent and registrar, clearing fees and DTC fees, preparing and printing stock certificates; the costs
of any “due diligence” meetings; all reasonable and documented fees and expenses for conducting a net road show presentation;
all filing fees (including SEC filing fees) and communication expenses relating to the registration of the shares to be sold in
this offering, FINRA filing fees; background checks of the Company’s officers and directors up to a maximum of $15,000; preparation
of bound volumes and Lucite cube mementos in such quantities as the representative may reasonably request up to an amount of $2,500;
transfer taxes, if any, payable upon the transfer of securities from the Company to the representative; and the fees and expenses
of the transfer agent, clearing firm and registrar for the shares of common stock. In addition, we will be obligated to reimburse
the representative for its out-of-pocket expenses up to a maximum of $75,000, inclusive of $10,000 previously paid by us to the
representative for out-of-pocket accountable expenses. The underwriting agreement, however, provides that in the event the offering
is terminated, any advance expense deposits paid to the underwriters will be returned to the extent that offering expenses are
not actually incurred in accordance with FINRA Rule 5110(f)(2)(C).
Right of First Negotiation
We have granted to the
representative the right of first negotiation to co-manage any public underwriting or private placement of debt or equity securities
(excluding (i) shares issued under any compensation or stock option plan approved by the stockholders of the company, (ii) shares
issued in payment of the consideration for an acquisition or as part of strategic partnerships and transactions and (iii) conventional
banking arrangements and commercial debt financing) of the company or any subsidiary or successor of the company, with the representative
receiving the right to underwrite or place a number of the securities to be sold therein having an aggregate purchase price therein
equal to a minimum of the aggregate purchase price of the shares offered by us in this offering, until six (6) months after completion
of this offering.
We estimate that the total
expenses of the offering payable by us, excluding underwriting discounts and commissions, will be approximately $500,000.
Underwriters Warrants
We have agreed to issue
to the underwriters warrants to purchase up to a total of 138,000 shares
of commons stock (6% of the shares of common stock sold in this offering). The warrants are exercisable at $ per
share (125% of the public offering price) commencing on a date which is six months year from the effective date of the offering
under this prospectus supplement and expiring on a date which is no more than five (5) years from the effective date of the offering
in compliance with FINRA Rule 5110(f)(2)(G). The warrants have been deemed compensation by FINRA and are therefore subject to
a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriters (or their permitted assignees under the Rule) will not
sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will it engage
in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the
warrants or the underlying securities for a period of 180 days from effectiveness. In addition, the warrants provide for registration
rights upon request, in certain cases. We will bear all fees and expenses attendant to registering the securities issuable on
exercise of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number
of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend,
extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation. However, the warrant exercise price
or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.
Discretionary
Accounts
The underwriters do not
intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.
Lock-Up
Agreements
Pursuant to certain “lock-up”
agreements, we, our executive officers, directors and holders of substantially all of our common stock and securities exercisable
for or convertible into our common stock outstanding immediately upon the closing of this offering, have agreed, subject to certain
exceptions, not to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention
to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part,
the economic risk of ownership of, directly or indirectly, engage in any short selling of any common stock or securities convertible
into or exchangeable or exercisable for any common stock, whether currently owned or subsequently acquired, without the prior
written consent of the representative, for a period of 180 days from the date of effectiveness of the offering.
We, all directors and
officers and the holders of substantially all of our outstanding common stock and securities convertible into or exercisable or
exchangeable for common stock are subject to lock- up agreements with the underwriters agreeing that, without the prior written
consent of the, we and they will not, during the period ending 180 days after the date of this prospectus (the “restricted
period”):
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offer,
pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of common
stock or any securities convertible into or exercisable or exchangeable for shares of common stock;
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file
any registration statement with the SEC relating to the offering of any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock; or
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enter
into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership
of the common stock,
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whether any such transaction
described above is to be settled by delivery of common stock or such other securities, in cash or otherwise. In addition, we and
each such person agrees that, without the prior written consent of the representative on behalf of the underwriters, we or such
other person will not, during the restricted period, make any demand for, or exercise any right with respect to, the registration
of any shares of common stock or any security convertible into or exercisable or exchangeable for common stock.
The restrictions
in the immediately preceding paragraph do not apply to our directors, officers or holders of our outstanding common stock or other
securities in certain circumstances, including the (i) transfers of our common stock acquired in open market transactions after
the completion of this offering; (ii) transfers of our common stock as bona fide gifts, by will, to an immediate family member
or to certain trusts provided that no filing under Section 16(a) of the Exchange Act would be required or voluntarily made; (iii)
distributions of our common stock to another corporation, partnership, limited liability company, trust or other business entity
that is an affiliate, or to an entity controlled or managed by an affiliate provided that no filing under Section 16(a) of the
Exchange Act would be required or voluntarily made; (iv) distributions of our common stock to the stockholders, partners or members
of such holders provided that no filing under Section 16(a) of the Exchange Act would be required or voluntarily made; (v) the
exercise of options, settlement of restricted stock units or other equity awards granted under a stock incentive plan or other
equity award plan described in this prospectus, or the exercise of warrants outstanding described in this prospectus; (vi) transfers
of our common stock to us for the net exercise of options, settlement of restricted stock units or warrants granted pursuant to
our equity incentive plans or to cover tax withholding for grants pursuant to our equity incentive plans; (vii) the establishment
by such holders of trading plans under Rule 10b5-1 under the Exchange Act provided that such plan does not provide for the transfer
of common stock during the restricted period; (viii) transfers of our common stock pursuant to a domestic order, divorce settlement
or other court order; (ix) transfers of our common stock to us pursuant to any right to repurchase or any right of first refusal
we may have over such shares; (x) conversion of our outstanding securities into common stock in connection with the closing of
this offering; and (xi) transfers of our common stock pursuant to a bona fide third-party tender offer, merger, consolidation
or other similar transaction that is approved by our board of directors.
Certain of these
exceptions are subject to a requirement that the transferee enter into a lock-up agreement with the underwriters containing similar
restrictions.
The representative
may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at
any time.
In order to facilitate
the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting
agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available
for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising
the over-allotment option or purchasing shares in the open market. In determining the source of shares to close out a covered
short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available
under the over-allotment option. The underwriters may also sell shares in excess of the over-allotment option, creating a naked
short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short
position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the
common stock in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional
means of facilitating this offering, the underwriters may bid for, and purchase, shares of common stock in the open market to
stabilize the price of the common stock. These activities may raise or maintain the market price of the common stock above independent
market levels or prevent or retard a decline in the market price of the common stock. The underwriters are not required to engage
in these activities and may end any of these activities at any time.
We and the underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
Electronic Offer, Sale and Distribution
of Shares
A prospectus in electronic
format may be made available on the websites maintained by the underwriters, if any, participating in this offering and the underwriters
participating in this offering may distribute prospectuses electronically. The underwriters may agree to allocate a number of
shares for sale to its online brokerage account holders. Internet distributions will be allocated by the underwriter that will
make internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information
on these websites is not part of, nor incorporated by reference into, this prospectus or the registration statement of which this
prospectus forms a part, has not been approved or endorsed by us or the underwriter in its capacity as underwriters, and should
not be relied upon by investors.
Other
Relationships
The underwriters and their
respective affiliates may, in the future provide various investment banking, commercial banking and other financial services for
us and our affiliates for which they have received, and may in the future receive, customary fees. However, except as disclosed
in this prospectus, we have no present arrangements with the underwriters for any further services.
Legal
Matters
Certain legal matters
with respect to the validity of the securities being offered by this prospectus will be passed upon by Mitchell Silberberg &
Knupp LLP, Los Angeles, California. Magri Law, LLC, Fort Lauderdale, Florida is representing the underwriter in this offering.
As of the date of this prospectus, an entity affiliated with Mitchell Silberberg & Knupp LLP owns 37,755 shares of common
stock and shares of preferred stock convertible into 74,109 shares of common stock in connection with this offering.
Experts
The company’s financial
statements appearing elsewhere in this prospectus have been included herein in reliance upon the report, which includes an explanatory
paragraph as to our ability to continue as a going concern, of dbbmckennon, an independent registered public accounting firm,
appearing elsewhere herein, and upon the authority of dbbmckennon as experts in accounting and auditing.
Where
You Can Find More Information
We
have filed with the SEC a registration statement on Form S-1, together with any amendments and related exhibits, under the Securities
Act, with respect to our shares of common stock offered by this prospectus. The registration statement contains additional information
about us and our shares of common stock that we are offering in this prospectus. We are subject to the informational requirements
of the Exchange Act and file annual, quarterly and current reports and other information with the SEC. You can read our filings
over the Internet at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at its
public reference facility at 100 F Street, N.E., Washington, D.C., 20549, on official business days during the hours of 10 a.m.
to 3 p.m. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC
at 100 F Street, N.E., Washington, D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference facility. In addition, you can find more information about us on our website at http://www.hyrecar.com.
INDEX
TO FINANCIAL STATEMENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and the Board of Directors of HyreCar, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of HyreCar, Inc. (the "Company") as of December 31, 2017 and 2016, the
related statements of operations, stockholders' deficit, and cash flows for the years then ended, and the related notes (collectively
referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly,
we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Going
Concern
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note
2 of the financial statements, the Company will require additional financing and has incurred losses since Inception, and has
significant operating costs expected to be incurred in the next twelve months. These factors raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plans with respect to these matters are discussed in
Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/
dbb
mckennon
We
have served as the Company's auditor since 2016.
Newport
Beach, California
March
23, 2018
HYRECAR, INC.
BALANCE SHEETS
|
|
|
(Unaudited) March 31, 2018
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
810,119
|
|
|
$
|
213,944
|
|
|
$
|
516,163
|
|
|
Accounts receivable
|
|
|
32,200
|
|
|
|
41,000
|
|
|
|
-
|
|
|
Related party receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
7,000
|
|
|
Deferred offering costs
|
|
|
194,369
|
|
|
|
135,608
|
|
|
|
-
|
|
|
Deferred expenses
|
|
|
47,047
|
|
|
|
35,153
|
|
|
|
14,614
|
|
|
Other current assets
|
|
|
82,560
|
|
|
|
118,020
|
|
|
|
216
|
|
|
Total current assets
|
|
|
1,166,295
|
|
|
|
543,725
|
|
|
|
537,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
3,577
|
|
|
|
-
|
|
|
|
-
|
|
|
Other assets
|
|
|
90,000
|
|
|
|
90,000
|
|
|
|
20,325
|
|
|
Total assets
|
|
$
|
1,259,872
|
|
|
$
|
633,725
|
|
|
$
|
558,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,046,982
|
|
|
$
|
1,355,064
|
|
|
$
|
45,986
|
|
|
Accrued liabilities
|
|
|
254,288
|
|
|
|
119,226
|
|
|
|
161,311
|
|
|
Deferred revenue
|
|
|
67,724
|
|
|
|
47,718
|
|
|
|
20,436
|
|
|
Related party advances
|
|
|
9,629
|
|
|
|
9,629
|
|
|
|
9,629
|
|
|
Note payable, net of discount
|
|
|
48,972
|
|
|
|
46,368
|
|
|
|
-
|
|
|
Notes payable - related party, net of discount
|
|
|
297,011
|
|
|
|
278,607
|
|
|
|
-
|
|
|
Convertible debt, net of discount
|
|
|
2,333,142
|
|
|
|
-
|
|
|
|
-
|
|
|
Settlement payable
|
|
|
6,111
|
|
|
|
24,444
|
|
|
|
73,333
|
|
|
Total current liabilities
|
|
|
4,063,859
|
|
|
|
1,881,056
|
|
|
|
310,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
350,000
|
|
|
Convertible debt - related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
150,000
|
|
|
Settlement payable, net of current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
24,445
|
|
|
Total liabilities
|
|
|
4,063,859
|
|
|
|
1,881,056
|
|
|
|
835,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, 15,000,000 shares authorized, par value $0.00001, 2,429,638, 2,429,638, and 985,369 issued and outstanding as of March 31 2018 and December 31, 2017 and 2016, respectively
|
|
|
1,591,886
|
|
|
|
1,591,886
|
|
|
|
700,000
|
|
|
Common stock, 50,000,000 shares authorized, par value $0.00001, 5,252,953, 5,252,953, and 3,978,610 issued and outstanding as of March 31 2018 and December 31, 2017 and 2016, respectively
|
|
|
52
|
|
|
|
52
|
|
|
|
39
|
|
|
Additional paid-in capital
|
|
|
2,764,394
|
|
|
|
2,553,672
|
|
|
|
142,961
|
|
|
Subscription receivable - related party
|
|
|
(140,434
|
)
|
|
|
(140,087
|
)
|
|
|
(138,700
|
)
|
|
Accumulated deficit
|
|
|
(7,019,885
|
)
|
|
|
(5,252,854
|
)
|
|
|
(981,122
|
)
|
|
Total stockholders' deficit
|
|
|
(2,803,987
|
)
|
|
|
(1,247,331
|
)
|
|
|
(276,822
|
)
|
|
Total liabilities and stockholders' deficit
|
|
$
|
1,259,872
|
|
|
$
|
633,725
|
|
|
$
|
558,318
|
|
See accompanying
notes to financial statements
HYRECAR, INC.
STATEMENTS OF OPERATIONS
|
|
|
(Unaudited)
Three Months ended
March 31, 2018
|
|
|
(Unaudited) Three Months ended March 31, 2017
|
|
|
Year ended
December 31, 2017
|
|
|
Year ended
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,714,183
|
|
|
$
|
505,325
|
|
|
$
|
3,223,874
|
|
|
$
|
515,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
1,290,872
|
|
|
|
468,452
|
|
|
|
2,912,548
|
|
|
|
427,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
423,311
|
|
|
|
36,873
|
|
|
|
311,326
|
|
|
|
87,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
889,254
|
|
|
|
315,884
|
|
|
|
1,819,588
|
|
|
|
438,055
|
|
|
Sales and marketing
|
|
|
883,027
|
|
|
|
319,677
|
|
|
|
1,871,649
|
|
|
|
370,947
|
|
|
Research and development
|
|
|
225,087
|
|
|
|
81,468
|
|
|
|
687,039
|
|
|
|
117,059
|
|
|
Total operating expenses
|
|
|
1,997,368
|
|
|
|
717,029
|
|
|
|
4,378,276
|
|
|
|
926,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,574,057
|
)
|
|
|
(680,156
|
)
|
|
|
(4,066,950
|
)
|
|
|
(838,560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
161,773
|
|
|
|
140,065
|
|
|
|
202,454
|
|
|
|
31,153
|
|
|
Other expense
|
|
|
31,201
|
|
|
|
3,009
|
|
|
|
1,528
|
|
|
|
509
|
|
|
Other income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,346
|
)
|
|
Total other (income) expense
|
|
|
192,974
|
|
|
|
143,074
|
|
|
|
203,982
|
|
|
|
27,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income taxes
|
|
|
(1,767,031
|
)
|
|
|
(823,230
|
)
|
|
|
(4,270,932
|
)
|
|
|
(865,876
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
800
|
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,767,031
|
)
|
|
$
|
(823,230
|
)
|
|
$
|
(4,271,732
|
)
|
|
|
(866,676
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted
|
|
|
5,252,953
|
|
|
|
3,978,610
|
|
|
|
4,590,478
|
|
|
|
3,645,988
|
|
|
Weighted average net loss per share - basic and diluted
|
|
$
|
(0.34
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.93
|
)
|
|
$
|
(0.24
|
)
|
See accompanying
notes to financial statements
HYRECAR,
INC.
STATEMENTS OF STOCKHOLDERS’ DEFICIT
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional Paid-in
|
|
|
Subscription Receivable - Related
|
|
|
Accumulated
|
|
|
Total Stockholders
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Parties
|
|
|
Deficit
|
|
|
Deficit
|
|
|
December 31, 2015
|
|
|
-
|
|
|
$
|
-
|
|
|
|
3,341,665
|
|
|
$
|
33
|
|
|
$
|
47
|
|
|
$
|
-
|
|
|
$
|
(114,446
|
)
|
|
$
|
(114,366
|
)
|
|
Series Seed Preferred Stock issued for cash
|
|
|
985,369
|
|
|
|
700,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
700,000
|
|
|
Restricted stock issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
434,689
|
|
|
|
4
|
|
|
|
4,216
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,220
|
|
|
Return shares - forfeited restricted stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(830,131
|
)
|
|
|
(8
|
)
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Common stock issued for subscription receivable -
related party
|
|
|
-
|
|
|
|
-
|
|
|
|
1,032,387
|
|
|
|
10
|
|
|
|
138,690
|
|
|
|
(138,700
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(866,676
|
)
|
|
|
(866,676
|
)
|
|
December 31, 2016
|
|
|
985,369
|
|
|
$
|
700,000
|
|
|
|
3,978,610
|
|
|
$
|
39
|
|
|
$
|
142,961
|
|
|
$
|
(138,700
|
)
|
|
$
|
(981,122
|
)
|
|
$
|
(276,822
|
)
|
|
Preferred stock issued for services
|
|
|
78,059
|
|
|
|
55,452
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,452
|
|
|
Stock option compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
281,229
|
|
|
|
-
|
|
|
|
-
|
|
|
|
281,229
|
|
|
Shares issued for payables
|
|
|
-
|
|
|
|
-
|
|
|
|
37,755
|
|
|
|
1
|
|
|
|
66,069
|
|
|
|
-
|
|
|
|
-
|
|
|
|
66,070
|
|
|
Discount on warrants issued with convertible debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
84,031
|
|
|
|
-
|
|
|
|
-
|
|
|
|
84,031
|
|
|
Conversion of convertible debt
|
|
|
943,908
|
|
|
|
536,434
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
536,434
|
|
|
Series Seed Preferred Stock issued for cash
|
|
|
422,302
|
|
|
|
300,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
300,000
|
|
|
Common stock issued for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
1,236,588
|
|
|
|
12
|
|
|
|
2,164,017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,164,029
|
|
|
Offering costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(320,130
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(320,130
|
)
|
|
Contingent beneficial conversion feature triggered upon
conversion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
134,108
|
|
|
|
-
|
|
|
|
-
|
|
|
|
134,108
|
|
|
Interest on subscription receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,387
|
|
|
|
(1,387
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,271,732
|
)
|
|
|
(4,271,732
|
)
|
|
December 31, 2017
|
|
|
2,429,638
|
|
|
$
|
1,591,886
|
|
|
|
5,252,953
|
|
|
$
|
52
|
|
|
$
|
2,553,672
|
|
|
$
|
(140,087
|
)
|
|
$
|
(5,252,854
|
)
|
|
$
|
(1,247,331
|
)
|
|
Stock option compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48,917
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48,917
|
|
|
Stock compensation on forfeitable restricted common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
161,458
|
|
|
|
-
|
|
|
|
-
|
|
|
|
161,458
|
|
|
Interest on subscription receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
347
|
|
|
|
(347
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,767,031
|
)
|
|
|
(1,767,031
|
)
|
|
March 31, 2018 (unaudited)
|
|
|
2,429,638
|
|
|
$
|
1,591,886
|
|
|
|
5,252,953
|
|
|
$
|
52
|
|
|
$
|
2,764,394
|
|
|
$
|
(140,434
|
)
|
|
$
|
(7,019,885
|
)
|
|
$
|
(2,803,987
|
)
|
See accompanying
notes to financial statements
HYRECAR,
INC.
STATEMENTS OF CASH FLOWS
|
|
|
(Unaudited) Three Months ended March 31, 2018
|
|
|
(Unaudited) Three Months ended March 31, 2017
|
|
|
Year ended December 31, 2017
|
|
|
Year ended December 31, 2016
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,767,031
|
)
|
|
$
|
(823,230
|
)
|
|
$
|
(4,271,732
|
)
|
|
$
|
(866,676
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
143
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Forgiveness of related party advance
|
|
|
-
|
|
|
|
-
|
|
|
|
7,500
|
|
|
|
7,500
|
|
|
Amortization of debt discount
|
|
|
103,453
|
|
|
|
-
|
|
|
|
59,006
|
|
|
|
-
|
|
|
Interest expense on beneficial conversion feature
|
|
|
-
|
|
|
|
134,108
|
|
|
|
134,108
|
|
|
|
-
|
|
|
Stock-based compensation
|
|
|
210,375
|
|
|
|
-
|
|
|
|
336,681
|
|
|
|
4,220
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
8,800
|
|
|
|
-
|
|
|
|
(41,000
|
)
|
|
|
-
|
|
|
Deferred expense
|
|
|
(11,894
|
)
|
|
|
-
|
|
|
|
(20,539
|
)
|
|
|
(14,614
|
)
|
|
Accounts payable
|
|
|
(344,604
|
)
|
|
|
183,140
|
|
|
|
1,330,148
|
|
|
|
41,383
|
|
|
Accrued liabilities
|
|
|
135,062
|
|
|
|
(40,127
|
)
|
|
|
(5,651
|
)
|
|
|
157,711
|
|
|
Deferred revenues
|
|
|
20,006
|
|
|
|
-
|
|
|
|
27,282
|
|
|
|
20,436
|
|
|
Settlement paid
|
|
|
(18,333
|
)
|
|
|
(18,334
|
)
|
|
|
(73,334
|
)
|
|
|
(12,222
|
)
|
|
Net cash used in operating activities
|
|
|
(1,664,023
|
)
|
|
|
(564,443
|
)
|
|
|
(2,517,531
|
)
|
|
|
(662,262
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(3,720
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Related party advances
|
|
|
-
|
|
|
|
-
|
|
|
|
(500
|
)
|
|
|
(14,500
|
)
|
|
Deposits and other
|
|
|
(9,540
|
)
|
|
|
(15,135
|
)
|
|
|
(142,479
|
)
|
|
|
(20,325
|
)
|
|
Net cash used in investing activities
|
|
|
(13,260
|
)
|
|
|
(15,135
|
)
|
|
|
(142,979
|
)
|
|
|
(34,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from related party advances
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,000
|
|
|
Proceeds from note payable
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
Proceeds from notes payable - related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
300,000
|
|
|
|
-
|
|
|
Proceeds from convertible debt
|
|
|
2,318,579
|
|
|
|
-
|
|
|
|
-
|
|
|
|
350,000
|
|
|
Proceeds from convertible debt - related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
150,000
|
|
|
Offering costs
|
|
|
(45,121
|
)
|
|
|
-
|
|
|
|
(455,738
|
)
|
|
|
-
|
|
|
Proceeds from sale of preferred stock
|
|
|
-
|
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
700,000
|
|
|
Proceeds from sale of common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
2,164,029
|
|
|
|
-
|
|
|
Net cash provided by financing activities
|
|
|
2,273,458
|
|
|
|
300,000
|
|
|
|
2,358,291
|
|
|
|
1,203,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
596,175
|
|
|
|
(279,578
|
)
|
|
|
(302,219
|
)
|
|
|
505,913
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
213,944
|
|
|
|
516,163
|
|
|
|
516,163
|
|
|
|
10,250
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
810,119
|
|
|
$
|
236,585
|
|
|
$
|
213,944
|
|
|
$
|
516,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
3,125
|
|
|
$
|
-
|
|
|
$
|
3,383
|
|
|
$
|
-
|
|
|
Cash paid for income taxes
|
|
$
|
800
|
|
|
$
|
-
|
|
|
$
|
800
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for subscription receivable and interest
|
|
$
|
347
|
|
|
$
|
347
|
|
|
$
|
694
|
|
|
$
|
138,700
|
|
|
Discount on debt with warrants
|
|
$
|
-
|
|
|
$
|
84,031
|
|
|
$
|
84,031
|
|
|
$
|
-
|
|
|
Debt and accrued interest converted to preferred stock
|
|
$
|
-
|
|
|
$
|
536,434
|
|
|
$
|
536,434
|
|
|
$
|
-
|
|
See accompanying
notes to financial statements
HyreCar,
Inc.
Notes
to Financial Statements
NOTE
1 – NATURE OF OPERATIONS
HyreCar,
Inc. was incorporated on November 24, 2014 (“Inception”) in the State of Delaware. The Company headquarters are located
at Los Angeles, California. The Company is a web-based marketplace that allows car owners to rent their idle cars to
Uber and Lyft drivers safely, securely and reliably. The financial statements of HyreCar, Inc. (which may be referred to as “HyreCar”,
the “Company,” “we,” “us," or "our") are prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”).
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation – Unaudited Interim Financial Information
The
accompanying balance sheet as of March 31, 2018, the statements of operations and cash flows for the three months ended March
31, 2018 and 2017, and the statement of stockholders’ deficit for the three months ended March 31, 2018 are unaudited. The
unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally
accepted in the U.S. GAAP for interim financial information, within the rules and regulations of the United States Securities
and Exchange Commission (“SEC”). The unaudited interim financial statements have been prepared on the same basis
as the audited financial statements and in the opinion of management, reflect all adjustments, consisting of only normal recurring
adjustments, necessary for the fair statement of the Company's financial position as of March 31, 2018 and results of operations
and cash flows for the three months ended March 31, 2018 and 2017. The financial data and the other information disclosed
in these notes to the interim financial statements related to these three month periods are unaudited. Unaudited interim results
are not necessarily indicative of the results for the full fiscal year. These unaudited interim consolidated financial statements
should be read in conjunction with the financial statements of the Company for the year ended December 31, 2017 and notes thereto.
Going
Concern and Management’s Plans
We
will rely on debt and equity financing for working capital until positive cash flows from operations can be achieved and have
incurred operating losses since Inception. These above matters raise substantial doubt about the Company's ability to continue
as a going concern. Throughout the next 12 months, the Company intends to fund its operations with funding from additional debt
and/or equity, and increased revenue from our operations. If we cannot raise additional short-term capital, we may consume all
our cash reserved for operations. There are no assurances that management will be able to raise capital on terms acceptable to
the Company. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our
planned development, which could harm our business, financial condition and operating results. The balance sheet does not include
any adjustments that might result from these uncertainties.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions
that affect the reported amounts of assets and liabilities, and the reported amount of revenues and expenses during the reporting
period. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will
occur in the near term.
Fair
Value of Financial Instruments
Fair
value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as
of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value
that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable
inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability
and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect
the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There
are three levels of inputs that may be used to measure fair value:
|
|
Level 1
|
-
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
|
Level 2
|
-
Include other inputs that are directly or indirectly observable in the marketplace.
|
|
|
Level 3
|
-
Unobservable inputs which are supported by little or no market activity.
|
Hyrecar,
Inc.
Notes
to Financial Statements
The
fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value.
Fair-value
estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March
31, 2018, December 31, 2017 and 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated
their fair values. These financial instruments include cash, accounts payable, accrued liabilities, notes payable, convertible
debts and settlement payable. Fair values for these items were assumed to approximate carrying values because of their short-term
nature or they are payable on demand.
Cash
and Cash Equivalents
For
purpose of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
Accounts
Receivable
Accounts
receivable are reported net of allowance for expected losses. It represents the amount management expects to collect from outstanding
balances. Differences between the amount due and the amount management expects to collect are charged to operations in the year
in which those differences are determined, with an offsetting entry to a valuation allowance. As of March 31, 2018 and December
31, 2017 and 2016, the Company has no reserve allowance. As of March 31, 2018 and December 31, 2017 one customer made up of 100%
of the balance in accounts receivable. The Company does not believe the loss of this customer would have a material impact on
the Company's financial position, results of operations, or cash flows.
Property
and Equipment
Property
and equipment are stated at cost. The Company’s fixed assets are depreciated using the straight-line method over the estimated
useful life. Leasehold improvements are depreciated over the shorter of the useful life or lease life. Maintenance and repairs
are charged to operations as incurred. Significant renewals and betterments are capitalized. At the time of retirement or other
disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain
or loss is reflected in operations.
Internal
Use Software
We
incur software development costs to develop software programs to be used solely to meet our internal needs and cloud-based applications
used to deliver our services. In accordance with Accounting Standards Codification ("ASC") 350-40, Internal-Use Software,
we capitalize development costs related to these software applications once a preliminary project stage is complete, funding has
been committed, and it is probable that the project will be completed and the software will be used to perform the function intended.
No costs have been capitalized to date.
Impairment
of Long-Lived assets
The
long-lived assets held and used by the Company are reviewed for impairment no less frequently than annually or whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event facts and circumstances
indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. There were no impairment
losses during the three months ended March 31, 2018 and 2017 and the years ended December 31, 2017 and 2016. There can be no assurance,
however, that market conditions will not change or demand for the Company’s products and services will continue, which could
result in impairment of long-lived assets in the future.
Deferred
Rent
The
Company recognizes rental expense on a straight-line basis from the time of the lease commencement date through the end of the
lease. As of March 31, 2018, the Company recognized deferred rent resulting from future escalating lease payments and abated rent
totaling $80,821, which is included in accrued liabilities in the accompanying balance sheets.
Hyrecar,
Inc.
Notes
to Financial Statements
Offering
Costs
The
Company accounts for offering costs in accordance with ASC 340, Other Assets and Deferred Costs. Prior to the completion of an
offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will
be netted against the proceeds of the offering in stockholders’ deficit or the related debt, as applicable, or charged to
expense if the offering is unsuccessful.
Convertible
Debt
Convertible
debt is accounted for under the guidelines established by ASC 470-20, Debt with Conversion and Other Options. ASC 470-20 governs
the calculation of an embedded beneficial conversion and/or debt issued with warrants, which is treated as a discount to the instruments
where derivative accounting does not apply. The discounts are accreted over the term of the debt.
The
Company calculates the fair value of warrants and conversion features issued with convertible instruments using the Black-Scholes
valuation method, using the same assumptions used for valuing employee options for purposes of ASC 718, Compensation – Stock
Compensation, except that the contractual life of the warrant or conversion feature is used. Under these guidelines, the Company
allocates the value of the proceeds received from a convertible debt transaction between the conversion feature and any other
detachable instruments (such as warrants) on a relative fair value basis. The allocated fair value is recorded as a debt discount
or premium and is amortized over the expected term of the convertible debt to interest expense.
Preferred
Stock
ASC
480, Distinguishing Liabilities from Equity, includes standards for how an issuer of equity (including equity shares issued by
consolidated entities) classifies and measures on its balance sheet certain financial instruments with characteristics of both
liabilities and equity.
Management
is required to determine the presentation for the preferred stock because of the redemption and conversion provisions, among other
provisions. Specifically, management is required to determine whether the embedded conversion feature in the preferred stock is
clearly and closely related to the host instrument, and whether the bifurcation of the conversion feature is required and whether
the conversion feature should be accounted for as a derivative instrument. If the host instrument and conversion feature are determined
to be clearly and closely related (both more akin to equity), derivative liability accounting under ASC 815, Derivatives and Hedging,
is not required. Management determined that the host contract of the preferred stock is more akin to equity, and accordingly,
derivative liability accounting is not required by the Company. The Company has presented preferred stock within stockholders'
deficit.
Costs
incurred directly for the issuance of the preferred stock are recorded as a reduction of gross proceeds received by the Company,
resulting in a discount to the preferred stock.
Dividends
which are required to be paid upon redemption are accrued and recorded within preferred stock and accumulated deficit.
Revenue
Recognition
The
Company recognizes revenue primarily from a transaction fee and an insurance fee when a car is rented on the Company’s platform
when (a) persuasive evidence that an agreement exists which occurs when the rental contract is signed electronically between the
two parties involved; (b) the services have been delivered; (c) the prices are fixed and determinable and not subject to refund
or adjustment; and (d) collection of the amounts due is reasonably assured which occurs simultaneously when the booking is accepted
and the credit card or account on file is charged. The Company defers revenue where the earnings process is not yet complete.
Hyrecar,
Inc.
Notes
to Financial Statements
The
Company also recognizes revenue from other sources such as referrals, motor vehicle record fees (application fees), late rental
fees, and other fees charged to drivers in specific situations.
In
limited circumstances, the Company provides contingent consideration in the form of a rebate or refund that is redeemable only
if the customer completes a specific level of transaction over a specific time period. In such cases, the rebate or refund obligation
is recognized as a reduction of revenues. Measurement of the total rebate or refund obligation is based on management estimates
using historical data.
The
following is a breakout of revenue components by subcategory for the three months ended March 31, 2018 and 2017, and the years
ended December 31, 2017 and 2016.
|
|
|
(Unaudited)
Three Months ended March 31, 2018
|
|
|
(Unaudited) Three Months ended March 31, 2017
|
|
|
Year ended December 31, 2017
|
|
|
Year ended December 31, 2016
|
|
|
Insurance fees
|
|
$
|
957,167
|
|
|
$
|
250,062
|
|
|
$
|
1,650,512
|
|
|
$
|
215,028
|
|
|
Transaction fees
|
|
|
694,938
|
|
|
|
222,021
|
|
|
|
1,465,426
|
|
|
|
232,279
|
|
|
Other fees
|
|
|
150,341
|
|
|
|
33,242
|
|
|
|
212,077
|
|
|
|
68,130
|
|
|
Incentives and rebates
|
|
|
(88,263
|
)
|
|
|
-
|
|
|
|
(104,141
|
)
|
|
|
-
|
|
|
Net revenue
|
|
$
|
1,714,183
|
|
|
$
|
505,325
|
|
|
$
|
3,223,874
|
|
|
$
|
515,437
|
|
Transaction
fees and insurance fees are charged to a Driver in a single transaction. Drivers currently do not have an option to decline insurance
at any point during the transaction.
Principal
Agent Considerations
In
accordance with ASC 605-45, Revenue Recognition: Principal Agent Considerations, we evaluate our service offerings to determine
if we are acting as the principal or as an agent, which we consider in determining if revenue should be reported gross or net.
Our primary revenue source is a transaction fee made from a confirmed booking of a vehicle on our platform. Key indicators that
we evaluate to reach this determination include:
|
|
●
|
the
terms and conditions of our contracts;
|
|
|
●
|
whether
we are paid a fixed percentage of the arrangement's consideration or a fixed fee for each transaction;
|
|
|
●
|
the
party which sets the pricing with the end-user, has the credit risk and provides customer support; and
|
|
|
●
|
the
party responsible for delivery/fulfillment of the product or service to the end consumer.
|
We
have determined that we act as the agent in the transaction for vehicle bookings, as we are not the primarily obligor of the arrangement
and receive a fixed percentage of the transaction. Therefore, revenue is recognized on a net basis.
For
other fees such as insurance fees, referrals, and motor vehicle records (application fees) we have determined that revenue should
be recorded on a gross basis. In such arrangements, the Company sets pricing, has risk of economic loss, has certain credit risk,
provides support services related to these transactions, and has decision making ability about service providers used.
Gross
billings is an important measure by which we evaluate and manage our business. We define gross billings as the amount billed to
Drivers, without any adjustments for amounts paid to Owners or refunds. Gross billings include transactions from both our revenues
recorded on a net and a gross basis. It is important to note that gross billings is a non-GAAP measure and as such, is not recorded
in our financial statements as revenue. However, we use gross billings to asses our business growth, scale of operations and our
ability to generate gross billings is strongly correlated to our ability to generate revenues. Gross billings may also be used
to calculate net revenue margin, defined as the Company’s GAAP reportable revenue over gross billings.
The
table below sets forth a reconciliation of our GAAP reported revenues to gross billings as follows:
|
|
|
(Unaudited) Three Months ended March 31, 2018
|
|
|
(Unaudited) Three Months ended March 31, 2017
|
|
|
Year ended December 31, 2017
|
|
|
Year ended December 31, 2016
|
|
|
Revenues (GAAP reported revenues)
|
|
$
|
1,714,183
|
|
|
$
|
505,325
|
|
|
$
|
3,223,874
|
|
|
$
|
515,437
|
|
|
Add: Refunds, rebates and deferred revenue
|
|
|
384,187
|
|
|
|
136,166
|
|
|
|
766,487
|
|
|
|
125,720
|
|
|
Add: Owner payments (not recorded in financial statements)
|
|
|
2,347,760
|
|
|
|
749,900
|
|
|
|
5,030,933
|
|
|
|
831,731
|
|
|
Gross billings (non-GAAP measure not recorded in financial statements)
|
|
$
|
4,446,130
|
|
|
$
|
1,391,391
|
|
|
$
|
9,021,294
|
|
|
$
|
1,472,888
|
|
Hyrecar,
Inc.
Notes
to Financial Statements
Cost
of Revenues
Cost
of revenues primarily include direct fees paid for driver insurance, merchant processing fees, and motor vehicle record fees incurred
for paid driver applications.
Advertising
The
Company expenses the cost of advertising and promotions as incurred. Advertising expense was $407,538, $99,508, $433,506, and
$123,479 for the three months ended March 31, 2018 and 2017 and the years ended December 31, 2017 and 2016, respectively.
Research
and Development
We
incur research and development costs during the process of researching and developing our technologies and future offerings. Our
research and development costs consist primarily of non-capitalized development and maintenance costs. We expense these costs
as incurred unless such costs qualify for capitalization under applicable guidance.
Stock
Based Compensation
The
Company accounts for stock options issued to employees under ASC 718, Compensation – Stock Compensation. Under ASC 718,
share-based compensation cost to employees is measured at the grant date, based on the estimated fair value of the award, and
is recognized as expense over the employee’s requisite vesting period. The fair value of each stock option or warrant award
is estimated on the date of grant using the Black-Scholes option valuation model.
The
Company measures compensation expense for its non-employee stock-based compensation under ASC 505, Equity. The fair value of the
option issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the
services received. The fair value is measured at the value of the Company’s common stock or equity award on the date that
the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair
value of the equity instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital.
Stock-based
compensation is included in the statements of operations as follows:
|
|
|
(Unaudited)
Three Months ended March 31, 2018
|
|
|
(Unaudited)
Three Months ended March 31,
2017
|
|
|
Year ended December 31, 2017
|
|
|
Year ended December 31, 2016
|
|
|
General and administrative
|
|
$
|
182,071
|
|
|
$
|
-
|
|
|
$
|
155,723
|
|
|
$
|
-
|
|
|
Sales and marketing
|
|
|
21,711
|
|
|
|
-
|
|
|
|
138,406
|
|
|
|
-
|
|
|
Research and development
|
|
$
|
6,593
|
|
|
$
|
-
|
|
|
$
|
42,552
|
|
|
$
|
-
|
|
Income
Taxes
The
Company applies ASC 740, Income Taxes (“ASC 740”). Deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and liabilities and their financial statement
reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized. The provision for income taxes represents the tax expense for the period,
if any, and the change during the period in deferred tax assets and liabilities. At December 31, 2017 and 2016, the Company
has established a full allowance against all deferred tax assets.
ASC
740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. A
tax benefit from an uncertain position is recognized only if it is “more likely than not” that the position is sustainable
upon examination by the relevant taxing authority based on its technical merit.
Hyrecar,
Inc.
Notes
to Financial Statements
Loss
per Common Share
The Company presents basic loss per share
(“EPS”) and diluted EPS on the face of the statements of operations. Basic loss per share is computed as net loss
divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur from common shares issuable through stock options and convertible debt. For periods in which we incur a net loss,
the effects of potentially dilutive securities would be antidilutive and would be excluded from diluted EPS calculations. For
the three months ended March 31, 2018 and 2017, there were 1,315,490 and 0 options or warrants excluded, respectively. For the
years ended December 31, 2017 and 2016, there were 1,344,830 and 0 options or warrants excluded, respectively. As of March 31,
2018 and 2017, there were no debts convertible into common stock. For the years ended December 31, 2017 and 2016 the Company had
convertible debt, convertible into 0 and 665,997 shares of common stock. As of March 31, 2018 and 2017, and December 31, 2017
and 2016, there was 2,429,638, 2,429,638, 2,429,638, and 985,369 shares of preferred stock convertible into common stock outstanding. Additionally,
as noted in Note 5 below, the Company granted 264,285 unvested forfeitable restricted common stock to consultants during the three
months ended March 31, 2018. These shares were not considered outstanding and were excluded from the calculation of loss per share
as the effect would be antidilutive.
Concentration
of Credit Risk
The
Company maintains its cash with a major financial institution located in the United States of America which it believes to be
credit worthy. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At times,
the Company maintains balances in excess of the federally insured limits.
Other
Concentrations
The
Company relies on two insurance agencies to provide all insurance on vehicles in service. The loss of either of these insurance
carriers would have a negative effect on our operations.
New
Accounting Standards
In
January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, Goodwill and Other (Topic 350): Simplifying
the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill
impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount
to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.
An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment
test is necessary. This guidance is effective for the annual or any interim goodwill impairment tests in fiscal years beginning
after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates
after January 1, 2017. The Company is currently reviewing the provisions of the new standard, but it is not expected to have a
significant impact on the Company.
In
November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which clarifies the presentation
of restricted cash on the statement of cash flows. Amounts generally described as restricted cash and restricted cash equivalents
should be included with cash and cash equivalents when reconciling the beginning and ending cash balances on the statement of
cash flows. This guidance is effective for fiscal years-and interim periods within those fiscal years-beginning after December
15, 2017, with early adoption permitted. The adoption of the provisions of this standard did not have a material impact on the
Company.
In
August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash
Payments, to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The eight
specific issues are: (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other
Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing;
(3) Contingent Consideration Payments Made after a Businesses Combination; (4) Proceeds from the Settlement of Insurance Claims;
(5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned Life Insurance Policies; (6)
Distributions Received from Equity Method Invitees; (7) Beneficial Interests in Securitization Transactions; and (8) Separately
Identifiable Cash and Application of the Predominance Principle. The guidance is effective for annual periods beginning after
December 15, 2017 and interim periods within those annual periods, with early adoption permitted. The adoption of the provisions
of this standard did not have a material impact on the Company.
Hyrecar,
Inc.
Notes
to Financial Statements
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), specifying the accounting for leases, which supersedes the leases
requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply
to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising
from a lease. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases
with a term of twelve months or less. Lessors’ accounting is largely unchanged from the previous accounting standard. In
addition, Topic 842 expands the disclosure requirements of lease arrangements. Lessees and lessors will use a modified retrospective
transition approach, which includes several practical expedients. This guidance is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently reviewing
the provisions of the new standard.
In
May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and has issued subsequent amendments
to this guidance. This new standard will replace all current guidance on this topic and eliminate all industry-specific guidance.
The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle
is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The guidance is
effective for interim and annual periods beginning after December 15, 2017. The standard may be applied either retrospectively
to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company determined that the adoption
of the new revenue recognition standard on January 1, 2018 had no material impact to the Company’s financial statements.
The
FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs to date, including those above, that
amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are
technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our financial statements.
NOTE
3 – COMMITMENTS AND CONTINGENCIES
Settlement
and Legal
In
September 2015, a claim was made by certain former founders against the Company for violations of the founders’ agreement.
The claimants and the Company entered into an arbitration agreement on April 25, 2016 to settle the claim. The settlement stated
that each of the claimants would maintain 190,177 shares of their common stock (post reverse split as described in Note 5) that
was restricted per the founders’ agreement with the remaining being remitted back to the Company. However, the shares while
not separate in class, would not have voting rights until such shares are sold to a non-affiliated third party. The claimants
will be diluted upon subsequent money raises, stock option offerings and vesting, however, any dilution will remain consistent
and proportional to the remaining Founders’ dilution ratios and will not be diluted more than the Founders’ ratios
in any current or subsequent money raise. The claimants also are to receive a total of $110,000 paid out over eighteen (18) months
starting November 1, 2016. As of March 31, 2018 and December 31, 2017 and 2016, $6,111, $24,444 and $97,778 of the balance remained
outstanding, of which $6,111, $24,444, and $73,333 is considered short term, respectively.
In July 2017, an owner of several vehicles
that he was renting through the company’s platform filed arbitration seeking damages for losses associated with renting his
vehicles, specifically losses associated with a claimed stolen vehicle, storage fees, damage/repair fees, an insurance deductible,
and purported loss of income due to his inability to rent the stolen/damaged vehicles. In December 2017, the owner also filed a
lawsuit in Los Angeles Superior Court reasserting the same claims. The company believes that this action is without merit and is
vigorously defending itself, while also exploring whether the dispute can be settled in an expeditious manner. The company has
moved to compel the owner to arbitrate his claims and to stay his Superior Court case. That motion will be heard on June 19, 2018.
The
Company is involved in claims and litigation from time to time in the normal course of business. At March 31, 2018, the Management
of the Company believes there are no pending matters, except as noted above, that are expected to have a material adverse effect
on the business of the Company, their financial condition, results of operations or cash flows.
Agreements
In
November 2017, the Company entered into a 180-day agreement with a third-party broker/dealer to assist in raising funds under
a private placement. For their services, they are to receive five (5) percent of the gross proceeds under the placement as a success
fee defined by the agreement, non-callable warrants equal to ten (10%) of the aggregate number of shares of common stock, or in
the case of non-convertible securities, the aggregate number of shares of common stock issuable as if the non-convertible securities
were convertible into common stock at the public stock price on the date of closing if the Company is public or valuation per
share on the date of closing if the Company is private (excluding warrants) sold to potential investors in the placement. The
warrants entitle the holder to purchase securities of the Company at the same terms as issued under the placement, except that
the exercise price of the warrants shall be 110% of the less of (a) the price at which securities (excluding the value of any
warrants) are issued or (b) the exercise price of any warrants issued to entities funding the placement. The agreement also calls
for $20,000 due upon execution of the agreement and non-accountable expense cash fees equal to three (3) percent of the gross
proceeds due and payable immediately upon the closing of the placement. See Note 4 for 2018 Convertible Debt related to this agreement.
Hyrecar,
Inc.
Notes
to Financial Statements
Other
During
2017 and 2016, the Company leased office space in Los Angeles, CA on a month-to-month basis. Rent expense for the years ended
December 31, 2017 and 2016 was $161,293 and $35,576, respectively.
In
November of 2017, the Company entered a lease in Los Angeles, California commencing April 1, 2018, with the ability to occupy
the facility in January 2018. The lease term is 39 months from the commencement date. Annual base rent is as follows: 2018 - $249,381,
2019 - $342,480, 2020 - $356,145, 2021 - $183,489, respectively. The lease required a deposit of $90,000. Per the lease agreement,
the monthly rate will range from $27,708 to $31,167 a month.
Furniture
Lease
Upon
occupying the new leased space as disclosed above in January 2018, the Company entered into a 42-month furniture lease. The
required down payment was paid using a portion of the tenant improvements allowance granted by the lessor noted above and as
outlined within the agreement. The Company is to make 42-monthly installments of $1,000 each. At the end of the
lease, the Company has the option to buy the furniture for $50,026 plus applicable taxes and fees.
NOTE
4 – DEBT
2016
Convertible Debt
From
June to September 2016, the Company issued convertible debt to related parties and third parties with the same terms and conditions
(“2016 Convertible Debt”) totaling $500,000, $150,000 of which was borrowed from related parties. The convertible
debt bore interest at 12%, with a default rate of 15% and was due in three years from the date of issuance. The debt was automatically
convertible upon 1) the consummation of an investment in the Company’s equity securities of over $250,000 through a single
or series of transactions involving the same party or parties and 2) the occurrence of a liquidity event as defined by the agreements.
The holder had the option to convert the entire unpaid and outstanding principal amount and any accrued interest thereon under
this note on the maturity date. The conversion price was the lesser of 1) that price per share that is eighty percent (80%) of
the purchase price per share of the same class and series of equity securities sold by the Company in a qualifying transaction
or liquidity event or 2) an amount equal to $4,000,000 divided by the total number of outstanding shares of the Company’s
common stock immediately prior to the transaction or liquidity event on a fully-diluted, as-converted basis.
In
February 2017, the convertible debt was converted into Series Seed 1 Preferred Stock based on the conversion terms noted
above due to the closing of a qualifying investment in equity securities. Accordingly, the convertible debt
of
$500,000 and accrued interest thereon totaling $36,434 was converted into 943,908 shares of Series Seed 1 Convertible
Preferred Stock. Upon conversion, the contingent beneficial conversion feature was no longer contingent, and resulted in a
discount and immediate accretion of such discount in the amount of $134,108, which was charged to interest expense in the
accompanying statement of operations during the year ended December 31, 2017.
Interest
expense for the 2016 Convertible Debt, including the charge for the beneficial conversion feature, for the years ended December
31, 2017 and 2016 totaled $140,065 and $30,477, respectively.
2017
Debt
In
April and May 2017, the Company issued debt (“2017 Debt”) to related parties totaling $300,000 and a third party totaling
$50,000 with the same terms and conditions. The 2017 Debt is due in one year and while it does not bear interest, 200,000 warrants
were issued with the 2017 Debt. The warrants are exercisable at $2.10 and expire in five years. The Company calculated the relative
fair value of the warrants using a Black-Scholes option pricing model with similar inputs as disclosed for stock options in Note
5, resulting in a discount of $84,031. During the three months ended March 31, 2018 and the year ended December 31, 2017, the
Company accreted $21,008 and $59,006 of this discount to interest expense, respectively. The remaining discount of $4,017 as of
March 31, 2018 will be amortized over the term of the debt on a straight-line basis due to the short-term nature of the debt.
Interest
expense for the 2017 Debt, for the three months ended March 31, 2018 and the year ended December 31, 2017 totaled $21,008 and
$59,006, respectively. No other periods presented contained interest expense related to the 2017 Debt.
Hyrecar,
Inc.
Notes
to Financial Statements
2018
Convertible Debt
During the three months ended March 31,
2018, pursuant to a securities purchase agreement, the Company issued and sold senior secured convertible promissory notes (the
“Bridge Notes”) to accredited investors in the aggregate principal amount of $2,546,281, of which the Company received
$2,318,579 after broker dealer and other fees withheld. The Company also incurred additional offering costs of $67,882 for a total
debt discount of $295,584, which is to be accreted over the term of the Bridge Notes. The Company recorded amortization of this
discount of $82,445 for the three months ended March 31, 2018, and the remaining amount to be amortized is $213,139 as of March
31, 2018. The Bridge Notes bear interest at the rate of 13% per annum and are due eight months from the original issue date, which
ranges from September to November 2018 (the “Maturity Dates”). The Bridge Notes are not immediately convertible by
the holder, but provide that the principal and all accrued and unpaid interest on the Bridge Notes are convertible to shares of
common stock at a conversion rate of the lesser of $2.5480 per share or seventy percent (70%) of the initial public offering (“IPO”)
price per share, or if the IPO has not occurred by the Maturity Dates, 70% of the Company’s next bona fide sale of its preferred
stock or common stock in excess of $1,000,000 in gross proceeds, in one transaction or a series of related transactions, which
offering definitively sets a price per share of the Company’s common stock or preferred stock. The obligations under the
Bridge Notes are secured by the Company’s assets. The Bridge Notes also include contingent five-year warrants for 50% of
the shares of common stock that the holder is entitled to in connection with the conversion of the Holder’s Bridge Note when
the Bridge Note first becomes convertible. Prior to the Bridge Notes being convertible, the holder does not have a right to exercise
these warrants. Upon the Bridge Notes being convertible and warrants exercisable, the exercise price shall be 125% of the then
conversion price as noted above. See Note 3 for broker-dealer compensation related to these Notes.
The
Bridge Notes contain various provisions that can cause a default, which primarily include non-performance of obligations or other
events, as defined by the Bridge Notes. In an event of default, which is not cured within applicable cure periods, all amounts
being owed to the holder become immediately due and payable at the default redemption amount, which equals 130% of the outstanding
principal amount of the note and accrued and unpaid interest thereon, in addition to payment of all other amounts, costs, expenses,
late fees, and liquidation damages due in respect to the note. The notes will also accrue interest at the lesser of 18% or the
maximum rate permitted under applicable law. If the Bridge Notes are not repaid after a default event, the Company shall use 25%
of all the Company’s future revenue and capital raised to pay down the note and provide an additional 50% warrant coverage
of the shares of common stock the holder is entitled to in connection with the conversion of the note when it first becomes convertible
at the same terms as noted above. In addition, immediately upon an event of default, the Company shall grant the collective holders
of the Bridge Notes to appoint one (1) director to the board of directors until the event default is cured.
In
addition to standard anti-dilution provisions, as defined by the agreements, if at any time while this Bridge Note is outstanding,
the Company sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues
common stock or common stock equivalents entitling a person to acquire shares of common stock at an effective price per share
lower than the conversion price noted above, then the conversion price shall be reduced to equal such lesser amount. Such adjustment
shall be made whenever such common stock or common stock equivalents are issued.
NOTE
5 – STOCKHOLDERS' DEFICIT
Reverse
Stock Split
The
Company executed a 1 for 1.8404 reverse stock split for each share of common stock outstanding on May 17, 2017. Unless otherwise
stated, all share information herein has been retrospectively adjusted to reflect the reverse stock split.
Preferred
Stock
In
August 2016, the Company authorized 15,000,000 shares of preferred stock, par value $0.00001. Of these, the Company designated
4,471,489 shares as Series Seed 1 Convertible Preferred Stock (“Series Seed 1”).
Each
share of Series Seed 1 shall be entitled to cast the number of votes equal to the number of whole shares of common stock into
which the shares of Series Seed 1 held are convertible as of the record date. Series Seed 1 and common stock vote together as
a single class, except as provided by law or by other provisions of the certificate of incorporation.
Upon
the occurrence of any voluntary or involuntary liquidation, dissolution or winding up of the corporation or deemed liquidation
event (as defined by the HyreCar, Inc. Certificate of Designation of Preferences, Rights and Limitations of Series Seed 1 Convertible
Preferred Stock), the holders of shares of Series Seed 1 then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders before any payment shall be made to the holders of common stock by
reason of their ownership thereof, an amount per share equal to the greater of (i) one (1) times the Series Seed 1 Original Issue
Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all
shares of Series Seed 1 been converted into common stock immediately prior to such liquidation, dissolution, winding up or deemed
liquidation event. If upon any such liquidation, dissolution or winding up of the corporation or deemed liquidation event, the
assets of the corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of
Series Seed 1 the full amount to which they shall be entitled, the holders of shares of Series Seed 1 shall share ratably in any
distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable
in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid
in full.
Hyrecar,
Inc.
Notes
to Financial Statements
Each
share of Series Seed 1 shall be convertible, at the option of the holder and at any time, into such number of shares of common
stock as determined by dividing the Series Seed 1 original issue price by $0.71, subject to customary adjustments for stock dividends,
stock splits, or other recapitalization with respect to the Series Seed 1.
During
2016, the Company issued 985,369 shares Series Seed 1 for aggregate proceeds of $700,000 or $0.71 per share. During the year ended
December 31, 2017, the Company issued 422,302 shares of Series Seed 1 for aggregate proceeds of $300,000 to bring the total investment
of Series Seed 1 to $1,000,000.
During
the year ended December 31, 2017, convertible debt was converted into Series Seed 1 stock as disclosed in Note 4 above.
Common
Stock
In
August 2016, the Company increased the authorized shares from 10,000,000 to 50,000,000 shares of our common stock, each share
having a par value of $0.00001.
Private
Placement
Starting
in June 2017, the Company undertook a private placement for the sale of common stock for $1.75 per share. During the year ended
December 31, 2017, 1,236,588 common shares were sold for gross proceeds of $2,164,029. This private placement was closed as of
December 31, 2017.
Relating
to this offering, we are required to pay our investment banker 13% of proceeds and provide 10% warrant coverage. Accordingly,
as of December 31, 2017, $281,324 in commissions have been paid or are payable along with $38,806 in related legal and other fees,
both of which were netted against gross proceeds of the offering. Based on the amounts raised through December 31, 2017, the Company
has issued the investment banker 123,659 warrants, exercisable at $2.00. The value of these warrants, for which similar inputs
were used compared to stock options below, are both an increase and reduction to additional paid-in capital for a net zero effect
on the gross proceeds of the offering.
Founders'
Stock
On
or near the Inception date, the Company issued 4,346,882 shares of common stock to its four founders subject to vesting over a
period of four years. On the date of issuance, the grant-date fair value was nil as the Company had no assets nor operations.
In 2017 and 2016, a total of 0 and 624,865 shares were forfeited by founders due the settlement described in Note 3, as agreed
upon. On August 27, 2016, the Company eliminated any additional vesting terms and all shares held at such time by founders were
deemed vested.
Shares
for Services
During
the three months ended March 31, 2018, the Company granted 264,285 non-vested forfeitable shares of restricted common stock to
three consultants for services. This restricted stock shall vest upon a qualified financing event, defined in each agreement as
a financing of $10,000,000, on or before December 31, 2018. If a qualified financing event does not occur on or before December
31, 2018, all stock is forfeited. The Company did not account for these restricted shares as issued and outstanding per ASC 505-50-s99-1
as they are unvested and forfeitable based on a future contingent event. The Company will recognize the estimated fair value of
the stock over the anticipated period over which they will become nonforfeitable. Accordingly, stock-based compensation of $161,458
was recognized during the three months ended March 31, 2018.
In
December 2017, the Company issued 37,755 shares of common stock for payment of $66,070 in accounts payable related to legal services.
During
2016, the Company issued 434,689 shares of restricted common stock to our former Chief Executive Officer, subject to vesting over
three years. Formal termination of the former Chief Executive Officer’s employment took place in January 2017; however,
this related to circumstances that existed in 2016, and thus, the forfeited shares were deemed to be returned in 2016. The former
Chief Executive Officer retained 229,419 shares of common stock for services provided. Related to this issuance, the Company recognized
$4,220 of stock-based compensation within general and administrative expense in the accompanying statement of operations during
the year ended December 31, 2016. As part of his severance, he was provided three months of pay totaling $24,000, and the Company
forgave advances due the Company totaling $7,500.
Hyrecar,
Inc.
Notes
to Financial Statements
Collateralized
Restricted Stock Purchases
In
2016, the Company issued 1,032,387 shares of restricted common stock to related parties that vest as follows: 33% upon a sale
of securities for gross proceeds of at least $250,000 in one or more transactions and the remaining 67% vest monthly over three
years, becoming fully vested in April 2019. For consideration of these shares, the related parties entered into note agreements
totaling $138,700 that call for the principal and interest to be paid back in ten years from the date of the loan. The notes bear
interest at 1%. The loans are secured by the related shares of common stock. If any portion of the shares are forfeited, the pro-rata
portion of the note will be relieved. The Company accounted for these shares within equity as a subscription receivable - related
parties. As of March 31, 2018, 741,416 shares have vested.
Stock
Options
In
2016, the Board of Directors adopted the HyreCar, Inc. 2016 Incentive Plan (the “2016 Plan”). The 2016 Plan
provides for the grant of equity awards to highly qualified personnel, including stock options, restricted stock, stock appreciation
rights, and restricted stock units to purchase shares of common stock. Up to 2,227,777 shares of common stock may be issued
pursuant to awards granted under the 2016 Plan. The 2016 Plan is administered by the Board of Directors, and expires ten years
after adoption, unless terminated earlier by the Board. There were no options granted during 2016.
During
the year ended December 31, 2017, the board of directors approved the grant of 1,105,394 stock options under the 2016 Plan to
various contractors and employees. There were no such grants in any other period presented. The granted options had an exercise
prices ranging from $0.71 - $1.75, expire in five to ten years, and ranged from immediate vesting to vesting over a four-year
period, many of which had vesting commencement dates retroactively applied based on the individual's service period. The total
grant date fair value of options granted to employees was approximately $286,966. Options granted to contractors are revalued
each reporting period. Certain contractors were hired as employees in 2018 and, accordingly, such grants will be treated as employee
grants prospectively. The stock options granted in 2017 and revalued during the three months ended March 31, 2018 were valued
using the Black-Scholes pricing model with the following range of inputs:
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
Expected Life (years)
|
|
|
5.25 - 6.00
|
|
|
|
5.50 - 6.25
|
|
|
Risk-free interest rate
|
|
|
2.56
|
%
|
|
|
1.87 - 2.56
|
%
|
|
Expected volatility
|
|
|
45
|
%
|
|
|
40 - 45
|
%
|
|
Annual dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
The
risk-free interest rate assumption for options granted is based upon observed interest rates on the United States government securities
appropriate for the expected term of the Company's stock options.
The
expected term of stock options is calculated using the simplified method which takes into consideration the contractual life and
vesting terms of the options.
The
Company determined the expected volatility assumption for options granted using the historical volatility of comparable public
company's common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected
volatility for future stock option grants, until such time that the Company’s common stock has enough market history to
use historical volatility.
Hyrecar,
Inc.
Notes
to Financial Statements
The
dividend yield assumption for options granted is based on the Company's history and expectation of dividend payouts. The Company
has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends
in the foreseeable future.
The
Company recognizes stock option forfeitures as they occur as there is insufficient historical data to accurately determine future
forfeitures rates.
Management
estimated the fair value of common stock by looking at a market approach which takes into consideration past sales of our common
and preferred stock, as well Company developments to date.
A
summary of the Company’s stock options activity and related information is as follows:
|
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted average Remaining Contractual Term
|
|
|
Outstanding at December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
Granted
|
|
|
1,105,394
|
|
|
|
1.01
|
|
|
|
9.8
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expired/Cancelled
|
|
|
(84,223
|
)
|
|
|
0.71
|
|
|
|
9.3
|
|
|
Outstanding at December 31, 2017
|
|
|
1,021,171
|
|
|
$
|
1.04
|
|
|
|
9.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2017
|
|
|
245,165
|
|
|
$
|
0.82
|
|
|
|
9.1
|
|
During
the three months ended March 31, 2018, 29,340 stock options were forfeited.
Stock
option expense for the three months ended March 31, 2018 and 2017 and the years ended December 31, 2017 and 2016 was $48,917,
$0, $281,229, and $0 respectively. As of December 31, 2017, 245,165 stock options were considered vested. The remaining unvested
employee options, including contractors who were hired as employees in 2018, will be expensed ratably through 2021 as follows:
2018 - $142,000, 2019 - $124,000, 2020 - $70,000, 2021 - $24,000.
Warrants
Relating
to the 2017 Debt as described in Note 4, the Company issued 200,000 warrants to purchase common stock with a fixed exercise price
of $2.10.
Relating
to the private placement described above, the Company agreed to issue warrants to the placement agent, equal to 10% the amount
of monies raised divided by $1.75. As of March 31, 2018, the Company had received $2,164,029 in gross funds from the private placement
which has earned the placement agent 123,659 warrants to acquire common stock with an exercise price of $2.00. The value of the
warrants nets against the funds raised but also is added back to equity for a net zero effect on equity.
The
Company used the Black-Scholes pricing model to value the warrants, which had similar inputs to stock options included in the
stock option section above except for the expected life of the warrants, which was set at five years.
As
of December 31, 2017, all warrants were vested.
Hyrecar,
Inc.
Notes
to Financial Statements
NOTE
6 – RELATED PARTY TRANSACTIONS
Related
Party Advances
From
time to time during the years ended December 31, 2017 and 2016, the Company received advances from related parties for short-term
working capital. Such advances are considered short-term and non-interest bearing and due on demand. As of March 31, 2018, December
31, 2017 and 2016, $9,629, $9,629 and $9,629, remained outstanding, respectively.
During
the year ended December 31, 2017, advances of $7,500 to former officers were forgiven, as disclosed in Note 5.
Settlement
Certain
shareholders and founders were involved in a settlement agreement as described in Note 3.
Common
Stock
Certain
officers and founders received shares of common stock and forfeited shares of common stock. Disclosures of issuances and forfeitures
are disclosed in Note 5.
Convertible
Debt
See
Note 4 for disclosure of convertible debt to related parties.
Insurance
The
president of the Company’s primary auto insurer, providing gap coverage for vehicles on the platform, when existing policy
coverage is not applicable, is also a minority shareholder and holder of 2017 Debt with related warrants. As of March 31, 2018,
and December 31, 2017 and 2016, the Company has outstanding balances to the insurer totaling $0, $337,882, and $0 included in
accounts payable, respectively. During the three months ended March 31, 2018 and 2017 and the years ended December 31, 2017 and
2016, the Company paid the insurer approximately $1,411,000, $232,000, $2,340,000 and $264,000, respectively.
NOTE
7 – INCOME TAXES
The
Tax Cuts and Jobs Act
The
Tax Cuts and Jobs Act, or TCJA, reduced the U.S. federal corporate income tax rate from 35% to 21%. As a result, carryforwards
have been recalculated to recognize the effect of future rates on deferred tax assets and liabilities. This resulted in a reduction
in the deferred tax asset of approximately $62,000 with a corresponding decrease in the valuation allowance in the same amount,
for zero net impact on the financial statements.
Hyrecar,
Inc.
Notes
to Financial Statements
The
following table presents the current and deferred tax provision for federal and state income taxes for the years ended December
31, 2017, and 2016:
|
|
|
2017
|
|
|
2016
|
|
|
Current tax provision
|
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
|
State
|
|
|
800
|
|
|
|
800
|
|
|
Total
|
|
$
|
800
|
|
|
$
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax provision (benefit)
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(739,000
|
)
|
|
$
|
(247,000
|
)
|
|
State
|
|
|
(365,000
|
)
|
|
|
(15,000
|
)
|
|
Valuation allowance
|
|
|
1,104,000
|
|
|
|
262,000
|
|
|
Total
|
|
|
-
|
|
|
|
-
|
|
|
Total provision for income taxes
|
|
$
|
800
|
|
|
$
|
800
|
|
The
components of our deferred tax assets (liabilities) for federal and state income taxes consisted of the following as of December
31, 2017 and 2016:
|
|
|
2017
|
|
|
2016
|
|
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
1,366,000
|
|
|
$
|
262,000
|
|
|
Valuation allowance
|
|
|
(1,366,000
|
)
|
|
|
(262,000
|
)
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
No
federal tax provision has been provided for the years ended December 31, 2017 and 2016 due to the losses incurred during such
periods. The Company’s effective tax rate is different from the federal statutory rate of 34% due primarily to operating
losses that receive no tax benefit because of a valuation allowance recorded for such losses and temporary differences related
to a settlement.
|
|
|
2017
|
|
|
2016
|
|
|
Statutory US Federal tax rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
|
Permanent differences:
|
|
|
|
|
|
|
|
|
|
State income taxes, net of Federal benefit
|
|
|
5.8
|
%
|
|
|
5.8
|
%
|
|
Stock compensation
|
|
|
-3.1
|
%
|
|
|
-0.2
|
%
|
|
Other
|
|
|
-0.9
|
%
|
|
|
-0.2
|
%
|
|
Temporary differences
|
|
|
0.7
|
%
|
|
|
-4.4
|
%
|
|
Change in effective tax rate
|
|
|
-10.7
|
%
|
|
|
-
|
|
|
Valuation allowance
|
|
|
-25.8
|
%
|
|
|
-35.0
|
%
|
|
Total
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Based
on federal tax returns to be filed through December 31, 2017, we had available approximately $4,576,000 in recalculated U.S. and
state tax net operating loss carryforwards, pursuant to the Tax Reform Act of 1986, which assesses the utilization of a Company’s
net operating loss carryforwards resulting from retaining continuity of its business operations and changes within its ownership
structure. Net operating loss carryforwards start to expire in 2035 or 20 years for federal income and state tax reporting purposes.
The
Company is subject to tax in the United States (“U.S.”) and files tax returns in the U.S. Federal jurisdiction and
California state jurisdiction. The Company is subject to U.S. Federal, state and local income tax examinations by tax authorities
for all period starting in 2015. The Company currently is not under examination by any tax authority.
NOTE
8 – SUBSEQUENT EVENTS
Subsequent
to March 31, 2018, the Company issued additional senior secured convertible promissory notes totaling $500,000. Net receipts after
offering costs related to these Notes were $460,000. The terms of such notes are the same as described in 2018 Convertible Debt
in Note 4.
Shares
Common
Stock
PROSPECTUS
,
2018
ALTERNATE PAGES FOR SELLING STOCKHOLDER
PROSPECTUS
The information in this prospectus
is not complete and may be changed. The selling stockholders named in this prospectus may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is
not permitted.
Subject
to Completion, dated May 23,
2018
PROSPECTUS
Up
to 1,948,801 Shares of Common Stock [1]
An aggregate of up to 1,948,801 shares
of our common stock, consisting of (i) 1,299,199 shares of our common stock issuable upon conversion of 13% senior secured convertible
promissory notes held by selling stockholders (the “Notes”) and (ii) 649,602 shares of our common stock issuable upon
the exercise of outstanding warrants (the “Warrants”), are currently being offered under this prospectus by certain
stockholders who were investors in the 2018 bridge loan financing. Pursuant to the Notes and the security agreements entered into
in connection with the 2018 bridge loan financing, we received $3,046,281 of new investor funding, which may be converted into
shares of our common stock at a conversion price equal to the lower of $2.5480 or 70% of the price of shares of the initial public
offering (“IPO”) price.
The selling stockholders must sell their
shares at a fixed price per share of $ , which is the per share price of the shares being offered in the IPO. Thereafter, the shares
offered by this prospectus may be sold by the selling stockholders from time to time in the open market, through privately negotiated
transactions or a combination of these methods, at market prices prevailing at the time of sale or at negotiated prices. By separate
prospectus (the “IPO Prospectus”), we have registered an aggregate of shares of our common stock which we are offering
for sale to the public through our underwriters, excluding any shares issuable upon the underwriters’ over-allotment option.
We have applied to list our shares of
common stock for trading on the Nasdaq Capital Market under the symbol “HYRE”. If our application is not approved
or we otherwise determine that we will not be able to secure the listing of our common stock on the Nasdaq, we will not complete
the primary offering to the public.
The
distribution of the shares by the selling stockholders is not subject to any underwriting agreement. We will not receive any proceeds
from the sale of the shares by the selling stockholders. We will bear all expenses of registration incurred in connection with
this offering, but all selling and other expenses incurred by the selling stockholders will be borne by them.
We
are an “emerging growth company” under the federal securities laws and have elected to be subject to reduced public
company reporting requirements. An investment in our common stock may be considered speculative and involves a high degree of
risk, including the risk of a substantial loss of your investment. See “Risk Factors” beginning on page 11 to read
about the risks you should consider before buying shares of our common stock. An investment in our common stock is not suitable
for all investors. See “Risk Factors-Risks Relating to Ownership of Our Securities.”
Sales of the shares of our common stock registered
in this prospectus and the IPO Prospectus will result in two offerings taking place concurrently which might affect price, demand,
and liquidity.
You
should rely only on the information contained in this prospectus and any prospectus supplement or amendment. We have not authorized
anyone to provide you with different information. This prospectus may only be used where it is legal to sell these securities.
The information in this prospectus is only accurate on the date of this prospectus, regardless of the time of any sale of securities.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The
date of this prospectus is ________, 2018
|
1
|
Calculated
using the initial public offering price set forth on the cover page of the IPO Prospectus and assuming the conversion of all
the principal and interest of the Notes at maturity and full exercise of the Warrants held by the selling
stockholders.
|
EXPLANATORY
NOTE
Concurrent with this
offering, the company is registering shares of common stock in connection with a public offering of 2,000,000 shares of our common
stock through the underwriters (excluding 300,000 shares which may be sold upon exercise of the underwriters’ over-allotment
option). Sales by stockholders that purchased shares in our common stock from the underwritten offering may reduce the price of
our common stock, demand for our shares and, as a result, the liquidity of your investment.
SELLING
STOCKHOLDERS
This
prospectus covers the resale from time to time by the selling stockholders identified in the table below of up to
1,948,801 shares of our common stock.
The selling stockholders
identified in the table below may, from time to time, offer and sell under this prospectus any or all of the shares of our common
stock described under the columns “Shares of Common Stock owned Prior to this Offering and Registered hereby” in the
table below.
Certain
selling stockholders may be deemed to be “an underwriter” as defined in the Securities Act. Any profits realized by
such selling stockholder may be deemed to be underwriting commissions.
The
table below has been prepared based upon information furnished to us. The selling stockholders identified below may have sold,
transferred or otherwise disposed of some or all of their shares since the date on which the information in the following table
is presented in transactions exempt from or not subject to the registration requirements of the Securities Act. Information concerning
the selling stockholders may change from time to time and, if necessary, we will amend or supplement this prospectus accordingly.
We cannot give an estimate as to the number of shares of our common stock that will actually be held by the selling stockholders
upon termination of this offering because the selling stockholders may offer some or all of their common stock under the offering
contemplated by this prospectus or acquire additional shares of common stock. The total number of shares that may be sold hereunder
will not exceed the number of shares offered hereby. Please read the section entitled “Plan of Distribution” in this
prospectus.
The following table sets
forth the name of each selling stockholder, the number of shares of our common stock beneficially owned by such stockholder before
this offering, the number of shares to be offered for such stockholder’s account and the number and (if one percent or more)
the percentage of the class to be beneficially owned by such stockholder after completion of the offering. The number of shares
owned are those beneficially owned, as determined under the rules of the SEC, and such information is not necessarily indicative
of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares of our common stock
as to which a person has sole or shared voting power or investment power and any shares of common stock which the person has the
right to acquire within 60 days of April 30, 2018 (the “Determination Date”) through the exercise of any option, warrant
or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of
a trust, discretionary account or similar arrangement, and such shares are deemed to be beneficially owned and outstanding for
computing the share ownership and percentage of the person holding such options, warrants or other rights, but are not deemed
outstanding for computing the percentage of any other person. Beneficial ownership percentages are calculated based on 7,946,876
shares of our common stock outstanding as of the Determination Date, which include (i) 494,851 shares of issued but unvested restricted
stock subject to forfeiture and (ii) the conversion of all outstanding shares of our convertible preferred stock into an aggregate
of 2,429,638 shares of our common stock.
Unless otherwise set forth
below, based upon the information furnished to us, (a) the persons and entities named in the table have sole voting and sole investment
power with respect to the shares set forth opposite the selling stockholder’s name, subject to community property laws,
where applicable, (b) no selling stockholder had any position, office or other material relationship within the past three years,
with us or with any of our predecessors or affiliates, and (c) no selling stockholder is a broker-dealer or an affiliate of a
broker-dealer.
The
number of shares of our common stock shown as beneficially owned before the offering is based on information furnished to us or
otherwise based on information available to us at the timing of the filing of the registration statement of which this prospectus
forms a part.
|
Selling Stockholder
|
|
Shares of
Common Stock Beneficially
Owned
Prior to the
Offering (A)
|
|
|
Shares of Common Stock to be
Sold in this
Offering and Registered
Hereby
|
|
|
Shares of
Common Stock Beneficially
Owned Upon Completion of
the Offering
|
|
|
Percentage of Common Stock Beneficially
Owned Upon Completion of the Offering
|
|
|
NMK Investment Fund, LLC
|
|
|
159,912
|
(1)
|
|
|
159,912
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
Stourbridge Investments LLC
|
|
|
15,992
|
(2)
|
|
|
15,992
|
(2)
|
|
|
-
|
|
|
|
-
|
|
|
James Karalis
|
|
|
127,931
|
(3)
|
|
|
127,931
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
Catalytic Holdings I LLC
|
|
|
453,599
|
(4)
|
|
|
453,599
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
Sergey Gogin
|
|
|
423,563
|
(5)
|
|
|
423,563
|
(5)
|
|
|
-
|
|
|
|
-
|
|
|
Brian FitzPatrick
|
|
|
223,878
|
(6)
|
|
|
223,878
|
(6)
|
|
|
-
|
|
|
|
-
|
|
|
Robert Giblin
|
|
|
63,945
|
(7)
|
|
|
63,945
|
(7)
|
|
|
-
|
|
|
|
-
|
|
|
Gregory Michael Calvino
|
|
|
256,008
|
(8)
|
|
|
256,008
|
(8)
|
|
|
-
|
|
|
|
-
|
|
|
Robert Masucci
|
|
|
64,008
|
(9)
|
|
|
64,008
|
(9)
|
|
|
-
|
|
|
|
-
|
|
|
John Kovitch
|
|
|
159,965
|
(10)
|
|
|
159,965
|
(10)
|
|
|
-
|
|
|
|
-
|
|
|
TOTAL
|
|
|
1,948,801
|
(11)
|
|
|
1,948,801
|
(11)
|
|
|
-
|
|
|
|
-
|
|
|
A
|
We issued to the selling stockholders Notes with the Warrants. The Notes are convertible into our common stock at the lower of $2.5480 per share or a discount of 70% to the price of the stock issued in an anticipated initial public offering. The Warrants have an exercise price equal to 125% of the conversion price of the Notes on the date of exercise. The amount of common stock underlying the Warrants shall be 50% of the shares of our common stock that the selling stockholders are entitled to receive in connection with the conversion of the selling stockholders’ Notes when such Not first become convertible. Calculated using the midpoint of the price range listed on the cover page of the IPO Prospectus and assuming the conversion of all principal plus accrued interest under the Notes at the maturity of each Note.
|
|
(1)
|
Amount includes up
to (i) 106,608 shares of common stock issuable upon conversion of the Notes and (ii) 53,304 shares of common stock issuable
upon exercise of the Warrants. Nicolas Karalis has voting and investment power over these securities.
|
|
(2)
|
Amount includes up to (i) 10,661 shares of common stock issuable upon conversion of the Notes and (ii) 5,331 shares of common stock issuable upon exercise of the Warrants. Steve Schnipper, Managing Member of Stourbridge Investments LLC, has sole voting and dispositive power over the securities held for the account of this stockholder.
|
|
(3)
|
Amount includes up to (i) 85,287 shares of common stock issuable upon conversion of the Notes and (ii) 42,644 shares of common stock issuable upon exercise of the Warrants.
|
|
(4)
|
Amount includes up
to (i) 302,399 shares of common stock issuable upon conversion of the Notes and (ii) 151,200 shares of common stock issuable
upon exercise of the Warrants. Joseph Giamichael has voting and investment power over these securities.
|
|
(5)
|
Amount includes up to (i) 282,375 shares of common stock issuable upon conversion of the Notes and (ii) 141,188 shares of common stock issuable upon exercise of the Warrants.
|
|
(6)
|
Amount includes up to (i) 149,252 shares of common stock issuable upon conversion of the Notes and (ii) 74,626 shares of common stock issuable upon exercise of the Warrants.
|
|
(7)
|
Amount includes up to (i) 42,630 shares of common stock issuable upon conversion of the Notes and (ii) 21,315 shares of common stock issuable upon exercise of the Warrants.
|
|
(8)
|
Amount includes up to (i) 170,672 shares of common stock issuable upon conversion of the Notes and (ii) 85,336 shares of common stock issuable upon exercise of the Warrants.
|
|
(9)
|
Amount includes up to (i) 42,672 shares of common stock issuable upon conversion of the Notes and (ii) 21,336 shares of common stock issuable upon exercise of the Warrants.
|
|
(10)
|
Amount includes up to (i) 106,643 shares of common stock issuable upon conversion of the Notes and (ii) 53,322 shares of common stock issuable upon exercise of the Warrants.
|
|
(11)
|
Amount includes up to (i) 1,299,199 shares of common stock issuable upon conversion of the Notes and (ii) 649,602 shares of common stock issuable upon exercise of the Warrants.
|
PLAN
OF DISTRIBUTION
The selling stockholders
may, from time to time, sell any or all of their shares of our common stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. If the shares of our common stock are sold through underwriters, the
selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of
common stock may be sold in one or more transactions at a price of $5.50 per share (the midpoint of the range set forth on the
cover page of the IPO Prospectus) until our shares are listed on the Nasdaq Capital Market and thereafter at prevailing market
prices or privately negotiated prices, at prevailing market prices at the time of the sale, at varying prices determined at the
time of sale or at negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares:
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●
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any
national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
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●
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ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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●
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block
trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
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●
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purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
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●
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transactions
other than on these exchanges or systems or in the over-the-counter market;
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●
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through
the writing of options, whether such options are listed on an options exchange or otherwise;
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●
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an
exchange distribution in accordance with the rules of the applicable exchange;
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●
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privately
negotiated transactions;
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short
sales;
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●
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broker-dealers
may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
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●
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a
combination of any such methods of sale; and
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●
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any
other method permitted pursuant to applicable law.
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The
selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.
In general, a person who has beneficially owned restricted shares of our common stock for at least six months, in the event we
have been a reporting company under the Exchange Act for at least 90 days, would be entitled to sell such securities, provided
that such person is not deemed to be an affiliate of ours at the time of sale or to have been an affiliate of ours at any time
during the three months preceding the sale.
The
selling stockholders may also engage in short sales against the box, puts and calls and other transactions in our securities or
derivatives of our securities and may sell or deliver shares in connection with these trades.
Broker-dealers
engaged by the selling stockholders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser)
in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary
in the types of transactions involved. Any profits on the resale of shares of our common stock by a broker-dealer acting as principal
might be deemed to be underwriting discounts or commissions under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, attributable to the sale of shares will be borne by a selling stockholder. The selling stockholders
may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities
are imposed on that person under the Securities Act.
In
connection with the sale of the shares of our common stock or otherwise, the selling stockholders may enter into hedging transactions
with broker-dealers, which may in turn engage in short sales of the shares of our common stock in the course of hedging in positions
they assume. The selling stockholders may also sell shares of our common stock short and deliver shares of our common stock covered
by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling
stockholders may also loan or pledge shares of our common stock to broker-dealers that in turn may sell such shares.
The
selling stockholders may from time to time pledge or grant a security interest in some or all of the shares of our common stock
owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer
and sell the shares of our common stock from time to time under this prospectus after we have filed an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include
the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.
The
selling stockholders also may transfer the shares of our common stock in other circumstances, in which case the transferees, pledgees
or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares
of our common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgees, transferees
or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and
donate the shares of our common stock in other circumstances in which case the transferees, donees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this prospectus.
The
selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be an “Underwriter”
within the meaning of the Securities Act in connection with such sales. In such event, any commissions paid, or any discounts
or concessions allowed to, such broker-dealers or agents and any profit realized on the resale of the shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares
of our common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount
of shares of our common stock being offered and the terms of the offering, including the name or names of any broker-dealers or
agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or re-allowed or paid to broker-dealers. Under the securities laws of some states, the shares
of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states
the shares of our common stock may not be sold unless such shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied with. There can be no assurance that any selling
stockholder will sell any or all of the shares of our common stock registered pursuant to the registration statement, of which
this prospectus forms a part.
Each
selling stockholder has informed us that it does not have any agreement or understanding, directly or indirectly, with any person
to distribute our common stock. None of the selling stockholders who are affiliates of broker-dealers, other than the initial
purchasers in private transactions, purchased the shares of common stock outside of the ordinary course of business or, at the
time of the purchase of the common stock, had any agreements, plans or understandings, directly or indirectly, with any person
to distribute the securities.
We
are required to pay all fees and expenses incident to the registration of the shares of common stock. Except as provided for indemnification
of the selling stockholders, we are not obligated to pay any of the expenses of any attorney or other advisor engaged by a selling
stockholder. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
If
we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale
of shares of common stock, we will file a post-effective amendment to the registration statement. If the selling stockholders
use this prospectus for any sale of the shares of our common stock, they will be subject to the prospectus delivery requirements
of the Securities Act.
The
anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of our common stock and activities of the selling
stockholders, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders
and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the
shares of common stock to engage in passive market-making activities with respect to the shares of common stock. Passive market
making involves transactions in which a market maker acts as both our underwriter and as a purchaser of our common stock in the
secondary market. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person
or entity to engage in market-making activities with respect to the shares of common stock.
Once sold under the registration statement,
of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our
affiliates.
USE
OF PROCEEDS
We
will not receive proceeds from sales of our common stock made under this prospectus.
DETERMINATION
OF OFFERING PRICE
There
currently is no public market for our common stock. The selling stockholders will determine at what price they may sell our common
stock, and such sales may be made at prevailing market prices or at privately negotiated prices. See “Plan of Distribution”
above for more information.
LEGAL
MATTERS
Certain legal matters
with respect to the validity of the securities being offered by this prospectus will be passed upon by Mitchell Silberberg &
Knupp LLP, Los Angeles, California. As of the date of this prospectus, an entity affiliated with Mitchell Silberberg & Knupp
LLP owns 37,755 shares of common stock shares and preferred stock convertible into 74,109 shares of common stock in connection
with the offering contemplated by the IPO Prospectus.
1,948,801 Shares of
Common Stock
SELLING STOCKHOLDER
PROSPECTUS
,
2018
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
The following table
indicates the expenses to be incurred in connection with the offering described in this registration statement, other than underwriting
discounts and commissions, all of which will be paid by us. All amounts are estimated except the Securities and Exchange Commission
registration fee, the Financial Industry Regulatory Authority, Inc., or FINRA, filing fee and the Nasdaq Capital Market listing
fee.
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Amount
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SEC registration fee
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$
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3,302.71
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FINRA filing fee
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2,539.81
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The Nasdaq Capital Market initial listing fee
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75,000
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Printing and engraving fees
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10,000
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Legal fees
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350,000
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Accounting fees and expenses
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65,000
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Transfer Agent Fees and Expenses
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5,000
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Miscellaneous Fees and Expenses
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4,500
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Total
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$
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512,039.81
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Item
14. Indemnification of Directors and Officers.
Section
145 of the General Corporation Law of the State of Delaware, or the DGCL, authorizes a corporation’s board of directors
to grant, and authorizes a court to award, indemnity to officers, directors and other corporate agents.
The
company’s amended and restated certificate of incorporation and amended and restated bylaws, each to be in effect at the
initial closing of the offering, limit the liability of the company’s directors for monetary damages to the fullest extent
permitted by Delaware law. Consequently, the company’s directors are not personally liable to the company or the company’s
stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for the following:
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●
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any
breach of their duty of loyalty to the Registrant or the company’ stockholders;
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●
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any
act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
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●
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unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; and
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●
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any
transaction from which they derived an improper personal benefit.
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Any
amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these provisions in respect of any act,
omission or claim that occurred or arose prior to that amendment or repeal. If the DGCL is amended to provide for further limitations
on the personal liability of directors of corporations, then the personal liability of the company’s directors will be further
limited to the greatest extent permitted by the DGCL.
The
company’s amended and restated certificate of incorporation that will be in effect at the initial closing provides that
the company will, under certain circumstances, indemnify any director, officer, employee or agent of the company, subject to any
provisions contained in the company’s amended and restated bylaws that will be in effect at the initial closing. The company’s
amended and restated bylaws that will be in effect at the initial closing provide that the company will indemnify, to the fullest
extent permitted by law, each person who was or is made a party or is threatened to be made a party to, or is otherwise involved
in, any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or
she, or a person for whom he or she is the legal representative, is or was a director or officer of the company, or is or was
serving at the request of the company, as a director, officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against all expense, liability and loss (including, among other things, attorney’s fees and amounts
paid in settlement) reasonably incurred or suffered by such director, officer, employee or agent in connection therewith, subject
to certain conditions. The company’s amended and restated bylaws that will be in effect at the initial closing also provide
the company with the power to, to the extent authorized by the company’s board of directors, grant rights to indemnification
and to advancement of expenses to any employee or agent of the company to the fullest extent indemnification may be granted to
the company’s directors and officers. In addition, the company’s amended and restated bylaws that will be in effect
at the initial closing provide that the company must advance expenses incurred by or on behalf of a director or officer in advance
of the final disposition of any action or proceeding, subject to certain exceptions.
The
company plans to enter into indemnification agreements with each of its directors and executive officers prior to the initial
closing that may be broader than the specific indemnification provisions contained in the DGCL. These indemnification agreements
require the company, among other things, to indemnify its directors and executive officers against liabilities that may arise
by reason of their status or service. These indemnification agreements also require the company to advance all expenses incurred
by the directors and executive officers in investigating or defending any such action, suit or proceeding, subject to certain
exceptions. The company believes that these agreements are necessary to attract and retain qualified individuals to serve as directors
and executive officers.
The
limitation of liability and indemnification provisions that are included in the company’s amended and restated certificate
of incorporation, amended and restated bylaws and indemnification agreements with its directors and executive officers may discourage
stockholders from bringing a lawsuit against the company’s directors and executive officers for breach of their fiduciary
duties. They may also reduce the likelihood of derivative litigation against the company’s directors and executive officers
even though an action, if successful, might benefit the company and other stockholders. Further, a stockholder’s investment
may be adversely affected to the extent that the company pays the costs of settlement and damage awards against directors and
executive officers as required by these indemnification provisions. At present, the company is not aware of any pending litigation
or proceeding involving any person who is or was one of its directors, officers, employees or other agents or is or was serving
at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise,
for which indemnification is sought, and the company is not aware of any threatened litigation that may result in claims for indemnification.
The
company’s amended and restated bylaws that will be in effect at the initial closing provide that the company may purchase
and maintain insurance, at its expense, to protect itself and any person who is or was a director, officer, employee or agent
of the company or is or was serving at its request as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any expense, liability or loss, whether or not the company would have the power
to indemnify such person against such expense, liability or loss under the DGCL. The company maintains insurance under which,
subject to the limitations of the insurance policies, coverage is provided to the company’s directors and executive officers
against loss arising from claims made by reason of breach of fiduciary duty or other wrongful acts as a director or executive
officer, including claims relating to public securities matters, and to the company with respect to payments that may be made
by the company to these directors and executive officers pursuant to the company’s indemnification obligations or otherwise
as a matter of law.
Item
15. Recent Sales of Unregistered Securities.
Since
November 24, 2014, the company has made the following sales of unregistered securities:
1. Sales of Convertible Promissory
Notes and Warrants
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●
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From June 2016 to
September 2016, the company issued and sold convertible promissory notes to a total of 13 investors for an aggregate principal
amount of $500,000.
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●
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In April 2017 and
May 2017, the company issued and sold promissory notes to three investors for an aggregate principal amount of $350,000 and issued
warrants to purchase up to 200,000 shares of common stock at an exercise price of $2.10 per share.
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●
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Between January
2018 and April 2018, the company issued and sold senior secured convertible promissory notes to 10 accredited investors for
an aggregate principal amount of $3,046,281 and issued warrants to purchase up to 50% of the shares receivable upon conversion
of such notes at an exercise price equal to one-hundred and twenty-five percent (125%) of the conversion price of such notes.
The notes provide that the principal and all accrued and unpaid interest on the notes are convertible to shares of common
stock at a conversion rate of $2.5480 per share or seventy percent (70%) of the company’s initial public offering (“IPO”)
price per share or, if the IPO has not occurred by the maturity date, 70% of the company’s next bona fide sale of its
preferred stock or common stock in excess of $1,000,000 in gross proceeds, in one transaction or a series of related transactions,
which offering definitively sets a price per share of the company’s common stock or preferred stock. The company also
agreed to issue the placement agent for this offering, non-callable warrants to purchase shares
of common stock, which is equal to ten percent (10%) of the aggregate number of shares of common stock issuable upon conversion
of the senior secured convertible promissory notes.
|
2.
Preferred Stock Issuances
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|
●
|
From
August 2016 to February 2017, the company issued and sold 1,407,671 shares of Series
Seed 1 Convertible Preferred Stock to one accredited investor at a purchase price of
$0.71 per share.
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|
|
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●
|
In
February 2017, the convertible promissory notes issued between June 2016 and September
2016 were converted into 943,908 shares of Series Seed 1 Convertible Preferred Stock
and an additional 78,059 shares were issued as advisor shares.
|
3.
2016 Equity Incentive Plan-Related Issuances
|
|
●
|
From
April 2016 to October 2017, the company granted its directors, officers, employees, consultants
and other service providers option to purchase 1,021,171 shares of common stock with
per share exercise prices ranging from $0.71 to $1.75 under the 2016 Equity Incentive
Plan.
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4.
Other Common Stock Issuances
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●
|
On
or near November 24, 2014, the company issued 4,346,882 shares of common stock to its
four founders subject to vesting over a period of four years. In 2016 and 2015, a total
of 624,865 and 1,005,217 shares were forfeited by founders due a settlement, termination,
or as agreed upon. On August 27, 2016, the company eliminated any additional vesting
terms and all shares held at such time by founders were deemed vested.
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●
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Since
September 2016, the company issued 1,032,387 shares of restricted common stock to a director,
officers and an employee that vest as follows: 33% upon a sale of securities for gross
proceeds of at least $250,000 in one or more transactions and the remaining 67% vest
monthly over three years, becoming fully vested in April 2019. For consideration of these
shares, the related parties entered into note agreements totaling $138,700 that call
for the principal and interest to be paid back in ten years from the date of the loan.
The notes bear interest at 1%. The loans are secured by the related shares of common
stock. If any portion of the shares are forfeited, the pro-rata portion of the note will
be relieved.
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|
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●
|
From June 2017 to November 2017, the company issued and sold 1,236,588 shares of common stock to 68 accredited investors at a purchase price of $2.00 per share. In connection with this financing, the company issued to the placement agent a warrant to purchase up to 123,659 shares of common stock at an exercise price equal to $1.75 per share.
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|
●
|
In February 2018, the company issued 264,285 restricted shares of common stock to three consultants for services pursuant to a consulting agreement with each consultant. This restricted stock shall vest upon a qualified financing event, defined in each agreement as a financing of $10,000,000, on or before December 31, 2018. If a qualified financing event does not occur on or before December 31, 2018, all stock is forfeited.
|
Unless
otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance
upon Section 4(a)(2) of the Securities Act (or Regulation D or Regulation S promulgated thereunder), or Rule 701 promulgated
under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit
plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions
represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with
any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.
Item
16. Exhibits and Financial Statement Schedules.
(a)
Exhibits
|
1.1*
|
Form
of Underwriting Agreement
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3.1
|
Certificate of Incorporation of the Company, effective as of November 24, 2014
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3.2
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First Amendment to Certificate of Incorporation, effective as of August 30, 2016
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3.3
|
Second Amendment to Certificate of Incorporation, effective as of May 17, 2017
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3.4
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Third Amendment to Certificate of Incorporation, effective as of May 23, 2018
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3.5
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Form of Certificate of Incorporation of the Company, to be effect upon the initial closing of the Company’s initial public offering
|
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3.6
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Bylaws of the Company currently in effect
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3.7
|
Form of Bylaws of the Company, to be in effect upon the initial closing of the Company’s initial public offering
|
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4.1
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Form of the Company’s common stock certificate
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4.2
|
Form of 2016 Convertible Promissory Note
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4.3
|
Form of April/May 2017 Bridge Promissory Notes
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4.4
|
Form of Warrant for April/May 2017 Bridge Financing
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4.5
|
Form of Convertible Promissory Note for 2018 Bridge Financing
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4.6
|
Form of Warrant for 2018 Bridge Financing
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|
5.1*
|
Opinion of Mitchell
Silberberg and Knupp, LLP
|
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|
10.1+
|
Employment Agreement between the Company and Joseph Furnari
|
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10.2+
|
Employment Agreement between the Company and Michael Furnari
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10.3+
|
Oral Employment Arrangement between the Company and Abhishek Arora
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10.4+
|
Oral Consulting Arrangement between the Company and Kit Tran
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10.5+
|
Employment Agreement between the Company and Elizabeth Reynolds
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10.6+
|
2016 Equity Incentive Plan and forms of award agreements thereunder
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10.7+
|
2018 Equity Incentive Plan and forms of award agreements thereunder
|
|
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|
10.8
|
Form of Security and Pledge Agreement for 2018 Bridge Financing
|
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10.9
|
Form of Intellectual Property Security Agreement for 2018 Bridge Financing
|
|
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|
23.1
|
Consent of dbb
mckennon
|
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23.2*
|
Consent of Mitchell
Silberberg & Knupp LLP (included in Exhibit 5.1)
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24.1
|
Power of Attorney (included on signature page)
|
|
*
|
To
be filed by amendment
|
|
+
|
Indicates
a management contract or compensatory plan or arrangement
|
(b)
No financial statement schedules are provided because the information called for is not required or is shown in the financial
statements or the notes thereto.
Item
17. Undertakings.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, may be permitted
to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The
undersigned registrant hereby undertakes:
|
|
(1)
|
To
file, during any period in which offers or sales are being made, a post-effective amendment
to this registration statement:
|
|
|
(i)
|
To
include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
|
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than 20% change in the maximum aggregate offering price set forth in the “Calculation
of Registration Fee” table in the effective registration statement.
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|
|
(iii)
|
To
include any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such information in
the registration statement;
|
|
|
(2)
|
That,
for the purpose of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
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|
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(3)
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To
remove from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
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(4)
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That,
for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
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(i)
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Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part
of the registration statement as of the date the filed prospectus was deemed part of
and included in the registration statement; and
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(ii)
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Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part
of a registration statement in reliance on Rule 430B relating to an offering made pursuant
to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required
by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included
in the registration statement as of the earlier of the date such form of prospectus is
first used after effectiveness or the date of the first contract of sale of securities
in the offering described in the prospectus. As provided in Rule 430B, for liability
purposes of the issuer and any person that is at that date an underwriter, such date
shall be deemed to be a new effective date of the registration statement relating to
the securities in the registration statement to which that prospectus relates, and the
offering of such securities at that time shall be deemed to be the initial bona fide
offering thereof. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated
or deemed incorporated by reference into the registration statement or prospectus that
is part of the registration statement will, as to a purchaser with a time of contract
of sale prior to such effective date, supersede or modify any statement that was made
in the registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such effective date.
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(5)
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That,
for the purpose of determining liability of the registrant under the Securities Act to
any purchaser in the initial distribution of the securities: the undersigned registrant
undertakes that in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such purchaser
by means of any of the following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell such securities to such
purchaser:
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(i)
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Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424;
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(ii)
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Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
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(iii)
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The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the undersigned registrant; and
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(iv)
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Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
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(6)
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Provide
to the underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
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(7)
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For
purposes of determining any liability under the Securities Act, the information omitted
from the form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
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(8)
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For
the purpose of determining any liability under the Securities Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Los Angeles, State of California, on May 23,
2018.
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HYRECAR
INC.
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By:
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/s/
Joseph
Furnari
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Joseph
Furnari
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Chief
Executive Officer,
Chief Financial Officer and Director
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Each
person whose signature appears below constitutes and appoints Joseph Furnari as his true and lawful attorney-in-fact and agent,
each acting along with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments) and exhibits to the Registration Statement on
Form S-1, and to any registration statement filed under SEC Rule 462, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the SEC, granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements
of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities set forth
opposite their names and on the date indicated above.
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Signature
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Title
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Date
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/s/ Anshu “Andy” Bansal
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Anshu “Andy” Bansal
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Chairman
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May 23, 2018
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/s/ Joseph Furnari
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Joseph Furnari
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Chief Executive Officer and Chief Financial Officer
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May 23, 2018
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(
principal executive officer and principal financial and accounting officer
)
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/s/ Abhishek Arora
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Abhishek Arora
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Director
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May 23, 2018
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/s/ Grace Mellis
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Grace Mellis
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Director
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May 23, 2018
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II-7
Exhibit 3.1
CERTIFICATE OF
INCORPORATION OF
HYRECAR INC
ARTICLE I
The name of the corporation is HyreCar Inc
(the
“Corporation”).
ARTICLE II
The
address of the Corporation’s registered office in the State of Delaware is One Commerce Center - 1201 Orange St. #600, Wilmington,
New Castle County, Delaware 19899. The name of its registered agent at such address is InCorp Services, Inc.
ARTICLE III
The purpose
of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General
Corporation Law.
ARTICLE IV
The
aggregate number of shares which the Corporation shall have authority to issue is 10,000,000 shares of capital stock all of which
shall be designated “Common Stock” and have a par value of $0.00001 per share.
ARTICLE V
The
business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Elections of directors
need not be by written ballot unless otherwise provided in the Bylaws of the Corporation. In furtherance of and not in limitation
of the powers conferred by the laws of the state of Delaware, the Board of Directors of the Corporation is expressly authorized
to make, amend or repeal Bylaws of the Corporation.
ARTICLE VI
(A) To
the fullest extent permitted by the Delaware General Corporation Law, as the same exists or as may hereafter be amended, a director
of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director.
(B) The
Corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate
is or was a director or officer of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise
as a director or officer at the request of the Corporation or any predecessor to the Corporation.
(C) Neither
any amendment nor repeal of this Article VI, nor the adoption of any provision of the Corporation’s Certificate of Incorporation
inconsistent with this Article VI, shall eliminate or reduce the effect of this Article VI in respect of any matter occurring,
or any action or proceeding accruing or arising or that, but for this Article VI, would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision.
ARTICLE VII
Unless
the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall
be the sole and exclusive forum for (A) any derivative action or proceeding brought on behalf of the Corporation, (B) any action
or proceeding asserting a claim of breach of a fiduciary duty owed by any director or officer of the Corporation to the Corporation
or the Corporation’s stockholders, (C) any action or proceeding asserting a claim against the Corporation arising pursuant to any
provision of the Delaware General Corporation Law or the Corporation’s Certificate of Incorporation or Bylaws, or (D) any action
or proceeding asserting a claim against the Corporation governed by the internal affairs doctrine.
ARTICLE VIII
The name and mailing address of the incorporator
are as follows:
Abhishek Arora
909 Golden Prados Dr,
Diamond Bar, CA, 91765 Executed on November 23, 2014.
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/s/ Abhishek Arora
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Abhishek Arora, Incorporator
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Exhibit 3.2
AMENDMENT
TO
CERTIFICATE
OF
INCORPORATION
OF HYRECAR
INC
The
undersigned,
Marciano
Kim, hereby certifies that:
1.
He
is the
Chief
Executive
Officer of Hyrecar Inc, a Delaware corporation
(the
“Corporation”),
and
is
duly
authorized
by the unanimous written consent of the Board of Directors of the Corporation to
exec
ut
e
this instrument.
2.
This
Certi
ficate
o
f
Amendment
of the Certificate of Incorporation was duly
approved
by
the Corporation’s Board of
Directors,
in
accord
ance
,with
th
e
applicable
provisions of Sections
141
and 242 of the
General Corporation
Law
of
the
State
of Delaware, and duly
adopted
by
written consent of the holders of
a
majority of
the outstanding shares of common stock
of
the
Corporation,
in
accordance
with
the
applicable
provisions
of Sections
228
and
242
of
the
General
Corporation Law of the State
of Delaware.
3. Article
IV of the Certificate
of Incorporation
is
h
ereby
amended
to read in full as follows:
(A)
This
corporation is authorized to issue two classes of stock to be designated. respectively,
“Common
Stock”
and
“
Preferred
Stock.” The
total number of shares which
the
corporation
is
authorized
to
issue
is
Sixty Five Million (65,000,000)
s
har
es
.
Fifty
Million
(50,000,000)
shares shall be
Com
mon
Stock,
par
value of $0.00001 per
share and
Fifteen
Million
(
15,
000,000)
sha
r
es shall
be
Preferred Stock,
par
value of $0.00001 per
share
.
(B)
The
Preferred Stock may be issued from
time
to time
in
one
or more series.
The
Board
of
Directors
is
hereby authorized, within the limitations and restrictions
s
t
ated
in
this
C
ertificate
of
Incorporation,
to
fix or
alter
t
he
divided
ri
gh
t
s,
dividend
rate, conversion rights,
voting
rights, rights and
t
erms
of
redemption (including sinking fund provisions),
the
redemption
price or
pric
es,
and
the liquidation preferences of any wholly unissued
series
of
Preferred
Stock, a
nd
the
number
of
shares constituting any such series
and
the
designation
thereof, or any of them, and to
in
cre
a
se
o
r
decrease
the
numb
er
of
shares of any
series subseque
nt
to
the
issue of
shares of that
series,
but
not below
the
number of share of such
se
ries
then
outstanding.
In
case the
number
of
sha
r
es
of
any
series shall
be
so
decrease,
the shares
co
nstituting
such
decrease shall resume
the
status
which
they had prior to the adoption of
the
re
sol
ution
origina
ll
y
fixing
the
number
of
share
of
su
ch
series.”
4.
This
Cer
t
ificate o
f
Amendment
is
effective immediately
upon
filing.
IN
WITNESS WHEREOF,
the Corporation has
cause
this Certificate
of
Amendment
of
the
Certificate
of
Incorporation to be
exe
cute
d
this 29
th
day
of August 2016.
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HYRECAR INC
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By:
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/s/ Marciano Kim
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Marciano Kim
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Chief
Executive Officer
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Exhibit 3.3
SECOND AMENDMENT TO
CERTIFICATE OF INCORPORATION OF HYRECAR INC
The undersigned, Joseph Furnari,
hereby certifies that:
1. He
is the Chief Executive Officer of Hyrecar Inc, a Delaware corporation (the “Corporation”), and is duly authorized by
the unanimous written consent of the Board of Directors of the Corporation to execute this instrument.
2. This
Certificate of Amendment of the Certificate of Incorporation was duly approved by the Corporation’s Board of Directors, in
accordance with the applicable provisions of Sections 141 and 242 of the General Corporation Law of the State of Delaware, and
duly adopted by written consent of the holders of a majority of the outstanding shares of common stock of the Corporation, in accordance
with the applicable provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware.
3.
Article IV of the Certificate of Incorporation is hereby amended to read in full as follows:
“Immediately upon the filing of this
Certificate of Amendment, each 1.8404 outstanding shares of Common Stock will be exchanged and combined, automatically and without
further action, into one (1) share of Common Stock (the “Reverse Stock Split”). The Reverse Stock Split shall also
apply to any outstanding securities or rights convertible into, or exchangeable or exercisable for, Common Stock of the Corporation.
The Reverse Stock Split shall be effected on a certificate-by-certificate basis and no fractional shares shall be issued upon the
exchange and combination and any such fractional shares shall be rounded up to the nearest whole share.
(A) This
corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred
Stock.” The total number of shares which the corporation is authorized to issue is Sixty Five Million (65,000,000) shares.
Fifty Million (50,000,000) shares shall be Common Stock, par value of $0.00001 per share and Fifteen Million (15,000,000) shares
shall be Preferred Stock, par value of $0.00001 per share.
(B)
The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized, within
the limitations and restrictions stated in this Certificate of Incorporation, to fix or alter the divided rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or
prices, and the liquidation preferences of any wholly unissued series of Preferred Stock, and the number of shares constituting
any such series and the designation thereof, or any of them, and to increase or decrease the number of shares of any series subsequent
to the issue of shares of that series, but not below the number of share of such series then outstanding. In case the number of
shares of any series shall be so decrease, the shares constituting such decrease shall resume the status which they had prior
to the adoption of the resolution originally fixing the number of share of such series.”
4.
This Certificate of Amendment is effective immediately upon filing.
IN WITNESS WHEREOF
, the Corporation
has caused this Second Amendment to the Certificate of Incorporation to be executed this 8th day of May 2017.
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HYRECAR INC
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By:
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/s/ Joseph
Furnari
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Joseph Furnari
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Chief Executive Officer
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Exhibit
3.4
CERTIFICATE
OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF
HYRECAR INC
HYRECAR INC
(the “
Corporation
”), a corporation organized and existing under and by virtue of the General Corporation
Law of the State of Delaware, as amended (the “
DGCL
”), hereby certifies as follows:
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A.
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The name of the Corporation is HyreCar Inc
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B.
|
This Certificate of Amendment to the Certificate of Incorporation (the “
Certificate
of Amendment
”) amends the Corporation’s Certificate of Incorporation filed with the Secretary of State of the
State of Delaware on November 24, 2014, as amended (the “
Certificate
”), and has been duly adopted by
the Corporation’s Board of Directors in accordance with the provisions of Section 242 of the DGCL.
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C.
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Article I of the Certificate is hereby amended and restated to read as follows:
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ARTICLE
I
“The
name of the corporation is HyreCar Inc. (the “
Corporation
”).”
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D.
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The Certificate of Amendment of the Certificate so adopted reads in full as set forth above and
is hereby incorporated by reference. All other provisions of the Certificate remain in full force and effect.
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IN WITNESS
WHEREOF
, HyreCar Inc has caused this Certificate of Amendment to be signed by Joseph Furnari, a duly authorized officer of
the Corporation, on May 23, 2018.
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HYRECAR INC
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By:
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/s/ Joseph Furnari
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Name:
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Joseph Furnari
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Title:
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Chief Executive Officer
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Exhibit 3.5
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HYRECAR INC.
Pursuant to Sections 242 and 245 of
the General Corporation Law of the State of Delaware, HyreCar Inc. (the “
Corporation
”), a corporation
organized and existing under the General Corporation Law of the State of Delaware, as amended (the “
DGCL
”),
DOES HEREBY CERTIFY:
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1.
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The name of the Corporation is HyreCar Inc.
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2.
|
This Amended and Restated Certificate of Incorporation (the “
Amended and Restated Certificate of Incorporation
”)
amends and restates the Corporation’s Certificate of Incorporation filed with the Secretary of State of the State of Delaware
on November 24, 2014, as amended (the “
Prior Certificate
”), and has been duly adopted in accordance with
the provisions of Sections 242, 245 and 228 of the DGCL.
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3.
|
The text of the Prior Certificate is hereby amended and restated in its entirety to read as set forth in
Exhibit A
attached hereto.
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IN WITNESS WHEREOF
, this Amended
and Restated Certificate of Incorporation has been executed by a duly authorized officer of this Corporation on this __ day of
______, 2018.
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By:
|
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Name:
Joseph Furnari
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Title: Chief Executive Officer
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Exhibit A
ARTICLE I
The name of this Corporation is HyreCar
Inc. (the “
Corporation
”).
ARTICLE II
The address of the registered office of
the Corporation in the State of Delaware is 2140 South DuPont Highway, City of Camden, Kent County, Delaware 19934. The name of
its registered agent at such address is Paracorp Incorporated.
ARTICLE III
The nature of the business or purposes to
be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
ARTICLE IV
A. The
total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 50,000,000 shares
of Common Stock, $0.00001 par value per share (“
Common Stock
”), and (ii) 15,000,000 shares of Preferred
Stock, $0.00001 par value per share (“
Preferred Stock
”).
B. The
Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Company (the “
Board
”)
is hereby expressly authorized, by filing a certificate (“
Certificate of Designation
”) pursuant to the DGCL,
to provide for the issue of any or all of the unissued and undesignated shares of the Preferred Stock in one or more series, and
to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers,
and such designation, preferences and relative, participating, optional, or other rights and such qualifications, limitations or
restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the Board providing for the issuance
of such shares and as may be permitted by the DGCL. The Board of Directors is also expressly authorized to increase or decrease
the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence,
the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally
fixing the number of shares of such series. The number of authorized shares of Preferred Stock may be increased or decreased (but
not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power
of the stock of the Company entitled to vote thereon, without a separate vote of the holders of the Preferred Stock, or of any
series thereof, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with
respect to any series of Preferred Stock.
Each outstanding share of Common Stock shall
entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Company for their vote;
provided
,
however
, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote
on any amendment to this Amended and Restated Certificate of Incorporation (this “
Certificate of Incorporation
”)
(including any Certificate of Designation filed with respect to any series of Preferred Stock) that relates solely to the terms
of one or more outstanding series of Preferred Stock if the holders of such affected series of Preferred Stock are entitled, either
separately or together as a class with the holders of one or more other series of Preferred Stock, to vote thereon by law or pursuant
to this Certificate of Incorporation (including any Certificate of Designation filed with respect to any series of Preferred Stock).
ARTICLE V
In furtherance and not in limitation of
the powers conferred by the DGCL, subject to the rights of the holders of any series of Preferred Stock that may be designated
from time to time, the Board is expressly authorized to adopt, amend or repeal the bylaws of the Corporation (the “
Bylaws
”),
subject to the power of the stockholders of the Corporation to alter or repeal any Bylaws whether adopted by them or otherwise;
provided
,
however
, that, in addition to any vote of the holders of any class or series of stock of the Corporation
required by law or by this Certificate of Incorporation (including any Certificate of Designation that may be filed from time to
time), the affirmative vote of holders of not less than sixty-six and two-thirds percent (66 2/3%) of the votes of all outstanding
shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for purposes hereof
as a single class, shall be required for the stockholders to adopt new Bylaws or to alter, amend or repeal the Bylaws.
ARTICLE VI
A. The
management of the business and the conduct of the affairs of the Corporation shall be vested in the Board. The number of directors
which shall constitute the whole Board shall be fixed exclusively by one or more resolutions adopted from time to time by the Board.
B. The
directors shall be divided into three classes, designated as Class I, Class II and Class III, as nearly equal in number as possible.
Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board. At the first annual
meeting of stockholders following the effectiveness of this Certificate of Incorporation (the “
Qualifying Record Date
”),
the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Qualifying Record Date, the term of office of the Class II directors
shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders
following the Qualifying Record Date, the term of office of the Class III directors shall expire and Class III directors shall
be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a
full term of three years to succeed the directors of the class whose terms expire at such annual meeting. Notwithstanding the foregoing
provisions of this Article VI.B., each director shall serve until his or her successor is duly elected and qualified, or until
his or her earlier death, resignation or removal. No decrease in the number of directors constituting the Board shall shorten the
term of any incumbent director.
C. The
Board or any individual director may be removed from office only for cause at a meeting of stockholders called for that purpose,
by the affirmative vote of the holders of at least at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all
the then outstanding shares of voting stock of the Corporation entitled to vote at an election of directors, voting together as
a single class.
D. Any
vacancies on the Board resulting from death, resignation, disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as otherwise provided by law and or by this Certificate
of Incorporation or any Certificate of Designation that may be filed with respect to a series of Preferred Stock, be filled only
by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board, and not by
the stockholders. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full
term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected
and qualified.
E. The
directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.
F. There
shall be no cumulative voting in the election of directors.
ARTICLE VII
A. Subject
to the rights of the holders of any series of Preferred Stock or any other class of stock or series thereof having a preference
over the Common Stock as to dividends or upon liquidation, any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation. The taking
of any action by written consent of the stockholders in lieu of a meeting of the stockholders is specifically denied.
B. Special
meetings of the stockholders of the Corporation may be called, for any purpose or purposes, by the Secretary of the Corporation
at the direction of the Board, pursuant to a resolution adopted by a majority of the entire Board, but such special meetings may
not be called by any other person or persons.
C. Advance
notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting
of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.
ARTICLE VIII
A. To the fullest extent permitted by the
DGCL, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. If the DGCL is amended after approval by the stockholders of this Article VIII
to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended.
B. Any repeal or modification of the foregoing
provisions of this Article VIII shall not adversely affect any right or protection of a director of the Corporation existing
at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director
occurring prior to, such repeal or modification.
ARTICLE IX
Unless the Corporation consents in writing
to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted
by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation,
(b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation
to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim arising pursuant to any provision
of the DGCL, this Certificate of Incorporation or the Bylaws, or (d) any action asserting a claim that is governed by the
internal affairs doctrine, in each such case subject to the Court of Chancery having personal jurisdiction over the indispensable
parties named as defendants therein and the claim not being one which is vested in the exclusive jurisdiction of a court or forum
other than the Court of Chancery or for which the Court of Chancery does not have subject matter jurisdiction. Any person purchasing
or otherwise acquiring any interest in any shares of the Corporation’s capital stock shall be deemed to have notice of, and
to have consented to the provisions of this Article IX.
ARTICLE X
Notwithstanding any other provisions of
this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition
to any affirmative vote of the holders of any particular class or series of the Corporation required by law or by this Certificate
of Incorporation or any Certificate of Designation that may be filed with respect to a series of Preferred Stock, the affirmative
vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then-outstanding shares
of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class,
shall be required to alter, amend or repeal Articles VI, VII, VIII, IX and this Article X.
* * *
Exhibit 3.6
BYLAWS
OF
HYRECAR INC.
(A DELAWARE CORPORATION)
ARTICLE
I
Offices
Section 1. Registered
Office
. The registered office of the corporation in the State of Delaware shall be One Commerce Center – 1201 Orange
St. #600, Wilmington, New Castle County 19899 or in such other location as the Board of Directors may from time to time determine
or the business of the corporation may require..
Section 2. Other
Offices
. The corporation shall also have and maintain an office or principal place of business at such place as may be fixed
by the Board of Directors, and may also have offices at such other places, both within and without the State of Delaware, as the
Board of Directors may from time to time determine or the business of the corporation may require.
ARTICLE
II
Corporate Seal
Section 3. Corporate
Seal
. The Board of Directors may adopt a corporate seal. Said seal may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
ARTICLE
III
Stockholders’ Meetings
Section 4. Place
of Meetings
. Meetings of the stockholders of the corporation may be held at such place, either within or without the State
of Delaware, as may be determined from time to time by the Board of Directors. The Board of Directors may, in its sole discretion,
determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided
under the Delaware General Corporation Law (“
DGCL
”).
Section 5. Annual
Meeting
.
(a)
The
annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as
may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of
Directors. Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders: (i) pursuant to the corporation’s notice
of meeting of stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the corporation
who was a stockholder of record at the time of giving of notice provided for in the following paragraph, who is entitled to vote
at the meeting and who complied with the notice procedures set forth in this Section.
(b)
At
an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting.
For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of
paragraph (a) of this Section, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the corporation,
(ii) such other business must be a proper matter for stockholder action under the DGCL and applicable law, (iii) if the stockholder,
or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the corporation with a Solicitation
Notice (as defined in this paragraph), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy
statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable
law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy
to holders of a percentage of the corporation’s voting shares reasonably believed by such stockholder or beneficial owner
to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have
included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided
pursuant to this Section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number
of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section. To be timely, a stockholder’s
notice shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business
on the ninetieth (90
th
) day nor earlier than the close of business on the one hundred twentieth (120
th
) day
prior to the first anniversary of the preceding year’s annual meeting;
provided, however
, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary
of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the
close of business on the one hundred twentieth (120
th
) day prior to such annual meeting and not later than the close
of business on the later of the ninetieth (90
th
) day prior to such annual meeting or the tenth (10
th
) day
following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement
of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above.
Such stockholder’s notice shall set forth: (A) as to each person whom the stockholder proposed to nominate for election or
reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the “
1934 Act
”), and Rule 14a-4(d) thereunder (including such person’s
written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other
business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder
and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they
appear on the corporation’s books, and of such beneficial owner, (ii) the class and number of shares of the corporation which
are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or
beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the
percentage of the corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination
or nominations, a sufficient number of holders of the corporation’s voting shares to elect such nominee or nominees (an affirmative
statement of such intent, a “
Solicitation Notice
”).
(c)
Notwithstanding
anything in the second sentence of paragraph (b) of this Section to the contrary, in the event that the number of directors to
be elected to the Board of Directors of the corporation is increased and there is no public announcement naming all of the nominees
for director or specifying the size of the increased Board of Directors made by the corporation at least one hundred (100) days
prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section
shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the
tenth (10
th
) day following the day on which such public announcement is first made by the corporation.
(d)
Only
such persons who are nominated in accordance with the procedures set forth in this Section (or elected or appointed pursuant to
Article IV of these Bylaws) shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures set forth in this Section. Except as otherwise
provided by law, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed
to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these
Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal
or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.
(e)
Notwithstanding
the foregoing provisions of this Section, in order to include information with respect to a stockholder proposal in the proxy statement
and form of proxy for a stockholders’ meeting, stockholders must provide notice as required by the regulations promulgated
under the 1934 Act. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals
in the corporation proxy statement pursuant to Rule 14a-8 under the 1934 Act.
(f)
For
purposes of this Section, “public announcement” shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the
Securities and Exchange Commission (the “
SEC
”) pursuant to Section 13, 14 or 15(d) of the 1934 Act.
Section 6. Special
Meetings
.
(a)
Special
meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board
of Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors pursuant to a resolution adopted by directors
representing a quorum of the Board of Directors or (iv) by the holders of shares entitled to cast not less than 50% of the
votes at the meeting, and shall be held at such place, on such date, and at such time as the Board of Directors shall fix.
At any time or times
that the corporation is subject to Section 2115(b) of the California General Corporation Law (“
CGCL
”),
stockholders holding five percent (5%) or more of the outstanding shares shall have the right to call a special meeting of stockholders
as set forth in Section 18(b) of these Bylaws.
(b)
If
a special meeting is properly called by any person or persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by certified
or registered mail, return receipt requested, or by telegraphic or other facsimile transmission to the Chairman of the Board of
Directors, the Chief Executive Officer, or the Secretary of the corporation. No business may be transacted at such special meeting
otherwise than specified in such notice. The Board of Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty (120) days after the date of the receipt of the request.
Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the
stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws. Nothing contained in this paragraph (b)
shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors
may be held.
Section 7. Notice
of Meetings
. Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each meeting of
stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder
entitled to vote at such meeting, such notice to specify the place, if any, date and hour, in the case of special meetings, the
purpose or purposes of the meeting, and the means of remote communications, if any, by which stockholders and proxyholders may
be deemed to be present in person and vote at any such meeting. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation.
Notice of the time, place, if any, and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled
to notice thereof or by electronic transmission by such person, either before or after such meeting, and will be waived by any
stockholder by his or her attendance thereat in person, by remote communication, if applicable, or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because
the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings
of any such meeting in all respects as if due notice thereof had been given.
Section 8. Quorum
.
At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by these
Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of a majority
of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of
a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of
the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders
present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by statute, or
by the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote
of a majority of shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the
meeting and entitled to vote generally on the subject matter shall be the act of the stockholders. Except as otherwise provided
by statute, the Certificate of Incorporation or these Bylaws, directors shall be elected by a plurality of the votes of the shares
present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled
to vote generally on the election of directors. Where a separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or these Bylaws, a majority of the outstanding shares
of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized,
shall constitute a quorum entitled to take action with respect to that vote on that matter. Except where otherwise provided by
statute or by the Certificate of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of shares of such class or classes or series present in person, by remote communication, if applicable,
or represented by proxy at the meeting shall be the act of such class or classes or series.
Section 9. Adjournment
and Notice of Adjourned Meetings
. Any meeting of stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares present in person, by remote communication, if
applicable, or represented by proxy. When a meeting is adjourned to another time or place, if any, notice need not be given of
the adjourned meeting if the time and place, if any, thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting pursuant
to the Certificate of Incorporation, these Bylaws or applicable law. If the adjournment is for more than thirty (30) days or if
after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 10. Voting
Rights
. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise
provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided
in Section 12 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote or execute
consents shall have the right to do so either in person, by remote communication, if applicable, or by an agent or agents authorized
by a proxy granted in accordance with Delaware law. An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer period.
Section 11. Joint
Owners of Stock
. If shares or other securities having voting power stand of record in the names of two (2) or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two
(2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice
to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it
is so provided, their acts with respect to voting (including giving consent pursuant to Section 13) shall have the following effect:
(a) if only one (1) votes, his or her act binds all; (b) if more than one (1) votes, the act of the majority so voting
binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the
securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the DGCL, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for
the purpose of subsection (c) shall be a majority or even-split in interest.
Section 12. List
of Stockholders
. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, on a reasonably accessible electronic network, provided that the information required to
gain access to such list is provided with the notice of the meeting, or during ordinary business hours, at the principal place
of business of the corporation. In the event that the corporation determines to make the list available on an electronic network,
the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation.
The list shall be open to examination of any stockholder during the time of the meeting as provided by law.
Section 13. Action
Without Meeting
.
(a)
Unless
otherwise provided in the Certificate of Incorporation, any action required by statute to be taken at any annual or special meeting
of the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without
a meeting, without prior notice and without a vote, if a consent in writing, or by electronic transmission setting forth the action
so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
(b)
Every
written consent or electronic transmission shall bear the date of signature of each stockholder who signs the consent, and no written
consent or electronic transmission shall be effective to take the corporate action referred to therein unless, within sixty (60)
days of the earliest dated consent delivered to the corporation in the manner herein required, written consents or electronic transmissions
signed by a sufficient number of stockholders to take action are delivered to the corporation by delivery to its registered office
in the State of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be
by hand or by certified or registered mail, return receipt requested.
(c)
Prompt
notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders
who have not consented in writing or by electronic transmission and who, if the action had been taken at a meeting, would have
been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a
sufficient number of stockholders to take action were delivered to the corporation as provided in Section 228(c) of the DGCL. If
the action which is consented to is such as would have required the filing of a certificate under any section of the DGCL if such
action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu
of any statement required by such section concerning any vote of stockholders, that written consent has been given in accordance
with Section 228 of the DGCL.
(d)
An
electronic mail, facsimile or other electronic transmission consenting to an action to be taken and transmitted by a stockholder
or proxyholder, shall be deemed to be written, signed and dated for the purposes of this Section, provided that any such electronic
mail, facsimile or other electronic transmission sets forth or is delivered with information from which the corporation can determine
(i) that the electronic mail, facsimile or other electronic transmission was transmitted by the stockholder or proxyholder or by
a person or persons authorized to act for the stockholder and (ii) the date on which such stockholder or proxyholder or authorized
person or persons transmitted such electronic mail, facsimile or electronic transmission. The date on which such electronic mail,
facsimile or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent
given by electronic mail, facsimile or other electronic transmission shall be deemed to have been delivered until such consent
is reproduced in paper form and until such paper form shall be delivered to the corporation by delivery to its registered office
in the state of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be
made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery,
consents given by electronic mail, facsimile or other electronic transmission may be otherwise delivered to the principal place
of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the board of directors of the
corporation. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the
original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other
reproduction shall be a complete reproduction of the entire original writing.
Section 14. Organization
.
(a)
At
every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the
Chief Executive Officer, or, if the Chief Executive Officer is absent, a chairman of the meeting chosen by a majority in interest
of the stockholders entitled to vote, present in person or by proxy, shall act as chairman. The Secretary, or, in his or her absence,
an Assistant Secretary directed to do so by the Chief Executive Officer, shall act as secretary of the meeting.
(b)
The
Board of Directors shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall
deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman
of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as,
in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without
limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting
and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and
their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants
and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. The date and
time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced
at the meeting. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders
shall not be required to be held in accordance with rules of parliamentary procedure.
ARTICLE
IV
Directors
Section 15. Number
and Term of Office
.
The authorized number
of directors of the corporation shall be fixed by the Board of Directors from time to time.
Directors need not be
stockholders unless so required by the Certificate of Incorporation. If for any cause, the directors shall not have been elected
at an annual meeting, they may be elected as soon thereafter as convenient.
Section 16. Powers
.
The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors, except as may
be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. Term
of Directors
.
(a)
Subject
to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, directors
shall be elected at each annual meeting of stockholders to serve until the next annual meeting of stockholders and his or her successor
is duly elected and qualified or until his or her death, resignation or removal. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
(b)
No
person entitled to vote at an election for directors may cumulate votes to which such person is entitled, unless, at the time of
such election, the corporation is subject to Section 2115(b) of the CGCL. During such time or times that the corporation is
subject to Section 2115(b) of the CGCL, every stockholder entitled to vote at an election for directors may cumulate such
stockholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by
the number of votes to which such stockholder’s shares are otherwise entitled, or distribute the stockholder’s votes
on the same principle among as many candidates as such stockholder thinks fit. No stockholder, however, shall be entitled to so
cumulate such stockholder’s votes unless (i) the names of such candidate or candidates have been placed in nomination prior
to the voting and (ii) the stockholder has given notice at the meeting, prior to the voting, of such stockholder’s intention
to cumulate such stockholder’s votes. If any stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in nomination. Under cumulative voting, the candidates receiving
the highest number of votes, up to the number of directors to be elected, are elected.
Section 18. Vacancies
.
(a)
Unless
otherwise provided in the Certificate of Incorporation, and subject to the rights of the holders of any series of Preferred Stock,
any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly
created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by
resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining
director;
provided, however
, that whenever the holders of any class or classes of stock or series thereof are entitled to
elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of
such class or classes or series shall, unless the Board of Directors determines by resolution that any such vacancies or newly
created directorships shall be filled by stockholders, be filled by a majority of the directors elected by such class or classes
or series thereof then in office, or by a sole remaining director so elected. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and
until such director’s successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed
to exist under this Bylaw in the case of the death, removal or resignation of any director.
(b)
At
any time or times that the corporation is subject to Section 2115(b) of the CGCL, if, after the filling of any vacancy, the directors
then in office who have been elected by stockholders shall constitute less than a majority of the directors then in office, then
(i)
any
holder or holders of an aggregate of five percent (5%) or more of the total number of shares at the time outstanding having the
right to vote for those directors may call a special meeting of stockholders; or
(ii)
the
Superior Court of the proper county shall, upon application of such stockholder or stockholders, summarily order a special meeting
of the stockholders, to be held to elect the entire board, all in accordance with Section 305(c) of the CGCL, the term of
office of any director shall terminate upon that election of a successor.
Section 19. Resignation
.
Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary,
such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure
of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors.
When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then
in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect
when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion
of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified.
Section 20. Removal
.
(a)
Subject
to any limitations imposed by applicable law, the Board of Directors or any director may be removed from office at any time (i)
with cause by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock
of the corporation entitled to vote generally at an election of directors or (ii) without cause by the affirmative vote of the
holders of a majority of the voting power of all then-outstanding shares of capital stock of the corporation, entitled to elect
such director.
(b)
During
such time or times that the corporation is subject to Section 2115(b) of the CGCL, the Board of Directors or any individual
director may be removed from office at any time without cause by the affirmative vote of the holders of at least a majority of
the outstanding shares entitled to vote on such removal;
provided, however
, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director’s removal, or not consenting in writing to such
removal, would be sufficient to elect that director if voted cumulatively at an election which the same total number of votes were
cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director’s most recent election were then being elected.
Section 21. Meetings
(a) Regular
Meetings
. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of Delaware which has been designated by the Board of Directors
and publicized among all directors, either orally or in writing, including a voice-messaging system or other system designated
to record and communicate messages, facsimile, or by electronic mail or other electronic means. No further notice shall be required
for a regular meeting of the Board of Directors.
(b)
Special
Meetings
. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board, the Chief Executive
Officer (if a director), or by three (3) or more directors.
(c) Meetings
by Electronic Communications Equipment
. Any member of the Board of Directors, or of any committee thereof, may participate
in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.
(d) Notice
of Special Meetings
. Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing,
by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile,
telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least twenty-four (24) hours
before the date and time of the meeting. If notice is sent by US mail, it shall be sent by first class mail, postage prepaid at
least three (3) days before the date of the meeting. Notice of any meeting may be waived in writing or by electronic transmission
at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends
the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
(e) Waiver
of Notice
. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called
or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum
be present and if, either before or after the meeting, each of the directors not present who did not receive notice shall sign
a written waiver of notice or shall waive notice by electronic transmission. All such waivers shall be filed with the corporate
records or made a part of the minutes of the meeting.
Section 22. Quorum
and Voting
.
(a)
Unless
the Certificate of Incorporation requires a greater number, a quorum of the Board of Directors shall consist of a majority of the
total number of directors then serving;
provided, however
, that such number shall never be less than one-third (1/3) of
the total number of directors except that when one director is authorized, then one director shall constitute a quorum. At any
meeting, whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the
time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting. If
the Certificate of Incorporation provides that one or more directors shall have more or less than one vote per director on any
matter, every reference in this Section to a majority or other proportion of the directors shall refer to a majority or other proportion
of the votes of the directors.
(b)
At
each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required by law, the Certificate of Incorporation or these
Bylaws.
Section 23. Action
Without Meeting
. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members
of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and such
writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee.
Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are
maintained in electronic form.
Section 24. Fees
and Compensation
. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance
at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing
herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
Section 25. Committees
.
(a) Executive
Committee
. The Board of Directors may appoint an Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors, shall
have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee
shall have the power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or
matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing
any bylaw of the corporation.
(b) Other
Committees
. The Board of Directors may, from time to time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more members of the Board of Directors and shall have
such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event
shall any such committee have the powers denied to the Executive Committee in these Bylaws.
(c) Term
.
The Board of Directors, subject to any requirements of any outstanding series of Preferred Stock and the provisions of paragraphs
(a) or (b) of this Section may at any time increase or decrease the number of members of a committee or terminate the existence
of a committee. The membership of a committee member shall terminate on the date of his or her death or voluntary resignation from
the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee
member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number
of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification
of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
(d) Meetings
.
Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section shall be held at such times and places as are determined by the Board of Directors, or by any such
committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings
need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to
time by such committee, and may be called by any director who is a member of such committee, upon notice to the members of such
committee of the time and place of such special meeting given in the manner provided for the giving of notice to members of the
Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee
may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except
when the director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction
of any business because the meeting is not lawfully called or convened. Unless otherwise provided by the Board of Directors in
the resolutions authorizing the creation of the committee, a majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
Section 26. Organization
.
At every meeting of the directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent,
the Chief Executive Officer (if a director), or if the Chief Executive Officer is not a director or is absent, the President (if
a director), or if the President is not a director or is absent, the most senior Vice President (if a director) or, in the absence
of any such person, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting. The
Secretary, or in his or her absence, any Assistant Secretary directed to do so by the Chief Executive Officer or President, shall
act as secretary of the meeting.
ARTICLE
V
Officers
Section 27. Officers
Designated
. The officers of the corporation shall include, if and when designated by the Board of Directors, the Chief Executive
Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the Controller,
all of whom shall be elected at the annual organizational meeting of the Board of Directors. The Board of Directors may also appoint
one or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such other officers and agents with such powers
and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers
as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the
manner designated by the Board of Directors.
Section 28. Tenure
and Duties of Officers
.
(a) General
.
All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by
the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors,
or by the Chief Executive Officer or other officer if so authorized by the Board of Directors.
(b) Duties
of Chairman of the Board of Directors
. The Chairman of the Board of Directors, when present, shall preside at all meetings
of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform other duties commonly incident
to the office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from
time to time. If there is no President, then the Chairman of the Board of Directors shall also serve as the Chief Executive Officer
of the corporation and shall have the powers and duties prescribed in paragraph (c) of this Section.
(c) Duties
of Chief Executive Officer
. The Chief Executive Officer shall preside at all meetings of the stockholders and (if a director)
at all meetings of the Board of Directors, unless the Chairman of the Board of Directors has been appointed and is present. The
Chief Executive Officer shall be the chief executive officer of the corporation and shall, subject to the control of the Board
of Directors, have general supervision, direction and control of the business and officers of the corporation. The Chief Executive
Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other
powers as the Board of Directors shall designate from time to time.
(d) Duties
of President
. In the absence or disability of the Chief Executive Officer or if the office of Chief Executive Officer is vacant,
the President shall preside at all meetings of the stockholders and (if a director) at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present. If the office of Chief Executive Officer is vacant,
the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and officers of the corporation. The President shall perform other
duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors
shall designate from time to time.
(e) Duties
of Vice Presidents
. The Vice Presidents may assume and perform the duties of the President in the absence or disability of
the President or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to
their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties
of Secretary
. The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all
acts and proceedings thereof in the minute book of the corporation. The Secretary shall give notice in conformity with these Bylaws
of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice. The
Secretary shall perform all other duties provided for in these Bylaws and other duties commonly incident to the office and shall
also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The Chief
Executive Officer may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability
of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform
such other duties and have such other powers as the Board of Directors or the Chief Executive Officer shall designate from time
to time.
(g) Duties
of Chief Financial Officer
. The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often
as required by the Board of Directors or the Chief Executive Officer. The Chief Financial Officer, subject to the order of the
Board of Directors, shall have the custody of all funds and securities of the corporation. The Chief Financial Officer shall perform
other duties commonly incident to his or her office and shall also perform such other duties and have such other powers as the
Board of Directors or the Chief Executive Officer shall designate from time to time. The Chief Executive Officer may direct the
Treasurer or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief
Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident to the office and shall also perform such other
duties and have such other powers as the Board of Directors or the Chief Executive Officer shall designate from time to time.
Section 29. Delegation
of Authority
. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
Section 30. Resignations
.
Any officer may resign at any time by giving notice in writing or by electronic transmission notice to the Board of Directors or
to the Chief Executive Officer or to the President or to the Secretary. Any such resignation shall be effective when received by
the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall
become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not
be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 31. Removal
.
Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written or electronic consent of the directors in office at the time, or by
any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors.
ARTICLE
VI
Execution Of Corporate Instruments And Voting
Of Securities Owned By The Corporation
Section 32. Execution
of Corporate Instruments
. The Board of Directors may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign
on behalf of the corporation the corporate name, or to enter into contracts on behalf of the corporation, except where otherwise
provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation.
All checks and drafts
drawn on banks or other depositaries of funds to the credit of the corporation or on special accounts of the corporation shall
be signed by such person or persons as the Board of Directors shall authorize so to do.
Unless authorized or
ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose
or for any amount.
Section 33. Voting
of Securities Owned by the Corporation
. All stock and other securities of other corporations owned or held by the corporation
for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the
person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman of
the Board of Directors, the Chief Executive Officer, the President, or any Vice President.
ARTICLE
VII
Shares Of Stock
Section 34. Form
and Execution of Certificates
. The shares of the corporation shall be represented by certificates, or shall be uncertificated.
Certificates for the shares of stock, if any, of the corporation shall be in such form as is consistent with the Certificate of
Incorporation and applicable law. Every holder of shares of stock in the corporation represented by certificate shall be entitled
to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, the Chief Executive
Officer, or the President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary,
certifying the number of shares owned by him or her in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon
a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued
with the same effect as if he or she were such officer, transfer agent, or registrar at the date of issue.
Section 35. Lost
Certificates
. A new certificate or certificates shall be issued in place of any certificate or certificates theretofore issued
by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. The corporation may require, as a condition precedent to the
issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the
owner’s legal representative, to agree to indemnify the corporation in such manner as it shall require or to give the corporation
a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen, or destroyed.
Section 36. Restrictions
on Transfer
.
(a)
No holder of any of the shares of stock of the corporation may sell, transfer, assign, pledge, or otherwise dispose of or encumber
any of the shares of stock of the corporation or any right or interest therein, whether voluntarily or by operation of law, or
by gift or otherwise (each, a “
Transfer
”) without the prior written consent of the corporation, upon
duly authorized action of its Board of Directors. The corporation may withhold consent for any legitimate corporate purpose,
as determined by the Board of Directors. Examples of the basis for the corporation to withhold its consent include, without limitation,
(i) if such Transfer to individuals, companies or any other form of entity identified by the corporation as a potential competitor
or considered by the corporation to be unfriendly; or (ii) if such Transfer increases the risk of the corporation having a class
of security held of record by two thousand (2,000) or more persons, or five hundred (500) or more persons who are not accredited
investors (as such term is defined by the SEC), as described in Section 12(g) of the 1934 Act and any related regulations, or otherwise
requiring the corporation to register any class of securities under the 1934 Act; or (iii) if such Transfer would result in the
loss of any federal or state securities law exemption relied upon by the corporation in connection with the initial issuance of
such shares or the issuance of any other securities; or (iv) if such Transfer is facilitated in any manner by any public posting,
message board, trading portal, internet site, or similar method of communication, including without limitation any trading portal
or internet site intended to facilitate secondary transfers of securities; or (v) if such Transfer is to be effected in a brokered
transaction; or (vi) if such Transfer represents a Transfer of less than all of the shares then held by the stockholder and its
affiliates or is to be made to more than a single transferee.
(b)
If
a stockholder desires to Transfer any shares, then the stockholder shall first give written notice thereof to the corporation.
The notice shall name the proposed transferee and state the number of shares to be transferred, the proposed consideration, and
all other terms and conditions of the proposed transfer. Any shares proposed to be transferred to which Transfer the corporation
has consented pursuant to paragraph (a) of this Section will first be subject to the corporation’s right of first refusal
located in Section 46 of these Bylaws.
(c)
Any
Transfer, or purported Transfer, of shares not made in strict compliance with this Section shall be null and void, shall not be
recorded on the books of the corporation and shall not be recognized by the corporation.
(d)
The
foregoing restriction on Transfer shall terminate upon the date securities of the corporation are first offered to the public pursuant
to a registration statement filed with, and declared effective by, the SEC under the Securities Act of 1933, as amended (the “
1933
Act
”).
(e)
The
certificates representing shares of stock of the corporation shall bear on their face the following legend so long as the foregoing
Transfer restrictions are in effect:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A TRANSFER RESTRICTION, AS PROVIDED IN THE BYLAWS OF THE CORPORATION.”
Section 37. Fixing
Record Dates
.
(a)
In
order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, subject to applicable
law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day immediately preceding the day on which notice is given, or if notice is waived, at
the close of business on the day immediately preceding the day on which the meeting is held. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided,
however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b)
In
order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting,
the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which
the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders
authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors
to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such
a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within
ten (10) days of the date on which such a request is received, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law,
shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or
agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made
to the corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If
no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record
date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking such prior action.
(c)
In
order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date
shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more
than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
Section 38. Registered
Stockholders
. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Delaware.
ARTICLE
VIII
Other Securities Of The Corporation
Section 39. Execution
of Other Securities
. All bonds, debentures and other corporate securities of the corporation, other than stock certificates
(covered in Section 34 of these Bylaws), may be signed by the Chairman of the Board of Directors, the Chief Executive Officer,
the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal
impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant
Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer;
provided, however,
that where any such
bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature,
of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures
of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted
facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such
other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person.
In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature
shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate
security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be
adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall
have been used thereon had not ceased to be such officer of the corporation.
ARTICLE
IX
Dividends
Section 40. Declaration
of Dividends
. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation
and applicable law.
Section 41. Dividend
Reserve
. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends
such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves
to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such
other purpose as the Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE
X
Fiscal Year
Section 42. Fiscal
Year
. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.
ARTICLE
XI
indemnification
Section 43. Indemnification
of Directors, Executive Officers, Employees and Other Agents
.
(a) Directors
and Executive Officers
. The corporation shall indemnify its directors and executive officers (for the purposes of this Article,
“executive officers” shall have the meaning defined in Rule 3b-7 promulgated under the 1934 Act) to the fullest extent
not prohibited by the DGCL or any other applicable law;
provided, however,
that the corporation may modify the extent of
such indemnification by individual contracts with its directors and executive officers; and,
provided, further,
that the
corporation shall not be required to indemnify any director or executive officer in connection with any proceeding (or part thereof)
initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its
sole discretion, pursuant to the powers vested in the corporation under the DGCL or any other applicable law or (iv) such indemnification
is required to be made under paragraph (d) of this Section.
(b) Other
Officers, Employees and Other Agents
. The corporation shall have power to indemnify its other officers, employees and other
agents as set forth in the DGCL or any other applicable law. The Board of Directors shall have the power to delegate the determination
of whether indemnification shall be given to any such person except executive officers to such officers or other persons as the
Board of Directors shall determine.
(c) Expenses
.
The corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such
person is or was a director or executive officer of the corporation, or is or was serving at the request of the corporation as
a director or executive officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or executive officer
in connection with such proceeding;
provided, however
, that, if the DGCL requires, an advancement of expenses incurred by
a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery
to the corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately
be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to
be indemnified for such expenses under this Section or otherwise.
Notwithstanding the foregoing,
unless otherwise determined pursuant to paragraph (e) of this Section, no advance shall be made by the corporation to an executive
officer of the corporation (except by reason of the fact that such executive officer is or was a director of the corporation, in
which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative,
if a determination is reasonably and promptly made (i) by a majority vote of a quorum consisting of directors who were not
parties to the proceeding, even if not a quorum, or (ii) by a committee of such directors designated by a majority of such
directors, even though less than a quorum, or (iii) if there are no such directors, or such directors so direct, by independent
legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed
to the best interests of the corporation.
(d) Enforcement
.
Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and executive
officers under this Section shall be deemed to be contractual rights and be effective to the same extent and as if provided for
in a contract between the corporation and the director or executive officer. Any right to indemnification or advances granted by
this Section to a director or executive officer or officer shall be enforceable by or on behalf of the person holding such right
in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or
(ii) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim. In connection with any
claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not
met the standards of conduct that make it permissible under the DGCL or any other applicable law for the corporation to indemnify
the claimant for the amount claimed. In connection with any claim by an executive officer of the corporation (except in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such executive officer
is or was a director of the corporation) for advances, the corporation shall be entitled to raise as a defense as to any such action
clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not
opposed to the best interests of the corporation, or with respect to any criminal action or proceeding that such person acted without
reasonable cause to believe that his or her conduct was lawful. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action
that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth
in the DGCL or any other applicable law, nor an actual determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that claimant has not met the applicable standard of conduct.
(e) Non-Exclusivity
of Rights
. The rights conferred on any person by this Section shall not be exclusive of any other right which such person may
have or hereafter acquire under any applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or
all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited
by the DGCL or any other applicable law.
(f) Survival
of Rights
. The rights conferred on any person by this Section shall continue as to a person who has ceased to be a director
or executive officer and shall inure to the benefit of the heirs, executors and administrators of such a person.
(g) Insurance
.
To the fullest extent permitted by the DGCL, or any other applicable law, the corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Section.
(h) Amendments
.
Any repeal or modification of this Section shall only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of
the corporation.
(i) Saving
Clause
. If this Section or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnify each director and executive officer to the full extent not prohibited by any applicable
portion of this Bylaw that shall not have been invalidated, or by any other applicable law. If this Section shall be invalid
due to the application of the indemnification provisions of another jurisdiction, then the corporation shall indemnify each director
and executive officer to the full extent under applicable law.
(j) Certain
Definitions
. For the purposes of this Section, the following definitions shall apply:
(1)
The
term “proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation,
prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or investigative.
(2)
The
term “expenses” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees,
witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in
connection with any proceeding.
(3)
The
term the “corporation” shall include, in addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have
had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under the provisions of this Section with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had continued.
(4)
References
to a “director,” “executive officer,” “officer,” “employee,” or “agent”
of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation
as, respectively, a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(5)
References
to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation”
shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services
by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and
a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation”
as referred to in this Section.
ARTICLE
XII
Notices
Section 44. Notices
.
(a) Notice
to Stockholders
. Written notice to stockholders of stockholder meetings shall be given as provided in Section 7 of these Bylaws.
Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract
with such stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder
meetings may be sent by United States mail or nationally recognized overnight courier, or by facsimile, telegraph or telex or by
electronic mail or other electronic means.
(b) Notice
to Directors
. Any notice required to be given to any director may be given by the method stated in paragraph (a) of this
Section, or as provided for in Section 21 of these Bylaws. If such notice is not delivered personally, it shall be sent to such
address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post
office address of such director.
(c) Affidavit
of Mailing
. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected or other agent, specifying the name and address or the names and addresses
of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time
and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.
(d) Methods
of Notice
. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice,
but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed
in respect of any other or others.
(e) Notice
to Person with Whom Communication Is Unlawful
. Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such
notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license
or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person
with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that
the action taken by the corporation is such as to require the filing of a certificate under any provision of the DGCL, the certificate
shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except
such persons with whom communication is unlawful.
(f) Notice
to Stockholders Sharing an Address
. Except as otherwise prohibited under DGCL, any notice given under the provisions of DGCL,
the Certificate of Incorporation or the Bylaws shall be effective if given by a single written notice to stockholders who share
an address if consented to by the stockholders at that address to whom such notice is given. Such consent shall have been deemed
to have been given if such stockholder fails to object in writing to the corporation within 60 days of having been given notice
by the corporation of its intention to send the single notice. Any consent shall be revocable by the stockholder by written notice
to the corporation.
ARTICLE
XIII
Amendments
Section 45. Amendments
.
The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the corporation. The stockholders shall also
have power to adopt, amend or repeal the Bylaws of the corporation;
provided, however
, that, in addition to any vote of
the holders of any class or series of stock of the corporation required by law or by the Certificate of Incorporation, such action
by stockholders shall require the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding
shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single
class.
ARTICLE
XIV
Right Of First Refusal
Section 46. Right
of First Refusal
. No stockholder shall Transfer any of the shares of stock of the corporation, except by a Transfer which meets
the requirements set forth in Section 36 and below:
(a)
If
the stockholder desires to Transfer any of his shares of stock, then the stockholder shall first give the notice specified in Section
36(b) of these Bylaws and comply with the provisions therein.
(b)
For
thirty (30) days following receipt of such notice, the corporation shall have the option to purchase of the shares specified in
the notice at the price and upon the terms set forth in such notice;
provided, however,
that, with the consent of the stockholder,
the corporation shall have the option to purchase a lesser portion of the shares specified in said notice at the price and upon
the terms set forth therein. In the event of a gift, property settlement or other Transfer in which the proposed transferee is
not paying the full price for the shares, and that is not otherwise exempted from the provisions of this Section, the price shall
be deemed to be the fair market value of the stock at such time as determined in good faith by the Board of Directors. In the event
the corporation elects to purchase all of the shares or, with consent of the stockholder, a lesser portion of the shares, it shall
give written notice to the transferring stockholder of its election and settlement for said shares shall be made as provided below
in paragraph (d) of this Section.
(c)
The
corporation may assign its rights hereunder.
(d)
In
the event the corporation and/or its assignee(s) elect to acquire any of the shares of the transferring stockholder as specified
in said transferring stockholder’s notice, the Secretary of the corporation shall so notify the transferring stockholder
and settlement thereof shall be made in cash within thirty (30) days after the Secretary of the corporation receives said transferring
stockholder’s notice; provided that if the terms of payment set forth in said transferring stockholder’s notice were
other than cash against delivery, the corporation and/or its assignee(s) shall pay for said shares on the same terms and conditions
set forth in said transferring stockholder’s notice.
(e)
In
the event the corporation and/or its assignees(s) do not elect to acquire all of the shares specified in the transferring stockholder’s
notice, said transferring stockholder may, subject to the corporation’s approval and all other restrictions on Transfer located
in Section 36 of these Bylaws, within the sixty-day period following the expiration or waiver of the option rights granted to the
corporation and/or its assignees(s) herein, Transfer the shares specified in said transferring stockholder’s notice which
were not acquired by the corporation and/or its assignees(s) as specified in said transferring stockholder’s notice. All
shares so sold by said transferring stockholder shall continue to be subject to the provisions of this bylaw in the same manner
as before said Transfer.
(f)
Anything
to the contrary contained herein notwithstanding, the following transactions shall be exempt from the right of first refusal in
paragraph (a) of this Section:
(1)
A
stockholder’s Transfer of any or all shares held either during such stockholder’s lifetime or on death by will or intestacy
to such stockholder’s immediate family or to any custodian or trustee for the account of such stockholder or such stockholder’s
immediate family or to any limited partnership of which the stockholder, members of such stockholder’s immediate family or
any trust for the account of such stockholder or such stockholder’s immediate family will be the general or limited partner(s)
of such partnership. “Immediate family” as used herein shall mean spouse, lineal descendant, father, mother, brother,
or sister of the stockholder making such Transfer;
(2)
A
stockholder’s bona fide pledge or mortgage of any shares with a commercial lending institution, provided that any subsequent
Transfer of said shares by said institution shall be conducted in the manner set forth in this bylaw;
(3)
A
stockholder’s Transfer of any or all of such stockholder’s shares to the corporation or to any other stockholder of
the corporation;
(4)
A
stockholder’s Transfer of any or all of such stockholder’s shares to a person who, at the time of such Transfer, is
an officer or director of the corporation;
(5)
A
corporate stockholder’s Transfer of any or all of its shares pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of the corporate stockholder, or pursuant to a sale of all
or substantially all of the stock or assets of a corporate stockholder;
(6)
A
corporate stockholder’s Transfer of any or all of its shares to any or all of its stockholders; or
(7)
A
Transfer by a stockholder which is a limited or general partnership to any or all of its partners or former partners in accordance
with partnership interests.
In any such case, the
transferee, assignee, or other recipient shall receive and hold such stock subject to the provisions of this Section and the transfer
restrictions in Section 36, and there shall be no further Transfer of such stock except in accord with this Section and the transfer
restrictions in Section 36.
(g)
The
provisions of this bylaw may be waived with respect to any Transfer either by the corporation, upon duly authorized action of its
Board of Directors, or by the stockholders, upon the express written consent of the owners of a majority of the voting power of
the corporation (excluding the votes represented by those shares to be transferred by the transferring stockholder). This bylaw
may be amended or repealed either by a duly authorized action of the Board of Directors or by the stockholders, upon the express
written consent of the owners of a majority of the voting power of the corporation.
(h)
Any
Transfer, or purported Transfer, of securities of the corporation shall be null and void unless the terms, conditions, and provisions
of this bylaw are strictly observed and followed.
(i)
The
foregoing right of first refusal shall terminate upon the date securities of the corporation are first offered to the public pursuant
to a registration statement filed with, and declared effective by, the SEC under the Securities Act of 1933, as amended.
(j)
The
certificates representing shares of stock of the corporation shall bear on their face the following legend so long as the foregoing
right of first refusal remains in effect:
“THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS ASSIGNEE(S), AS PROVIDED IN THE
BYLAWS OF THE CORPORATION.”
(k)
To
the extent this Section conflicts with any written agreements between the Company and the stockholder attempting to Transfer shares,
such agreement shall control.
ARTICLE
XV
Loans To Officers
Section 47. Loans
to Officers
. Except as otherwise prohibited under applicable law, the corporation may lend money to, or guarantee any obligation
of, or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee
who is a Director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee
or assistance may reasonably be expected to benefit the corporation. The loan, guarantee or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation,
a pledge of shares of stock of the corporation. Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any statute.
ARTICLE
XVI
Miscellaneous
Section 48. Annual
Report
.
(a)
Subject
to the provisions of paragraph (b) of this Section, during such time or times that the corporation is subject to Section 1501
of the CGCL, the Board of Directors shall cause an annual report to be sent to each stockholder of the corporation not later than
one hundred twenty (120) days after the close of the corporation’s fiscal year. Such report shall include a balance sheet
as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year,
accompanied by any report thereon of independent accountants or, if there is no such report, the certificate of an authorized officer
of the corporation that such statements were prepared without audit from the books and records of the corporation. When there are
more than 100 stockholders of record of the corporation’s shares, as determined by Section 605 of the CGCL, additional
information as required by Section 1501(b) of the CGCL shall also be contained in such report, provided that if the corporation
has a class of securities registered under Section 12 of the 1934 Act, the 1934 Act shall take precedence. Such report shall
be sent to stockholders at least fifteen (15) days prior to the next annual meeting of stockholders after the end of the fiscal
year to which it relates.
(b)
If
and so long as there are fewer than one hundred (100) holders of record of the corporation’s shares, the requirement of sending
of an annual report to the stockholders of the corporation is hereby expressly waived.
Section 49. Forum
.
Unless the corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware
shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the corporation; (ii) any
action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the corporation to the
corporation or the corporation’s stockholders; (iii) any action asserting a claim against the corporation or any director
or officer or other employee of the corporation arising pursuant to any provision of the DGCL, the certificate of incorporation
or the Bylaws of the corporation; or (iv) any action asserting a claim against the corporation or any director or officer or other
employee of the corporation governed by the internal affairs doctrine.
Exhibit 3.7
AMENDED AND RESTATED
BYLAWS OF
HYRECAR INC.
Article I - CORPORATE
OFFICES
1.1
REGISTERED OFFICE.
The registered office of HyreCar Inc. (the
“
Corporation
”) shall be fixed in the Corporation’s certificate of incorporation, as the same may be amended
from time to time (the “
certificate of incorporation
”).
1.2
OTHER OFFICES.
The Corporation’s board of directors
(the “
Board
”) may at any time establish other offices at any place or places where the Corporation is qualified
to do business.
Article II - MEETINGS
OF STOCKHOLDERS
2.1
PLACE OF MEETINGS.
Meetings of stockholders shall be held
at any place, within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine
that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication
as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “
DGCL
”).
In the absence of any such designation or determination, stockholders’ meetings shall be held at the Corporation’s
principal executive office.
2.2
ANNUAL MEETING.
The Board shall designate the date and
time of the annual meeting. At the annual meeting, directors shall be elected and other proper business properly brought before
the meeting in accordance with Section 2.4 may be transacted.
2.3
SPECIAL MEETING.
A special meeting of the stockholders may
be called at any time by the Secretary of the Corporation at the direction of the Board, pursuant to a resolution adopted by a
majority of the entire Board, but such special meetings may not be called by any other person or persons.
No business may be transacted at such special
meeting other than the business specified in such notice to stockholders. Nothing contained in this paragraph of this Section 2.3
shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may
be held.
2.4
ADVANCE NOTICE PROCEDURES FOR BUSINESS BROUGHT BEFORE A MEETING.
(i) At an annual meeting of the stockholders,
only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an
annual meeting, business must be (a) specified in a notice of meeting given by or at the direction of the Board, (b) if
not specified in a notice of meeting, otherwise brought before the meeting by or at the direction of the Board or the chairperson
of the Board, or (c) otherwise properly brought before the meeting by a stockholder present in person who (A)(1) was a beneficial
owner of shares of the Corporation both at the time of giving the notice provided for in this Section 2.4 and at the time
of the meeting, (2) is entitled to vote at the meeting and (3) has complied with this Section 2.4 in all applicable
respects, or (B) properly made such proposal in accordance with Rule 14a-8 under the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder (as so amended and inclusive of such rules and regulations, the
“
Exchange Act
”). The foregoing clause (c) shall be the exclusive means for a stockholder to propose business
to be brought before an annual meeting of the stockholders. The only matters that may be brought before a special meeting are the
matters specified in the notice of meeting given by or at the direction of the person calling the meeting pursuant to Section 2.3
of these bylaws, and stockholders shall not be permitted to propose business to be brought before a special meeting of the stockholders.
For purposes of this Section 2.4, “present in person” shall mean that the stockholder proposing that the business
be brought before the annual meeting of the Corporation, or, if the proposing stockholder is not an individual, a qualified representative
of such proposing stockholder, appear at such annual meeting. A “qualified representative” of such proposing stockholder
shall be, if such proposing stockholder is (x) a general or limited partnership, any general partner or person who functions
as a general partner of the general or limited partnership or who controls the general or limited partnership, (y) a corporation
or a limited liability company, any officer or person who functions as an officer of the corporation or limited liability company
or any officer, director, general partner or person who functions as an officer, director or general partner of any entity ultimately
in control of the corporation or limited liability company or (z) a trust, any trustee of such trust. Stockholders seeking
to nominate persons for election to the Board must comply with Section 2.5 of these bylaws, and this Section 2.4 shall
not be applicable to nominations except as expressly provided in Section 2.5 of these bylaws.
(ii) Without qualification, for business
to be properly brought before an annual meeting by a stockholder, the stockholder must (a) provide Timely Notice (as defined
below) thereof in writing and in proper form to the Secretary of the Corporation and (b) provide any updates or supplements
to such notice at the times and in the forms required by this Section 2.4. To be timely, a stockholder’s notice must
be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than ninety (90) days
nor more than one hundred twenty (120) days prior to the one-year anniversary of the preceding year’s annual meeting;
provided
,
however
, that if the date of the annual meeting is more than thirty (30) days before or more than
sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered, or mailed and received,
not later than the ninetieth (90th) day prior to such annual meeting or, if later, the tenth (10th) day following the
day on which public disclosure of the date of such annual meeting was first made (such notice within such time periods, “
Timely
Notice
”). In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence
a new time period for the giving of Timely Notice as described above.
(iii) To be in proper form for purposes
of this Section 2.4, a stockholder’s notice to the Secretary shall set forth:
(a) As to each Proposing Person (as defined
below), (A) the name and address of such Proposing Person (including, if applicable, the name and address that appear on the
Corporation’s books and records); and (B) the class or series and number of shares of the Corporation that are, directly
or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing
Person, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of
the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future (the disclosures
to be made pursuant to the foregoing clauses (A) and (B) are referred to as “
Stockholder Information
”);
(b) As to each Proposing Person, (A) the
full notional amount of any securities that, directly or indirectly, underlie any “derivative security” (as such term
is defined in Rule 16a-1(c) under the Exchange Act) that constitutes a “call equivalent position” (as such term
is defined in Rule 16a-1(b) under the Exchange Act) (“
Synthetic Equity Position
”) and that is, directly
or indirectly, held or maintained by such Proposing Person with respect to any shares of any class or series of shares of the Corporation;
provided
that, for the purposes of the definition of “Synthetic Equity Position,” the term “derivative
security” shall also include any security or instrument that would not otherwise constitute a “derivative security”
as a result of any feature that would make any conversion, exercise or similar right or privilege of such security or instrument
becoming determinable only at some future date or upon the happening of a future occurrence, in which case the determination of
the amount of securities into which such security or instrument would be convertible or exercisable shall be made assuming that
such security or instrument is immediately convertible or exercisable at the time of such determination; and,
provided
,
further
, that any Proposing Person satisfying the requirements of Rule l3d-1(b)(1) under the Exchange Act (other than a
Proposing Person that so satisfies Rule l3d-1(b)(1) under the Exchange Act solely by reason of Rule l3d-1(b)(1) (ii)(E)) shall
not be deemed to hold or maintain the notional amount of any securities that underlie a Synthetic Equity Position held by such
Proposing Person as a hedge with respect to a bona fide derivatives trade or position of such Proposing Person arising in
the ordinary course of such Proposing Person’s business as a derivatives dealer, (B) any rights to dividends on the
shares of any class or series of shares of the Corporation owned beneficially by such Proposing Person that are separated or separable
from the underlying shares of the Corporation, (C)(x) if such Proposing Person is (i) a general or limited partnership, syndicate
or other group, the identity of each general partner and each person who functions as a general partner of the general or limited
partnership, each member of the syndicate or group and each person controlling the general partner or member, (ii) a corporation
or a limited liability company, the identity of each officer and each person who functions as an officer of the corporation or
limited liability company, each person controlling the corporation or limited liability company and each officer, director, general
partner and person who functions as an officer, director or general partner of any entity ultimately in control of the corporation
or limited liability company or (iii) a trust, any trustee of such trust (each such person or persons set forth in the preceding
clauses (i), (ii) and (iii), a “
Responsible Person
”), any fiduciary duties owed by such Responsible Person
to the equity holders or other beneficiaries of such Proposing Person and any material interests or relationships of such Responsible
Person that are not shared generally by other record or beneficial holders of the shares of any class or series of the Corporation
and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the
meeting, and (y) if such Proposing Person is a natural person, any material interests or relationships of such natural person
that are not shared generally by other record or beneficial holders of the shares of any class or series of the Corporation and
that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting,
(D) any material shares or any Synthetic Equity Position in any principal competitor of the Corporation in any principal industry
of the Corporation held by such Proposing Persons, (E) a summary of any material discussions regarding the business proposed
to be brought before the meeting (x) between or among any of the Proposing Persons or (y) between or among any Proposing
Person and any other record or beneficial holder of the shares of any class or series of the Corporation (including their names),
(F) any material pending or threatened legal proceeding in which such Proposing Person is a party or material participant
involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (G) any other material
relationship between such Proposing Person, on the one hand, and the Corporation, any affiliate of the Corporation or any principal
competitor of the Corporation, on the other hand, (H) any direct or indirect material interest in any material contract or
agreement of such Proposing Person with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation
(including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement) and (I) any
other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing
required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business
proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant
to the foregoing clauses (A) through (I) are referred to as “
Disclosable Interests
”);
provided
,
however
, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business
activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result
of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner; and
(c) As to each item of business that the stockholder
proposes to bring before the annual meeting, (A) a brief description of the business desired to be brought before the annual
meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing
Person, (B) the text of the proposal or business (including the text of any resolutions proposed for consideration and in
the event that such business includes a proposal to amend the bylaws of the Corporation, the language of the proposed amendment),
(C) a reasonably detailed description of all agreements, arrangements and understandings between or among any of the Proposing
Persons or between or among any Proposing Person and any other person or entity (including their names) in connection with the
proposal of such business by such stockholder and (D) any other information relating to such item of business that would be
required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in
support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act;
provided
,
however
, that the disclosures required by this Section 2.4(iii) shall not include any disclosures with respect to any
broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder
directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner.
(iv) For purposes of this Section 2.4,
the term “
Proposing Person
” shall mean (a) the stockholder providing the notice of business proposed to
be brought before an annual meeting, (b) the beneficial owner or beneficial owners, if different, on whose behalf the notice
of the business proposed to be brought before the annual meeting is made and (c) any participant (as defined in paragraphs (a)(ii)-(vi)
of Instruction 3 to Item 4 of Schedule 14A) with such stockholder in such solicitation or associate (within the meaning
of Rule 12b-2 under the Exchange Act for the purposes of these bylaws) of such stockholder or beneficial owner.
(v) A Proposing Person shall update and
supplement its notice to the Corporation of its intent to propose business at an annual meeting, if necessary, so that the information
provided or required to be provided in such notice pursuant to this Section 2.4 shall be true and correct as of the record
date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or
postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal
executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting
(in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business
days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on
the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and
supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).
(vi) Notwithstanding anything in these bylaws
to the contrary, no business shall be conducted at an annual meeting that is not properly brought before the meeting in accordance
with this Section 2.4. The presiding officer of the meeting shall, if the facts warrant, determine that the business was not
properly brought before the meeting in accordance with this Section 2.4, and if he or she should so determine, he or she shall
so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
(vii) This Section 2.4 is expressly
intended to apply to any business proposed to be brought before an annual meeting of stockholders, other than any proposal made
in accordance with Rule 14a-8 under the Exchange Act and included in the Corporation’s proxy statement. In addition
to the requirements of this Section 2.4 with respect to any business proposed to be brought before an annual meeting, each
Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such business. Nothing in
this Section 2.4 shall be deemed to affect the rights of stockholders to request inclusion of proposals in the Corporation’s
proxy statement pursuant to Rule l4a-8 under the Exchange Act.
(viii) For purposes of these bylaws, “
public
disclosure
” shall mean disclosure in a press release reported by a national news service or in a document publicly filed
by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
2.5
ADVANCE NOTICE PROCEDURES FOR NOMINATIONS OF DIRECTORS.
(i) Nominations of any person for election
to the Board at an annual meeting or at a special meeting (but only if the election of directors is a matter specified in the notice
of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only (a) by
or at the direction of the Board, including by any committee or persons authorized to do so by the Board or these bylaws, or (b) by
a stockholder present in person (A) who was a beneficial owner of shares of the Corporation both at the time of giving the
notice provided for in this Section 2.5 and at the time of the meeting, (B) is entitled to vote at the meeting and (C) has
complied with this Section 2.5 as to such notice and nomination. The foregoing clause (b) shall be the exclusive means
for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting or special meeting.
For purposes of this Section 2.5, “present in person” shall mean that the stockholder proposing that the business
be brought before the meeting of the Corporation, or, if the proposing stockholder is not an individual, a qualified representative
of such stockholder, appear at such meeting. A “qualified representative” of such proposing stockholder shall be, if
such proposing stockholder is (x) a general or limited partnership, any general partner or person who functions as a general
partner of the general or limited partnership or who controls the general or limited partnership, (y) a corporation or a limited
liability company, any officer or person who functions as an officer of the corporation or limited liability company or any officer,
director, general partner or person who functions as an officer, director or general partner of any entity ultimately in control
of the corporation or limited liability company or (z) a trust, any trustee of such trust.
(ii) Without qualification, for a stockholder
to make any nomination of a person or persons for election to the Board at an annual meeting, the stockholder must (a) provide
Timely Notice (as defined in Section 2.4(ii) of these bylaws) thereof in writing and in proper form to the Secretary of the
Corporation, (b) provide the information with respect to such stockholder and its proposed nominee as required by this Section 2.5,
and (c) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5.
Without qualification, if the election of directors is a matter specified in the notice of meeting given by or at the direction
of the person calling such special meeting, then for a stockholder to make any nomination of a person or persons for election to
the Board at a special meeting, the stockholder must (a) provide timely notice thereof in writing and in proper form to the
Secretary of the Corporation at the principal executive offices of the Corporation, (b) provide the information with respect
to such stockholder and its proposed nominee as required by this Section 2.5, and (c) provide any updates or supplements
to such notice at the times and in the forms required by this Section 2.5. To be timely, a stockholder’s notice for
nominations to be made at a special meeting must be delivered to, or mailed and received at, the principal executive offices of
the Corporation not earlier than the one hundred twentieth (120th) day prior to such special meeting and not later than the ninetieth
(90th) day prior to such special meeting or, if later, the tenth (10th) day following the day on which public disclosure
(as defined in Section 2.4(ix) of these bylaws) of the date of such special meeting was first made. In no event shall any
adjournment or postponement of an annual meeting or special meeting or the announcement thereof commence a new time period for
the giving of a stockholder’s notice as described above.
(iii) To be in proper form for purposes
of this Section 2.5, a stockholder’s notice to the Secretary shall set forth:
(a) As to each Nominating Person (as defined
below), the Stockholder Information (as defined in Section 2.4(iii)(a) of these bylaws) except that for purposes of this Section 2.5,
the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears
in Section 2.4(iii)(a);
(b) As to each Nominating Person, any Disclosable
Interests (as defined in Section 2.4(iii)(b), except that for purposes of this Section 2.5 the term “Nominating
Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(iii)(b)
and the disclosure with respect to the business to be brought before the meeting in Section 2.4(iii)(b) shall be made with
respect to the election of directors at the meeting);
(c) As to each person whom a Nominating Person
proposes to nominate for election as a director, (A) all information with respect to such proposed nominee that would be required
to be set forth in a stockholder’s notice pursuant to this Section 2.5 if such proposed nominee were a Nominating Person,
(B) all information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a)
under the Exchange Act (including such proposed nominee’s written consent to being named in the proxy statement as a nominee
and to serving as a director if elected), (C) a description of any direct or indirect material interest in any material contract
or agreement between or among any Nominating Person, on the one hand, and each proposed nominee or his or her respective associates
or any other participants in such solicitation, on the other hand, including, without limitation, all information that would be
required to be disclosed pursuant to Item 404 under Regulation S-K if such Nominating Person were the “registrant”
for purposes of such rule and the proposed nominee were a director or executive officer of such registrant (the disclosures to
be made pursuant to the foregoing clauses (A) through (C) are referred to as “
Nominee Information
”),
and (D) a completed and signed questionnaire, representation and agreement as provided in Section 2.5(vi); and
(d) The Corporation may require any proposed
nominee to furnish such other information (A) as may reasonably be required by the Corporation to determine the eligibility
of such proposed nominee to serve as an independent director of the Corporation in accordance with the Corporation’s Corporate
Governance Guidelines or (B) that could be material to a reasonable stockholder’s understanding of the independence
or lack of independence of such proposed nominee.
(iv) For purposes of this Section 2.5,
the term “
Nominating Person
” shall mean (a) the stockholder providing the notice of the nomination proposed
to be made at the meeting, (b) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the
nomination proposed to be made at the meeting is made and (c) any associate of such stockholder or beneficial owner or any
other participant in such solicitation.
(v) A stockholder providing notice of any
nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information
provided or required to be provided in such notice pursuant to this Section 2.5 shall be true and correct as of the record
date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or
postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal
executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting
(in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business
days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on
the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and
supplement required to be made as often (10) business days prior to the meeting or any adjournment or postponement thereof).
(vi) To be eligible to be a nominee for
election as a director of the Corporation at an annual or special meeting, the proposed nominee must be nominated in the manner
prescribed in Section 2.5 and must deliver (in accordance with the time period prescribed for delivery in a notice to such
proposed nominee given by or on behalf of the Board), to the Secretary at the principal executive offices of the Corporation, (a) a
completed written questionnaire (in a form provided by the Corporation) with respect to the background, qualifications, stock ownership
and independence of such proposed nominee and (b) a written representation and agreement (in form provided by the Corporation)
that such proposed nominee (A) is not and, if elected as a director during his or her term of office, will not become a party
to (1) any agreement, arrangement or understanding with, and has not given and will not give any commitment or assurance to,
any person or entity as to how such proposed nominee, if elected as a director of the Corporation, will act or vote on any issue
or question (a “
Voting Commitment
”) or (2) any Voting Commitment that could limit or interfere with such
proposed nominee’s ability to comply, if elected as a director of the Corporation, with such proposed nominee’s fiduciary
duties under applicable law, (B) is not, and will not become a party to, any agreement, arrangement or understanding with
any person or entity other than the Corporation with respect to any direct or indirect compensation or reimbursement for service
as a director and (C) if elected as a director of the Corporation, will comply with all applicable corporate governance, conflict
of interest, confidentiality, stock ownership and trading and other policies and guidelines of the Corporation applicable to directors
and in effect during such person’s term in office as a director (and, if requested by any proposed nominee, the Secretary
of the Corporation shall provide to such proposed nominee all such policies and guidelines then in effect).
(vii) In addition to the requirements of
this Section 2.5 with respect to any nomination proposed to be made at a meeting, each Proposing Person shall comply with
all applicable requirements of the Exchange Act with respect to any such nominations.
(viii) No proposed nominee shall be eligible
for nomination as a director of the Corporation unless such proposed nominee and the Nominating Person seeking to place such proposed
nominee’s name in nomination have complied with this Section 2.5, as applicable. The presiding officer at the meeting
shall, if the facts warrant, determine that a nomination was not properly made in accordance with this Section 2.5, and if
he or she should so determine, he or she shall so declare such determination to the meeting, the defective nomination shall be
disregarded and any ballots cast for the proposed nominee in question (but in the case of any form of ballot listing other qualified
nominees, only the ballots case for the nominee in question) shall be void and of no force or effect.
2.6
NOTICE OF STOCKHOLDERS’ MEETINGS.
Unless otherwise provided by law, the certificate
of incorporation or these bylaws, the notice of any meeting of stockholders shall be sent or otherwise given in accordance with
either Section 2.7 or Section 8.1 of these bylaws not less than ten (10) nor more than sixty (60) days before
the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date
and hour of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be
present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting
is called.
2.7
MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Notice of any meeting of stockholders shall
be deemed given:
(i) if mailed, when deposited in the U.S. mail,
postage prepaid, directed to the stockholder at his or her address as it appears on the Corporation’s records; or
(ii) if electronically transmitted as provided
in Section 8.1 of these bylaws.
An affidavit of the secretary or an assistant
secretary of the Corporation or of the transfer agent or any other agent of the Corporation that the notice has been given by mail
or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated
therein.
2.8
QUORUM.
Unless otherwise provided by law, the certificate
of incorporation or these bylaws, the holders of a majority in voting power of the stock issued and outstanding and entitled to
vote, present in person, or by remote communication, if applicable, or represented by proxy, shall constitute a quorum for the
transaction of business at all meetings of the stockholders. If, however, a quorum is not present or represented at any meeting
of the stockholders, then either (i) the chairperson of the meeting or (ii) a majority in voting power of the stockholders
entitled to vote at the meeting, present in person, or by remote communication, if applicable, or represented by proxy, shall have
power to adjourn the meeting from time to time in the manner provided in Section 2.9 of these bylaws until a quorum is present
or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might
have been transacted at the meeting as originally noticed.
2.9
ADJOURNED MEETING; NOTICE.
When a meeting is adjourned to another
time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if
any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present
in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting,
the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the meeting.
2.10
CONDUCT OF BUSINESS.
The chairperson of any meeting of stockholders
shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the
conduct of business.
2.11
VOTING.
The stockholders entitled to vote at any
meeting of stockholders shall be determined in accordance with the provisions of Section 2.13 of these bylaws, subject to
Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating
to voting trusts and other voting agreements) of the DGCL.
Except as may be otherwise provided in
the certificate of incorporation or these bylaws, each stockholder shall be entitled to one (1) vote for each share of capital
stock held by such stockholder.
At all duly called or convened meetings
of stockholders, at which a quorum is present, for the election of directors, a plurality of the votes cast shall be sufficient
to elect a director. Except as otherwise provided by the certificate of incorporation, these bylaws, the rules or regulations of
any stock exchange applicable to the Corporation, or applicable law or pursuant to any regulation applicable to the Corporation
or its securities, all other elections and questions presented to the stockholders at a duly called or convened meeting, at which
a quorum is present, shall be decided by the majority of the votes cast affirmatively or negatively (excluding abstentions and
broker non-votes) and shall be valid and binding upon the Corporation.
2.12
STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Subject to the rights of the holders of
the shares of any series of Preferred Stock or any other class of stock or series thereof having a preference over the Common Stock
as to dividends or upon liquidation, any action required or permitted to be taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
2.13
RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.
In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record
date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which shall not
be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other such action.
If the Board does not so fix a record date:
(i) The record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting
is held.
(ii) The record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided
,
however
,
that the Board may fix a new record date for the adjourned meeting.
2.14
PROXIES.
Each stockholder entitled to vote at a
meeting of stockholders may authorize another person or persons to act for such stockholder by proxy authorized by an instrument
in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. The
revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212
of the DGCL. A proxy may be in the form of a telegram, cablegram or other means of electronic transmission which sets forth or
is submitted with information from which it can be determined that the telegram, cablegram or other means of electronic transmission
was authorized by the stockholder.
2.15
LIST OF STOCKHOLDERS ENTITLED TO VOTE.
The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder
and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic
mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably
accessible electronic network, provided that the information required to gain access to such list is provided with the notice of
the meeting, or (ii) during ordinary business hours, at the Corporation’s principal executive office. In the event that
the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure
that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list
shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder
who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination
of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required
to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by each of them.
2.16
INSPECTORS OF ELECTION.
Before any meeting of stockholders, the
Board shall appoint an inspector or inspectors of election to act at the meeting or its adjournment and make a written report thereof.
The number of inspectors shall be either one (1) or three (3). If any person appointed as inspector fails to appear or fails or
refuses to act, then the chairperson of the meeting may, and upon the request of any stockholder or a stockholder’s proxy
shall, appoint a person to fill that vacancy.
Such inspectors shall:
(i) determine the number of shares outstanding
and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity,
validity, and effect of proxies;
(ii) receive votes or ballots;
(iii) hear and determine all challenges
and questions in any way arising in connection with the right to vote;
(iv) count and tabulate all votes;
(v) determine when the polls shall close;
(vi) determine the result; and
(vii) do any other acts that may be proper
to conduct the election or vote with fairness to all stockholders.
The inspectors of election shall perform
their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three
(3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act
or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated
therein.
Article III - DIRECTORS
3.1
POWERS.
Subject to the provisions of the DGCL and
any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders
or by the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised
by or under the direction of the Board.
3.2
NUMBER OF DIRECTORS.
The authorized number of directors shall
be determined from time to time by resolution of the Board, provided the Board shall consist of at least one (1) member. No
reduction of the authorized number of directors shall have the effect of removing any director before that director’s term
of office expires.
3.3
ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.
Except as provided in Section 3.4
of these bylaws, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until such director’s successor is elected and qualified or until such director’s earlier death,
resignation or removal. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws.
The certificate of incorporation or these bylaws may prescribe other qualifications for directors.
If so provided in the certificate of incorporation,
the directors of the Corporation shall be divided into three (3) classes.
3.4
RESIGNATION AND VACANCIES.
Any director may resign at any time upon
notice given in writing or by electronic transmission to the Corporation. When one or more directors so resigns and the resignation
is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective,
and each director so chosen shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate
of incorporation or these bylaws, vacancies and newly created directorships resulting from any increase in the authorized number
of directors shall, unless the Board determines by resolution that any such vacancies or newly created directorships shall be filled
by stockholders, be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining
director. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and
qualified. A vacancy in the Board shall be deemed to exist under these bylaws in the case of the death, removal or resignation
of any director.
3.5
PLACE OF MEETINGS; MEETINGS BY TELEPHONE.
The Board may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate
of incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting
of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a meeting pursuant to this bylaw shall constitute presence
in person at the meeting.
3.6
REGULAR MEETINGS.
Regular meetings of the Board may be held
without notice at such time and at such place as shall from time to time be determined by the Board.
3.7
SPECIAL MEETINGS; NOTICE.
Special meetings of the Board for any purpose
or purposes may be called at any time by the Board, the chief executive officer, the president, the secretary or a majority of
the authorized number of directors. Notice of the time and place of special meetings shall be:
(i) delivered personally by hand, by courier
or by telephone;
(ii) sent by United States first-class mail,
postage prepaid;
(iii) sent by facsimile; or
(iv) sent by electronic mail,
directed to each director at that director’s address,
telephone number, facsimile number or electronic mail address, as the case may be, as shown on the Corporation’s records.
If the notice is (i) delivered personally
by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic mail, it shall be delivered or
sent at least twenty-four (24) hours before the time of the holding of the meeting. If the notice is sent by U.S. mail,
it shall be deposited in the U.S. mail at least four (4) days before the time of the holding of the meeting. Any oral
notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to be held
at the Corporation’s principal executive office) nor the purpose of the meeting.
3.8
QUORUM.
At all meetings of the Board, a majority
of the authorized number of directors shall constitute a quorum for the transaction of business. The vote of a majority of the
directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically
provided by statute, the certificate of incorporation or these bylaws. If a quorum is not present at any meeting of the Board,
then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting,
until a quorum is present.
A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least
a majority of the required quorum for that meeting.
3.9
BOARD ACTION BY Written CONSENT WITHOUT A MEETING.
Unless otherwise restricted by the certificate
of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee
thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing
or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes
of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall
be in electronic form if the minutes are maintained in electronic form.
3.10
FEES AND COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the certificate
of incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors.
3.11
REMOVAL OF DIRECTORS.
Except as otherwise provided by the DGCL,
the Board of Directors or any individual director may be removed from office only for cause at a meeting of stockholders called
for that purpose, by the affirmative vote of the holders of at least sixty six and two thirds percent (66-2/3%) of the voting power
of all the then outstanding shares of voting stock of the Corporation entitled to vote at an election of directors, voting together
as a single class.
No reduction of the authorized number of
directors shall have the effect of removing any director prior to the expiration of such director’s term of office.
Article IV - COMMITTEES
4.1
COMMITTEES OF DIRECTORS.
The Board may designate one (1) or more
committees, each committee to consist of one (1) or more of the directors of the Corporation. The Board may designate one (1) or
more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified
from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution
of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require
it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any
action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal
any bylaw of the Corporation.
4.2
COMMITTEE MINUTES.
Each committee shall keep regular minutes
of its meetings and report the same to the Board when required.
4.3
MEETINGS AND ACTION OF COMMITIEES.
Meetings and actions of committees shall
be governed by, and held and taken in accordance with, the provisions of:
(i) Section 3.5 (place of meetings
and meetings by telephone);
(ii) Section 3.6 (regular meetings);
(iii) Section 3.7 (special meetings
and notice);
(iv) Section 3.8 (quorum);
(v) Section 7.12 (waiver of notice);
and
(vi) Section 3.9 (action without a
meeting),
with such changes in the context of those bylaws as are necessary
to substitute the committee and its members for the Board and its members.
However
:
(i) the time of regular meetings of committees
may be determined either by resolution of the Board or by resolution of the committee;
(ii) special meetings of committees may
also be called by resolution of the Board; and
(iii) notice of special meetings of committees
shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board may adopt
rules for the government of any committee not inconsistent with the provisions of these bylaws.
Article V - OFFICERS
5.1
OFFICERS.
The officers of the Corporation shall be
a president and a secretary. The Corporation may also have, at the discretion of the Board, a chairperson of the Board, a vice
chairperson of the Board, a chief executive officer, a chief financial officer or treasurer, one (1) or more vice presidents, one
(1) or more assistant vice presidents, one (1) or more assistant treasurers, one (1) or more assistant secretaries, and any such
other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the
same person.
5.2
APPOINTMENT OF OFFICERS.
The Board shall appoint the officers of
the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws,
subject to the rights, if any, of an officer under any contract of employment.
5.3
SUBORDINATE OFFICERS.
The Board may appoint, or empower the chief
executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as
the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws or as the Board may from time to time determine.
5.4
REMOVAL AND RESIGNATION OF OFFICERS.
Subject to the rights, if any, of an officer
under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority
of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer
upon whom such power of removal may be conferred by the Board.
Any officer may resign at any time by giving
written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later
time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall
not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any
contract to which the officer is a party.
5.5
VACANCIES IN OFFICES.
Any vacancy occurring in any office of
the Corporation shall be filled by the Board or as provided in Section 5.2.
5.6
REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairperson of the Board, the president,
any vice president, the treasurer, the secretary or assistant secretary of the Corporation, or any other person authorized by the
Board or the president or a vice president, is authorized to vote, represent and exercise on behalf of the Corporation all rights
incident to any and all shares of any other corporation or corporations standing in the name of the Corporation. The authority
granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
5.7
AUTHORITY AND DUTIES OF OFFICERS.
All officers of the Corporation shall respectively
have such authority and perform such duties in the management of the business of the Corporation as may be designated from time
to time by the Board or the stockholders and, to the extent not so provided, as generally pertain to their respective offices,
subject to the control of the Board.
Article VI - RECORDS
AND REPORTS
6.1
MAINTENANCE AND INSPECTION OF RECORDS.
The Corporation shall, either at its principal
executive office or at such place or places as designated by the Board, keep a record of its stockholders listing their names and
addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books
and other records.
Any stockholder of record, in person or
by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual
hours for business to inspect for any proper purpose the Corporation’s stock ledger, a list of its stockholders, and its
other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such
person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right
to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney
or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered
office in Delaware or at its principal executive office.
6.2
INSPECTION BY DIRECTORS.
Any director shall have the right to examine
the Corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related
to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether
a director is entitled to the inspection sought. The Court may summarily order the Corporation to permit the director to inspect
any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in
its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief
as the Court may deem just and proper.
Article VII - GENERAL
MATTERS
7.1
EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.
The Board, except as otherwise provided
in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument
in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances. Unless so authorized
or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority
to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any
amount.
7.2
STOCK CERTIFICATES; PARTLY PAID SHARES.
The shares of the Corporation shall be
represented by certificates or shall be uncertificated. Certificates for the shares of stock, if any, shall be in such form as
is consistent with the certificate of incorporation and applicable law. Every holder of stock represented by a certificate shall
be entitled to have a certificate signed by, or in the name of the Corporation by the chairperson or vice-chairperson of the Board,
or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary
of the Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.
The Corporation may issue the whole or
any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the
face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the Corporation
in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid
thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon
partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
7.3
SPECIAL DESIGNATION ON CERTIFICATES.
If the Corporation is authorized to issue
more than one class of stock or more than one series of any class, then the powers, the designations, the preferences and the relative,
participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate
that the Corporation shall issue to represent such class or series of stock;
provided
,
however
, that, except as otherwise
provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face or back of
the certificate that the Corporation shall issue to represent such class or series of stock a statement that the Corporation will
furnish without charge to each stockholder who so requests the powers, the designations, the preferences and the relative, participating,
optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
7.4
LOST CERTIFICATES.
Except as provided in this Section 7.4,
no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the
Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the
place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require
the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate or uncertificated shares.
7.5
CONSTRUCTION; DEFINITIONS.
Unless the context requires otherwise,
the general provisions, rules of construction and definitions in the DGCL shall govern the construction of these bylaws. Without
limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and
the term “person” includes both a corporation and a natural person.
7.6
DIVIDENDS.
The Board, subject to any restrictions
contained in either (i) the DGCL or (ii) the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock. Dividends may be paid in cash, in property or in shares of the Corporation’s capital stock.
The Board may set apart out of any of the
funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.
Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation,
and meeting contingencies.
7.7
FISCAL YEAR
The fiscal year of the Corporation shall
be fixed by resolution of the Board and may be changed by the Board.
7.8
SEAL.
The Corporation may adopt a corporate seal,
which shall be adopted and which may be altered by the Board. The Corporation may use the corporate seal by causing it or a facsimile
thereof to be impressed or affixed or in any other manner reproduced.
7.9
TRANSFER OF STOCK.
Shares of the Corporation shall be transferable
in the manner prescribed by law and in these bylaws. Shares of stock of the Corporation shall be transferred on the books of the
Corporation only by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender
to the Corporation of the certificate or certificates representing such shares endorsed by the appropriate person or persons (or
by delivery of duly executed instructions with respect to uncertificated shares), with such evidence of the authenticity of such
endorsement or execution, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied
by all necessary stock transfer stamps. No transfer of stock shall be valid as against the Corporation for any purpose until it
shall have been entered in the stock records of the Corporation by an entry showing the names of the persons from and to whom it
was transferred.
7.10
STOCK TRANSFER AGREEMENTS.
The Corporation shall have power to enter
into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict
the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited
by the DGCL.
7.11
REGISTERED STOCKHOLDERS.
The Corporation:
(i) shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;
(ii) shall be entitled to hold liable for
calls and assessments the person registered on its books as the owner of shares; and
(iii) shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
7.12
WAIVER OF NOTICE.
Whenever notice is required to be given
under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled
to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event
for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver
of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of
notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.
Article VIII - NOTICE
BY ELECTRONIC TRANSMISSION
8.1
NOTICE BY ELECTRONIC TRANSMISSION.
Without limiting the manner by which notice
otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any
notice to stockholders given by the Corporation under any provision of the DGCL, the certificate of incorporation or these bylaws
shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any
such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked
if:
(i) the Corporation is unable to deliver
by electronic transmission two (2) consecutive notices given by the Corporation in accordance with such consent; and
(ii) such inability becomes known to the
secretary or an assistant secretary of the Corporation or to the transfer agent, or other person responsible for the giving of
notice.
However, the inadvertent failure to treat
such inability as a revocation shall not invalidate any meeting or other action.
Any notice given pursuant to the preceding
paragraph shall be deemed given:
(i) if by facsimile telecommunication, when
directed to a number at which the stockholder has consented to receive notice; &sbsp;
(ii) if by electronic mail, when directed
to an electronic mail address at which the stockholder has consented to receive notice;
(iii) if by a posting on an electronic network
together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the
giving of such separate notice; and
(iv) if by any other form of electronic
transmission, when directed to the stockholder.
An affidavit of the secretary or an assistant
secretary or of the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission
shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
8.2 DEFINITION OF ELECTRONIC TRANSMISSION.
An “electronic transmission”
means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained,
retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an
automated process.
Article IX - INDEMNIFICATION
9.1
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended, any director or officer
of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a “
Proceeding
”) by reason of the fact that he or she,
or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss
suffered and expenses (including attorneys’ fees) reasonably incurred by such person in connection with any such Proceeding.
Notwithstanding the preceding sentence, except as otherwise provided in Section 9.4, the Corporation shall be required to
indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized in the specific
case by the Board.
9.2
INDEMNIFICATION OF OTHERS.
The Corporation shall have the power to
indemnify and hold harmless, to the extent permitted by applicable law as it presently exists or may hereafter be amended, any
employee or agent of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any Proceeding
by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was an employee or agent
of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such
Proceeding.
9.3
PREPAYMENT OF EXPENSES.
The Corporation shall to the fullest extent
not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by any officer or director of the
Corporation, and may pay the expenses incurred by any employee or agent of the Corporation, in defending any Proceeding in advance
of its final disposition;
provided
,
however
, that, to the extent required by law, such payment of expenses in advance
of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the person to repay all amounts
advanced if it should be ultimately determined that the person is not entitled to be indemnified under this Article IX or
otherwise.
9.4
DETERMINATION; CLAIM.
If a claim for indemnification (following
the final disposition of such Proceeding) or advancement of expenses under this Article IX is not paid in full within sixty
(60) days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim
to the fullest extent permitted by law. In any such action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification or payment of expenses under applicable law.
9.5
NON-EXCLUSIVITY OF RIGHTS.
The rights conferred on any person by this
Article IX shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision
of the certificate of incorporation, these bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
9.6
INSURANCE.
The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture,
trust enterprise or non-profit entity against any liability asserted against him or her and incurred by him or her in any such
capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or
her against such liability under the provisions of the DGCL.
9.7
OTHER INDEMNIFICATION.
The Corporation’s obligation, if
any, to indemnify or advance expenses to any person who was or is serving at its request as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such
person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust,
enterprise or non-profit enterprise.
9.8
CONTINUATION OF INDEMNIFICATION.
The rights to indemnification and to prepayment
of expenses provided by, or granted pursuant to, this Article IX shall continue notwithstanding that the person has ceased
to be a director or officer of the Corporation and shall inure to the benefit of the estate, heirs, executors, administrators,
legatees and distributees of such person.
9.9
AMENDMENT OR REPEAL.
The provisions of this Article IX
shall constitute a contract between the Corporation, on the one hand, and, on the other hand, each individual who serves or has
served as a director or officer of the Corporation (whether before or after the adoption of these bylaws), in consideration of
such person’s performance of such services, and pursuant to this Article IX the Corporation intends to be legally bound
to each such current or former director or officer of the Corporation. With respect to current and former directors and officers
of the Corporation, the rights conferred under this Article IX are present contractual rights and such rights are fully vested,
and shall be deemed to have vested fully, immediately upon adoption of theses bylaws. With respect to any directors or officers
of the Corporation who commence service following adoption of these bylaws, the rights conferred under this provision shall be
present contractual rights and such rights shall fully vest, and be deemed to have vested fully, immediately upon such director
or officer commencing service as a director or officer of the Corporation. Any repeal or modification of the foregoing provisions
of this Article IX shall not adversely affect any right or protection (i) hereunder of any person in respect of any act
or omission occurring prior to the time of such repeal or modification or (ii) under any agreement providing for indemnification
or advancement of expenses to an officer or director of the Corporation in effect prior to the time of such repeal or modification.
Article X - AMENDMENTS
Subject to the limitations set forth in
Section 9.9 of these bylaws or the provisions of the certificate of incorporation, the Board is expressly empowered to adopt,
amend or repeal the bylaws of the Corporation. Any adoption, amendment or repeal of the bylaws of the Corporation by the Board
shall require the approval of a majority of the authorized number of directors. The stockholders also shall have power to adopt,
amend or repeal the bylaws of the Corporation;
provided
,
however
, that, in addition to any vote of the holders of
any class or series of stock of the Corporation required by law or by the certificate of incorporation, such action by stockholders
shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then-outstanding shares of the capital stock of the Corporation entitled to vote at an election of directors.
HYRECAR INC.
CERTIFICATE OF AMENDMENT AND RESTATEMENT
OF BYLAWS
The undersigned hereby certifies that he
or she is the duly elected, qualified, and acting Secretary of HyreCar Inc., a Delaware corporation, and that the foregoing bylaws,
comprising 24 pages, were amended and restated on, [__], 2018 by the Corporation’s board of directors.
IN WITNESS WHEREOF, the undersigned has
hereunto set his or her hand this [__] day of [__], 2018.
Exhibit
4.1
The
following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations.
|
TEN
COM
|
-
|
as
tenants in common
|
|
UNIF GIFT MIN ACT
|
................................
|
Custodian........................
|
|
TEN
ENT
|
-
|
as
tenants by the entireties
|
|
|
(Cust)
|
(Minor)
|
|
JT
TEN
|
-
|
as
joint tenants with the right of
|
|
Act
........................................................................
|
|
|
|
survivorship
and not as tenants in common
|
|
|
(State)
|
|
Additional
abbreviations may also be used though not in the above list.
For
value received,
hereby
sell, assign and transfer unto
PLEASE
INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE:
(PLEASE
PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
of
the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
,
Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.
Dated
|
X
|
|
|
THE SIGNATURE
TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE. THE SIGNATURE(S) MUST BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks. Stockbrokers. Savings and Loan Associations and Credit Unions).
|
SIGNATURE
GUARANTEED :
TRANSFER
FEE WILL APPLY
Exhibit
4.2
THE
SECURITIES REPRESENTED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT THERETO UNDER SUCH ACT AND APPLICABLE LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE
LAWS AND AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. ANY TRANSFEREE OF THIS NOTE
SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE.
HYRECAR
INC.
CONVERTIBLE
PROMISSORY NOTE
|
$ ____________
|
Los Angeles, CA
|
|
|
__, 2016
|
HyreCar
Inc., a Delaware corporation (the “
Company
”), for value received hereby, promises to pay to _________, or registered
assigns (the “
Holder
”), the aggregate principal sum of ___________ Dollars ($_________), in accordance with
the terms of this convertible promissory note (the “
Note
”). Payment for all amounts due hereunder shall be
made by wire transfer of immediately available funds, in lawful tender of the United States, to an account designated by the Company.
This Note is being issued in connection with and pursuant to that certain Convertible Note Purchase Agreement dated concurrently
herewith (the “
Agreement
”) and is substantially similar to other notes issued pursuant to the Agreement.
The
following is a statement of the rights of the Holder of this Note and the conditions to which this Note is subject, and to which
the Holder hereof, by the acceptance of this Note, agrees:
1.
Definitions
.
As used in this Note, the following terms, unless the context otherwise requires, have the following meanings:
(i) “
Business
Day
” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States, or
any day on which banking institutions in Los Angeles, California are authorized or required by law or other governmental action
to close.
(ii) “
Common
Stock
” means the Company’s common stock, par value $0.00001 per share.
(iii) “
Conversion
Shares
” means shares of Common Stock, or equivalent substitute equity securities of the Company, into which this Note
may be converted pursuant to Section 4.
(iv) “
Holder
”
when the context refers to a holder of this Note, shall mean any person who shall at the time be the registered holder of this
Note.
(v) “
Issuance
Date
” means the date of this Note.
(vi) “
Liquidity
Event
” means (a) an initial public offering of the Company’s stock; (b) a sale of all or substantially all of
the Company’s stock (for cash or share consideration), but excluding any merger effected exclusively for the purpose of
changing the domicile of the Company; (c) a sale or licensing of all or substantially all of the Company’s assets, unless,
in the event of a sale, the Company’s shareholders of record as constituted immediately prior to such acquisition or sale
will immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company’s acquisition
or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity; or (d) any combination of the
foregoing.
2.
Interest;
Repayment of the Note
.
2.1 This
Note shall accrue simple interest, from the date hereof until such principal is paid or converted as provided in Section 4, on
any unpaid principal balance at the rate of twelve percent (12%) per annum; provided that, commencing upon the occurrence of any
Event of Default and so long as any Event of Default exists, interest on this Note shall accrue at the rate of fifteen percent
(15%) per annum; provided further that the interest rate shall not exceed the maximum amount of interest permitted to be charged
under applicable law. Upon conversion of this Note, accrued but unpaid interest shall be paid in cash or, at the election of the
Holder, converted into Conversion Shares.
2.2 Subject
to the terms of Section 4 below, this Note shall mature and all principal and interest described herein shall be due and payable
three (3) years from the Issuance Date, at which time all principal and other amounts outstanding under this Note shall be due
and payable (the “
Maturity Date
”). In addition, all amounts outstanding hereunder shall be due and payable
on the date upon which the repayment of this Note is accelerated upon an Event of Default pursuant to this Note. All payments
hereunder shall be made in lawful money of the United States of America and will be credited first to interest, fees, costs, and
expenses then due and the remainder to the principal amount of this Note.
2.3 The
Company may not make optional prepayments of principal or interest on this Note without the prior written consent of Holder.
3.
Legend
.
The Holder consents to the placement of a legend on any certificate or other document evidencing the Conversion Shares issued
by the Company that such Conversion Shares have not been registered under the Securities Act or any state securities or “blue
sky” laws and setting forth or referring to the restrictions on transferability and sale thereof contained in this Note.
The Holder is aware that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability
of such Conversion Shares. The legend to be placed on each certificate shall be in form substantially similar to the following:
The
securities represented by this certificate have not been registered under the Securities Act of 1933, as amended and may not be
sold, transferred, pledged, hypothecated, or otherwise disposed of in the absence of (i) an effective registration statement for
such securities under said act or (ii) an opinion of company counsel that such registration is not required.
4.
Conversion
.
The entire unpaid and outstanding principal amount and any accrued interest thereon under this Note shall be convertible into
shares of the Company’s Common Stock, or, upon the occurrence of a Section 4.1 Transaction, defined below, into the same
class and series of any equivalent substitute equity securities sold by the Company in such Section 4.1 Transaction, as applicable
(such shares, the “
Conversion Shares
”), in accordance with the terms and conditions of this Section 4.
4.1
Automatic Conversion
.
Upon (1) the consummation of an investment in the Company’s equity securities in an aggregate amount of no less than $250,000,
through a single transaction or related series of transactions involving the same party or parties and/or affiliates thereof (the
“
Section 4.1 Transaction
”), or (2) the occurrence of a Liquidity Event, the entire unpaid and outstanding principal
amount and any accrued interest thereon under this Note shall automatically convert in whole without any further action by the
Holder into the Conversion Shares at the Conversion Price, as defined below.
4.2
Voluntary Conversion
.
Holder shall have the option to convert the entire unpaid and outstanding principal amount and any accrued interest thereon under
this Note into the Conversion Shares at the Conversion Price if, as of the Maturity Date, no Section 4.1 Transaction has been
consummated and no Liquidity Event has occurred.
4.3
Conversion Price
.
For purposes of this Note, the “Conversion Price” shall be the lesser of:
4.3.1 that
price per share that is eighty percent (80%) of the purchase price per share of the same class and series of equity securities
sold by the Company in the Section 4.1 Transaction or Liquidity Event; or
4.3.2 an
amount equal to Four Million Dollars ($4,000,000) divided by the total number of outstanding shares of the Company’s Common
Stock immediately prior to the Section 4.1 Transaction or Liquidity Event on a fully-diluted, as-converted basis, but excluding
any shares reserved for issuance under any equity incentive plan, option plan or similar arrangement (and excluding any shares
of capital stock issuable upon conversion of this Note), as adjusted for stock splits, corporate reorganizations, or recapitalizations,
set forth in Section 4.5, below.
4.4
Conversion Procedure
.
4.4.1
Notice of Conversion
.
Before the Holder shall be entitled to convert this Note pursuant to Section 4.2, it shall surrender this Note at the office of
the Company and shall give written notice, in the form of the Notice of Conversion attached hereto as
Exhibit A
, to the
Company of the election to convert the same pursuant to Section 4.2, and shall state therein the name or names in which the Conversion
Shares shall be issued. At its expense, the Company shall deliver or cause to be delivered to the Holder the applicable number
of Conversion Shares in certificate form (bearing such legends as are required by applicable state and federal securities laws
in the opinion of counsel to the Company). Such conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of this Note and receipt of the Conversion Notice.
4.5
Split, Subdivision, or Combination of Shares
.
If the Company shall at any time while this Note remains outstanding and unpaid, split, subdivide, or combine its equity securities,
as applicable, into a different number of securities of the same class or otherwise, or as part of a merger or acquisition transaction,
the conversion ratio for such securities shall be proportionately decreased in the case of a split or subdivision or proportionately
increased in the case of a combination and the number of such securities shall be proportionately increased in the case of a split
or subdivision or proportionately decreased in the case of a combination.
4.6
Fractional Shares
.
No fractional shares will be issued upon conversion of this Note. In lieu thereof, the Company will pay to the Holder an amount
in cash equal to the product obtained by multiplying the applicable Conversion Price applied to effect such conversion by the
fraction of a share not issued pursuant to the previous sentence.
5.
Events
of Default
. So long as this Note will remain unpaid in whole or in part as to either principal
or interest, each of the following will constitute an “
Event of Default
” under this Note:
(a) the
commencement of an involuntary case or other proceeding against the Company seeking liquidation, reorganization, or other relief
with respect to it or its debts under any applicable bankruptcy, insolvency, or other similar law now or hereafter in effect,
or seeking the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the
Company, or for any substantial part of the property of the Company or the winding up or liquidation of the affairs of the Company,
and such case or proceeding remains unstayed and undismissed for a period of sixty (60) days, or an order for relief is entered
against the Company under the federal bankruptcy laws as now or hereafter in effect;
(b) the
commencement by the Company of a voluntary case under any applicable bankruptcy, insolvency, or other similar law now or hereafter
in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company,
or for any substantial part of the property of the Company, or the Company makes any general assignment for the benefit of creditors,
or fails generally to pay its debts as they come due, or takes any corporate action to authorize any of the foregoing; or
(c) failure
on the part of the Company to observe or perform any of the terms or covenants contained in this Note and continuance of such
failure for a period of sixty (60) days following receipt of notice from the Holders specifying such covenant and the nature of
the Company's non-performance.
6.
Remedies
.
If an Event of Default will occur and be continuing, then so long as the Event of Default will continue to exist the Holders may,
by written notice to the Company, declare the unpaid principal amount of this Note, together with all interest accrued hereunder,
to be forthwith due and payable immediately in cash, without further presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Company, to the fullest extent permitted by applicable law. All Notes for which
the full amount hereunder shall have been paid in accordance herewith shall promptly be surrendered to or as directed by the Company.
The Holder may enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable
law. Such declaration may be rescinded and annulled by the Holder at any time prior to payment hereunder and the Holder shall
have all rights as a Note holder until such time, if any, as the full payment under this Section 6 shall have been received by
it. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. In addition
to the foregoing remedies, upon the occurrence of any Event of Default, the Holder may exercise any other right, power, or remedy
granted to it by the Transaction Documents (as defined in the Agreement) or otherwise permitted to it by law, either by suit in
equity or by action at law, or both.
7.
Assignment
.
Subject to securities laws, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit
the successors and assigns of the parties; provided that the Company shall not assign its rights or obligations under this Note
without the prior written consent of the Holder.
8.
Waiver
and Amendment
. Any provision of this Note may be amended, waived, or modified upon the written
consent of the Company and Holder.
9.
Notices
.
Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been
duly given if faxed with confirmation of receipt by the sending device or if delivered by internationally recognized overnight
courier such as FedEx or UPS, at the respective addresses of the parties as set forth below, or via electronic mail transmission:
If
to Company:
HyreCar
Inc.
555
W. 5th Street
Los
Angeles, CA 90013
Attn:
Joseph Furnari, CFO
Email:
joe@hyrecar.com
If
to Holder:
_______________
Any
party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have
been given when delivered, faxed or transmitted in the manner set forth above and shall be deemed to have been received when delivered.
10.
No
Shareholder Rights
. For so long as the Notes remain unconverted, nothing contained in this
Note shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice
as a shareholder in respect of meetings of shareholders for the election of directors of the Company or any other matters or any
rights whatsoever as a shareholder of the Company; and no dividends or interest shall be payable or accrued in respect of this
Note or the Conversion Shares obtainable hereunder until, and only to the extent that, this Note shall have been converted.
11.
Governing
Law
. This Note shall be governed by and construed in accordance with the laws of the State
of California, without regard to principles of conflicts of law.
12.
Waiver
.
The Company hereby waives demand, notice, presentment, protest, and notice of dishonor.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Company has caused this Note to be issued as of the Issuance Date.
|
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HYRECAR
Inc.
,
a Delaware corporation
|
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By:
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Name:
Joseph Furnari
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Title:
Chief Financial Officer
|
Name
of Holder: ___________
Address:
_________
EXHIBIT
A
NOTICE
OF CONVERSION
(To
Be Signed Only Upon Voluntary Conversion of Note)
To:
HyreCar Inc.
The
undersigned, the holder of the foregoing Note, hereby surrenders such Note for conversion into _______ shares of Conversion
Shares of HyreCar Inc. to the extent of $__________________ unpaid principal and interest of such Note, and requests that the
certificates for such shares be issued in the name of, and delivered to ____________________, whose address is ______________________
.
|
Dated:
_____________________
|
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|
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(Signature
must conform in all respects to name of the registered holder of the Note)
|
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(Address)
|
Exhibit
4.3
HYRECAR
INC
PROMISSORY
NOTE
|
$___________
|
Los
Angeles, CA
|
|
|
__,
2017
|
HyreCar
Inc, a Delaware corporation (the “
Company
”), for value received hereby, promises to pay to ________, or his
registered assigns (the “
Holder
”), the aggregate principal sum of _________ Dollars ($__________), in accordance
with the terms of this promissory note (the “
Note
”). All payments shall be made by the Company to the Holder
for all amounts due hereunder by wire transfer of immediately available funds, in lawful tender of the United States, to an account
designated by the Holder. This Note is being issued in connection with and pursuant to that certain Note and Warrant Purchase
Agreement dated concurrently herewith (the “
Agreement
”).
The
following is a statement of the rights of the Holder of this Note and the conditions to which this Note is subject, and to which
the Holder hereof, by the acceptance of this Note, agrees:
1.
Definitions
. As used in this Note, the
following terms, unless the context otherwise requires, have the following meanings:
(i)
“
Business Day
” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the
United States, or any day on which banking institutions in Los Angeles, California are authorized or required by law or other
governmental action to close.
(ii)
“
Holder
” when the context refers to a holder of this Note, shall mean any person who shall at the time be the
registered holder of this Note.
(iii)
“
Issuance Date
” means the date of this Note.
2.
Repayment of the Note
.
2.1
This Note shall mature and the aggregate principal sum shall be due and payable one (1) year from the Issuance Date (the “
Maturity
Date
”). In addition, all amounts outstanding hereunder shall be due and payable on the date upon which the repayment
of this Note is accelerated upon an Event of Default pursuant to this Note.
2.2
The Company may make optional prepayments of principal on this Note without the prior written consent of Holder and without a
prepayment penalty.
3.
Events of Default
. So long as this Note
will remain unpaid in whole or in part as to principal, each of the following will constitute an “
Event of Default
”
under this Note:
(a) the
commencement of an involuntary case or other proceeding against the Company seeking liquidation, reorganization, or other relief
with respect to it or its debts under any applicable bankruptcy, insolvency, or other similar law now or hereafter in effect,
or seeking the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the
Company, or for any substantial part of the property of the Company or the winding up or liquidation of the affairs of the Company,
and such case or proceeding remains unstayed and undismissed for a period of sixty (60) days, or an order for relief is entered
against the Company under the federal bankruptcy laws as now or hereafter in effect;
(b) the
commencement by the Company of a voluntary case under any applicable bankruptcy, insolvency, or other similar law now or hereafter
in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company,
or for any substantial part of the property of the Company, or the Company makes any general assignment for the benefit of creditors,
or fails generally to pay its debts as they come due, or takes any corporate action to authorize any of the foregoing; or
(c) failure
on the part of the Company to observe or perform any of the terms or covenants contained in this Note and continuance of such
failure for a period of sixty (60) days following receipt of notice from the Holders specifying such covenant and the nature of
the Company's non-performance.
4.
Remedies
. If an Event of Default will
occur and be continuing, then so long as the Event of Default will continue to exist the Holder may, by written notice to the
Company, declare the unpaid principal amount of this Note, to be forthwith due and payable immediately in cash, without further
presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Company, to the fullest
extent permitted by applicable law. The Note for which the full amount hereunder shall have been paid in accordance herewith shall
promptly be surrendered to or as directed by the Company. The Holder may enforce any and all of its rights and remedies hereunder
and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by the Holder at any
time prior to payment hereunder and the Holder shall have all rights as a Note holder until such time, if any, as the full payment
under this Section 4 shall have been received by it. No such rescission or annulment shall affect any subsequent Event of Default
or impair any right consequent thereon. In addition to the foregoing remedies, upon the occurrence of any Event of Default, the
Holder may exercise any other right, power, or remedy permitted to it by law, either by suit in equity or by action at law, or
both.
5.
Assignment
. The rights and obligations
of the Company and the Holder of this Note shall be binding upon and benefit the successors and assigns of the parties; provided
that the Company shall not assign its rights or obligations under this Note without the prior written consent of the Holder.
6.
Waiver and Amendment
. Any provision of
this Note may be amended, waived, or modified upon the written consent of the Company and Holder.
7.
Notices
. Any notice, request or other
communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if faxed with confirmation
of receipt by the sending device or if delivered by internationally recognized overnight courier such as FedEx or UPS, at the
respective addresses of the parties as set forth below, or via electronic mail transmission:
If
to Company:
HyreCar
Inc.
555
W. 5th Street
Los
Angeles, CA 90013
Attn:
Joseph Furnari, CEO
Email:
joe@hyrecar.com
If
to Holder:
____________
Any
party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have
been given when delivered, faxed or transmitted in the manner set forth above and shall be deemed to have been received when delivered.
8.
Governing Law
. This Note shall be governed
by and construed in accordance with the laws of the State of California, without regard to principles of conflicts of law.
[SIGNATURE
PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused this Note
to be issued as of the Issuance Date.
|
|
HYRECAR
Inc.
,
a Delaware corporation
|
|
|
|
|
|
|
By:
|
|
|
|
|
Name:
Joseph Furnari
|
|
|
|
Title:
Chief Executive Officer
|
Name
of Holder:
Address:
3
Exhibit 4.4
THIS WARRANT AND THE SECURITIES UNDERLYING
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH SECURITIES ACT, ANY APPLICABLE STATE SECURITIES LAWS AND THE RULES AND REGULATIONS THEREUNDER.
HYRECAR INC
WARRANT
TO PURCHASE COMMON STOCK OF THE COMPANY
|
Warrant No. 2017-__
|
Issue Date: May __, 2017
|
FOR VALUE RECEIVED,
HYRECAR INC
, a Delaware corporation (the “
Company
”), grants the following rights to ___________,
and his permitted assigns, heirs, executors and administrators (individually and collectively, the “
Holder
”),
as of the __ day of May, 2017 (the “
Issue Date
”). This warrant (the “
Warrant
”)
has been issued pursuant to that certain Note and Warrant Purchase Agreement, dated May __, 2017, between the Company and the Holder.
Section 1.
Grant
.
The Holder is hereby
granted the right (collectively, the “
Purchase Rights
”), in accordance with the terms and conditions
of this Warrant, from the date hereof until the expiration of the Exercise Period (as defined in Section 3 hereof), to purchase
from the Company that number of fully paid and non-assessable shares of the common stock, par value $0.00001 per share (the “
Common
Stock
”) of the Company, set forth in Section 2 hereof, at the Exercise Price (as defined in Section 5 hereof), upon
delivery to the Company of this Warrant along with the Notice of Exercise form attached as
Exhibit 1
hereto, duly executed,
and upon tender of the Exercise Price for the shares of Common Stock to be purchased, which Payment shall be made in cash, wire
transfer or bank cashier’s check.
Section 2.
Number of Shares
of Common Stock Purchasable
.
2.1 Subject
to the other provisions of this Section 2, this Warrant entitles the Holder to purchase from time to time up to ______ shares of
the Company’s Common Stock (“
Warrant Shares
”).
2.2 In
case prior to the expiration of the Purchase Rights by exercise or by the terms of this Warrant, the Company shall undertake any
reclassification, stock split or combination, stock dividend or any similar proportionately-applied change or of any reorganization
of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this
Warrant) or any similar corporate reorganization at any time while this Warrant is outstanding (collectively, a “
Reclassification
”)
of outstanding shares of Common Stock (other than a change solely in, of, or from par value), the Holder shall thereafter be entitled,
upon exercise of this Warrant for the same total consideration as presently required, to purchase the kind and amount of shares
of stock and other securities and property receivable upon such Reclassification by a holder of the number of shares of Common
Stock which this Warrant entitles the Holder hereof to purchase immediately prior to such Reclassification. Notice of any such
Reclassification shall be given to the Holder pursuant to Section 11 hereof.
2.3 Subject
to Section 2.4 below, in case prior to the expiration of the Purchase Rights by exercise or by the terms of this Warrant, the Company
shall determine to consolidate or merge with, or convey all, or substantially all, of its property or assets to, any other corporation
or corporations, or to dissolve, liquidate or wind up (each a “
Fundamental Transaction
”), then, as a
condition precedent to such consolidation, merger, conveyance, dissolution, liquidation or winding up, notice shall be given to
the Holder pursuant to Section 11 hereof and lawful and adequate provision shall be made whereby the Holder shall thereafter have
the right to receive from the Company or from the Company’s successors or assigns, as the case may be, upon the basis and
upon the terms and conditions specified in this Warrant, in lieu of the shares of Common Stock of the Company theretofore purchasable
upon the exercise of the Purchase Rights, such shares of stock, securities, or assets as may be issued or payable with respect
to, or in exchange for, the number of shares of Common Stock of the Company theretofore purchasable upon the exercise of the Purchase
Rights had such consolidation, merger, conveyance, dissolution, liquidation or winding-up not taken place; and in any such event
the rights of the Holder to an adjustment of the number of shares of Common Stock purchasable upon the exercise of the Purchase
Rights as herein provided, shall continue and be preserved in respect of any stock or securities which the Holder becomes entitled
to purchase.
2.4 Notwithstanding
the foregoing, in the event of a Fundamental Transaction, the Company shall have the right, but not the obligation, in its sole
discretion upon 30 days prior written notice to the Holder (a “
Purchase Notice
”), to purchase this Warrant
from the Holder by paying to the Holder on the effective date of the Fundamental Transaction (or within five Business Days after
delivery of such notice, whichever occurs later), cash in an amount equal to the Black Scholes Value of the remaining unexercised
portion of this Warrant as of the date of such Fundamental Transaction. For purposes of this Section 2.4, the following definitions
shall apply:
“
Black Scholes Value
”
means the value of this Warrant based on the Black and Scholes Option Pricing Model calculated using (i) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of the delivery date of the
Purchase Notice, (ii) an expected volatility determined in good faith by the Board of Directors of the Company, and (iii) the underlying
price per share equal to the sum of the price per share to be paid in cash, if any, plus the value of any non-cash consideration,
if any, to be paid in the Fundamental Transaction.
“
Business Day
”
means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required
by law to remain closed.
Section 3.
Exercise Period
.
The Purchase Rights represented hereby shall be exercisable in whole or in part from time to time, subject to the terms and conditions
set forth herein, after the Issue Date of this Warrant until 5:00 p.m. Eastern time on the fifth (5th) anniversary of the Issue
Date hereof (the “
Exercise Period
”).
Section 4.
Exercise
.
4.1
Exercise
for Cash
. The Purchase Rights represented by this Warrant are exercisable at the option of the Holder in whole or in
part from time to time, subject to the terms and conditions set forth herein, but not for less than one hundred (100) shares at
a time, at any time and from time to time during the Exercise Period upon the delivery of the Notice of Exercise form to the Company
with such notice duly executed and upon tender of the Exercise Price for the shares of Common Stock to be purchased, which Payment
shall be made in cash, wire transfer or bank cashier’s check. The Purchase Rights shall be deemed to have been exercised,
and the Holder shall be deemed to have become a stockholder of record of the Company for the purposes of receiving dividends and
for all other purposes whatsoever with respect to the shares of Common Stock so purchased, as of the date of delivery of such properly
executed notice accompanied by proper tender of the Exercise Price at the principal office of the Company. As promptly as practicable
on or after such date, and in any event within three (3) business days thereafter, the Company at its expense shall issue and deliver,
or cause to be issued and delivered, to the person or persons entitled to receive the same, a certificate or certificates for the
number of shares issuable upon such exercise. In the event that this Warrant is exercised in part, the Company at its expense shall
execute and deliver a new warrant of like tenor exercisable for the number of shares for which this Warrant may then be exercised.
Section 5.
Exercise Price
.
5.1 The
exercise price for each share of Common Stock issuable to the Holder hereunder shall be equal to $2.10 per share, subject to proportionate
adjustment pursuant to any Reclassification (the “
Exercise Price
”).
Section 6.
Company’s
Warranties and Covenants as to Capital Stock
.
The Company has taken
all action necessary and appropriate to properly authorize, reserve and issue those shares of Common Stock issuable to the Holder
pursuant to this Warrant including an authorization of issuance and setting of the Exercise Price. The Common Stock deliverable
on the exercise of the Purchase Rights represented hereby shall, when issued, be duly and validly issued, fully paid and non-assessable.
The Company shall at all times reserve and hold available sufficient shares of Common Stock to satisfy all Purchase Rights hereby
granted.
Section 7.
Transfer; Compliance
with Securities Laws
The Purchase Rights shall
be registered on the books of the Company, which shall be kept by it at its principal office for that purpose. This Warrant and
the Common Stock issuable upon exercise of the Purchase Rights, may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the transferor and the transferee, including, if requested
by the Company, an opinion of counsel satisfactory to the Company to the effect that the transfer or assignment is in compliance
with applicable federal and state securities laws. Subject to such compliance, the Purchase Rights shall be transferable on said
books, in whole or in part, by the Holder in person or by duly authorized attorney upon surrender of this Warrant properly endorsed
by the Holder executing the Permitted Transfer or Assignment Form attached hereto and made a part hereof as
Exhibit 2
. All
reasonable and documented costs associated with any transfer or assignment, including, without limitation, the reasonable fees
of counsel to the Company shall be borne by the transferor or assignor. The Company agrees that, while the Purchase Rights remain
valid and outstanding, its stock transfer books shall not be closed for any purpose whatsoever except under arrangements which
shall inure to persons exercising warrants or applying for transfer of stock, all rights and privileges which they might have had
or received if the stock transfer books had not been closed and they had exercised their Purchase Rights at any time during which
such transfer book shall have been closed.
Section 8.
Charges, Taxes and
Expenses
.
Issuance of certificates
for shares of Common Stock issuable upon the exercise of this Warrant or any portion thereof (and issuance of a replacement warrant
certificate in the event of partial exercise) shall be made without charge to the Holder hereof for any issue taxes or any other
incidental expenses in respect of the issuance of such certificates to and in the name of the registered Holder of this Warrant,
all of which taxes and expenses shall be paid by the Company. Certificates may be issued in a name other than that of the Holder
upon the request of and payment by the Holder of any applicable transfer taxes and compliance with all applicable federal and state
securities laws and with all applicable provisions of this Warrant, including but not limited to Section 7 hereof.
Section 9.
Exchange for Other
Denominations
.
This Warrant is exchangeable
for new certificates of like tenor and date representing in the aggregate the right to purchase the number of shares purchasable
hereunder in denominations designated by the Holder at the time of surrender. In the event of the purchase, at any time prior to
the expiration of the Exercise Period, of less than all of the shares of Common Stock purchasable hereunder, the Company shall
cancel this Warrant upon surrender thereof, and shall promptly execute and deliver to the Holder hereof a new warrant of like tenor
and date for the balance of the shares purchasable hereunder.
Section 10.
Loss, Theft, Destruction
or Mutilation of Warrant
.
Upon receipt by the Company
of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Company of
all reasonable and documented expenses incidental thereto, and upon surrender of this Warrant, if mutilated, the Company shall
promptly make and deliver a new warrant of like tenor and date, in lieu of this Warrant and shall cancel this Warrant.
Section 11.
Notices Including
Certificate of Company in Event of Adjustment
.
(a) Whenever
the number of shares of Common Stock purchasable hereunder shall be adjusted pursuant to Section 2 hereof, the Company shall issue
a certificate signed by its Chief Financial Officer or its Chief Executive Officer or by such other appropriate officer, setting
forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the number of shares purchasable hereunder after giving effect to such adjustment, and shall cause a copy of
such certificate to be mailed (by first-class mail, postage prepaid) to the Holder of this Warrant.
(b) In
case:
(i) the
Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive
any other right;
(ii) of
any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger
of the Company with or into another corporation, or any conveyance of all or substantially all of the assets of the Company to
another entity; or
(iii) of
any voluntary dissolution, liquidation or winding-up of the Company;
then, and in each such case under sub-clauses
(i) through (iii), the Company shall mail or deliver, or cause to be mailed or delivered, to the Holder a notice specifying, as
the case may be, (A) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right; or (B) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed,
at which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities, assets
or other property of the Company deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding-up. Such notice shall be mailed or delivered at least fifteen (15) business days prior to the date therein
specified.
(c) All
notices, requests, consents and demands required by this Warrant shall be in writing and shall be personally delivered or mailed,
postage prepaid, to the principal office of the Company at:
Hyrecar Inc.
7750 Tamarack Dr.
Dublin, CA 94568
Attn: Chief Executive
Officer
and to the Holder at:
[ADDRESS
1]
[ADDRESS
2]
[CITY,
STATE ZIP]
Email:
Any notice, request or other communication
required or permitted hereunder shall be in writing and shall conclusively be deemed to have been duly given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed facsimile if sent during the normal business hours of the recipient,
if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day
delivery with written verification of receipt.
Section 12.
Miscellaneous
(a)
No
Stockholder Rights.
Nothing contained in this Warrant shall be construed as conferring upon the Holder or any other person
the right to vote, consent or receive notice as a stockholder in respect of any meeting of stockholders for the election of directors
of the Company or any other matters, or any other rights whatsoever of a stockholder of the Company.
(b)
Successors
and Assigns.
Subject to the restrictions on transfer described in Section 7 hereof, the rights and obligations of the Company
and the Holder of this Warrant shall be binding upon, and benefit the successors and assigns of, the parties hereto.
(c)
Governing
Law.
In all respects, including all matters of construction, validity and performance, this Warrant shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware, without regard to principles thereof relating to
conflicts or choice of law.
(d)
Waiver
and Amendment.
This Warrant may be changed, waived, discharged or terminated only by a statement in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is sought. In case any provision of this Warrant shall
be, in whole or in part, invalid, illegal or unenforceable, such provision shall be enforced to the extent, if any, that it may
legally be enforced and the validity, legality and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
(e)
Headings;
References.
All headings used herein are used for convenience only and shall not be used to construe or interpret this Warrant.
Except where otherwise indicated, all references herein to Sections refer to Sections hereof.
[SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, the
Company has caused this Warrant to be duly executed and delivered on its behalf as of the Issue Date set forth above.
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HYRECAR INC.
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By:
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Name: Joseph Furnari
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Title: Chief Executive Officer
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EXHIBIT 1
NOTICE OF EXERCISE PURSUANT TO
ATTACHED WARRANT
___________, 2017
To: Hyrecar Inc.
(1) The
undersigned, the Holder of record of the attached Warrant of HYRECAR INC, hereby exercises the option granted by the Purchase Rights
evidenced by the attached Warrant and hereby elects to purchase ____ shares of Common Stock of HYRECAR INC., pursuant to the provisions
of Section 4.1 of the attached Warrant, and tenders herewith payment of the Exercise Price as determined by the Warrant for such
shares in full. All capitalized terms used but not defined in this notice have the meanings assigned to such terms in the Warrant.
(2) In
exercising this Warrant, the undersigned hereby confirms and acknowledges that (a) the undersigned has complied with all terms
and conditions as defined in the Warrant, including the requirement that the offer and sale of the Shares was limited to “accredited”
investors only, (b) the shares of the Common Stock to be issued are being acquired solely for investment and solely for the account
of the undersigned, (c) the undersigned will not offer, sell or otherwise dispose of any such shares of Common Stock except under
circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any applicable state securities
laws, and (d) as required under the terms of the Warrant, the certificate or certificates representing said shares of Common Stock
shall bear a restrictive legend prohibiting and restricting transfer of such shares except in compliance with applicable federal
and state securities laws.
(3) Please
issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name
as is specified below.
(4) Please
issue a new Warrant for the unexercised portion of the attached Warrant, if any, in the name of the undersigned or in such other
name as is specified below:
(If certificates for Common Stock or new
Warrants are requested in a name other than the undersigned, be advised that the delivery of the certificates and/or new Warrants
will be delayed until the Company assures itself that such change is permitted under Section 7 of the Warrant that such change
does not violate applicable federal and state securities laws.)
EXHIBIT 2
PERMITTED TRANSFER OR ASSIGNMENT FORM
NOTE: THIS ASSIGNMENT BEARS A RESTRICTIVE
LEGEND BELOW
FOR VALUE RECEIVED,
the undersigned Holder of record of this Warrant of HYRECAR INC (the “Company”), which is dated ____________, 2017,
hereby sells, assigns and transfers unto the Assignee named below all of the rights, including, without limitation, the Purchase
Rights (as such term is defined in this Warrant) of the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below:
Name of Transferee/Assignee Address No. of Shares
and does hereby irrevocably constitute
and appoint the Secretary of HYRECAR INC to make such transfer on the books of HYRECAR INC, maintained for the purpose, with full
power of substitution in the premises.
Attached hereto, if
and to the extent requested by the Company, is an opinion of counsel that the assignment does not violate or is exempt from, any
federal and state securities laws. As provided in the Warrant, including but not limited to Section 7 of the Warrant, the Company
may, in its sole discretion, decide whether such opinion is satisfactory, and Assignee and Holder agree to any reasonable delay
in transfer caused by such evaluation and further acknowledge and agree that they shall bear all reasonable and documented costs
associated with any transfer or assignment, including, without limitation, the reasonable fees of counsel to the Company shall
be borne by the transferor or assignor.
The undersigned also
represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of Common Stock to be issued
upon exercise hereof or conversion thereof are being acquired for investment and that the Assignee will not offer, sell or otherwise
dispose of this Warrant or any shares of stock to be issued upon exercise hereof or conversion thereof except under circumstances
which will not result in a violation of the Securities Act of 1933, as amended (the “Act”), or any state securities
laws. Further, the Assignee has acknowledged that upon exercise of this Warrant, the Assignee shall, if requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock so purchased are being acquired for
investment and not with a view toward distribution or resale in violation of applicable securities laws.
Accordingly, the
following restrictive legend is made applicable to this assignment (and to this Warrant and securities covered by this Warrant
as assigned hereby to Assignee):
This Assignment and this Warrant and
the securities underlying this Warrant as assigned hereby, have not been registered under the Act, and may not be offered, sold
or otherwise transferred, assigned, pledged or hypothecated in the absence of such registration or an exemption therefrom under
such Act, any applicable state securities laws and the rules and regulations thereunder.
[Signatures appear on following page.]
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Dated:
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HOLDER:
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By:
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Name:
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Title:
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Dated:
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ASSIGNEE:
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Name & Title:
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Exhibit 4.5
NEITHER THIS SECURITY NOR THE SECURITIES
INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND ANY SECURITIES ISSUABLE PURSUANT
TO THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
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Original Issue Date: __, 2018
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Original Principal Amount: $______________
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Note: 13% SPN-No -__
13% SENIOR SECURED CONVERTIBLE PROMISSORY
NOTE
DUE __, 2018
THIS 13% SENIOR SECURED
CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued 13% Senior Secured Convertible Promissory
Notes of Hyrecar Inc, a Delaware corporation, (the “
Company
”), having its principal place of business at 355
South Grand Avenue, Suite 1650, Los Angeles, California 90071, designated as its 13% Senior Secured Convertible Promissory Note
due __, 2018
1
(this “
Note
”, or the “
Note
”
and collectively with the other Notes of such series, the “
Notes
”).
FOR VALUE RECEIVED,
the Company promises to pay to ______________________, or its registered assigns (the “
Holder
”), or shall have
paid pursuant to the terms hereunder, the principal sum of $___________ (the “
Principal Amount
”) on __, 2018
(the “
Maturity Date
”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder,
and to pay interest to the Holder on the aggregate unconverted and then outstanding Principal Amount of this Note in accordance
with the provisions hereof. This Note is subject to the following additional provisions:
Section 1.
Definitions
.
For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase Agreement, dated as of January 3, 2018 (the “
Purchase
Agreement
”), by and between the Company the purchasers thereto and (b) the following terms shall have the following
meanings:
“
Bankruptcy
Event
” means any of the following events: (a) the Company or any Subsidiary (as such term is defined in Rule 1-02(w)
of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any
Subsidiary thereof, (b) there is commenced against the Company or any Subsidiary thereof any such case or proceeding that is not
dismissed within 60 days after commencement, (c) the Company or any Subsidiary thereof is adjudicated insolvent or bankrupt or
any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Subsidiary thereof
suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed
within 60 calendar days after such appointment, (e) the Company or any Subsidiary thereof makes a general assignment for the benefit
of creditors, (f) the Company or any Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts or (g) the Company or any Subsidiary thereof, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose
of effecting any of the foregoing.
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1
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8 months from the Original Issue Date.
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“
Board of
Directors
” means the Board of Directors of the Company.
“
Change of
Control Transaction
” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by
an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess
of 33% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities issued
together with the Notes), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates
with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction
own less than 66% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells
or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to
such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, (d)
a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is
not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those
individuals who are serving as members of the Board of Directors on any date, whose nomination to the Board of Directors was approved
by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company
of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a)
through (d) above.
“
Common Stock”
means (i) the Company’s common stock, $0.00001 par value per share, and (ii) any capital stock into which such common stock
shall have been changed or any share capital resulting from a reclassification of such common stock.
“
Conversion
Amount
” means the sum of (i) the portion of the Principal Amount to be converted with respect to which this determination
is being made, (ii) all accrued and unpaid interest thereon, if any, and any other unpaid amounts due under this Note.
“
Default Redemption
Amount
” means the payment of 130% of the outstanding Principal Amount of this Note and accrued and unpaid interest hereon,
in addition to the payment of all other amounts, costs, expenses, late fees, and liquidated damages due in respect of this Note.
“
Default Redemption
Date
” means the date of redemption which shall be at least ten (10) days but not more than thirty (30) days after Company
notifies the Holder of redemption. On this date, the Default Redemption Amount must be paid in good funds to the Holder. After
this date, interest will cease to accrue on the Notes or the portion thereof called for redemption.
“
Exempt Issuance
”
means the issuance of (i) securities issued under any equity incentive plan of the Company and any amendments thereto approved
by the Board of Directors of the Company, including securities issuable upon conversion or exercise of such securities, (ii) securities
issued for consideration other than cash pursuant to a strategic arrangement, joint venture, merger, consolidation, acquisition,
or similar business combination approved by the Board of Directors of the Company, or (iii) securities issued hereunder or under
the Purchase Agreement or upon the exercise or exchange of or conversion of any securities issued hereunder or under the Purchase
Agreement and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding
on the date hereof, provided that such securities have not been amended since the date hereof to increase the number of such securities
or to decrease the exercise price, exchange price or conversion price of such securities.
“
Event of
Default
” shall have the meaning set forth in Section 5(a).
“
Fundamental
Transaction
” means (i) any merger or consolidation of the Company with or into another Person, (ii) 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) pursuant to which holders of the Company’s 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)
one or more related transactions which effects any reclassification, reorganization or recapitalization of the common stock or
any compulsory share exchange pursuant to which the Company’s Common Stock is effectively converted into or exchanged for
other securities, cash or property, (v) one or more related transactions which consummates a stock or share purchase agreement
or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement)
with another Person whereby such other Person acquires more than 50% of the outstanding shares of Company’s 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).
“
IPO
”
means the initial closing of the first underwritten public offering of the Company’s Common Stock pursuant to an effective
registration statement under the Securities Act, other than pursuant to a registration statement on Form S-4 or Form S-8 (or any
similar or successor form) after the date hereof.
“
IPO Price
to Public
” means the price to public specified in the IPO registration statement.
“
Late Fees
”
shall have the meaning set forth in Section 2(c).
“
New York
Courts
” shall have the meaning set forth in Section 7(d).
“
Note Register
”
shall have the meaning set forth in Section 2(b).
“
Original
Issue Date
” means the date of the first issuance of this Note, regardless of any transfers of any Note and regardless
of the number of instruments which may be issued to evidence such Notes.
“
Securities Act
” means
the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Section 2.
Interest.
a)
Payment
of Interest
. The Company shall pay interest to the Holder on the then outstanding Principal Amount of this Note at a rate per
annum equivalent to a fixed rate of thirteen percent (13%) of the Principal Amount of the Note, payable in cash in quarterly arrears
on each January 1, April 1, July 1 and October 1.
b)
Interest
Calculations
. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company
regarding registration and transfers of this Note (the “
Note Register
”).
c)
Late
Fee
. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the
lesser of 18% per annum or the maximum rate permitted by applicable law (the “
Late Fees
”) which shall accrue
daily from the date such interest is due hereunder through and including the date of actual payment in full.
Section 3.
Conversion
Rights.
a)
Conversion
.
On or after the earlier of (i) the date of the pricing of the Company’s IPO or (ii) the date of the Next Financing (as defined
below), the Holder of this Note will have the right, at the Holder’s option, to convert all or any portion of the Principal
Amount hereof and any accrued but unpaid interest thereon into shares of Common Stock in a manner and in accordance with Section
3(b) below (unless earlier paid or redeemed) at the Conversion Price as set forth below in Section 3(c) (subject to adjustment
as described herein). The shares of Common Stock to be issued upon such conversion are hereinafter referred to as the “
Conversion
Shares.
” The right to convert the Principal Amount or interest thereon of this Note called for redemption will terminate
at the earlier to occur of (i) the Maturity Date or (ii) the close of business on the Business Day prior to the Default Redemption
Date for such Note, unless the Company subsequently fails to pay the applicable Default Redemption Amount.
b)
Mechanics
of Holder’s Conversion.
In the event that the Holder elects to convert any portion of this Note into Common Stock, the
Holder shall give notice of such election by delivering a fully completed and executed notice of conversion (“
Notice of
Conversion
”) to the Company. The Notice of Conversion shall (i) provide a breakdown in reasonable detail of the Principal
Amount and/or accrued interest that is being converted, (ii) state the denominations in which such Holder wishes the certificate
or certificates evidencing the Conversion Shares to be issued and (iii) surrender this Note to the Company. On each Conversion
Date (as hereinafter defined) and in accordance with its Notice of Conversion, the Company shall make the appropriate reduction
to the Principal Amount and/or accrued interest as entered in its records and shall provide written notice thereof to the Holder
within five (5) Business Days after the Conversion Date. Each date on which a Notice of Conversion is delivered or telecopied to
the Company in accordance with the provisions hereof shall be deemed a Conversion Date (the “
Conversion Date
”).
Pursuant to the terms of the Notice of Conversion, the Company will issue instructions to its transfer agent, and cause to be issued
and delivered to the Holder not later than three (3) Business Days after each Conversion Date (the “
Share Delivery Date
”),
a certificate or certificates evidencing the number of full shares of Conversion Shares to which such Holder shall be entitled
as aforesaid and, if necessary, the Company shall cause to be issued and delivered to the Holder a new promissory note representing
any unconverted portion of this Note. The Company shall not issue fractional Conversion Shares upon conversion, but the number
of Conversion Shares to be received by any Holder upon conversion shall be rounded down to the next whole number and the Holder
shall be entitled to payment of the remaining Principal Amount from the Company by check or wire transfer. In the case of the exercise
of the conversion rights set forth herein the conversion privilege shall be deemed to have been exercised and the Conversion Shares
issuable upon such conversion shall be deemed to have been issued upon the date of receipt by the Company of the Notice of Conversion.
The Holder shall be treated for all purposes as the record holder of the Conversion Shares, unless the Holder provides the Company
written instructions to the contrary.
c)
Conversion
Price
. The Conversion Price of each Conversion Share, as of any Conversion Date, shall be the lower of $2.5480 (subject to
adjustment for any stock split, reverse stock split, reclassification or similar transaction) or seventy percent (70%) of the IPO
Price to Public or, if the IPO has not occurred by the Maturity Date, 70% of the price of the Next Financing (as hereinafter defined).
For purposes of this Note, “
Next Financing
” shall mean, after the Original Issue Date, the Company’s next
bona fide sale of its preferred stock or Common Stock in excess of $1,000,000 in gross proceeds, in one transaction or a series
of related transactions, which offering definitively sets a price per share of the Company’s Common Stock or preferred stock.
If, after the Original Issue Date, the Holders wish to convert before the Company completes the Next Financing, the Conversion
Price shall be $2.5480.
d)
Failure
to Deliver Certificates
. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to
or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to
the Company at any time on or before its receipt of such certificate or certificates, to rescind such conversion, in which event
the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return
to the Company the Common Stock certificate or certificates issued to such Holder pursuant to the rescinded Conversion Notice.
e)
Obligation
Absolute; Partial Liquidated Damages
. The Company’s obligations to issue and deliver the Conversion Shares upon conversion
of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or
alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law
by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of such Conversion Shares;
provided
,
however,
that such delivery
shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder
of this Note shall elect to convert any or all of the outstanding Principal Amount or interest hereof, the Company may not refuse
conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation
of law, agreement or for any other reason, unless an injunction from a court, on notice to the Holder, restraining and or enjoining
conversion of all or part of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit
of the Holder in the amount of 150% of the outstanding Principal Amount of this Note, which is subject to the injunction, which
bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which
shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue the
Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to
the Holder such certificate or certificates pursuant to Section 3(b) by the Share Delivery Date, the Company shall pay to the Holder,
in cash, as liquidated damages and not as a penalty, $1,000 per Business Day for each Business Day after such Share Delivery Date
until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to
pursue actual damages or declare an Event of Default pursuant to Section 5 hereof for the Company’s failure to deliver Conversion
Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any
such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable
law.
f)
Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Conversion
. In addition to any other rights available to the Holder,
if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant
to Section 3(b), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction
of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such
Share Delivery Date (a “
Buy-In
”), then the Company shall (A) pay in cash to the Holder (in addition to any other
remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase price (including
any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common
Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the
sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of
the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount of the attempted conversion
(in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would
have been issued if the Company had timely complied with its delivery requirements under Section 3(b). 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 conversion of this
Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to
such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect
of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares
of Common Stock upon conversion of this Note as required pursuant to the terms hereof.
g)
Adjustment
Provisions.
The Conversion Price and number and kind of shares or other securities to be issued upon conversion pursuant to
this Note shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains
outstanding, as follows:
(i)
Reclassification
.
In the case of any reclassification, consolidation or merger of the Company with or into another entity or any merger of another
entity with or into the Company, or in the case of any sale, transfer or conveyance of all or substantially all of the assets of
the Company (computed on a consolidated basis), each Note then outstanding will, without the consent of any Holder, become convertible
only into the kind and amount of securities, cash or other property receivable upon such reclassification, consolidation, merger,
sale, transfer or conveyance by a Holder of the number of shares of Common Stock into which such Note was convertible immediately
prior thereto, after giving effect to any adjustment event.
(ii)
Stock
Split, Dividend
. If the number of shares of Common Stock outstanding at any time after the date hereof is increased by a subdivision
or split of Common Stock, or by the declaration of a dividend on the Common Stock, which dividend is wholly or partially in the
form of additional shares of Common Stock or any other securities of the Company, then immediately after the effective date of
such subdivision or split-up, or the record date with respect to such dividend, as the case may be, the Conversion Price shall
be appropriately reduced so that the holder of this Note thereafter exchanged shall be entitled to receive the percentage of shares
of Common Stock which such holder would have owned immediately following such action had this Note been exchanged immediately prior
thereto;
(iii)
Reverse
Split
. If the number of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding
Common Stock or reverse split, then, immediately after the effective date of such combination, the Conversion Price shall be appropriately
increased so that the holder of this Note thereafter exchanged shall be entitled to receive the percentage of shares of Common
Stock which such holder would have owned immediately following such action had this Note been exchanged immediately prior thereto.
(iv)
Issuance
of New Note
. Upon any partial conversion of this Note, a new promissory note containing the same date and provisions of this
Note shall be issued by the Company to the Holder for the principal balance of this Note and interest which shall not have been
converted or paid. The Holder shall not pay any costs, fees or any other consideration to the Company for the production and issuance
of a new promissory note.
(v)
Reservation
of Shares
. The Company shall at all times reserve for issuance and maintain available, out of its authorized but unissued Common
Stock, solely for the purpose of effecting the full conversion of the Note, the full number of shares of Common Stock deliverable
upon the conversion of the Note from time to time outstanding. The Company shall from time to time (subject to obtaining necessary
director and stockholder action), in accordance with the laws of the State of Delaware, increase the authorized number of shares
of its Common Stock if at any time the authorized number of shares of its Common Stock remaining unissued shall not be sufficient
to permit the conversion of the Note.
(vi)
Subsequent
Equity Sales
. If, at any time while this Note is outstanding, the Company sells or grants any option to purchase or sells or
grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other
disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective
price per share that is lower than the then Conversion Price (such lower price, the “
Base Conversion Price
”
and such issuances, collectively, a “
Dilutive Issuance
”) (if the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such
issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price,
such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then
the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock
or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 3(g)(vi) in
respect of an Exempt Issuance. The Company shall notify the Holder in writing, no later than the Business Day following the issuance
of any Common Stock or Common Stock Equivalents subject to this Section 3(g)(vi), 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(g)(vi), upon the occurrence of any Dilutive Issuance, the Holder will be entitled to receive a number of Conversion Shares
based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately
refers to the Base Conversion Price in the Notice of Conversion.
Section 4.
Registration
of Transfers and Exchanges.
a)
Different
Denominations
. This Note is exchangeable for an equal aggregate Principal Amount of Notes of different authorized denominations,
as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
b)
Reliance
on Note Register
. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company
may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.
Section 5.
Events
of Default.
a) “
Event
of Default
” means, wherever used herein, any of the following events (whatever the reason for such event and whether
such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental body):
i. any
default in the payment of (A) the Principal Amount of any Note or (B) interest, liquidated damages, Late Fees and other amounts
owing to a Holder on any Note, as and when the same shall become due and payable (whether on the Maturity Date or by acceleration
or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within
five (5) Business Days;
ii. the
Company shall fail to observe or perform any other material covenant or agreement contained in the Notes which failure is not cured,
if possible to cure, within the earlier to occur of (A) five (5) Business Days after notice of such failure sent by the Holder
or by any other Holder to the Company and (B) ten (10) Business Days after the Company has become or should have become aware of
such failure;
iii. a
material default or material event of default (subject to any grace or cure period provided in the applicable agreement, document
or instrument) shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument
to which the Company or any Subsidiary is obligated and/or which any of their respective assets are subject to or bound by (and
not covered by clause (vi) below), which is not cured, waived or amended within ten (10) Business Days of notice of such default
from the other party to such agreements;
iv. any
representation or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto or thereto
or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or
incorrect in any material respect as of the date when made or deemed made;
v. the
Company or any Subsidiary shall be subject to a Bankruptcy Event;
vi. the
Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced,
any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation
greater than $50,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness
becoming or being declared due and payable prior to the date on which it would otherwise become due and payable, which is not cured,
waived or amended within ten (10) Business Days of notice of such default from the other party to such agreements;
vii. the
Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all
or a portion of its assets in one transaction or a series of related transactions, without the approval of the Holder or Holders
(whether or not such sale would constitute a Change of Control Transaction);
viii. the
Company or any Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of
it or any of its properties, (ii) admit in writing its inability to pay its debts as they mature, (iii) make a general assignment
for the benefit of creditors, (iv) be adjudicated abankrupt or insolvent or be the subject of an order for relief under Title 11
of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or
statute of any other jurisdiction or foreign country, or (v) file a voluntary petition in bankruptcy, or a petition or an answer
seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against
it in any proceeding under any such law, or (vi) take or permit to be taken any action in furtherance of or for the purpose of
effecting any of the foregoing;
ix. if
any order, judgment or decree shall be entered, without the application, approval or consent of the Company or any Subsidiary,
by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company or any Subsidiary,
or appointing a receiver, trustee, custodian or liquidator of the Company or any Subsidiary, or of all or any substantial part
of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;
x. the
occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company or
any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of $50,000 individually or in the aggregate,
and any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date thereof;
xi. any
monetary judgment, writ or similar final process shall be entered or filed against the Company or any of their respective property
or other assets for more than $50,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed
for a period of 45 calendar days;
xii. the
Company, without the written consent of the Holders, shall enter into, create, incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money of any kind, including, but not limited to, a guarantee on or with respect to any of its property
or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; or
xiii. the
Company, without the written consent of the Holders, shall enter into, create, incur, assume or suffer to exist any liens of any
kind on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income
or profits therefrom.
b)
Remedies
Upon Event of Default
. If any Event of Default occurs and is not cured within applicable cure periods, then the following default
provisions take effect:
i.
Principal
and Interest
. If any Event of Default specified in Section 5(a)(v), (viii) or (ix) occurs, then the outstanding Principal Amount
of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date
of such Event of Default shall become immediately due and payable in cash, without any action on the part of the Holder, at the
Default Redemption Amount. If any other Event of Default occurs, the outstanding Principal Amount of this Note, plus accrued but
unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become,
at the Holder’s election, immediately due and payable in cash at the Default Redemption Amount. After the occurrence of any
Event of Default that results in the eventual acceleration of this Note, the interest rate on this Note shall accrue at an additional
interest rate equal to the lesser 18% per annum or the maximum rate permitted under applicable law. Upon the payment in full of
the Default Redemption Amount, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with
such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest
or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its
rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and
annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such
time, if any, as the Holder receives full payment pursuant to this Section 5(b).
ii.
Future
Revenue and Capital
. The Company shall use twenty-five percent (25%) of all the Company’s future revenue and capital
raised to pay down the Note.
iii.
Additional
Warrant Coverage
. The Company shall deliver to the Holder an additional warrant to purchase fifty percent (50%) of the shares
of Common Stock the Holder is entitled to in connection with the conversion of this Note when it first becomes convertible on the
same terms and conditions as the Warrant issued to the Holder concurrently with the execution and delivery of this Note.
iv.
Board
Seat
. Immediately upon any Event of Default, the Company shall grant and the Holder shall be entitled, together with the holders
of the other Notes (if any), to appoint one (1) director to the Board of Directors until such Event of Default is cured.
c) No
such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. The Default Redemption
Amount shall be due and payable within five (5) Business Days of the date on which the notice for the payment therefor is provided
by a Holder. If the Company fails to pay in full the Default Redemption Amount hereunder on the date such amount is due in accordance
with this Section the Company will pay interest thereon at a rate equal to the lesser of 18% per annum or the maximum rate permitted
by applicable law, accruing and compounding daily from such date until the Default Redemption Amount, plus all such interest thereon,
is paid in full.
Section 6.
Prepayment
At any time upon five
(5) days prior written notice to the Holder, the Company may prepay any portion of the Principal Amount of this Note, all accrued
and unpaid interest relating to such prepaid portion of the principal and all other amounts due under this Note. The written notice
shall, among other items, state the date such Prepayment Amount (as defined below) is to be paid to the Holder, which shall not
in any event be later than 5 days from the date of mailing of the prepayment notice to the Holder (“the
Prepayment Date
”).
If the Company exercises its right to prepay the Note, the Company shall make payment to the Holder of an amount in cash equal
to the product of (i) the sum of (x) the then outstanding principal amount of this Note, (y) all accrued but unpaid interest and
(z) all other amounts owed pursuant to this Note including, but not limited to, all Late Fees and liquidated damages (collectively
the “
Prepayment Amount
”), multiplied by (ii) 100%. If the entire Prepayment Amount is not received by the Holder
in immediately available funds by wire transfer pursuant to wire transfer instructions provided to the Company by the Holder, on
or before the Prepayment Date, such shall, (at the election of the Holder) be an Event of Default of the payment of principal pursuant
to Section 5(a)(1) hereof.
Section 7.
Miscellaneous.
a)
Notices
.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at 555 West 5th
Street, Los Angeles, California 90013, or such other facsimile number or address as the Company may specify for such purposes by
notice to the Holder delivered in accordance with this Section 7(a). Any and all notices or other communications or deliveries
to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile number or address of the Holder appearing on the books of the
Company, or if no such facsimile number or address appears on the books of the Company, at the principal place of business of such
Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to 12:00 p.m. (New York City time) on any date, (ii) the
next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a Business Day or later than 12:00 p.m. (New York City time)
on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight
courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.
b)
Absolute
Obligation
. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note
at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.
This Note ranks
pari passu
with all other Notes now or hereafter issued under the terms set forth herein.
c)
Lost
or Mutilated Note
. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange
and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed
Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence
of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.
d)
Governing
Law
. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by
and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict
of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the New York County.
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts
are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out
of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce
any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for
its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action
or proceeding.
e)
Waiver
.
Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or
the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other
occasion. Any waiver by the Company or the Holder must be in writing.
f)
Severability
.
If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.
If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury,
the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under
applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and
the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has been enacted.
g)
Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief.
The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s
right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company
covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein.
Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation
of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that,
in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies,
to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and
without any bond or other security being required. The Company shall provide all information and documentation to the Holder that
is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this
Note.
h)
Successors
and Assigns
. The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors
and assigns of the Company and the Holder. Notwithstanding the foregoing, the Holder may not assign, pledge, or otherwise transfer
this Note without the prior written consent of the Company. Subject to the preceding sentence, this Note may be transferred only
upon surrender of the original Note for registration of transfer, duly endorsed, or accompanied by a duly executed written instrument
of transfer in form satisfactory to the Company. Thereupon, a new note for the same principal amount and interest will be issued
to, and registered in the name of, the transferee. Interest and principal are payable only to the registered holder of this Note.
i)
Next
Business Day
. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.
j)
Headings
.
The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit
or affect any of the provisions hereof.
k)
Counterparts
.
This Note may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original,
and all of which together shall constitute one and the same instrument.
(Signature Pages Follow)
IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.
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HYRECAR INC
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By:
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Name: Joseph Furnari
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Title: CEO and CFO
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[Signature Page to 13% Senior Secured Convertible
Promissory Note]
EXHIBIT I
CONVERSION NOTICE
NOTICE OF CONVERSION
The undersigned hereby
elects to convert principal and/or accrued interest under the 13% Senior Secured Convertible Promissory Note due of Hyrecar Inc,
a Delaware corporation (the “Company”), into shares of common stock, par value $0.00001 per share (the “Common
Stock”) of the Company, according to the conditions hereof, as of the date written below. If shares of Common Stock are to
be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.
No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any.
Conversion Calculations:
Date to Effect Conversion: __________________________
Principal Amount of 13% Senior Secured Convertible
Promissory Note to be Converted: ________________________
Accrued Interest Amount of 13% Senior Secured
Convertible Promissory Note to be Converted: ______________________
Number of Shares of Common Stock to be Issued:
__________________
Exhibit 4.6
THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO
THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AS SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
1933 ACT AND APPLICABLE LAWS IS AVAILABLE.
WARRANT TO PURCHASE
COMMON STOCK OF
HYRECAR INC
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Date of Issuance: __, 2018
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Warrant No. 2018-__
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This certifies that,
for value received, Hyrecar Inc, a Delaware corporation (the “Company”), grants ___________________, or his registered
assigns (the “Registered Holder”), the right to subscribe for and purchase from the Company, at the Exercise Price
(as defined herein), from and after 9:00 a.m. Pacific Standard Time on the earlier of the date of the IPO (as defined in the Promissory
Note) or the date of the Next Financing (as defined in the Promissory Note) (the “Exercise Date”) and to and including
5:00 p.m., Pacific Standard Time, on __, 2023 (the “Expiration Date”), shares,
1
as such number of shares may be adjusted from time to time as described herein (the “Warrant Shares”), of the Company’s
common stock, par value 0.00001 per share (the “Common Stock”), subject to the provisions and upon the terms and conditions
herein set forth. The “Exercise Price” per share of Common Stock will be equal to 125% of the then Conversion Price
(as defined in the Promissory Note (as defined below)) on the Date of Exercise.
This Warrant is issued
in connection with the issuance to the Registered Holder of a 13% Senior Secured Convertible Promissory Note dated as of January
__, 2018 (the “Promissory Note”) and in connection with that certain Securities Purchase Agreement between the Company
and the Registered Holder dated as of January 3, 2018 (the “Securities Agreement”). The Registered Holder of this Warrant
is subject to the terms and conditions set forth in the Securities Agreement.
Section 1.
Recordation
on Books of the Company
. The Company shall record this Warrant, upon records to be maintained by the Company for that purpose
(the “Warrant Records”), in the name of the Registered Holder. The Company may deem and treat the Registered Holder
as the absolute owner of this Warrant for the purpose of any exercise hereof or any distribution to the Registered Holder.
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1
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The
amount shall be 50% of the shares of Common Stock that the Registered Holder is entitled to in connection with the conversion
of the Registered Holder’s Promissory Note when such Promissory Note first becomes convertible.
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Section 2.
Registration
of Transfers and Exchanges
.
(a) Subject
to Section 9 hereof, the Company shall register the transfer of this Warrant, in whole or in part, upon records to be maintained
by the Company for that purpose, upon surrender of this Warrant, with the Form of Assignment attached hereto completed and duly
endorsed by the Registered
Holder, to the Company at the office specified in or pursuant to Section
3(b). Upon any such registration of transfer, a new Warrant, in substantially the form of this Warrant, evidencing the Common Stock
purchase rights so transferred shall be issued to the transferee and a new Warrant, in similar form, evidencing the remaining Common
Stock purchase rights not so transferred, if any, shall be issued to the Registered Holder.
(b) This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at the office of the Company specified in or pursuant
to Section 3(b) hereof, for new Warrants, in substantially the form of this Warrant evidencing, in the aggregate, the right to
purchase the number of Warrant Shares which may then be purchased hereunder, each of such new Warrants to be dated the date of
such exchange and to represent the right to purchase such number of Warrant Shares as shall be designated by the Registered Holder
at the time of such surrender.
Section 3.
Duration
and Exercise of this Warrant; Delivery of Warrant Shares Upon Exercise
.
(a) This
Warrant shall be exercisable by the Registered Holder as to the Warrant Shares at any time during the period commencing on the
Exercise Date and ending on the Expiration Date. At 5:00 p.m., Pacific Standard Time, on the Expiration Date, this Warrant, to
the extent not previously exercised, shall become void and of no further force or effect.
(b) Subject
to Section 7 hereof, upon exercise or surrender of this Warrant, with the Form of Election to Purchase attached hereto completed
and duly endorsed by the Registered Holder, to the Company at 355 South Grand Avenue, Suite 1650, Los Angeles, CA 90071, Attention:
Chief Financial Officer, or at such other address as the Company may specify in writing to the Registered Holder, and upon payment
of the Exercise Price multiplied by the number of Warrant Shares then issuable upon exercise of this Warrant in lawful money of
the United States of America, all as specified by the Registered Holder in the Form of Election to Purchase, within three (3) Business
Days after delivery of the Form of Election to Purchase to the Company (the “
Warrant Share Delivery Date
”),
the Company shall issue and cause to be delivered to the Registered Holder, and in such name or names as the Registered Holder
may designate, a certificate evidencing the Warrant Shares issued upon such exercise. Any person so designated in the Form of Election
to Purchase, duly endorsed by the Registered Holder, as the person to be named on the certificates evidencing the Warrant Shares,
shall be deemed to have become holder of record of such Warrant Shares, evidenced by such certificates, as of the Date of Exercise
(as hereinafter defined) of such Warrant.
(c) The
Registered Holder may pay the applicable Exercise Price pursuant to Section 3(b), at the option of the Registered Holder, either
(i) by cashier’s or certified bank check payable to the Company, or (ii) by wire transfer of immediately available funds
to the account which shall be indicated in writing by the Company to the Registered Holder, in either case, in an amount equal
to the product of the Exercise Price multiplied by the number of Warrant Shares being purchased upon such exercise (the “Aggregate
Exercise Price”). Alternatively, payment of the Aggregate Exercise Price may be made by the Registered Holder instructing
the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value
as of the Exercise Date equal to such Aggregate Exercise Price.
(d) “Fair
Market Value” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common
Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have
been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices
for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic
securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board, the Pink OTC Markets or similar
quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the OTC Bulletin Board,
the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices
for the Common Stock quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association at the end
of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to
the day as of which “Fair Market Value” is being determined;
provided
, that if the Common Stock is listed on
any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such
exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the
OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association, the “Fair Market Value” of the
Common Stock shall be the fair market value per share as determined jointly by the Board and the Registered Holder; provided, that
if the Company and the Holder are unable to agree on the fair market value per share of the Common Stock within a reasonable period
of time (not to exceed 5 days from the Company’s receipt of the Form of Election), such fair market value shall be determined
by a nationally recognized investment banking, accounting or valuation firm jointly selected by the Company and the Registered
Holder. The determination of such firm shall be final and conclusive, and the fees and expenses of such valuation firm shall be
borne by the Company.
(e) The
“Date of Exercise” of any Warrant means the date on which the Company shall have received (i) this Warrant, with the
Form of Election to Purchase attached hereto appropriately completed and duly endorsed, and (ii) payment of the Aggregate Exercise
Price as provided herein.
(f) This
Warrant will be exercisable either in its entirety or, from time to time, for part, only of the number of Warrant Shares which
are issuable hereunder. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of the
certificates for the Warrant Shares issued pursuant to such exercise, deliver to the Registered Holder a new Warrant evidencing
the rights to purchase the remaining Warrant Shares, which Warrant shall be substantially in the form of this Warrant.
(g) If
the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Form of Election to Purchase 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, $10 per Business Day (increasing to $20 per Business Day on the fifth (5th) Business
Day after such liquidated damages begin to accrue) for each Business Day after such Warrant Share Delivery Date until such Warrant
Shares are delivered or Holder rescinds such exercise.
(h)
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 transmit or cause to be transmitted to the Holder the Warrant Shares 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.
Section 4.
Payment
of Expenses
. The Company will pay all expenses (other than any federal or state taxes, including without limitation income
taxes, or similar obligations of the Registered Holder) attributable to the preparation, execution, issuance and delivery of this
Warrant, any new Warrant and the Warrant Shares.
Section 5.
Mutilated
or Missing Warrant Certificate
. If this Warrant is mutilated, lost, stolen or destroyed, upon request by the Registered Holder,
the Company will issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen
or destroyed Warrant, a substitute Warrant, in substantially the form of this Warrant, of like tenor, but, in the case of loss,
theft or destruction, only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of
this Warrant and, if requested by the Company, indemnity also reasonably satisfactory to it.
Section 6.
Reservation,
Listing and Issuance of Warrant Shares
.
(a) The
Company will at all times have authorized, and reserve and keep available, free from preemptive rights, for the purpose of enabling
it to satisfy any obligation to issue Warrant Shares upon the exercise of the rights represented by this Warrant, the number of
Warrant Shares deliverable upon exercise of this Warrant. The Company will, at its expense, use it best efforts to cause such shares
to be included in or listed on (subject to issuance or notice of issuance of Warrant Shares) all markets or stock exchanges in
or on which the Common Stock is included or listed not later than the date on which the Common Stock is first included or listed
on any such market or exchange and will thereafter maintain such inclusion or listing of all shares of Common Stock from time to
time issuable upon exercise of this Warrant.
(b) Before
taking any action which could cause an adjustment pursuant to Section 7 hereof reducing the Exercise Price below the par value
of the Warrant Shares, the Company will take any corporate action which may be necessary in order that the Company may validly
and legally issue at the Exercise Price, as so adjusted, Warrant Shares that are fully paid and non-assessable.
(c) The
Company covenants that all Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be (i) duly authorized,
fully paid and nonassessable, and (ii) free from all liens, charges and security interests.
Section 7.
Adjustment
of Number of Warrant Shares
.
(a) The
number of Warrant Shares to be purchased upon exercise hereof is subject to change or adjustment from time to time as hereinafter
provided:
(i)
Stock
Dividends; Stock Splits; Reverse Stock Splits; Reclassifications
. In case the Company shall (a) pay a dividend with respect
to its Common Stock in shares of capital stock, (b) subdivide its outstanding shares of Common Stock, (c) combine its outstanding
shares of Common Stock into a smaller number of shares of any class of Common Stock or (d) issue any shares of its capital stock
in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in
which the Company is the continuing corporation), other than elimination of par value, a change in par value, or a change from
par value to no par value (any one of which actions is herein referred to as an “Adjustment Event”), the number of
Warrant Shares purchasable upon exercise of the Warrant immediately prior to the record date for such Adjustment Event shall be
adjusted so that the Registered Holder shall thereafter be entitled to receive the number of shares of Common Stock or other securities
of the Company (such other securities thereafter enjoying the rights of shares of Common Stock under this Warrant) that such Registered
Holder would have owned or have been entitled to receive after the happening of such Adjustment Event, had such Warrant been exercised
immediately prior to the happening of such Adjustment Event or any record date with respect thereto. An adjustment made pursuant
to this Section 7(a)(i) shall become effective immediately after the effective date of such Adjustment Event retroactive to the
record date, if any, for such Adjustment Event.
(ii)
Adjustment
of Exercise Price
. Whenever the number of Warrant Shares purchasable upon the exercise of each Warrant is adjusted pursuant
to Section 7(a)(i), the Exercise Price for each Warrant Share payable upon exercise of each Warrant shall be adjusted by multiplying
such Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of shares of
Common Stock purchasable upon the exercise of each Warrant immediately prior to such adjustment, and the denominator of which shall
be the number of shares of Common Stock so purchasable immediately thereafter.
(iii)
Adjustments
for Consolidation, Merger, Sale of Assets, Reorganization, etc
. In case the Company (a) consolidates with or merges into any
other corporation and is not the continuing or surviving corporation of such consolidation of merger, or (b) permits any other
corporation to consolidate with or merge into the Company and the Company is the continuing or surviving corporation but, in connection
with such consolidation or merger, the Common Stock is changed into or exchanged for stock or other securities of any other corporation
or cash or any other assets, or (c) transfers all or substantially all of its properties and assets to any other corporation, or
(d) effects a capital reorganization or reclassification of the capital stock of the Company in such a way that holders of Common
Stock shall be entitled to receive stock, securities, cash and/or assets with respect to or in exchange for Common Stock, then,
and in each such case, proper provision shall be made so that, upon the basis and upon the terms and in the manner provided in
this subsection 7(a)(iii), the Registered Holder, upon the exercise of this Warrant at any time after the consummation of such
consolidation, merger, transfer, reorganization or reclassification, shall be entitled to receive (at the aggregate Exercise Price
in effect for all shares of Common Stock issuable upon such exercise immediately prior to such consummation as adjusted to the
time of such transaction), in lieu of shares of Common Stock issuable upon such exercise prior to such consummation, the stock
and other securities, cash and/or assets to which such holder would have been entitled upon such consummation if the Registered
Holder had so exercised this Warrant immediately prior thereto (subject to adjustments subsequent to such corporate action as nearly
equivalent as possible to the adjustments provided for in this Section).
(iv)
De
Minimis Adjustments
. No adjustment in the Exercise Price and number of Warrant Shares purchasable hereunder shall be required
unless such adjustment would require an increase or decrease of at least $0.001 in the Exercise Price; provided, however, that
any adjustments which by reason of this Section 7(a)(iv) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations shall be made to the nearest full share.
(b)
Notice
of Adjustment; Notice of Replacement
. (i) Whenever the number of Warrant Shares purchasable upon the exercise of each Warrant
or the Exercise Price is adjusted, as herein provided, the Company shall promptly notify the Registered Holder in writing (such
writing referred to as an “
Adjustment Notice
”) of such adjustment or adjustments and shall deliver to such Registered
Holder a statement setting forth the number of shares of Common Stock purchasable upon the exercise of each Warrant and the Exercise
Price after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation
by which such adjustment was made. (ii) In the event of an IPO, the Company will provide the Registered Holder with notice of the
Exercise Price established pursuant to the IPO and a replacement warrant evidencing the same within ten (10) Business Days after
the closing of the IPO, or in the event that the IPO does not occur, within fifteen (15) Business Days after the closing of the
Next Financing.
(c)
Other
Notices
. In case at any time:
(i) the
Company shall declare any cash dividend on its Common Stock;
(ii) the
Company shall pay any dividend payable in stock upon its Common Stock or make any distribution (other than regular cash dividends)
to the holders of its Common Stock;
(iii) the
Company shall offer for subscription
pro rata
to all of the holders of its Common Stock any additional shares of stock of
any class or other rights;
(iv) the
Company shall authorize the distribution to all holders of its Common Stock of evidences of its indebtedness or assets (other than
cash dividends or cash distributions payable out of earnings or earned surplus or dividends payable in Common Stock);
(v) there
shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger of the
Company with another corporation (other than a subsidiary of the Company in which the Company is the surviving or continuing corporation
and no change occurs in the Company’s Common Stock), or sale of all or substantially all of its assets to another corporation;
or
(vi) there
shall be a voluntary or involuntary dissolution, liquidation, bankruptcy, assignment for the benefit of creditors, or winding up
of the Company; then, in any one or more of said cases the Company shall give written notice, addressed to the Registered Holder
at the address of such Registered Holder as shown on the books of the Company, of (1) the date on which the books of the Company
shall close or a record shall be taken for such dividend, distribution or subscription rights, or (2) the date (or, if not then
known, a reasonable approximation thereof by the Company) on which such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, bankruptcy, assignment for the benefit of creditors, winding up or other action, as the case may
be, shall take place. Such notice shall also specify (or, if not then known, reasonably approximate) the date as of which the holders
of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, bankruptcy, assignment for the benefit of creditors, winding up, or other action, as the case may
be. Such written notice shall be given (except as to any bankruptcy proceeding) at least five (5) days prior to the action in question
and not less than five (5) days prior to the record date or the date on which the Company’s transfer books are closed in
respect thereto. Such notice shall also state that the action in question or the record date is subject to the effectiveness of
a registration statement under the Securities Act of 1933, as amended (the “1933 Act”), or to a favorable vote of stockholders,
if either is required.
(d)
Statement
on Warrants
. The form of this Warrant need not be changed because of any change in the Exercise Price or in the number or kind
of shares purchasable upon the exercise of a Warrant. However, the Company may at any time in its sole discretion make any change
in the form of the Warrant that it may deem appropriate and that does not affect the substance thereof and any Warrant thereafter
issued, whether in exchange or substitution for any outstanding Warrant or otherwise, may be in the form so changed.
(e)
Fractional
Interest
. The Company will not be required to issue fractional Warrant Shares on the exercise of the Warrants. The number of
full Warrant Shares which shall be issuable upon such exercise shall be computed on the basis of the aggregate number of whole
shares of Common Stock purchasable on the exercise of the Warrants so presented. If any fraction of a share of Common Stock would,
except for the provisions of this Section 7(e) be issuable on the exercise of the Warrants (or specified proportion thereof), the
Company shall pay an amount in cash calculated by it to be equal to the then fair value of one share of Common Stock, as determined
by the Board of Directors of the Company in good faith, multiplied by such fraction computed to the nearest whole cent.
(f)
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. Such adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued; provided that if such Common Stock or Common Stock Equivalents are issued in tranches such adjustment shall
be made at the first closing of such issuance. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under
this Section 7(f) in respect of an Exempt Issuance (as defined below). The Company shall notify the Holder, in writing, no later
than the Business Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this
Section 7(f), 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 7(f), upon the occurrence of any Dilutive Issuance,
the Holder is entitled to receive Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers
to the Base Share Price in the Form of Election to Purchase. “
Exempt Issuance
” means the issuance of (i) securities
issued under any equity incentive plan of the Company and any amendments thereto approved by the Board of Directors of the Company,
including securities issuable upon conversion or exercise of such securities, (ii) securities issued for consideration other than
cash pursuant to a strategic arrangement, joint venture, merger, consolidation, acquisition, or similar business combination approved
by the Board of Directors of the Company, or (iii) securities issued hereunder or under the Securities Agreement or upon the exercise
or exchange of or conversion of any securities issued hereunder or under the Securities Agreement and/or other securities exercisable
or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date hereof, provided that such securities
have not been amended since the date hereof to increase the number of such securities or to decrease the exercise price, exchange
price or conversion price of such securities. Notwithstanding the foregoing, this Section 7(f) shall not apply if the Registration
Statement (as defined in the Securities Agreement) may be used by the Holder to re-sell the Warrant Shares.
Section 8.
No
Rights or Liabilities as a Stockholder
. The Registered Holder shall not be entitled to vote or be deemed the holder of Common
Stock or any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, the rights of a stockholder of the Company or the right
to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or give or withhold
consent to any corporate action or to receive notice of meetings or other actions affecting stockholders (except as provided herein),
or to receive dividends or subscription rights or otherwise, until the Date of Exercise shall have occurred. No provision of this
Warrant, in the absence of affirmative action by the Registered Holder hereof to purchase shares of Common Stock, and no mere enumeration
herein of the rights and privileges of the Registered Holder, shall give rise to any liability of such holder for the Exercise
Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
Section 9.
Transfer
Restrictions; Registration of the Warrant and Warrant Shares
.
(a) Neither
the Warrant nor the Warrant Shares have been registered under the 1933 Act. The Registered Holder, by acceptance hereof, represents
that it is acquiring this Warrant to be issued to it for its own account and not with a view to the distribution thereof, and agrees
not to sell, transfer, pledge or hypothecate this Warrant, any purchase rights evidenced hereby or any Warrant Shares unless a
registration statement is effective for this Warrant or the Warrant Shares under the 1933 Act, or in the opinion of such Registered
Holder’s counsel reasonably satisfactory to the Company, a copy of which opinion shall be delivered to the Company, such
registration is not required as some other exemption from the registration requirement of the 1933 Act and applicable laws is available.
(b) Subject
to the provisions of the following paragraph of this Section 9, each Certificate for Warrant Shares shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR SUCH SECURITIES UNDER THE 1933 ACT, AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION
IS NOT REQUIRED UNDER THE 1933 ACT AS SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND APPLICABLE LAWS
IS AVAILABLE.
(c) The
restrictions and requirements set forth in the foregoing paragraph shall apply with respect to Warrant Shares unless and until
such Warrant Shares are sold or otherwise transferred pursuant to an effective registration statement under the 1933 Act or are
otherwise no longer subject to the restrictions of the 1933 Act, at which time the Company agrees to promptly cause such restrictive
legends to be removed and stop transfer restrictions applicable to such Warrant Shares to be rescinded.
Section 10.
Notices
.
All notices and other communications relating to this Warrant shall be in writing and shall be deemed to have been duly given if
delivered personally or sent by United States certified or registered first-class mail, postage prepaid, return receipt requested,
or overnight air courier guaranteeing next day delivery to the parties hereto at the following addresses or at such other address
as any party hereto shall hereafter specify by notice to the other party hereto:
(a) If
to the Registered Holder of this Warrant or the holder of the Warrant Shares, addressed to the address of such Registered Holder
or holder as set forth on books of the Company or otherwise furnished by the Registered Holder or holder to the Company.
(b) If
to the Company, addressed to:
Hyrecar Inc
355 South Grand Avenue, Suite 1650
Los Angeles, CA 90071
Attn: Joseph Furnari, Chief Executive Officer and Chief Financial Officer
Telephone: (213) 839-6932
Email: joe@hyrecar.com
A notice or communication will be effective
(i) if delivered in person or by overnight courier, on the business day it is delivered, and (ii) if sent by registered or certified
mail, the earlier of the date of actual
receipt by the party to whom such notice is required to be
given or three (3) days after deposit in the United States mail.
Section 11.
Binding
Effect
. This Warrant shall be binding upon and inure to the sole and exclusive benefit of the Company, its successors and assigns,
and the holder or holders from time to time of this Warrant and the Warrant Shares.
Section 12.
Survival
of Rights and Duties
. This Warrant shall terminate and be of no further force and effect on the earlier of (i) 5:00 p.m., Pacific
Standard Time, on the Expiration Date and (ii) the date on which this Warrant and all purchase rights evidenced hereby have been
exercised, except that the provisions of Section 9 hereof shall continue in full force and effect after such termination date.
Section 13.
Governing
Law
. This Warrant shall be governed and controlled as to the validity, enforcement, interpretations, construction and effect
and in all other aspects by the substantive laws of the State of New York. In any action between or among any of the parties, whether
arising out of this Warrant or otherwise, each of the parties irrevocably consents to the exclusive jurisdiction and venue of the
federal and state courts located in New York County, New York. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Warrant
or the transactions contemplated hereby.
Section 14.
Section
Headings
. The Section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof.
[Signature Page Follows]
IN WITNESS WHEREOF,
Hyrecar Inc has caused this Warrant to be duly executed in its corporate name by its officer thereunto duly authorized as of the
date first above indicated.
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HYRECAR INC
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By:
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Joseph Furnari
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CEO and CFO
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FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise of this Warrant)
To Hyrecar Inc:
The undersigned, the
record holder of this Warrant (Warrant No. __), hereby
irrevocably elects to exercise the right, represented
by this Warrant, to purchase ____ of the Warrant Shares and herewith and hereby tenders payment for such Warrant Shares:
☐ in lawful money of
the United States to the order of Hyrecar Inc of $_______; or
☐ the withholding of
such number of Warrant Shares equal to the aggregate Fair Market Value as of the date hereof equal to the Aggregate Exercise
Price, calculated in accordance with Section 3 hereof.
The
undersigned requests that certificates for such shares be issued in the name of:
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(Please print name and address
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Social Security or Tax Identification No.
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In the
event that not all of the purchase rights represented by the Warrant are exercised, a new Warrant, substantially identical to the
attached Warrant, representing the rights formerly represented by the attached Warrant which have not been exercised, shall be
issued in the name of and delivered to:
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(Please
print name and address
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Social Security or Tax Identification No.
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Dated:
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Name of Holder (Print):
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By:
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(Name):
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(Title):
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED,
hereby sells, assigns and transfers to
each assignee set forth below all of the rights of the undersigned
under the attached Warrant (Warrant No.
) with respect to the number of shares of Common Stock covered thereby set forth
opposite the name of such assignee unto:
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Name of Assignee
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Address
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Number of Shares of Common Stock
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If the total of said
purchase rights represented by the Warrant shall not be assigned, the undersigned requests that a new Warrant Certificate evidencing
the purchase rights not so assigned be issued in the name of and delivered to the undersigned.
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Dated:_________________
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Name of Holder (Print):________________________
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Warrant –
Page 13
Exhibit 10.1
Hyrecar
Inc
555
W. 5th Street
Los
Angeles, CA 90013
September
12, 2016
Joseph
Furnari
Dear
Mr. Furnari:
Hyrecar
Inc, a Delaware corporation (the “
Company
”), is pleased to offer you employment as its Chief Financial Officer,
reporting to the Company’s Board of Directors (“
Board
”). This is an offer of at will employment and is
subject to the terms and conditions set forth in this letter agreement (this “
Letter Agreement
”) and may be
terminated by the Company at any time, for any reason, with or without cause.
1.
Position.
Your title will be Chief Financial Officer. This is a full-time position. While you are an employee of the Company, you will
not engage in any other employment, consulting or other business activity (whether full-time or part-time) or serve as a director
on the board of any other company (“
External Activities
”) in each case which (a) would create a conflict of
interest with the Company, or (b) is not approved by the Board in a written acknowledgment. By signing this Letter Agreement,
you confirm to the Company that you currently have no such External Activities and that you have no contractual commitments or
other legal obligations that would prohibit you from performing or would materially limit your capability to perform your duties
for the Company.
2. Cash
Compensation.
The Company will pay you a base salary at the annual rate of $48,000, payable in accordance with the Company’s
standard payroll schedule. In addition, subject to the discretion of the Board, you will be considered for an annual incentive
bonus, typically for each fiscal year of the Company.
3. Employee
Benefits.
As a regular employee of the Company, you will be eligible to participate in Company-sponsored benefits, as in effect
from time to time. In addition, you will be entitled to paid vacation in accordance with the Company’s vacation policy,
as in effect from time to time.
4. Restricted
Stock Award.
Subject to the approval of the Board, you will be issued 900,000 restricted shares (the “
Shares
”)
of the Company’s common stock, par value $0.00001 per share (the “
Award
”) under the Company’s 2016
Equity Incentive Plan (the “
Plan
”). The Award will be subject to the terms and conditions of the Plan, as set
forth in the Plan and the applicable Restricted Stock Award Agreement. The Shares of restricted stock shall initially be unvested
and forfeitable. The Shares shall vest, the restrictions thereon shall lapse and such Shares shall become nonforfeitable
according to the following schedule, subject to your continuous service with the Company through and including the applicable
vesting date
: (i) 33% of the Shares shall vest on the consummation of a sale of securities for aggregate gross proceeds
of at least $250,000 in one or more transactions and (ii) the remaining 67% of the Shares shall vest in 36 successive equal monthly
installments commencing on May 1, 2016 and vesting in full on April 30, 2019.
Joseph Furnari
At Will Employment Offer Letter
Page | 2
5. Nondisclosure
of Confidential Information.
You shall not, without the prior written consent of the Board, use, divulge, disclose or make
accessible to any other person, any Confidential Information pertaining to the business or affairs of the Company, except (i)
while employed by the Company, in the business of and for the benefit of the Company, or (ii) when required to do so by a court
of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company, or by any
administrative body or legislative body with jurisdiction to order you to divulge, disclose or make accessible such information.
For
purposes hereof, “Confidential Information” shall mean non-public information concerning financial data, strategic
business plans, sales or marketing plans, or other proprietary marketing data, proprietary information, contracts or agreements
with customers, vendors or consultants, and all other non-public, proprietary and confidential information of the Company that
in any case is not otherwise available to the public (other than by your breach of the terms hereof).
6. Restrictive
Covenants.
6.1
Non-Solicitation
.
a) In
consideration of your employment with the Company, participation in any stock, bonus or other incentive compensation plans of
the Company, which you acknowledge is of direct benefit to you, you hereby covenant that, during the period commencing on the
date hereof and ending on the two (2) year anniversary of your termination (the “
Restricted Period
”), you and
your Affiliates (as defined herein) shall not directly or indirectly, through any other person:
(i)
(1) employ, solicit or induce any individual who is, or was at any time during the one (1) year period prior to your termination,
an employee or consultant of the Company, (2) cause such individual to terminate or refrain from renewing or extending his or
her employment by or consulting relationship with the Company, or (3) cause such individual to become employed by or enter into
a consulting relationship with the Company and its Affiliates or any other individual, person or entity; or
(ii)
solicit, persuade or induce any Customer to terminate, reduce or refrain from renewing or extending its contractual or other relationship
with the Company in regard to the purchase of products or services, performed, manufactured, marketed or sold by the Company or
any other person in regard to the purchase of products or services similar or identical to those performed, manufactured, marketed
or sold, by the Company. For purposes hereof, “Customer” means any individual, person or entity which is a customer
of the Company or which was a customer of the Company within one (1) year prior to the termination of employment hereunder.
(iii)
whether as owner, consultant, executive, partner, member, manager, officer, director, venturer, agent, through stock ownership,
investment of capital, lending of money or property, rendering of services, or otherwise, engage or assist others to engage in
the business of ride sharing in the Territory; provided, that you may own up to three (3%) percent of the outstanding shares of
a company engaged in such business if such shares are listed on national securities exchange.
Joseph Furnari
At Will Employment Offer Letter
Page | 3
6.2
Non-Disparagement
.
You agree that neither you nor any of your Affiliates shall (i) in any way publicly disparage the Company, its equity holders,
officers, directors, employees, agents or Affiliates, (ii) cause embarrassment or public humiliation to such persons or (iii)
make any public statement that is adverse, inimical or otherwise detrimental to the interests of any such persons or the Company’s
business at any time, including without limitation, during periods after the termination of this Agreement.
6.3
Certain
Definitions
. The following terms shall have the following meanings when used in this Agreement:
a) “
Affiliate
”
means, as to any person, a person that directly or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, the person specified. With respect to any natural person, the term Affiliate shall also include
any member of said person’s immediate family, any family limited partnership or similar entity for said person and any trust,
voting or otherwise, of which said person is a trustee or of which said person or any of said person’s immediate family
is a beneficiary. With respect to any trust, the term Affiliate shall also include any beneficiary or trustee of such trust. For
purposes of the foregoing, the term “control” and variations thereof means the possession of the power to direct or
cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract
or otherwise.
b) “
Territory
”
means the United States.
7. Tax
Matters.
7.1
Withholding
.
All forms of compensation referred to in this Letter Agreement are subject to reduction to reflect applicable withholding and
payroll taxes and other deductions required by law.
7.2
Tax
Advice
. You are encouraged to obtain your own tax advice regarding your compensation from the Company. You agree that the
Company does not have a duty to design its compensation policies in a manner that minimizes your tax liabilities, and you will
not make any claim against the Company or its Board related to tax liabilities arising from your compensation.
8. Interpretation,
Amendment and Enforcement.
This Letter Agreement supersedes and replaces any prior agreements, representations or understandings
(whether written, oral, implied or otherwise) between you and the Company and constitutes the entire agreement between you and
the Company regarding the subject matter set forth herein. This Letter Agreement may not be amended or modified, except by an
express written agreement signed by both you and a duly authorized officer of the Company. The terms of this Letter Agreement
and the resolution of any disputes as to the meaning, effect, performance or validity of this Letter Agreement or arising out
of, related to, or in any way connected with, this Letter Agreement, your employment with the Company or any other relationship
between you and the Company (the “
Disputes
”) will be governed by California law, excluding laws relating to
conflicts or choice of law. You and the Company submit to the exclusive personal jurisdiction of the federal and state courts
located in Los Angeles County, California, in connection with any Dispute or any claim related to any Dispute. You acknowledge
and agree that if any term or provision of this Agreement is deemed invalid or unenforceable by a court of competent jurisdiction,
the remainder of this Agreement shall continue in full force and effect.
Joseph Furnari
At Will Employment Offer Letter
Page | 4
Please
contact me if you have any questions or concerns.
Sincerely,
|
HYRECAR INC
|
|
|
|
|
|
/s/ Abhishek Arora
|
|
|
Abhishek Arora, Chief Operating Officer
|
|
|
I have read and understood, and herby accept this employment offer:
|
|
|
|
|
/s/ Joseph Furnari
|
|
|
Name:
|
Joseph Furnari
|
|
Exhibit 10.2
Hyrecar Inc
555 W. 5th Street
Los Angeles, CA 90013
September 12, 2016
Michael Furnari
Dear Mr. Furnari:
Hyrecar
Inc, a Delaware corporation (the “Company”), is pleased to offer you employment as its Secretary and Director of Sales,
reporting to the Company’s Board of Directors (“Board”). This is an offer of at will employment and is subject
to the terms and conditions set forth in this letter agreement (this “Letter Agreement”) and may be terminated by the
Company at any time, for any reason, with or without cause.
1. Position.
Your title will be Secretary and Director of Sales. This is a full-time position. While you are an employee of the Company,
you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) or serve as
a director on the board of any other company (“External Activities”) in each case which (a) would create a conflict
of interest with the Company, or (b) is not approved by the Board in a written acknowledgment. By signing this Letter Agreement,
you confirm to the Company that you currently have no such External Activities and that you have no contractual commitments or
other legal obligations that would prohibit you from performing or would materially limit your capability to perform your duties
for the Company.
2. Cash
Compensation.
The Company will pay you a base salary at the annual rate of $48,000, payable in accordance with the Company’s
standard payroll schedule. In addition, subject to the discretion of the Board, you will be considered for an annual incentive
bonus, typically for each fiscal year of the Company.
3. Employee
Benefits.
As a regular employee of the Company, you will be eligible to participate in Company-sponsored benefits, as in effect
from time to time. In addition, you will be entitled to paid vacation in accordance with the Company’s vacation policy, as
in effect from time to time.
4.
Restricted
Stock Award.
Subject to the approval of the Board, you will be issued 900,000 restricted shares (the
“Shares”) of the Company’s common stock, par value $0.00001 per share (the “Award”) under the
Company’s 2016 Equity Incentive Plan (the “Plan”). The Award will be subject to the terms and conditions of
the Plan, as set forth in the Plan and the applicable Restricted Stock Award Agreement. The Shares of restricted stock shall
initially be unvested and forfeitable. The Shares shall vest, the restrictions thereon shall lapse and such Shares shall
become nonforfeitable according to the following schedule, subject to your continuous service with the Company through and
including the applicable vesting date:
(i) 33% of the Shares shall vest on the consummation of a sale of securities for
aggregate gross proceeds of at least $250,000 in one or more transactions and (ii) the remaining 67% of the Shares shall vest
in 36 successive equal monthly installments commencing on May 1, 2016 and vesting in full on April 30, 2019.
Michael Furnari
At Will Employment Offer Letter
Page | 2
5. Nondisclosure
of Confidential Information.
You shall not, without the prior written consent of the Board, use, divulge, disclose or make
accessible to any other person, any Confidential Information pertaining to the business or affairs of the Company, except (i) while
employed by the Company, in the business of and for the benefit of the Company, or (ii) when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority over the business of the Company, or by any administrative
body or legislative body with jurisdiction to order you to divulge, disclose or make accessible such information.
For purposes hereof, “Confidential
Information” shall mean non-public information concerning financial data, strategic business plans, sales or marketing plans,
or other proprietary marketing data, proprietary information, contracts or agreements with customers, vendors or consultants, and
all other non-public, proprietary and confidential information of the Company that in any case is not otherwise available to the
public (other than by your breach of the terms hereof).
6. Restrictive Covenants.
6.1
Non-Solicitation
.
a) In
consideration of your employment with the Company, participation in any stock, bonus or other incentive compensation plans of the
Company, which you acknowledge is of direct benefit to you, you hereby covenant that, during the period commencing on the date
hereof and ending on the two
(2) year anniversary of your termination (the “
Restricted Period
”), you and your Affiliates (as defined herein) shall not directly or indirectly, through any other person:
(i) (1) employ, solicit or induce any
individual who is, or was at any time during the one (1) year period prior to your termination, an employee or consultant of
the Company, (2) cause such individual to terminate or refrain from renewing or extending his or her employment by or
consulting relationship with the Company, or (3) cause such individual to become employed by or enter into a consulting
relationship with the Company and its Affiliates or any other individual, person or entity; or
(ii) solicit,
persuade or induce any Customer to terminate, reduce or refrain from renewing or extending its contractual or other relationship
with the Company in regard to the purchase of products or services, performed, manufactured, marketed or sold by the Company or
any other person in regard to the purchase of products or services similar or identical to those performed, manufactured, marketed
or sold, by the Company. For purposes hereof, “Customer” means any individual, person or entity which is a customer
of the Company or which was a customer of the Company within one (1) year prior to the termination of employment hereunder.
(iii) whether
as owner, consultant, executive, partner, member, manager, officer, director, venturer, agent, through stock ownership, investment
of capital, lending of money or property, rendering of services, or otherwise, engage or assist others to engage in the business
of ride sharing in the Territory;
Michael Furnari
At Will Employment Offer Letter
Page | 3
provided, that you may own up
to three (3%) percent of the outstanding shares of a company engaged in such business if such shares are listed on national securities
exchange.
6.2
Non-Disparagement
.
You agree that neither you nor any of your Affiliates shall (i) in any way publicly disparage the Company, its equity holders,
officers, directors, employees, agents or Affiliates,
(ii) cause embarrassment or
public humiliation to such persons or (iii) make any public statement that is adverse, inimical or otherwise detrimental to the
interests of any such persons or the Company’s business at any time, including without limitation, during periods after the
termination of this Agreement.
6.3
Certain
Definitions
. The following terms shall have the following meanings when used in this Agreement:
a) “
Affiliate
”
means, as to any person, a person that directly or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, the person specified. With respect to any natural person, the term Affiliate shall also include
any member of said person’s immediate family, any family limited partnership or similar entity for said person and any trust,
voting or otherwise, of which said person is a trustee or of which said person or any of said person’s immediate family is
a beneficiary. With respect to any trust, the term Affiliate shall also include any beneficiary or trustee of such trust. For purposes
of the foregoing, the term “control” and variations thereof means the possession of the power to direct or cause the
direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise.
b) “
Territory
” means the United States.
7. Tax Matters.
7.1
Withholding
.
All forms of compensation referred to in this Letter Agreement are subject to reduction to reflect applicable withholding and payroll
taxes and other deductions required by law.
7.2
Tax
Advice
. You are encouraged to obtain your own tax advice regarding your compensation from the Company. You agree that the Company
does not have a duty to design its compensation policies in a manner that minimizes your tax liabilities, and you will not make
any claim against the Company or its Board related to tax liabilities arising from your compensation.
8. Interpretation, Amendment and
Enforcement.
This Letter Agreement supersedes and replaces any prior agreements, representations or understandings
(whether written, oral, implied or otherwise) between you and the Company and constitutes the entire agreement between you
and the Company regarding the subject matter set forth herein. This Letter Agreement may not be amended or modified, except
by an express written agreement signed by both you and a duly authorized officer of the Company. The terms of this Letter
Agreement and the resolution of any disputes as to the meaning, effect, performance or validity of this Letter Agreement or
arising out of, related to, or in any way connected with, this Letter Agreement, your employment with the Company or any
other relationship between you and the Company (the “
Disputes
”) will be governed by California law,
excluding laws relatingto conflicts or choice of law. You and the Company submit to the exclusive personal jurisdiction of
the federal and state courts located in Los Angeles County, California, in connection with any Dispute or any claim related
to any Dispute. You acknowledge and agree that if any term or provision of this Agreement is deemed invalid or unenforceable
by a court of competent jurisdiction, the remainder of this Agreement shall continue in full force and effect.
Michael Furnari
At Will Employment Offer Letter
Page | 4
Please contact me if you have any questions or concerns.
Sincerely,
HYRECAR INC
|
/s/ Abhishek Arora
|
|
|
Abhishek Arora, Chief Operating Officer
|
|
I have read and understood, and hereby accept this
employment offer:
|
/s/ Michael Furnari
|
|
|
Name: Michael Furnari
|
|
Exhibit 10.3
Oral Employment Arrangement
between the Company and Abhishek Arora
The company has an oral agreement with Mr.
Abhishek Arora pursuant to which he receives an annual salary of $96,000 for his services as Chief Technology Officer. During the
year ended December 31, 2017, Mr. Arora deferred $12,000 of his salary. As a result, Mr. Arora received cash compensation equal
to $84,000 during the year ended December 31, 2017. Subject to the discretion of the board, Mr. Arora will be considered for an
annual incentive bonus. Mr. Arora is an at-will employee of the company.
Exhibit 10.4
Oral Consulting Arrangement
between the Company and Kit Tran
The company has a consulting arrangement with Mr. Kit Tran, through his entity DMA Capital Inc., pursuant
to which Mr. Tran provides services to the company as its Chief Marketing Officer and earns consulting fees of $4,000 per month.
Subject to the discretion of the board, Mr. Tran will be considered for an annual incentive bonus.
Exhibit 10.5
Peer-to-Peer Carshare for Rideshare
|
555
West 5
th
Street
Los Angeles, CA 90013
|
June
16, 2017
Elizabeth
Reynolds
Dear
Ms. Reynolds:
Hyrecar
Inc, a Delaware corporation (the “
Company
”), is pleased to offer you employment as its Director of Operations,
reporting to the Company’s Chief Executive Officer. This is an offer of at will employment and is subject to the terms and
conditions set forth in this letter agreement (this “
Letter Agreement
”) and may be terminated by the Company
at any time, for any reason, with or without cause.
1. Position.
Your title will be
Director of Operations
. This is a full-time position. While you are an employee of the Company,
you will not engage in any other employment, consulting or other business activity (whether full-time or part-time) or serve as
a director on the board of any other company (“
External Activities
”) in each case which (a) would create a
conflict of interest with the Company, or (b) is not approved by the Board of Directors (the “
Board
”) in a
written acknowledgment. By signing this Letter Agreement, you confirm to the Company that you currently have no such External
Activities and that you have no contractual commitments or other legal obligations that would prohibit you from performing or
would materially limit your capability to perform your duties for the Company.
2.
Cash Compensation.
The Company will pay you a base salary at the annual rate of
$75,000
, payable in accordance
with the Company’s standard payroll schedule. In addition, subject to the discretion of the Board, you will be
considered for an annual incentive bonus, typically for each fiscal year of your employment with the Company.
3. Employee
Benefits.
As a regular employee of the Company, you will be eligible toparticipate in Company-sponsored benefits, as in effect
from time to time. In addition, you will be entitled to paid vacation in accordance with the Company’s vacation policy,
as in effect from time to time.
4. Stock
Option Grant.
Subject to the approval of the Board, you will be granted an option (the “
Option
”) to purchase
up to 75,000 shares of the Company’s common stock, par value $0.00001 per share (the “
Shares
”) at an
exercise price of $1.75 per share under the Company’s 2016 Equity Incentive Plan (the “
Plan
”). The Option
will be subject to the terms and conditions of the Plan, as set forth in the Plan and the applicable Stock Option Grant Notice
and Stock Option Agreement. Subject to the terms of forfeiture, termination and acceleration provided for in the Plan, the Option
shall vest as follows
:
(i) 25% of the Shares shall vest on the first anniversary of the date you commence your employment
with the Company and (ii) the remaining 75% of the Shares shall vest in 36 successive equal installments on the last day of each
month thereafter.
Peer-to-Peer Carshare for Rideshare
|
555
West 5
th
Street
Los Angeles, CA 90013
|
5. Nondisclosure
of Confidential Information.
You shall not, without the prior written consent of the Board, use, divulge, disclose or make
accessible to any other person, any Confidential Information pertaining to the business or affairs of the Company, except (i)
while employed by the Company, in the business of and for the benefit of the Company, or
(ii)when
required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business
of the Company, or by any administrative body or legislative body with jurisdiction to order you to divulge, disclose or make
accessible such information.
For
purposes hereof, “Confidential Information” shall mean non-public information concerning financial data, strategic
business plans, sales or marketing plans, or other proprietary marketing data, proprietary information, contracts or agreements
with customers, vendors or consultants, and all other non-public, proprietary and confidential information of the Company that
in any case is not otherwise available to the public (other than by your breach of the terms hereof).
6.
Restrictive Covenants.
6.1
Non-Solicitation
.
In consideration of your employment with the Company, participation in any stock, bonus or other incentive compensation plans
of the Company, which you acknowledge is of direct benefit to you, you hereby covenant that, during the period commencing on the
date hereof and ending on the two (2) year anniversary of your termination (the “
Restricted Period
”), you and
your Affiliates (as defined herein) shall not directly or indirectly, through any other person:
(i) (a)
employ, solicit or induce any individual who is, or was at any time during the one (1) year period prior to your termination,
an employee or consultant of the Company, (b) cause such individual to terminate or refrain from renewing or extending his or
her employment by or consulting relationship with the Company, or (3) cause such individual to become employed by or enter into
a consulting relationship with the Company and its Affiliates or any other individual, person or entity; or
(ii) solicit,
persuade or induce any Customer to terminate, reduce or refrain from renewing or extending its contractual or other relationship
with the Company in regard to the purchase of products or services, performed, manufactured, marketed or sold by the Company or
any other person in regard to the purchase of products or services similar or identical to those performed, manufactured, marketed
or sold, by the Company. For purposes hereof, “Customer” means any individual, person or entity which is a customer
of the Company or which was a customer of the Company within one (1) year prior to the termination of employment hereunder.
(iii) whether
as owner, consultant, executive, partner, member, manager, officer, director, venturer, agent, through stock ownership, investment
of capital, lending of money or property, rendering of services, or otherwise, engage or assist others to engage in the business
of ride sharing in the Territory; provided, that you may own up to three (3%) percent of the outstanding shares of a company engaged
in such business if such shares are listed on national securities exchange.
Peer-to-Peer Carshare for Rideshare
|
555
West 5
th
Street
Los Angeles, CA 90013
|
6.2
Non-Disparagement
.
You agree that neither you nor any of your Affiliates shall (i) in any way publicly disparage the Company, its equity holders,
officers, directors, employees, agents or Affiliates, (ii) cause embarrassment or public humiliation to such persons or (iii)
make any public statement that is adverse, inimical or otherwise detrimental to the interests of any such persons or the Company’s
business at any time, including without limitation, during periods after the termination of this Agreement.
6.3
Certain
Definitions
. The following terms shall have the following meanings when used in this Agreement:
(i) “Affiliate”
means, as to any person, a person that directly or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, the person specified. With respect to any natural person, the term Affiliate shall also include
any member of said person’s immediate family, any family limited partnership or similar entity for said person and any trust,
voting or otherwise, of which said person is a trustee or of which said person or any of said person’s immediate family
is a beneficiary. With respect to any trust, the term Affiliate shall also include any beneficiary or trustee of such trust. For
purposes of the foregoing, the term “control” and variations thereof means the possession of the power to direct or
cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract
or otherwise.
(ii)
“Territory” means the United States.
7.
Tax Matters.
7.1
Withholding
.
All forms of compensation referred to in this Letter Agreement are subject to reduction to reflect applicable withholding and
payroll taxes and other deductions required by law.
7.2
Tax
Advice
. You are encouraged to obtain your own tax advice regarding your compensation from the Company. You agree that the
Company does not have a duty to design its compensation policies in a manner that minimizes your tax liabilities, and you will
not make any claim against the Company or its Board related to tax liabilities arising from your compensation.
8. Interpretation,
Amendment and Enforcement.
This Letter Agreement supersedes and replaces any prior agreements, representations or
understandings (whether written, oral, implied or otherwise) between you and the Company and constitutes the entire agreement
between you and the Company regarding the subject matter set forth herein. This Letter Agreement may not be amended or
modified, except by an express written agreement signed by both you and a duly authorized officer of the Company. The terms
of this Letter Agreement and the resolution of any disputes as to the meaning, effect, performance or validity of this Letter
Agreement or arising out of, related to, or in any way connected with, this Letter Agreement, your employment with the
Company or any other relationship between you and the Company (the “
Disputes
”) will be governed by
California law, excluding laws relating to conflicts or choice of law. You and the Company submit to the exclusive personal
jurisdiction of the federal and state courts located in Los Angeles County, California, in connection with any Dispute or any
claim related to any Dispute. You acknowledge and agree that if any term or provision of this Agreement is deemed invalid or
unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall continue in full force and
effect.
Please
contact me if you have any questions or concerns.
Sincerely,
|
HYRECAR
INC
|
|
|
|
|
|
/s/
Joseph Furnari
|
|
|
Joseph
Furnari, Chief Executive Officer
|
|
Peer-to-Peer Carshare for Rideshare
|
555
West 5
th
Street
Los Angeles, CA 90013
|
I
have read and understood, and herby accept this employment offer:
|
/s/
Elizabeth Reynolds
|
|
|
Name:
Elizabeth Reynolds
|
|
Exhibit 10.6
HYRECAR INC
2016 EQUITY INCENTIVE PLAN
Section
1.
Purpose; Definitions
. The purposes of the Hyrecar Inc, 2016 Equity Incentive Plan (the “
Plan
”)
are to enable Hyrecar Inc (the “
Company
”) and its affiliated companies to recruit and retain highly qualified
personnel, to provide those personnel with an incentive for productivity and to provide those personnel with an opportunity to
share in the growth and value of the Company. This Plan is intended to be exempt from Code Section 409A, and shall be administered
and interpreted in a manner to preserve that exemption.
For purposes of the Plan,
the following initially capitalized words and phrases will be defined as set forth below:
(a) “
Affiliate
”
means any Person that directly or indirectly controls, or is controlled by, or is under common control with the Company (or its
successors).
(b) “
Award
”
means a grant of Options, SARs, Restricted Stock, or Restricted Stock Units pursuant to the provisions of the Plan.
(c) “
Award
Agreement
” means, with respect to any particular Award, the written document that sets forth the terms of that particular
Award.
(d) “
Board
”
means the Board of Directors of the Company, as constituted from time to time;
provided
,
however
, that if
the Board appoints a Committee to perform some or all of the Board’s administrative functions hereunder pursuant to
Section
2
hereof, references in the Plan to the “Board” will be deemed to also refer to that Committee in connection with
matters to be performed by that Committee.
(e) “
Cause
”
means (i) conviction of, or the entry of a plea of guilty or no contest to, a felony or any other crime that causes the Company
or its Affiliates public disgrace or disrepute, or adversely affects the Company’s or its Affiliates’ operations,
condition (financial or otherwise), prospects or interests, (ii) gross negligence or willful misconduct with respect to the
Company or any of its Affiliates, including, without limitation fraud, embezzlement, theft or dishonesty in the course of his
or her employment; (iii) alcohol abuse or use of controlled drugs other than in accordance with a physician’s prescription;
(iv) refusal, failure or inability to perform any material obligation or fulfill any duty (other than any duty or obligation
of the type described in clause (vi) below) to the Company or any of its Affiliates (other than due to a Disability), which failure,
refusal or inability is not cured within 10 days after delivery of notice thereof; (v) material breach of any agreement with
or duty owed to the Company or any of its Affiliates; or (vi) any breach of any obligation or duty to the Company or any
of its Affiliates (whether arising by statute, common law, contract or otherwise) relating to confidentiality, noncompetition,
nonsolicitation or proprietary rights. Notwithstanding the foregoing, if a Participant and the Company (or any of its Affiliates)
have entered into an employment agreement, consulting agreement or other similar agreement that specifically defines “cause,”
then with respect to such Participant, “Cause” shall have the meaning defined in that employment agreement, consulting
agreement or other agreement.
(f) “
Change
in Control
” means, with respect to any entity: (i) any entity, person or group (within the meaning of Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act), other than (A) the Company, (B) its Parent or any of its Subsidiaries, (C) any employee
benefit plan (or related trust) sponsored or maintained by the Company or any of its Subsidiaries or (D) any stockholder of the
Company as of the effective date of the Plan, shall have acquired beneficial ownership of, or shall have acquired voting control
over, 50% or more of the outstanding capital stock entitled to vote in the election of directors of the entity (on a fully diluted
basis), unless the transaction pursuant to which such person, entity or group acquired such beneficial ownership or control resulted
from the original issuance by such entity of shares of its voting capital stock; (ii) a consolidation, share exchange, reorganization
or merger of the entity resulting in the stockholders of the entity immediately prior to such event not owning at least a majority
of the voting power of the resulting entity’s securities outstanding immediately following such event or, if the resulting
entity is a direct or indirect subsidiary of the entity whose securities are issued in such transaction(s), the voting power of
such issuing entity’s securities outstanding immediately following such event; (iii) the sale or other disposition of all
or substantially all the assets of the entity (other than a transfer of financial assets made in the ordinary course of business
for the purpose of securitization or any similar purpose); (iv) a liquidation or dissolution of the entity; or (v) any similar
event deemed by the Board to constitute a Change in Control for purposes of the Plan.
For the avoidance of
doubt, a transaction or a series of related transactions will not constitute a Change in Control if such transaction(s) result(s)
in the entity, any successor to the entity, or any successor to the entity’s business, being controlled, directly or indirectly,
by the same Person or Persons who controlled such entity, directly or indirectly, immediately before such transaction(s).
(g) “
Code
”
means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.
(h) “Committee”
means a committee appointed by the Board in accordance with
Section 2
of the Plan.
(i) “
Common
Stock
” means the common stock, par value $0.0001 per share, of the Company.
(j) “
Director
”
means a member of the Board.
(k) “
Disability
”
means a condition rendering a Participant Disabled.
(l) “
Disabled
”
will have the same meaning set forth in Section 22(e)(3) of the Code.
(m) “
Exchange
Act
” means the Securities Exchange Act of 1934, as amended.
(n) “
Fair
Market Value
” means, as of any date: (i) if the Shares are not publicly traded, the value of such Shares on that date,
as reasonably determined by the Board in a manner that preserves the exemption of Plan benefits under Code Section 409A;
or (ii) if the Shares are publicly traded, then the Fair Market Value per Share shall be determined as follows: (A) if the principal
trading market for the Shares is a national securities exchange or the Nasdaq National Market, the price per Share at the close
of regular trading on the relevant date (or, if the relevant date is not a day in which the Shares are being traded, then the
last such date before the relevant date), or (B) if the Shares are not principally traded on such exchange or market, the mean
between the last reported “bid” and “asked” prices of Shares on the relevant date (or, if the relevant
date is not a date upon which a sale was reported, as reported on Nasdaq or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable, then the last such date before
the relevant date) and as the Board determines.
(o) “
Incentive
Stock Option
” means any Option intended to be and designated as an “Incentive Stock Option” within the meaning
of Section 422 of the Code.
(p) “
Non-Employee
Director
” will have the meaning set forth in Rule 16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission
under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission;
provided
,
however
,
that the Board or the Committee may, to the extent that it deems necessary to comply with Section 162(m) of the Code or regulations
thereunder, require that each “Non-Employee Director” also be an “outside director” as that term is defined
in regulations under Section 162(m).
(q) “
Non-Qualified
Stock Option
” means any Option that is not an Incentive Stock Option.
(r) “
Option
”
means any option to purchase Shares (including Restricted Stock, if the Board so specifies in the applicable Award Agreement) granted
pursuant to
Section 5
hereof.
(s) “
Parent
”
means, in respect of the Company, a “parent corporation” as defined in Section 424(e) of the Code.
(t) “
Participant
”
means an employee, consultant, Director, or other service provider of or to the Company or any of its Affiliates to whom an Award
is granted.
(u) “
Person
”
means an individual, partnership, corporation, limited liability company, trust, joint venture, unincorporated association, or
other entity or association.
(v) “
Restricted
Stock
” means Shares that are subject to restrictions pursuant to
Section 8
hereof.
(w) “
Restricted
Stock Unit
” means a right granted under and subject to restrictions pursuant to
Section 9
hereof.
(x) “
SAR
”
means a stock appreciation right granted under the Plan and described in
Section 6
hereof.
(y) “
Shares
”
means shares of the Company’s Common Stock subject to the Plan and subject to substitution or adjustment as provided in
Section
3
hereof.
(z)
“
Subsidiary
” means, in respect of the Company, a subsidiary company, whether now or hereafter existing, as
defined in Sections 424(f) and (g) of the Code.
Section
2.
Administration
. The Plan will be administered by the Board;
provided
,
however
, that the
Board may at any time appoint a Committee to perform some or all of the Board’s administrative functions hereunder;
provided
further
, that the authority of any Committee appointed pursuant to this
Section 2
will be subject to such terms and
conditions as the Board may prescribe and will be coextensive with, and not in lieu of, the authority of the Board hereunder.
Subject to the requirements
of the Company’s Bylaws and Certificate of Incorporation, each as amended from time to time, and any other agreement that
governs the appointment of Board committees, any Committee established under this
Section 2
will be composed of not fewer
than two members, each of whom will serve for such period of time as the Board determines;
provided
,
however
, that
if the Company has a class of securities required to be registered under Section 12 of the Exchange Act, all members of any
Committee established pursuant to this
Section 2
will be Non-Employee Directors. From time to time the Board may increase
the size of the Committee and appoint additional members thereto, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer
the Plan.
Directors who are eligible
for Awards or have received Awards may vote on any matters affecting the administration of the Plan or the grant of Awards, except
that no such member will act upon the grant of an Award to himself or herself, but any such member may be counted in determining
the existence of a quorum at any meeting of the Board during which action is taken with respect to the grant of Awards to himself
or herself.
The Board will have full
authority to grant Awards under this Plan. In particular, subject to the terms of the Plan, the Board will have the authority:
(a) to
select the Persons to whom Awards may from time to time be granted hereunder (consistent with the eligibility conditions set forth
in
Section 4
);
(b) to
determine the type of Award to be granted to any Person hereunder;
(c) to
determine the number of Shares, if any, to be covered by each Award;
(d) to
establish the terms and conditions of each Award Agreement;
(e) to
adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it, from time to time, deems
advisable;
(f) to
interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Award Agreement);
(g) to
correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award Agreement in the manner and
to the extent it deems necessary to carry out the intent of the Plan; and
(h) to
otherwise supervise the administration of the Plan.
All decisions made by
the Board pursuant to the provisions of the Plan will be final and binding on all persons, including the Company and Participants.
No Director will be liable for any good faith determination, act or omission in connection with the Plan or any Award.
Section
3.
Shares Subject to the Plan
.
(a)
Shares
Subject to the Plan
. The Shares to be subject to or related to Awards under the Plan will be authorized and unissued Shares
of the Company. The maximum number of Shares that may be subject to Awards under the Plan is 4,100,000, all of which Shares subject
to the Plan may be issued in respect of Incentive Stock Options. The Company will reserve for the purposes of the Plan, out of
its authorized and unissued Shares, such number of Shares.
(b)
Effect
of the Expiration or Termination of Awards
. If and to the extent that an Option or SAR expires, terminates or is canceled or
forfeited for any reason without having been exercised in full, the Shares associated with that Option or SAR will again become
available for grant under the Plan. Similarly, if any Restricted Stock or Restricted Stock Unit is canceled or forfeited for any
reason, the Shares subject to that Award will again become available for grant under the Plan. For the avoidance of doubt, Shares
tendered, delivered or withheld in settlement of a tax withholding obligation associated with an Award, or in satisfaction of the
exercise price payable upon exercise of an Option, will not again become available for grant under the Plan and if any Award or
portion thereof is repurchased or settled for cash, the Shares repurchased or attributable to such cash settlement will not again
become available for grant under the Plan.
(c)
Other
Adjustment
. In the event of any recapitalization, reorganization, merger, stock split or combination, stock dividend or other
similar event or transaction (including, without limitation, any “corporate transaction,” within the meaning of Treasury
Regulation § 1.424-1(a)(3)), substitutions or adjustments will be made by the Board: (i) to the aggregate number, class and/or
issuer of the securities reserved for issuance under the Plan; (ii) to the number, class and/or issuer of securities subject to
outstanding Awards; and (iii) to the exercise price of outstanding Options and SARs, in each case in a manner that reflects equitably
the effects of such event or transaction. For avoidance of doubt, a substitution or adjustment that reflects equitably the effects
of a given event or transaction will include (but will not be limited to) any substitution or adjustment consistent with the requirements
of Treasury Regulation § 1.424-1(a) or any successor provision.
(d)
Change
in Control
. Notwithstanding anything to the contrary set forth in the Plan, upon or in anticipation of any Change in Control
of the Company, its Parent (if any), or any of their Affiliates, the Board may, in its sole and absolute discretion and without
the need for the consent of any Participant, take one or more of the following actions contingent upon the occurrence of that Change
in Control:
(i) cause
any or all outstanding Options or SARs to become vested and immediately exercisable, in whole or in part;
(ii) cause
any or all outstanding Restricted Stock or Restricted Stock Units to become non-forfeitable, in whole or in part;
(iii) cause
any outstanding Option to become fully vested and immediately exercisable for a reasonable period in advance of the Change in Control
and, to the extent not exercised prior to that Change in Control, cancel that Option upon closing of the Change in Control;
(iv) cancel
any unvested Award or unvested portion thereof, with or without consideration;
(v) cancel
any Option in exchange for a substitute award in a manner consistent with the principles of Treas. Reg. §1.424-1(a) or any
successor rule or regulation (notwithstanding the fact that the original Award may never have been intended to satisfy the requirements
for treatment as an Incentive Stock Option);
(vi) cancel
any Restricted Stock, Restricted Stock Unit or SAR in exchange for restricted shares, restricted stock units or stock appreciation
rights with respect to the capital stock of any successor corporation or its parent;
(vii) redeem
any Restricted Stock or Restricted Stock Unit for cash and/or other substitute consideration with value equal to fair value (as
determined in the sole discretion of the Board) which may equal Fair Market Value of a Share or the per Share consideration to
be paid in connection with the Change in Control transaction to the holders of Shares;
(viii) cancel
any SAR in exchange for cash and/or other substitute consideration with a value equal to: (A) the number of Shares subject
to that SAR, multiplied by (B) the difference, if any, between the fair value per Share (as determined in the sole discretion
of the Board, which may equal Fair Market Value of a Share or the per Share consideration to be paid in connection with the Change
in Control transaction to the holders of Shares) on the date of the Change in Control and the exercise price of that SAR;
provided
,
that if the fair value per Share (as determined in the sole discretion of the Board) on the date of the Change in Control does
not exceed the exercise price of any such SAR, the Board may cancel that SAR without any payment of consideration therefore; and/or
(ix) cancel
any Option in exchange for cash and/or other substitute consideration with a value equal to: (A) the number of Shares subject
to that Option, multiplied by (B) the difference, if any, between the fair value per Share (as determined in the sole discretion
of the Board, which may equal Fair Market Value of a Share or the per Share consideration to be paid in connection with the Change
in Control transaction to the holders of Shares) on the date of the Change in Control and the exercise price of that Option;
provided
,
that if the fair value per Share (as determined in the sole discretion of the Board) on the date of the Change in Control does
not exceed the exercise price of any such Option, the Board may cancel that Option without any payment of consideration therefor.
In the discretion of
the Board, any cash or substitute consideration payable upon cancellation of an Award may be subjected to (i) vesting terms substantially
identical to those that applied to the cancelled Award immediately prior to the Change in Control, or (ii) earn-out, escrow, holdback
or similar arrangements, to the extent such arrangements are applicable to any consideration paid to stockholders in connection
with the Change in Control.
Section
4.
Eligibility
. Employees, Directors, consultants, and other individuals who provide services to the Company or
its Affiliates are eligible to be granted Awards under the Plan;
provided
,
however
,
that only employees
of the Company, its Parent or a Subsidiary are eligible to be granted Incentive Stock Options.
Section
5.
Options
. Options granted under the Plan may be Incentive Stock Options or Non-Qualified Stock Options. Any
Option granted under the Plan will be in such form as the Board may at the time of such grant approve.
The Award Agreement evidencing
any Option will incorporate the following terms and conditions and will contain such additional terms and conditions, not inconsistent
with the terms of the Plan, as the Board deems appropriate in its sole and absolute discretion:
(a)
Exercise
Price
. The exercise price per Share purchasable under an Option will be determined by the Board and will not be less than 100%
of the Fair Market Value of a Share on the date of the grant. However, any Incentive Stock Option granted to any Participant who,
at the time the Option is granted, owns more than 10% of the voting power of all classes of shares of the Company, its Parent or
of a Subsidiary will have an exercise price per Share of not less than 110% of Fair Market Value per Share on the date of the grant.
(b)
Option
Term
. The term of each Option will be fixed by the Board, but no Incentive Stock Option will be exercisable more than 10 years
after the date the Option is granted. However, any Incentive Stock Option granted to any Participant who, at the time such Option
is granted, owns more than 10% of the voting power of all classes of shares of the Company, its Parent or of a Subsidiary may not
have a term of more than five years. No Option may be exercised by any Person after expiration of the term of the Option.
(c)
Exercisability
.
Options will vest and be exercisable at such time or times and subject to such terms and conditions as determined by the Board
at the time of grant.
(d)
Method
of Exercise
. Subject to the exercisability and termination provisions set forth herein and in the applicable Award Agreement,
Options may be exercised in whole or in part at any time and from time to time during the term of the Option, by the delivery of
written notice of exercise by the Participant to the Company specifying the number of Shares to be purchased. Such notice will
be accompanied by payment in full of the purchase price, either by (i) cash or certified or bank check, or (ii) by such other method
as the Board may approve or accept.
No Shares will be issued
upon exercise of an Option until full payment therefor has been made. A Participant will not have the right to distributions or
dividends or any other rights of a stockholder with respect to Shares subject to the Option until the Participant has given written
notice of exercise, has paid in full for such Shares, if requested, has given the representation described in
Section 11(a)
hereof and fulfills such other conditions as may be set forth in the applicable Award Agreement.
(e)
Rights
as a Stockholder
. Shares subject to an Option shall be deemed issued, and the Participant shall be deemed the record
holder of such Shares, on the Option exercise date. Until such Option exercise date, no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect to the Shares subject to the Option. In the event that the
Company effects a split of the Shares by means of a stock dividend and the exercise price of, and number of Shares subject to,
an Option are adjusted as of the date of distribution of the dividend (rather than as of the record date for such dividend), then
a Participant who exercises such Option between the record date and the distribution date for such stock dividend shall be entitled
to receive, on the distribution date, the stock dividend with respect to the Shares subject to the Option. No other adjustment
shall be made for a dividend or other right for which the record date is prior to the date the Shares are issued.
(f)
Incentive
Stock Option Limitations
. In the case of an Incentive Stock Option, the aggregate Fair Market Value (determined as of the time
of grant) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during
any calendar year under the Plan and/or any other plan of the Company, its Parent or any Subsidiary will not exceed $100,000. For
purposes of applying the foregoing limitation, Incentive Stock Options will be taken into account in the order granted. To the
extent any Option does not meet such limitation, that Option will be treated for all purposes as a Non-Qualified Stock Option.
(g)
Termination
of Service
. Unless otherwise specified in the Award Agreement, Options will be subject to the terms of
Section 7
with
respect to exercise upon or following termination of employment or other service.
(h)
Transferability
of Options
. Except as may otherwise be specifically determined by the Board with respect to a particular Option, no Option
will be transferable by the Participant other than by will or by the laws of descent and distribution, and all Options will be
exercisable, during the Participant’s lifetime, only by the Participant or, in the event of his Disability, by his personal
representative.
Section
6.
Stock Appreciation Rights
.
(a)
Nature
of Award
. Upon the exercise of a SAR, its holder will be entitled to receive an amount equal to the excess (if any) of: (i) the
Fair Market Value of the Shares covered by such SAR as of the date such SAR is exercised, over (ii) the Fair Market Value
of the Shares covered by such SAR as of the date such SAR was granted. Such amount may be paid in either cash and/or Shares, as
determined by the Board in its sole and absolute discretion.
(b)
Terms
and Conditions
. The Award Agreement evidencing any SAR will incorporate the following terms and conditions and will contain
such additional terms and conditions, not inconsistent with the terms of the Plan, as the Board deems appropriate in its sole and
absolute discretion:
(i)
Term
of SAR
. Unless otherwise specified in the Award Agreement, the term of a SAR will be ten years.
(ii)
Exercisability
.
SARs will vest and become exercisable at such time or times and subject to such terms and conditions as will be determined by the
Board at the time of grant.
(iii)
Termination
of Service
. Unless otherwise specified in the Award Agreement, SARs will be subject to the terms of
Section 7
with respect
to exercise upon termination of employment or other service.
(iv)
Non-Transferability
.
Except as may otherwise be specifically determined by the Board with respect to a particular SAR: (A) SARs may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner either voluntarily or involuntarily by operation of law,
other than by will or by the laws of descent or distribution, and (B) during the Participant’s lifetime, SARs will be exercisable
only by the Participant (or, in the event of the Participant’s Disability, by his personal representative).
(v)
Rights
as a Stockholder
. If and solely to the extent that, upon exercise of a SAR, the amount payable under
Section 6(a)
hereof is paid in whole or in part with Shares, then such Shares shall be deemed issued, and the Participant shall be deemed the
record holder of such Shares, on the date the SAR is exercised. Until such date, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Shares subject to the SAR. If the Company effects a split
of the Shares by means of a stock dividend and the exercise price of, and number of Shares subject to, a SAR are adjusted as of
the date of distribution of the dividend (rather than as of the record date for such dividend), then a Participant who exercises
such SAR between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution
date, the stock dividend with respect to the Shares subject to the SAR. No other adjustment shall be made for a dividend
or other right for which the record date is prior to the date the Shares are issued.
Section
7.
Termination of Service
. Unless otherwise specified with respect to a particular Option or SAR in the applicable
Award Agreement, all any portion of an Option or SAR that is not exercisable upon termination of service will expire immediately
and automatically upon such termination and any portion of an Option or SAR that is exercisable upon termination of service will
expire on the date it ceases to be exercisable in accordance with this
Section 7
.
(a)
Termination
by Reason of Death
. If a Participant’s service with the Company or any Affiliate terminates by reason of death, any Option
or SAR held by such Participant may thereafter be exercised, to the extent it was exercisable at the time of his or her death,
by the legal representative of the estate or by a legatee of the Participant under the will of the Participant, for a period ending
12 months following the date of death (or, if sooner, on the last day of the stated term of such Option or SAR);
provided
that in order to exercise any Option or SAR, the legal representative of the estate or a legatee of the Participant shall provide
written documentation in the form of letters testamentary (or the applicable equivalent from Participant’s state of residence)
to the Company within 12 months after the Participant’s death.
(b)
Termination
by Reason of Disability
. If a Participant’s service with the Company or any Affiliate terminates by reason of Disability,
any Option or SAR held by such Participant may thereafter be exercised by the Participant or his personal representative, to the
extent it was exercisable at the time of termination, for a period ending 12 months following the date of termination (or, if sooner,
on the last day of the stated term of such Option or SAR).
(c)
Cause
.
If a Participant’s service with the Company or any Affiliate is terminated for Cause: (i) any Option or SAR held by the Participant
will immediately and automatically expire as of the date of such termination, and (ii) any Shares for which the Company has not
yet delivered share certificates will be immediately and automatically forfeited and the Company will refund to the Participant
the Option exercise price paid for such Shares, if any.
(d)
Other
Termination
. If a Participant’s service with the Company or any Affiliate terminates for any reason other than death,
Disability or Cause, any Option or SAR held by such Participant may thereafter be exercised by the Participant, to the extent it
was exercisable at the time of such termination, for a period ending 90 days following the date of such termination (or, if sooner,
on the last day of the stated term of such Option or SAR).
Section
8.
Restricted Stock
.
(a)
Issuance
.
Restricted Stock may be issued either alone or in conjunction with other Awards. The Board will determine the time or times within
which Restricted Stock may be subject to forfeiture, and all other conditions of such Awards.
(b)
Awards
and Certificates
. The Award Agreement evidencing the grant of any Restricted Stock will contain such terms and conditions,
not inconsistent with the terms of the Plan, as the Board deems appropriate in its sole and absolute discretion. The prospective
recipient of an Award of Restricted Stock will not have any rights with respect to such Award, unless and until such recipient
has delivered to the Company an executed Award Agreement and has otherwise complied with the applicable terms and conditions of
such Award. The purchase price for Restricted Stock will be determined by the Board and will not be less than 100% of the Fair
Market Value of a Share on the date of an Award of Restricted Stock. Any purchase price may be satisfied in cash or certified or
bank check, or by such other method as the Board may approve or accept, including a promissory note in such form acceptable to
the Board.
Any share certificate
issued in connection with an Award of Restricted Stock will be registered in the name of the Participant receiving the Award, and
will bear the following legend and/or any other legend required by this Plan, the Award Agreement, or by applicable law:
THE TRANSFERABILITY OF THIS CERTIFICATE
AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
HYRECAR
INC
2016 EQUITY INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE PARTICIPANT AND
HYRECAR
INC
(WHICH TERMS AND CONDITIONS MAY INCLUDE, WITHOUT LIMITATION, CERTAIN TRANSFER RESTRICTIONS, REPURCHASE RIGHTS AND FORFEITURE
CONDITIONS). COPIES OF THAT PLAN AND AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF
HYRECAR
INC
AND WILL BE MADE AVAILABLE TO THE HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY.
Share certificates evidencing
Restricted Stock will be held in custody by the Company or in escrow by an escrow agent until the restrictions thereon have lapsed.
As a condition to any Restricted Stock award, the Participant may be required to deliver to the Company a share power, endorsed
in blank, relating to the Shares covered by such Award.
Any
Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this
Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the
payment of the Participant’s obligation to the Company under the promissory note;
provided
,
however
,
that the Board may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any
event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the
Participant’s Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to
execute and deliver a written pledge agreement in such form as the Board will from time to time approve. The Shares purchased with
the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.
(c)
Restrictions
and Conditions
. The Restricted Stock awarded pursuant to this
Section 8
will be subject to the following restrictions
and conditions, and any other restrictions and conditions set forth in the applicable Award Agreement.
(i) During
a period commencing with the date of an Award of Restricted Stock and ending at such time or times as specified by the Board (the
“
Restriction Period
”), the Participant will not be permitted to sell, transfer, pledge, assign or otherwise
encumber Restricted Stock awarded under the Plan. The Board may condition the lapse of restrictions on Restricted Stock upon the
continued employment or service of the recipient, the attainment of specified individual or corporate performance goals, or such
other factors as the Board may determine, in its sole and absolute discretion.
(ii) Except
as provided in this subsection (ii) or the applicable Award Agreement, the Participant will have, with respect to the Restricted
Stock, all of the rights of a holder of Common Stock of the Company. The Board, in its sole discretion, may require cash distributions
or dividends to be subjected to the same Restriction Period as is applicable to the Restricted Stock with respect to which such
amounts are paid, or, if the Board so determines, reinvested in additional Restricted Stock to the extent Shares are available
under
Section 3(a)
of the Plan. Any distributions or dividends paid in the form of securities with respect to Restricted
Stock will be subject to the same terms and conditions as the Restricted Stock with respect to which they were paid, including,
without limitation, the same Restriction Period.
(iii) Subject
to the applicable provisions of the Award Agreement, if a Participant’s service with the Company and its Affiliates terminates
prior to the expiration of the Restriction Period, all of that Participant’s Restricted Stock which then remain subject to
forfeiture will then be forfeited automatically.
(iv) If
and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period (or
if and when the restrictions applicable to Restricted Stock are removed pursuant to
Section 3(d)
or otherwise), any certificates
for such Shares will be replaced with new certificates, without the restrictive legend applicable to such lapsed restrictions,
and such new certificates will be promptly delivered to the Participant, the Participant’s representative (if the Participant
has suffered a Disability), or the Participant’s estate or heir (if the Participant has died).
(d)
Voting
Rights
. During the Restriction Period, Participants holding Shares of Restricted Stock granted hereunder may exercise
full voting rights with respect to those Shares, unless otherwise provided in the Award Agreement.
Section
9.
Restricted Stock Units
. The Board may grant Restricted Stock Units to eligible Participants and may impose
conditions on such units as it may deem appropriate. Each Restricted Stock Unit shall be evidenced by an Award Agreement in the
form that is approved by the Board and that is not inconsistent with the terms and conditions of the Plan. Each Restricted Stock
Unit shall entitle the Participant to whom it is granted a distribution from the Company in an amount equal to the Fair Market
Value (at the time of the distribution) of one Share. Distributions may be made in cash and/or Shares. All other terms governing
Restricted Stock Units, such as vesting, time and form of payment and termination of units shall be set forth in the Award Agreement.
Section
10.
Amendments and Termination
. The Board may amend, alter or discontinue the Plan at any time;
provided
,
however
, that no amendment, alteration or discontinuation will be made, without the approval of such amendment by the Company’s
stockholders in a manner consistent with the requirements of Treas. Reg. § 1.422-3 (or any successor provision), that would:
(i) increase the total number of Shares reserved for issuance hereunder (except as otherwise provided in
Section 3
hereof)
or (ii) change the classes of persons eligible to receive Awards.
Section
11.
General Provisions
.
(a) The
Board may require each Participant to represent to and agree with the Company in writing that the Participant is acquiring securities
of the Company for investment purposes and without a view to distribution thereof and as to such other matters as the Board believes
are appropriate. The certificate evidencing any Award and any securities issued pursuant thereto may include any legend which the
Board deems appropriate to reflect any restrictions on transfer and compliance with applicable securities laws.
(b) All
certificates for Shares or other securities delivered under the Plan will be subject to such share-transfer orders and other restrictions
as the Board may deem advisable under the rules, regulations, and other requirements of any stock exchange upon which the Shares
are then listed and any applicable laws, and the Board may cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
(c) Shares
shall not be issued hereunder unless, in the judgment of counsel for the Company, the issuance complies with the requirements of
any stock exchange or quotation system on which the Shares are then listed or quoted, the Securities Act of 1933, the Exchange
Act, all rules and regulations promulgated thereunder and all other applicable laws.
(d) Neither
the adoption of the Plan nor the execution of any document in connection with the Plan will: (i) confer upon any employee
of the Company or an Affiliate any right to continued employment or engagement with the Company or such Affiliate, or (ii) interfere
in any way with the right of the Company or such Affiliate to terminate the employment of any of its employees at any time.
(e) No
later than the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax
purposes with respect to any Award under the Plan, the Participant will pay to the Company, or make arrangements satisfactory to
the Board regarding the payment of, taxes of any kind required by law to be withheld with respect to such amount. The obligations
of the Company under the Plan will be conditioned on such payment or arrangements and the Company will have the right to deduct
any such taxes from any payment of any kind otherwise due to the Participant. Unless otherwise determined by the Board, the minimum
required withholding obligation with respect to an Award may be settled in Shares, including the Shares that are subject to that
Award.
Section
12.
Effective Date of Plan
. The Plan will become effective on the date that it is adopted by the Board;
provided
,
however
,
that all Options intended to be Incentive Stock Options will automatically be converted into Non-Qualified
Stock Options if the Plan is not approved by the Company’s stockholders within 365 days of its adoption by the Board in a
manner consistent with Treas. Reg. § 1.422-5.
Section
13.
Term of Plan
. The Plan will continue in effect until terminated in accordance with
Section 10
;
provided
,
however
, that no Incentive Stock Option will be granted hereunder on or after the 10th anniversary of the effective
date of the Plan (or, if the stockholders approve an amendment that increases the number of shares subject to the Plan, the 10th
anniversary of the date of such approval); but
provided further
, that Incentive Stock Options granted prior to such 10th
anniversary may extend beyond that date.
Section
14.
Invalid Provisions
. In the event that any provision of this Plan is found to be invalid or otherwise unenforceable
under any applicable law, such invalidity or unenforceability will not be construed as rendering any other provisions contained
herein as invalid or unenforceable, and all such other provisions will be given full force and effect to the same extent as though
the invalid or unenforceable provision was not contained herein.
Section
15.
Governing Law
. The Plan and all Awards granted hereunder will be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the application of the principles of conflicts of laws.
Section
16.
Board Action
. Notwithstanding anything to the contrary set forth in the Plan, any and all actions of the Board
or Committee, as the case may be, taken under or in connection with the Plan and any agreements, instruments, documents, certificates
or other writings entered into, executed, granted, issued and/or delivered pursuant to the terms hereof, will be subject to and
limited by any and all votes, consents, approvals, waivers or other actions of all or certain stockholders of the Company or other
Persons required by:
(a) the
Company’s Certificate of Incorporation (as the same may be amended and/or restated from time to time);
(b) the
Company’s Bylaws (as the same may be amended and/or restated from time to time); and
(c) any
other agreement, instrument, document or writing now or hereafter existing, between or among the Company and its stockholders or
other Persons (as the same may be amended from time to time).
Section
17.
Notices
. Any notice to be given to the Company pursuant to the provisions of the Plan shall be given by registered
or certified mail, postage prepaid, and, addressed, if to the Company to its principal executive office to the attention of its
Chief Executive Officer (or such other Person as the Company may designate in writing from time to time), and, if to a Participant,
to the address contained in the Company’s personnel records, or to such other address as that Participant may hereafter designate
in writing to the Company. Any such notice shall be deemed given or delivered three days after the date of mailing.
* * * * * *
STOCK OPTION GRANT NOTICE
Hyrecar Inc (the “
Company
”)
hereby grants to the holder listed below (“
Participant
”) an option to purchase the number of shares of the Company’s
common stock, par value $0.00001 per share (“
Shares
”), set forth below (the “
Option
”) under its
2016 Equity Incentive Plan attached hereto as
Exhibit A
(the “
Plan
”). The Option is subject to all
of the terms and conditions set forth in this Grant Notice and in the Stock Option Agreement attached hereto as
Exhibit B
(the “
Stock Option Agreement
”) and the Plan, which are incorporated herein by reference. Unless otherwise defined
herein, capitalized terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Stock Option Agreement.
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Participant:
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_____________________________
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Grant Date:
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____________
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Vesting Commencement Date:
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________ __, 2017
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Total Number of Shares Subject to the Option:
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_____________________________
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Exercise Price per Share:
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$
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Expiration Date:
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________, 2027
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Type of Option:
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[ ] Incentive Stock Option
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[ ] Non-Qualified Stock Option
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Vesting Schedule:
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Subject to the terms of forfeiture, termination and acceleration provided for in the Plan, each such Option shall vest as follows: (i) 25% of the Shares shall vest on the first anniversary of the Vesting Commencement Date (see above) and (ii) the remaining 75% of the Shares shall vest and become exercisable in 12 successive equal installments on the last day of each June, September, December and March, commencing on June 30, 2018 and vesting in full on March 31, 2021.
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By signing below, Participant
agrees to be bound by the terms and conditions of the Plan, the Stock Option Agreement and this Grant Notice. Participant has reviewed
the Stock Option Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel
prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Stock Option Agreement and
the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under the Plan or relating to the Option.
IN WITNESS WHEREOF, the parties hereto have
executed this Grant Notice as of the date written below.
DATED:
__, 201_
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HYRECAR INC
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By:
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Name: Joseph Furnari
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Title: Chief Executive Officer
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PARTICIPANT
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Address:
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Attachments
Exhibit A – 2016 Equity Incentive Plan
Exhibit B – Stock Option Agreement
Exhibit C – Exercise Notice
Exhibit D – Consent of Spouse
EXHIBIT A
2016 EQUITY INCENTIVE PLAN
EXHIBIT B
STOCK OPTION AGREEMENT
EXHIBIT C
FORM OF EXERCISE NOTICE
Effective as of today,
____________, _____, the undersigned (“
Participant
”) hereby elects to exercise Participant’s option to purchase
the number of shares of common stock specified below (the “
Shares
”) of Hyrecar Inc, a Delaware corporation (the
“
Company
”), under and pursuant to the 2016 Equity Incentive Plan (the “
Plan
”) and the Stock Option
Grant Notice, dated as of ___________, _____, and Stock Option Agreement attached thereto (the “
Option Agreement
”).
Capitalized terms used herein without definition shall have the meanings given in the Plan and, if not defined in the Plan, the
Option Agreement.
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Grant Date:
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Number of Shares as to which Option is Exercised:
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Exercise Price per Share:
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$
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Total Exercise Price:
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$
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Stock Certificate to be issued in name of:
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Payment delivered:
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$
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Form of Payment:
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Type of Option:
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[ ] Incentive Stock Option
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[ ] Non-Qualified Stock Option
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Participant acknowledges
that Participant has received, read and understood the Plan and the Option Agreement. Participant agrees to abide by and be bound
by their terms and conditions. Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s
purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant
deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company
for any tax advice. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan, and the Option
Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements
of the Company and Participant with respect to the subject matter hereof.
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By:
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Accepted By:
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Participant Name:
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Name:
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Title:
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Exhibit
D
CONSENT OF SPOUSE
I,__________________________, spouse of the Participant
have read and approve the foregoing Grant Notice and Stock Option Agreement (the “
Agreement
”). In consideration
of the purchase of shares of Hyrecar Inc (the “
Company
”) as set forth in that Agreement, I hereby appoint my
spouse as my attorney-in-fact with respect to the exercise of any rights under the Agreement and agree to be bound by the provisions
of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the community property
laws or similar laws relating to marital property.
Dated: ___________________, ________
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(
Signature of Spouse)
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(
Printed Name
)
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STOCK OPTION AGREEMENT
Hyrecar Inc (the “Company”)
has granted to Participant an option under the Company’s 2016 Equity Incentive Plan (the “
Plan
”) to purchase the
number of Shares indicated in the attached Stock Option Grant Notice (the “
Grant Notice
”).
ARTICLE
1
General
1.1
Defined
Terms
. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and the Grant Notice.
1.2
Incorporation
of Terms of Plan
. The Option is subject to the terms and conditions of the Plan which are incorporated herein by reference.
ARTICLE
2
Grant of Option
2.1
Grant
of Option
. In consideration of Participant’s past and/or continued employment with or service to the Company or an Affiliate
and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “
Grant
Date
”), the Company irrevocably grants to Participant the Option to purchase any part or all of an aggregate of the number
of Shares set forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement. The Grant Notice
will specify whether the Option is an Incentive Stock Option or a Non-Qualified Stock Option.
2.2
Exercise
Price
. The initial exercise price per Share subject to the Option shall be as set forth in the Grant Notice;
provided
,
however
, that such price per share will not be less than 100% of the Fair Market Value of a Share on the date of the grant;
provided
,
further
, that any Incentive Stock Option granted to any Participant who, at the time the Option is granted,
owns more than 10% of the voting power of all classes of shares of the Company, its Parent or of a Subsidiary will have an exercise
price per Share of not less than 110% of Fair Market Value per Share on the date of the grant.
2.3
Consideration
to the Company
. In consideration of the grant of the Option by the Company, Participant agrees to render faithful and efficient
services to the Company and its Affiliates. Nothing in the Plan or this Agreement shall confer upon Participant any right to continue
in the employ or service of the Company or any Affiliate or shall interfere with or restrict in any way the rights of the Company
and its Affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time
for any reason whatsoever, with or without Cause (as defined in Section 5.15 below), except to the extent expressly provided otherwise
in a written agreement between the Company or its Affiliates and a Participant.
ARTICLE
3
Period of Exercisability
3.1
Commencement
of Exercisability
.
(a)
Subject
to Sections 3.3, 5.7, 5.9, and 5.14, the Option shall become vested and exercisable in such amounts and at such times as are set
forth in the Grant Notice.
(b)
No
portion of the Option that has not become vested and exercisable at the date of Participant’s termination of service (as provided
in Section 7 of the Plan) shall thereafter become vested and exercisable, except as may be otherwise provided by the Board or as
set forth in a written agreement between the Company and Participant.
3.2
Vesting
Schedule
. The installments provided for in the vesting schedule set forth in the Grant Notice are cumulative. Each such installment
which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable
until it becomes unexercisable under Section 3.3.
3.3
Expiration
of Option
. The Option will expire and may not be exercised to any extent by anyone after the first to occur of the following
events:
(a)
the
expiration of ten years from the Grant Date;
(b)
the
expiration of three months from the date of Participant’s termination of service, unless such termination occurs by reason of Participant’s
death, Disability or Participant’s discharge for Cause;
(c)
the
expiration of one year from the date of Participant’s termination of service by reason of Participant’s death or Disability; or
(d)
the
date of Participant’s termination of service by the Company or any of its Affiliates by reason of Participant’s discharge for Cause.
Participant acknowledges
that an Incentive Stock Option exercised more than three months after Participant’s termination of employment, other than by reason
of death or Disability, will be taxed as a Non-Qualified Stock Option.
3.4
Special
Tax Consequences
. Participant acknowledges that, to the extent that the aggregate Fair Market Value (determined as of the time
the Option is granted) of all Shares with respect to which Incentive Stock Options, including the Option, are exercisable for the
first time by Participant in any calendar year exceeds $100,000, the Option and such other options shall be Non-Qualified Stock
Options to the extent necessary to comply with the limitations imposed by Section 422(d) of the Code. Participant further acknowledges
that the rule set forth in the preceding sentence shall be applied by taking the Option and other Incentive Stock Options into
account in the order in which they were granted, as determined under Section 422(d) of the Code and the Treasury Regulations thereunder.
ARTICLE
4
Exercise of Option
4.1
Person
Eligible to Exercise
. Except as provided in Sections 5.2(b) and 5.2(c), during the lifetime of Participant, only Participant
may exercise the Option or any portion thereof. If Participant’s service with the Company or any Affiliate terminates by
reason of death, the Option may thereafter be exercised, to the extent it was exercisable at the time of his or her death, by the
legal representative of the estate or by the legatee of the Participant under the will of the Participant, for a period ending
12 months following the date of death (or, if sooner, on the last day of the stated term of the Option).
4.2
Partial
Exercise
. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole
or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3.
4.3
Manner
of Exercise
. The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company
or the Secretary’s office of all of the following prior to the time when the Option or such portion thereof becomes unexercisable
under Section 3.3:
(a)
An
Exercise Notice electronically or in writing signed by Participant or any other person then entitled to exercise the Option or
portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules
established by the Board. Such notice shall be substantially in the form attached as
Exhibit C
to the Grant Notice (or such
other form as is prescribed by the Board).
(b)
The
receipt by the Company of full payment for the Shares with respect to which the Option or portion thereof is exercised, including
payment of any applicable withholding tax, which may be in one or more of the forms of consideration permitted under Section 4.4.
(c)
A
bona fide written representation and agreement, in such form as is prescribed by the Board, signed by Participant or the other
person then entitled to exercise such Option or portion thereof, stating that the Shares are being acquired for Participant’s own
account, for investment and without any present intention of distributing or reselling said Shares or any of them except as may
be permitted under the Securities Act of 1933 (the “
Securities Act
”) and then applicable rules and regulations
thereunder and any other applicable law, and that Participant or other person then entitled to exercise such Option or portion
thereof will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting
to the Company if any sale or distribution of the Shares by such person is contrary to the representation and agreement referred
to above. The Board may, in its absolute discretion, take whatever additional actions it deems appropriate to ensure the observance
and performance of such representation and agreement and to effect compliance with the Securities Act and any other federal or
state securities laws or regulations and any other applicable law. Without limiting the generality of the foregoing, the Board
may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of Shares acquired on an Option exercise
does not violate the Securities Act, and may issue stop-transfer orders covering such Shares. Share certificates evidencing Shares
issued on exercise of the Option shall bear an appropriate legend referring to the provisions of this subsection (c) and the agreements
herein. The written representation and agreement referred to in the first sentence of this subsection (c) shall, however, not be
required if the Shares to be issued pursuant to such exercise have been registered under the Securities Act, and such registration
is then effective in respect of such Shares.
(d)
In
the event the Option or portion thereof shall be exercised under Section 4.1 by any person or persons other than Participant, appropriate
proof of the right of such person or persons to exercise the Option.
4.4
Method
of Payment
. Payment of the exercise price shall be by cash or certified or bank check, or by such other method as the Committee
may approve or accept.
4.5
Rights
as Stockholder
. Shares subject to an Option shall be deemed issued, and the Participant shall be deemed the record holder of
such Shares, on the Option exercise date. Until such Option exercise date, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to the Shares subject to the Option.
4.6
Adjustment
in Option Shares
. In the event of any recapitalization, reorganization, merger, stock split or combination, stock dividend
or other similar event or transaction (including, without limitation, any “corporate transaction,” within the meaning
of Treasury Regulation § 1.424-1(a)(3)), substitutions or adjustments will be made by the Board: (i) to the aggregate
number, class and/or issuer of the securities reserved for issuance under the Plan; (ii) to the number, class and/or issuer
of securities subject to outstanding Awards; and (iii) to the exercise price of outstanding Options, in each case in a manner
that reflects equitably the effects of such event or transaction. For avoidance of doubt, a substitution or adjustment that reflects
equitably the effects of a given event or transaction will include (but will not be limited to) any substitution or adjustment
consistent with the requirements of Treasury Regulation § 1.424-1(a) or any successor provision.
ARTICLE
5
Other Provisions
5.1
Administration
.
The Plan will be administered by the Board;
provided
,
however
, that the Board may at any time appoint a Committee
to perform some or all of the Board’s administrative functions hereunder;
provided further
, that the authority of
any Committee appointed pursuant to Section 2 of the Plan will be subject to such terms and conditions as the Board may prescribe
and will be coextensive with, and not in lieu of, the authority of the Board thereunder.
5.2
Option
Not Transferable
.
(a)
Subject
to Section 5.2(b), the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of
descent and distribution, unless and until the Shares underlying the Option have been issued, and all restrictions applicable to
such Shares have lapsed. Neither the Option nor any interest or right therein shall be liable for the debts, contracts or engagements
of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.
(b)
Notwithstanding
any other provision in this Agreement, with the consent of the Board and to the extent the Option is not intended to qualify as
an Incentive Stock Option, the Option may be transferred to one or more members of the Participant’s immediate family, to trusts
for the benefit of such family members or to partnerships in which such family members are the only partners (each a “
Permitted
Transferee
”), provided the Permitted Transferee agrees in writing with the Company to be bound by all of the terms and
conditions of the Plan and this Option Agreement.
(c)
Unless
transferred to a Permitted Transferee in accordance with Section 5.2(b), during the lifetime of Participant, only the Participant
may exercise the Option or any portion thereof. Subject to such conditions and procedures as the Board may require, a Permitted
Transferee may exercise the Option or any portion thereof during Participant’s lifetime. After the death of Participant, any exercisable
portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by Participant’s
personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable
laws of descent and distribution.
5.3
Restrictive
Legends and Stop-Transfer Orders
.
(a)
The
share certificate or certificates evidencing the Shares purchased hereunder shall be endorsed with any legend that may be required
by the Plan or by state or federal securities laws.
(b)
Participant
agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop
transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c)
Company
shall not be required: (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any
of the provisions of this Agreement, or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such Shares shall have been so transferred.
5.4
Shares
to Be Reserved
. The Company shall at all times during the term of the Option reserve and keep available such number of Shares
as will be sufficient to satisfy the requirements of this Agreement.
5.5
Notices
.
Any notice to be given to the Company pursuant to the provisions of the Plan shall be given by registered or certified mail, postage
prepaid, and, addressed, if to the Company to its principal executive office to the attention of its Chief Executive Officer (or
such other Person as the Company may designate in writing from time to time), and, if to a Participant, to the address contained
in the Company’s personnel records, or to such other address as that Participant may hereafter designate in writing to the
Company. Any such notice shall be deemed given or delivered three days after the date of mailing.
5.6
Titles
.
Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
5.7
Stockholder
Approval
. The Plan will be submitted for approval by the Company’s stockholders within twelve months after the date the Plan
was initially adopted by the Board. The Option may not be exercised to any extent by anyone prior to the time when the Plan is
approved by the stockholders, and if such approval has not been obtained by the end of said twelve month period, the Option shall
thereupon be canceled and become null and void.
5.8
Governing
Law; Severability
. This Agreement shall be administered, interpreted and enforced under the laws of the State of Delaware,
without regard to the conflicts of law principles thereof should any provision of this Agreement be determined by a court of law
to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.
5.9
Conformity
to Securities Laws
. Participant acknowledges that the Plan is intended to conform to the extent necessary with all provisions
of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission
thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered,
and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the
extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.
5.10
Amendments
.
This Agreement may not be modified, amended or terminated except by an instrument in writing, signed by Participant or such other
person as may be permitted to exercise the Option pursuant to Section 4.1 and by a duly authorized representative of the Company.
5.11
Successors
and Assigns
. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth
in Section 5.2, this Agreement shall be binding upon Participant and his or her heirs, executors, Boards, successors and assigns.
5.12
Notification
of Disposition
. If this Option is designated as an Incentive Stock Option, Participant shall give prompt notice to the Company
of any disposition or other transfer of any Shares acquired under this Agreement if such disposition or transfer is made (a) within
two years from the Grant Date with respect to such Shares or (b) within one year after the transfer of such Shares to him. Such
notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption
of indebtedness or other consideration, by Participant in such disposition or other transfer.
5.13
Limitations
Applicable to Section 16 Persons
. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject
to Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set forth
in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act)
that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall
be deemed amended to the extent necessary to conform to such applicable exemptive rule.
5.14
Change
in Control
. Notwithstanding anything to the contrary set forth herein, upon or in anticipation of any Change in Control of
the Company, its Parent (if any), or any of their Affiliates, the Board may, in its sole and absolute discretion and without the
need for the consent of any Participant, take one or more of the following actions contingent upon the occurrence of that Change
in Control:
(a)
cause
any or all outstanding Options to become vested and immediately exercisable, in whole or in part;
(b)
cause
any outstanding Option to become fully vested and immediately exercisable for a reasonable period in advance of the Change in Control
and, to the extent not exercised prior to that Change in Control, cancel that Option upon closing of the Change in Control;
(c)
cancel
any Option in exchange for a substitute award in a manner consistent with the principles of Treas. Reg. §1.424-1(a) or any
successor rule or regulation (notwithstanding the fact that the original Award may never have been intended to satisfy the requirements
for treatment as an Incentive Stock Option); and
(d)
cancel
any Option in exchange for cash and/or other substitute consideration with a value equal to: (i) the number of Shares subject
to that Option, multiplied by (ii) the difference, if any, between the fair value per Share (as determined in the sole discretion
of the Board, which may equal Fair Market Value of a Share or the per Share consideration to be paid in connection with the Change
in Control transaction to the holders of Shares) on the date of the Change in Control and the exercise price of that Option; provided,
that if the fair value per Share (as determined in the sole discretion of the Board) on the date of the Change in Control does
not exceed the exercise price of any such Option, the Board may cancel that Option without any payment of consideration therefor.
In the discretion of
the Board, any cash or substitute consideration payable upon cancellation of an Award may be subjected to (1) vesting terms
substantially identical to those that applied to the cancelled Award immediately prior to the Change in Control, or (2) earn-out,
escrow, holdback or similar arrangements, to the extent such arrangements are applicable to any consideration paid to stockholders
in connection with the Change in Control.
5.15
Cause
Defined
. For purposes of this Agreement, “Cause” shall mean:
(a)
conviction
of, or the entry of a plea of guilty or no contest to, a felony or any other crime that causes the Company or its Affiliates public
disgrace or disrepute, or adversely affects the Company’s or its Affiliates’ operations, condition (financial or otherwise),
prospects or interests;
(b)
gross
negligence or willful misconduct with respect to the Company or any of its Affiliates, including, without limitation fraud, embezzlement,
theft or dishonesty in the course of his or her employment;
(c)
alcohol
abuse or use of controlled drugs other than in accordance with a physician’s prescription;
(d)
refusal,
failure or inability to perform any material obligation or fulfill any duty (other than any duty or obligation of the type described
in clause (vi) below) to the Company or any of its Affiliates (other than due to a Disability), which failure, refusal or inability
is not cured within 10 days after delivery of notice thereof;
(e)
material
breach of any agreement with or duty owed to the Company or any of its Affiliates; or
(f)
any
breach of any obligation or duty to the Company or any of its Affiliates (whether arising by statute, common law, contract or otherwise)
relating to confidentiality, noncompetition, nonsolicitation or proprietary rights.
Notwithstanding the foregoing, if Participant
and the Company (or any of its Affiliates) have entered into an employment agreement, consulting agreement or other similar agreement
that specifically defines “cause,” then with respect to such Participant, “Cause” shall have the meaning
defined in that employment agreement, consulting agreement or other agreement. For purposes of this section, the term “Company”
shall include any parent and any subsidiary of the Company
5.16
Additional
Documents
. As a condition to the effectiveness of the purchase of Shares hereunder:
(a) the
Participant’s spouse (if any) shall execute and deliver to the Company the “Consent of Spouse” attached as
Exhibit D
to the Grant Notice;
(b) the
Participant shall, upon request of the Company, execute any further documents or instruments necessary or desirable to carry out
the purposes or intent of this Agreement.
5.17
Section
409A
. It is intended that the grant contemplated hereby will be exempt from Section 409A of the Code as a “stock right.”
However, nothing in this Agreement shall be construed to result in a guarantee of this tax treatment, and the Participant shall
be responsible for all of his or her federal, state and local taxes (and any related liabilities).
5.18
Entire
Agreement
. The Plan, the Stockholders Agreement and this Agreement (including all Exhibits hereto) constitute the entire agreement
of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect
to the subject matter hereof.
*
* * * * *
RESTRICTED STOCK AWARD NOTICE
Hyrecar Inc (the “
Company
”)
hereby agrees to issue to the holder listed below (“
Participant
”) the number of restricted shares of the Company’s
common stock, par value $0.00001 per share (“
Shares
”), set forth below (“
Award
”) under its
2016 Equity Incentive Plan attached hereto as
Exhibit A
(the “
Plan
”). The Award is subject to all
of the terms and conditions set forth in this Award Notice and in the Restricted Stock Agreement attached hereto as
Exhibit B
(the “
Restricted Stock Agreement
”) and the Plan, which are incorporated herein by reference. Unless otherwise
defined herein, capitalized terms defined in the Plan shall have the same defined meanings in this Award Notice and the Restricted
Stock Agreement.
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Participant:
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Award Date:
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Vesting Commencement Date:
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______ __, 2016
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Total Number of Shares of Restricted Stock:
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Purchase Price per Share:
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$
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Total Purchase Price:
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Vesting Schedule:
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The Shares of Restricted Stock shall initially be unvested and forfeitable. The Shares shall vest, the restrictions thereon shall lapse and such Shares shall become nonforfeitable according to the following schedule, subject to Participant’s continuous service with the Company through and including the applicable vesting date: (i) 25% of the Shares shall vest on the first anniversary of the Vesting Commencement Date (see above) and (ii) the remaining 75% of the Shares shall vest in 12 successive equal installments the on the last day of each [____, _____, _____ and ____, commencing on ____ 30, 2017 and vesting in full on ___ 30, 2020].
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By signing below, Participant
agrees to be bound by the terms and conditions of the Plan, the Restricted Stock Agreement and this Award Notice. Participant has
reviewed the Restricted Stock Agreement (and all exhibits thereto), the Plan and this Award Notice in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Award Notice and fully understands all provisions of this Award
Notice, the Restricted Stock Agreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan or relating to the Restricted Stock.
[
signature page follows
]
IN WITNESS WHEREOF, the parties hereto have
executed this Award Notice as of the date written below.
DATED: ___________________, _____
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HYRECAR INC
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By:
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Name:
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Title:
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PARTICIPANT
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Address:
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Attachments
Exhibit A – 2016 Equity Incentive Plan
Exhibit B – Restricted Stock Agreement
EXHIBIT A
2016 EQUITY INCENTIVE PLAN
EXHIBIT B
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK
AGREEMENT (this “
Agreement
”) is made this __ day of _______, 2016 (the “
Effective Date
”)
between Hyrecar Inc (the “
Company
”) and _______________ (the “
Participant
”).
WHEREAS, the Company
maintains its 2016 Equity Incentive Plan (the “
Plan
”) for the benefit of its employees, directors, consultants,
and other individuals who provide services to the Company;
WHEREAS, the Plan permits
the award of shares of the Company’s common stock, par value $0.0001 per share (as defined in the Plan, the “
Common
Stock
”), subject to certain restrictions; and
WHEREAS, to compensate
the Participant for his service to the Company and to further align the Participant’s personal financial interests with those
of the Company’s stockholders, the Company desires to allow the Participant to purchase a number of shares of Common Stock,
subject to the restrictions and on the terms and conditions contained in the Plan and this Agreement;
NOW, THEREFORE, in consideration
of these premises and the agreements set forth herein, the parties, intending to be legally bound hereby, agree as follows:
Section
18.
Award
. As of the Effective Date, the Company hereby sells the Participant _____________ shares of Common Stock
(the “
Shares
”) at a price of $[____] per share (the “
Purchase Price
”), subject to the restrictions
and on the terms and conditions set forth in this Agreement and the Plan. The Participant shall pay for the Shares by delivering
to the Company a single sum cash payment or by delivering to the Company a full recourse secured promissory note in substantially
the form attached hereto as
Exhibit 1
(a “
Promissory Note
”). The terms of the Plan are hereby incorporated
into this Agreement by reference, as though fully set forth herein. Capitalized terms used but not defined herein will have the
same meaning as defined in the Plan.
Section
19.
Vesting of Shares
. The Shares are subject to forfeiture to the Company until they become nonforfeitable in
accordance with this
Section 2
.
(a)
Vesting
.
Subject to the limitations contained herein, the Shares will vest and become nonforfeitable as provided in the Restricted Stock
Award Notice to which this Agreement is attached.
(b)
Change
in Control Vesting
. Notwithstanding the foregoing, if a Change in Control occurs and the Participant remains in continuous
service to the Company through the date of that Change in Control, all of the Shares will be subject to any action taken by the
Board under Section 3(d) of the Plan.
(c)
All
Unvested Shares Forfeited Upon Cessation of Service
. Upon cessation of Participant’s service to the Company for any reason
or for no reason (and whether such cessation is initiated by the Company, the Participant or otherwise): (i) any Shares that
have not vested, prior to the effective date of such cessation, will immediately and automatically, without any action on the part
of the Company, be forfeited, (ii) the Company will return to the Participant, without interest, the lesser of (A) the Purchase
Price that is attributable to those forfeited Shares or (B) the Fair Market Value of those forfeited Shares, and (iii) the Participant
will have no further rights with respect to those Shares. Any Shares that have vested, prior to the effective date of such cessation,
will be subject to repurchase in accordance with
Section 9
hereof.
(d)
Service
with Affiliates
. Solely for purposes of this Agreement, service to the Company will be deemed to include service to any Subsidiary
or Affiliate of the Company (for only so long as such entity remains a Subsidiary or Affiliate).
Section
20.
Escrow of Shares.
(a) The
Company will cause the Shares to be issued in the Participant’s name either by book-entry registration or issuance of a stock
certificate or certificates.
(b) While
Shares remain unvested, they will be non-transferable and the Company will hold the certificates representing such Shares in escrow
until such time as they become fully vested (or are forfeited). The Company will cause an appropriate stop-transfer order to be
issued and to remain in effect with respect to such Shares. As soon as practicable following the time that any Share becomes fully
vested (and provided that appropriate arrangements have been made with the Company for the withholding or payment of any taxes
that may be due with respect to such Share), the Company will cause that stop-transfer order to be removed and such Share will
become transferable. The Company may also condition delivery of certificates for Shares upon receipt from the Participant of any
undertakings that it may determine are appropriate to facilitate compliance with federal and state securities laws.
(c) If
any certificate is issued in respect of Shares, that certificate will be legended as described in the Plan and held in escrow by
the Company’s secretary or his designee. In addition, the Participant may be required to execute and deliver to the Company
a stock power with respect to those Shares. At such time as those Shares become fully vested, the Company will cause a new certificate
to be issued without that portion of the legend referencing the previously applicable forfeiture conditions and will cause that
new certificate to be delivered to the Participant (provided that appropriate arrangements have been made with the Company for
the withholding or payment of any taxes that may be due with respect to such Shares).
(d)
Any
Participant who is permitted to execute a Promissory Note as partial or full consideration for the purchase of Shares under this
Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the
payment of the Participant’s obligation to the Company under the Promissory Note;
provided
,
however
,
that the Board may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any
event, the Company will have full recourse against the Participant under the Promissory Note notwithstanding any pledge of the
Participant’s Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to
execute and deliver a written stock pledge agreement substantially in the form attached hereto as
Exhibit 2
(the “
Stock
Pledge Agreement
”). The Shares purchased with the Promissory Note may be released from the pledge on a pro rata basis
as the Promissory Note is paid.
Section
21.
Stock Splits, etc
. If, while any of the Shares remain subject to forfeiture, there occurs any merger, consolidation,
reorganization, reclassification, recapitalization, stock split, stock dividend, or other similar change in the Common Stock, then
any and all new, substituted or additional securities or other consideration to which the Participant is entitled by reason of
the Participant’s ownership of the Shares will be immediately subject to the escrow contemplated by Section 3, deposited
with the Escrow Holder and will thereafter be included in the term “Shares” for all purposes of the Plan and this Agreement.
Section
22.
Dividends and Distributions during Restricted Period
. The Participant will have the right to receive dividends
and distributions with respect to the Shares;
provided
,
however
, that any cash dividends or distributions
paid in respect of the Shares while those Shares remain subject to forfeiture will be held by the Company and delivered to the
Participant (without interest) only if and when the Shares giving rise to such dividends or distributions become fully vested.
Section
23.
Tax Consequences
. The Participant acknowledges that the Company has not advised the Participant regarding
the Participant’s income tax liability in connection with the award or vesting of the Shares. The Participant has reviewed
with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Participant understands that the Participant (and not the Company) shall be responsible
for the Participant’s own tax liability that may arise as a result of the transactions contemplated by this Agreement.
Section
24.
Additional Documents
. As a condition to the effectiveness of the purchase of Shares hereby made:
(a) the
Participant’s spouse (if any) shall execute and deliver to the Company the Consent of Spouse in the form attached hereto
as
Exhibit 3
; and
(b) the
Participant shall file timely an election under Section 83(b) of the Internal Revenue Code, as amended, with respect to the
purchase of the Shares (a form of Section 83(b) election is attached hereto as
Exhibit 4
);
(c) If
the Participant elects to pay all or part of the Purchase Price with a Promissory Note then the Participant shall execute and deliver
to the Company:
(i) the
Promissory Note with an initial principal amount equal to the aggregate amount of the Purchase Price that the Participant wishes
to finance; and
(ii) the
Stock Pledge Agreement;
(d) the
Participant shall, upon request of the Company, execute any further documents or instruments necessary or desirable to carry out
the purposes or intent of this Agreement.
Section
25.
Restriction on Transfer of Unvested Shares
. Except for the escrow described in
Section 3
and the
Company’s right to repurchase the Shares under certain circumstances, the Participant may not sell, pledge, assign, encumber,
hypothecate, gift, transfer, bequeath, devise, donate or otherwise dispose of, in any way or manner whatsoever, whether voluntarily
or involuntarily, any legal or beneficial interest in any of the Shares until the Shares become fully vested in accordance with
Section 2
.
Section
26.
Call Upon Cessation of Service
.
(a) If
the Participant’s service with the Company ceases for any reason, the Company or its assignee may repurchase up to all the
Shares that have become fully vested in accordance with
Section 2
and that the Participant (including, for purposes of this
Section 9
, any permitted transferee(s)) then hold(s) (the “
Repurchase Option
”). The price payable by
the Company or its assignee to repurchase Shares pursuant to this
Section 9
will be the Fair Market Value of those Shares
at the time the right described in this
Section 9
is exercised (which exercise is deemed to occur upon notice thereof
being given by the Company). Such price may be paid (i) in cash; (ii) by offset of any obligation of the Participant to the Company
or its affiliates (including a Promissory Note); or (iii) to the extent that payment in cash would give rise to an “event
of default” under the Company’s or any of its Affiliates’ principal credit agreement then in effect, by delivery
of a promissory with interest accruing at the then-current rate of U.S. Treasury Notes with a comparable duration, which interest
will be paid annually in arrears through maturity. Such note will mature and the Company shall make reasonable efforts to pay promptly
following the date upon which such payment would not give rise to an “event of default” under the Company’s principal
credit agreement then in effect, and in any event no longer than five years from such date.
(b) With
respect to each Share subject to repurchase pursuant to this
Section 9
, the Company (or its assignee) may exercise its repurchase
right by delivery of written notice to the holder of such Share at any time during the ninety (90) day period beginning on the
later of (i) the date the Participant’s provision of services to the Company ceases, or (ii) the date six months following
the date such Share became nonforfeitable in accordance with
Section 2
. All the rights of the holder of any such Shares,
other than the right to receive payment in the manner described in this
Section 9
, will terminate as of the date of delivery
by the Company of the written notice described in this paragraph. The only representation, warranty or covenant which the holder
of such Shares will be required to make in connection with a sale pursuant to this
Section 9
is a representation and warranty
with respect to his or her ownership of the Shares and his or her ability to convey title thereto free and clear of liens, claims
or encumbrances.
(c) Upon
delivery of the notice described above in
Section 9(b)
, full right, title and interest in such Shares will pass to the Company
or its assignee. If a holder of Shares becomes obligated to transfer any or all of such Shares to the Company or its assignee pursuant
to this Agreement, that holder will endorse in blank the certificates evidencing the Shares being repurchased and deliver those
certificates to the Company or its assignee within fifteen (15) days after receipt of the notice described above. Upon the delivery
of those Shares, the Company will deliver the repurchase price for the Shares in the manner described above in
Section 9(a)
.
If a holder of Shares fails to deliver those Shares in accordance with the terms of this Agreement, the Company or its assignee
may, at its option, in addition to all other remedies it may have, either (i) send to that holder the purchase price for such
Shares, as herein specified, or (ii) deposit such amount with a trustee or escrow agent for the benefit of that holder for
release upon delivery of Shares in accordance with the terms of this Agreement. Thereupon, the Company or its assignee, upon written
notice to the holder, will (x) cancel on its books the certificate or certificates representing the Shares required to be
transferred, and (y) issue, in lieu thereof, in the name of the Company (or its assignee) a new certificate or certificates
representing such Shares.
Section
27.
Representations and Warranties
. By executing this Agreement, the Participant hereby represents, warrants,
covenants, acknowledges and/or agrees that:
(a) The
Participant has received a copy of the Plan, has read the Plan and is familiar with its terms, and hereby accepts the Shares subject
to the terms and provisions of the Plan, as amended from time to time.
(b) The
Shares are being acquired for the Participant’s own account, for investment purposes only, and not for the account of any
other person, and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the
“
Securities Act
”);
(c) No
other person (other than the Participant and the Company) has or will have a direct or indirect beneficial interest in the Shares
as of the Effective Date;
(d) The
Shares have not been registered or qualified under the Securities Act or any state securities laws, the offering and sale of the
Shares is intended to be exempt from registration under the Securities Act by virtue of Section 4(2) of, or Rule 701 promulgated
under the Securities Act, and reliance on that exemption is predicated in part on the accuracy of these representations and warranties;
(e) The
Participant has a preexisting business relationship with the Company, has such knowledge and experience in financial and business
matters in order to be able to evaluate the merits and risks of an investment in the Company, and is not utilizing any other person
as a purchaser representative to evaluate such merits and risks;
(f) The
Participant has been provided reasonable access to all relevant information in order to be able to evaluate an investment in the
Company and has had an opportunity to discuss with management of the Company the business and financial affairs of the Company;
(g) The
Participant understands and acknowledges that investment in the Company is speculative and involves a high degree of risk, the
Participant has no present need for liquidity in his investment in the Company and is able to bear the risk of that investment
for an indefinite period and to afford a complete loss thereof;
(h) The
Participant understands and acknowledges that there is no public market for the Shares, there can be no assurance that any such
market will ever develop and, therefore, the Participant may be required to hold the Shares indefinitely;
(i) In
addition to complying with other similar restrictions contained herein, the Participant will not sell, transfer, pledge, hypothecate
or otherwise dispose of any interest in the Shares unless such interest is registered in accordance with the Securities Act and
applicable state securities laws or an exemption from such registration is available and, if required by the Company, an opinion
of counsel is delivered to the Company, in a form satisfactory to the Company, that such registration is unnecessary; and
(j) The
Participant acknowledges and agrees that the Company is under no obligation to register the Shares on behalf of the Participant
or to assist the Participant in complying with any exemption from registration.
Section
28.
General Provisions
:
(a) This
Agreement (including the exhibits hereto), together with the Plan, represents the entire agreement between the parties with respect
to the purchase of the Shares and merges and supersedes all prior and contemporaneous discussions, agreements and understandings
of every nature relating to the Participant’s equity incentive compensation from the Company and any of its affiliates or
subsidiaries or any of their predecessors. This Agreement may only be modified or amended in a writing signed by both parties.
(b) Neither
this Agreement nor any rights or interest hereunder shall be assignable by the Participant, his beneficiaries or legal representatives,
and any purported assignment shall be null and void.
(c) Either
party’s failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from enforcing each and every other provision of this Agreement.
The rights granted both parties herein are cumulative and shall not constitute a waiver of either party’s right to assert
all other legal remedies available to it under the circumstances.
(d) The
purchase of Shares hereunder will not confer upon the Participant any right to continue in service with the Company or any of its
subsidiaries or affiliates.
(e) This
Agreement shall be governed by, and enforced in accordance with, the laws of the State of Delaware, without regard to the application
of the principles of conflicts or choice of laws.
(f) This
Agreement may be executed, including execution by facsimile signature, in one or more counterparts, each of which shall be deemed
an original, and all of which together shall be deemed to be one and the same instrument.
* * * * * *
EXHIBIT 1
FULL RECOURSE SECURED PROMISSORY NOTE
FOR
VALUE RECEIVED, the undersigned promises to pay to Hyrecar Inc, a Delaware corporation (the “
Company
”), or order,
at its principal office, the principal amount of $[
],
plus accrued interest thereon, upon the earlier of (i) the [tenth (10th)] anniversary of the date of this Full Recourse Secured
Promissory Note (this “Note”), (ii) the closing of a Change of Control in which the proceeds to the stockholders
of the Company include cash or freely marketable securities, or (iii) 30 days following the cessation of Participant’s
service with the Company if such cessation is (A) by the Company for Cause (as defined in the Company’s 2016 Equity
Incentive Plan (the “
Plan
”)) or (B) voluntarily by the undersigned, unless the Board elects, in its sole
discretion, to have the term in subsection (i) of this section apply to such voluntary cessation of service, or (iv) the
closing of any private sale of the Pledged Stock (as defined below) (the “
Due Date
”). This Note shall bear interest
at the rate per annum of [_____]% [the applicable Federal Rate as of
August 2016
], compounded annually. Payment of such
interest shall be deferred until the Due Date, provided that the undersigned shall submit to the Company payment in full of all
such interest on the Due Date.
Capitalized
terms used but not defined herein shall have the meanings ascribed to them in that certain Restricted Stock Agreement between the
Company and the undersigned dated the date hereof (the “
Restricted Stock Agreement
”) or in the Plan.
As
security for the full and timely payment of this Note, the undersigned hereunder pledges and grants to the Company a security interest
in [
] Shares purchased by the undersigned pursuant
to the Restricted Stock Agreement (the “
Pledged Stock
”), together with any stock subscription rights, liquidating
dividends, stock dividends, new securities of any type whatsoever, or any other property which the undersigned is or may be entitled
to receive as a result of the undersigned’s ownership of the Pledged Stock. The undersigned shall, upon execution of this
Note, deliver (or authorize the Company to retain) all certificates representing the Pledged Stock to the Company. The Company
shall hold the Pledged Stock to perfect the security interest granted hereunder.
If
the undersigned’s service to the Company is terminated that portion of the principal amount of this Note (and any interest
accrued thereon from the date hereof) equal to the number of unvested Shares multiplied by the lesser of (A) the Purchase Price
that is attributable to those unvested Shares or (B) the Fair Market Value of those unvested Shares shall be automatically cancelled
and the undersigned’s payment obligations for such unvested and forfeited shares shall be extinguished.
The
undersigned may prepay any amount due hereunder at any time, without premium or penalty.
The
undersigned hereby waives to the full extent permitted by law all rights to plead any statute of limitations as a defense to any
action hereunder.
The
undersigned acknowledges that this Note is a full recourse note and that the undersigned is liable for full payment of this Note
without regard to the value at any time or from time to time of the Pledged Stock. In the event of any default in the payment of
this Note, the Company shall have and may exercise any and all remedies of a secured party under the Uniform Commercial Code, and
any other remedies available at law or in equity, with respect to the Pledged Stock. The undersigned acknowledges that state or
federal securities laws may restrict the public sale of securities, and may require private sales at prices or on terms less favorable
to the seller than public sales.
The
failure of the Company to exercise any of the rights created hereby, or to promptly enforce any of the provisions of this Note,
shall not constitute a waiver of the right to exercise such rights or to enforce any such provisions.
As
used herein, the undersigned includes the successors, assigns and distributees of the undersigned.
As
used herein, the Company includes the successors, assigns and distributees of the Company, as well as a holder in due course of
this Note.
In
the event the Company incurs any costs or fees in order to enforce payment of this Note or any portion thereof, the undersigned
agrees to pay to the Company, in addition to such amounts as are owed pursuant to this Note, such costs and fees, including, without
limitation, a reasonable sum for attorneys’ fees.
This
Note is made under and shall be construed in accordance with the laws of the State of Delaware, without regard to the conflict
of law provisions thereof.
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(Signature)
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Name:
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Address:
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EXHIBIT
2
FORM OF STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT
(this “
Agreement
”), is made and entered into as of the ____ day of _____, 2016, by and between [Participant’s
Name] (“
Pledgor
”) on the one hand, and Hyrecar Inc (the “
Secured Party
”) on the other hand.
Capitalized terms used but not defined herein will have the same meaning as defined in the Note (defined below).
RECITALS
WHEREAS, the Secured
Party is loaning the Pledgor $__________ in exchange for a full recourse promissory note secured by a pledge of ________ shares
of the Secured Party’s Common Stock (the “
Pledged Stock
”);
WHEREAS, concurrently
with the execution and delivery of this Agreement, Pledgor is executing and delivering a Full Recourse Promissory Note in favor
of the Secured Party with a principal amount of $_________ (the “
Note
”);
WHEREAS, in order to
secure the Pledgor’s performance and payment of the Note, the Pledgor has agreed to grant to the Secured Party a security
interest in the Pledged Stock and enter into this Agreement.
AGREEMENT
NOW, THEREFORE, in
consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1.
Definitions.
The following terms shall have the following meanings wherever used in this Agreement:
“
Loan
”
means the loan made by the Secured Party to the Pledgor on the date of the Note, in an amount equal to the original principal amount
of the Note.
“
Obligations
”
shall mean all principal and interest and other payments, penalties and/or obligations which may be due and payable under the Note,
whether upon stated maturity, by acceleration, or otherwise, outstanding at any time and under this Agreement.
“
Satisfaction
Date
” shall mean that date on which all of the Obligations have been paid or otherwise satisfied in full.
2.
Pledge
of the Pledged Stock/Additional Deposits
.
a. As
security for the due and timely payment and performance of all of the Obligations, the Pledgor pledges to the Secured Party, and
grants to the Secured Party a security interest in, all of the Pledged Stock (as same are constituted from time to time), together
with all cash dividends, stock dividends, interest, profits, premiums, redemptions, warrants, subscription rights, options, substitutions,
exchanges and other distributions now or hereafter made on the Pledged Stock and all cash and non-cash proceeds thereof, until
the Satisfaction Date. The Pledged Stock and all property at any time pledged to the Secured Party hereunder or in which the Secured
Party is granted a security interest (whether described herein or not) and all income therefrom and proceeds thereof are herein
included in the definition of Pledged Stock.
b. In
furtherance of the pledge hereunder, the Pledgor is, concurrently herewith, delivering to the Secured Party, the certificate or
certificates representing all of the Pledged Stock, each of which now remains in the name of the Pledgor and accompanied by appropriate
undated stock power(s) duly endorsed in blank by the Pledgor, attached as
Exhibit A
.
c. If,
while this Agreement is in effect, the Pledgor becomes entitled to receive or receives any stock certificate(s) (including, without
limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or
reduction of capital or issued in connection with any reorganization), option or rights whether as an addition to, in substitution
of, or in exchange for, any Pledged Stock or otherwise, the Pledgor agrees to accept the same, to hold the same in trust on behalf
of and for the benefit of the Secured Party.
3.
Retention
of the Pledged Stock
.
a. Except
as otherwise provided herein, the Secured Party shall have no obligation with respect to the Pledged Stock, except to use reasonable
care in the custody and preservation thereof, to the extent required by law.
b. The
Secured Party shall hold the Pledged Stock in the form in which same are delivered herewith.
c. Without
the prior written consent of the Secured Party, the Pledgor shall not cause or permit any lien or encumbrance to attach to the
Pledged Stock, nor shall Pledgor transfer, sell, convey the Pledged Stock to any other party as collateral or otherwise (or agree
to do any of the foregoing), until the Satisfaction Date.
4.
Rights
of the Pledgor
. Throughout the term of this Agreement the Pledgor shall have the right to vote the Pledged Stock in all matters
presented to the stockholders of the Secured Party for vote thereon, except in a manner inconsistent with the terms of this Agreement
or detrimental to the interests of the Secured Party.
5.
Power
of Attorney
.
a. The
Pledgor hereby authorizes and appoints the Secured Party, with full powers of substitution, as the true and lawful attorney-in-fact
of the Pledgor, in his name, place and stead, to take any and all such action as the Secured Party, in its sole discretion, may
deem necessary or appropriate in furtherance of the exercise of the aforesaid powers specifically set forth in this Agreement.
Such power of attorney shall be coupled with an interest, and shall be irrevocable until the Satisfaction Date. Without limitation
of the foregoing, such power of attorney shall not in any manner be affected or impaired by reason of any act of the Pledgor or
by operation of law. Nothing herein contained, however, shall be deemed to require or impose any duty upon the Secured Party to
exercise any of the rights or powers granted herein.
b. The
foregoing power of attorney, shall be fully binding upon any person who may acquire any beneficial interest in any of the Pledged
Stock.
6.
Covenants,
Representations and Warranties
. In connection with the transactions contemplated by this Agreement, and knowing that the Secured
Party is and shall be relying hereon, the Pledgor hereby covenants, represents and warrants that:
a. the
Pledged Stock is and will be owned by the Pledgor free and clear of any and all restrictions, pledges, liens, encumbrances or other
security interests of any kind, save and except for the pledge under this Agreement;
b. there
are and will be no options, warrants or other rights in respect of the sale, transfer or other disposition of any of the Pledged
Stock by the Pledgor, and the Pledgor has the absolute right to pledge the Pledged Stock hereunder without the necessity of any
consent of any Person;
c. neither
the execution or delivery of this Agreement, nor the consummation of the transactions contemplated hereby, nor the compliance with
or performance of this Agreement by the Pledgor, conflicts with or will result in the breach or violation of or a default under
the terms, conditions or provisions of (i) any mortgage, security agreement, indenture, evidence of indebtedness, loan or financing
agreement, or other agreement or instrument to which the Pledgor is a party or by which the Pledgor is bound, or (ii) any provision
of law, any order of any court or administrative agency, or any rule or regulation applicable to the Pledgor;
d. this
Agreement has been duly executed and delivered by the Pledgor, and constitutes the legal, valid and binding obligation of the Pledgor,
enforceable against the Pledgor in accordance with its terms;
e. there
are no actions, suits or proceedings pending or threatened against or affecting the Pledgor that involve or relate to the Pledged
Stock; and
f. upon
execution and performance of this Agreement by Pledgor, the Secured Party shall have the senior security interest in the Pledged
Stock.
7.
Return
of the Pledged Stock
. To the extent that the Secured Party shall not previously have taken, acquired, sold, transferred, disposed
of or otherwise realized value on the Pledged Stock in accordance with this Agreement, on the date on which the Obligations have
been indefeasibly discharged by payment in cash, any remaining security interest in the Pledged Stock shall automatically terminate,
cease to exist and be released, and the Secured Party shall forthwith return any remaining Pledged Stock and irrevocably release
such shares from collateral.
8.
Expenses
of the Secured Party
. All expenses incurred by the Secured Party (including but not limited to reasonable attorneys’
fees) in connection with any actual or attempted sale or other disposition of Pledged Stock hereunder shall be reimbursed to the
Secured Party by the Pledgor on demand, or, at the Secured Party’s option, such expenses may be added to the Obligations
and shall be payable on demand.
9.
Further
Assurances
. From time to time hereafter, each party shall take any and all such further action, and shall execute and deliver
any and all such further documents and/or instruments, as any other party may request in order to accomplish the purposes of and
fulfill the parties’ obligations under this Agreement, in order to enable the Secured Party to exercise any of its rights
hereunder, and/or in order to secure the Secured Party’s interest in the Pledged Stock.
10.
Termination
.
This Agreement shall terminate on the Satisfaction Date, except that the parties’ obligations under
Section 8
shall
survive until performed or paid.
11.
Miscellaneous
.
a. All
notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
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To Pledgor:
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Participant
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[Address 1]
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[Address 2]
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[Facsimile]
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[Telephone]
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To Secured Party:
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Hyrecar Inc
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7750 Tamarack Dr.
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Dublin, CA 94568
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Attn: Marciano Kim, CEO
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With a copy to:
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Mitchell, Silberberg & Knupp LLP
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11377 W. Olympic Blvd.
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Los Angeles, California 90064
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Attn: Nimish Patel, Esq.
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b. If
any notice to Pledgor of the sale or other disposition of Pledged Stock is required by then applicable law, five (5) business days
prior written notice (which Pledgor agrees is reasonable notice within the meaning of Section 9-504(3) of the Uniform Commercial
Code) to Pledgor of the time and place of any sale of Pledged Stock which Pledgor agrees may be by private sale. The rights granted
in this Section are in addition to any and all rights available to Secured Party under the Uniform Commercial Code.
c. The
laws of the State of Delaware including but not limited to Article 9 of the Uniform Commercial Code as in effect from time to time,
shall govern the construction and enforcement of this Agreement and the rights and remedies of the parties hereto. The parties
hereby consent to the exclusive jurisdiction of all courts sitting in the State of Delaware, in connection with any action or proceeding
under or relating to this Agreement, and waive trial by jury in any such action or proceeding.
d. This
Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators,
personal representatives, successors and permitted assigns. The Pledgor shall not, however, assign any of its or his rights or
obligations hereunder without the prior written consent of the Secured Party, and the Secured Party shall not assign its rights
hereunder without simultaneously assigning their obligations hereunder to the subject assignee. Except as otherwise referred to
herein, this Agreement, and the documents executed and delivered pursuant hereto, constitute the entire agreement between the parties
relating to the specific subject matter hereof.
e. Neither
any course of dealing between the Pledgor and/or Secured Party nor any failure to exercise, or any delay in exercising, on the
part of the Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege operate as a waiver of any other exercise of such right, power or privilege or any other
right, power or privilege.
f. The
Secured Party’s rights and remedies, whether hereunder or pursuant to any other agreements or by law or in equity, shall
be cumulative and may be exercised singly or concurrently.
g. No
change, amendment, modification, waiver, assignment of rights or obligations, cancellation or discharge hereof, or of any part
hereof, shall be valid unless the Secured Party shall have consented thereto in writing.
h. The
captions and paragraph headings in this Agreement are for convenience of reference only, and shall not in any way define, limit
or describe the construction, terms or provisions of this Agreement.
i. If
any provision of this Agreement is held invalid or unenforceable, either in its entirety or by virtue of its scope or application
to given circumstances, such provision shall thereupon be deemed modified only to the extent necessary to render same valid, or
not applicable to given circumstances, or excised from this Agreement, as the situation may require, and this Agreement shall be
construed and enforced as if such provision had been included herein as so modified in scope or application, or had not been included
herein, as the case may be.
j. This
Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, by facsimile
signature via facsimile transmission or PDF scan via electronic mail, each of which, when so executed, shall be deemed to have
the same legal effect as an original.
[
Remainder of Page Left Blank Intentionally
]
IN WITNESS WHEREOF, the parties hereto have
executed this Stock Pledge Agreement on and as of the date first set forth above.
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PLEDGOR:
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[PARTICIPANT], an individual
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SECURED PARTY:
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HYRECAR INC
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Name: Marciano Kim
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Title: Chief Executive Officer
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EXHIBIT A
STOCK POWER
ASSIGNMENT SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED,
[Participant] (the
“Stockholder
”) hereby assigns all right, title and interest in ______ shares of Common Stock
(the “
Stock
”) of HYRECAR INC, a Delaware corporation (the “
Company
”), represented by Stock
Certificate Number _____, to and for the benefit of the Company, subject to the terms and conditions of that certain Stock Pledge
Agreement dated ______ __, 2016, by and between the Stockholder as “Pledgor” and the above named beneficiaries as “Secured
Party” (“
Pledge Agreement
”). This Stock Power and the accompanying Stock Certificate is being delivered
to the Secured Party in connection with a pledge of the Stock under the Pledge Agreement. The Stockholder does hereby irrevocably
constitute and appoint the Secured Party to transfer the said shares, subject to the terms and conditions of the Pledge Agreement,
on the share register of the Company with full power of substitution in the premises.
Executed this ___ day of _______, 2016.
EXHIBIT 3
CONSENT
OF SPOUSE
I, , spouse of the Participant
have read and approve the foregoing Restricted Stock Award Notice and Restricted Stock Agreement (the “
Agreement
”).
In consideration of the purchase of shares of Hyrecar Inc (the “
Company
”) as set forth in that Agreement, I
hereby appoint my spouse as my attorney-in-fact with respect to the exercise of any rights under the Agreement and agree to be
bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto
under the community property laws or similar laws relating to marital property.
Dated: ___________________, ________
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(Signature of Spouse)
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(Printed Name)
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Exhibit
4
SECTION 83(b) TAX ELECTION
This statement is being made under Section
83(b) of the Internal Revenue Code, pursuant to Treasury Regulation Section 1.83-2.
(1) The taxpayer who
performed the services is:
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Name:
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Address:
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Taxpayer ID No.:
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(2) The
property with respect to which the election is being made is [________] shares of the common stock of Hyrecar Inc
(3) The
property was transferred on [_____________].
(4) The
taxable year in which the election is being made is the calendar year [______].
(5) Subject
to the taxpayer’s continued service to the issuer, the property will become nonforfeitable [on the fourth anniversary of
the transfer date, subject to accelerated vesting upon certain corporate transactions.
(6) The
fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms
will never lapse) is [$_______] per share.
(7) The
taxpayer paid [$________] per share for the property herein described.
(8) A
copy of this statement was furnished to the entity for whom the taxpayer rendered the services underlying the transfer of property.
(9) This
statement was executed on [___________________].
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By:
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[PARTICIPANT], Taxpayer
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This form must be filed with the
Internal Revenue Service Center with which the taxpayer files his/her Federal income tax returns within 30 days of the transfer
of the above-described property.
Exhibit 10.7
HYRECAR INC
2018 EQUITY INCENTIVE PLAN
Adopted by Board:_____, 2018
Approved by Stockholders: _____, 2018
Termination Date: _____, 2028
1.1
Purposes
.
The purposes of the Hyrecar Inc.
2018 Equity Incentive Plan, effective :_____, 2018, as set forth herein (this “
Plan
”) are (i) to align the interests
of the Company’s stockholders and the recipients of awards under this Plan by increasing the proprietary interest of such
recipients in the Company’s growth and success, (ii) to advance the interests of the Company by attracting and retaining
directors, officers, employees and other service providers and (iii) to motivate such persons to act in the long-term best interests
of the Company and its stockholders.
1.2
Certain Definitions
.
“
Agreement
”
shall mean an electronic
or written agreement evidencing an award hereunder between the Company and the recipient of such award.
“
Assumed
”
means that pursuant to a
Change in Control, either (i) the award is expressly affirmed by the Company or (ii) the contractual obligations represented by
the award are expressly assumed (and not simply by operation of law) by the successor entity or its parent in connection with the
Change in Control with appropriate adjustments to the number and type of securities of the successor entity or its parent subject
to the award and the exercise or purchase price thereof which at least preserves the compensation element of the award existing
at the time of the Change in Control as determined in accordance with the instruments evidencing the agreement to assume the award.
“
Board
”
shall mean the Board of Directors
of the Company.
“
Bonus Shares
”
shall mean Shares which
are not subject to a Restriction Period or Performance Measures.
“
Bonus Share Award
”
shall mean an
award of Bonus Shares under this Plan.
“
Cash-Based Award
”
shall mean an award
denominated in cash that may be settled in cash and/or Shares, which may be subject to restrictions, as established by the Committee.
“
Change in Control
”
shall have the
meaning set forth in Section 6.8(b).
“
Code
”
shall mean the Internal Revenue
Code of 1986, as amended.
“
Committee
”
shall mean the Committee
designated by the Board, or a subcommittee thereof, consisting of two or more members of the Board, each of whom is intended to
be (i) a “Non-Employee Director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) “independent”
within the meaning of the rules of the Nasdaq Capital Market or any other stock exchange on which Shares are then traded.
“
Common Stock
”
shall mean the common
stock of the Company.
“
Company
”
shall mean HyreCar Inc.,
a Delaware corporation, or any successor thereto.
“
Exchange Act
”
shall mean the Securities
Exchange Act of 1934, as amended.
“
Fair Market Value
”
shall mean the
closing transaction price of a Share as reported on the Nasdaq Capital Market on the date as of which such value is being determined
or, if Shares are not listed on the Nasdaq Capital Market
,
the closing transaction price of a Share on the principal national
stock exchange on which Shares are traded on the date as of which such value is being determined or, if there shall be no reported
transactions for such date, on the next preceding date for which transactions were reported;
provided
,
however
, that
if Shares are not listed on a national stock exchange or if Fair Market Value for any date cannot be so determined, Fair Market
Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion,
shall at such time deem appropriate and in compliance with Section 409A of the Code.
“
Free-Standing SAR
”
shall mean an
SAR which is not granted in tandem with, or by reference to, an option, which entitles the holder thereof to receive, upon exercise,
Shares (which may be Restricted Shares) or, to the extent provided in the applicable Agreement, cash or a combination thereof,
with an aggregate value equal to the excess of the Fair Market Value of one Share on the date of exercise over the base price of
such SAR, multiplied by the number of such SARs which are exercised.
“
Incentive Stock Option
”
shall mean
an option to purchase Shares that meets the requirements of Section 422 of the Code, or any successor provision, which is intended
by the Committee to constitute an Incentive Stock Option.
“
Incumbent Director
”
shall have the
meaning set forth in Section 6.8(b)(iii).
“
Initial Public Offering
”
shall mean
the initial public offering of the Company registered on Form S-1 (or any successor form under the Securities Act of 1933, as amended).
“
Non-Employee Director
”
shall mean
any director of the Company who is not an officer or employee of the Company or any Subsidiary.
“
Nonqualified Option
”
shall mean an
option to purchase Shares which is not an Incentive Stock Option.
“
Performance Measures
”
shall mean
the criteria and objectives, established by the Committee in its sole discretion, which shall be satisfied or met (i) as a condition
to the grant or exercisability of all or a portion of an option or SAR or (ii) during the applicable Restriction Period or Performance
Period as a condition to the vesting of the holder’s interest, in the case of a Restricted Share Award, of the Shares subject
to such award, or, in the case of a Restricted Share Unit Award, Performance Unit Award or Cash-Based Award, to the holder’s
receipt of the Shares subject to such award or of payment with respect to such award. The performance goals may consist of any
objective or subjective corporate- wide or subsidiary, division, operating unit or individual measures, whether or not listed herein.
The applicable performance measures may be applied on a pre- or post-tax basis and may be adjusted as determined by the Committee
to include or exclude objectively determinable components of any performance measure, including, without limitation, special charges
such as restructuring or impairment charges, debt refinancing costs, extraordinary or noncash items, unusual, nonrecurring or one-time
events affecting the Company or its financial statements or changes in law or accounting principles (“Adjustment Events”).
In the sole discretion of the Committee, the Committee may amend or adjust the Performance Measures or other terms and conditions
of an outstanding award in recognition of any Adjustment Events. Performance goals shall be subject to such other special rules
and conditions as the Committee may establish at any time.
“
Performance Period
”
shall mean any
period designated by the Committee during which (i) the Performance Measures applicable to an award shall be measured and (ii)
the conditions to vesting applicable to an award shall remain in effect.
“
Performance Unit
”
shall mean a right
to receive, contingent upon the attainment of specified Performance Measures within a specified Performance Period, a specified
cash amount or, in lieu thereof and to the extent set forth in the applicable award Agreement, Shares having a Fair Market Value
equal to such cash amount.
“
Performance Unit Award
”
shall mean
an award of Performance Units under this Plan.
“
Replaced
”
means that pursuant to
a Change in Control the award is replaced with a comparable stock award or a cash incentive award or program of the Company, the
successor entity (if applicable) or parent of either of them which preserves the compensation element of such award existing at
the time of the Change in Control and provides for subsequent payout in accordance with the same (or, for the participant, a more
favorable) vesting schedule applicable to such award. The determination of award comparability shall be made by the Committee and
its determination shall be final, binding and conclusive.
“
Restricted Shares
”
shall mean Shares
which are subject to a Restriction Period and which may, in addition thereto, be subject to the attainment of specified Performance
Measures within a specified Performance Period.
“
Restricted Share Award
”
shall mean
an award of Restricted Shares under this Plan.
“
Restricted Share Unit
”
shall mean
a right to receive one Share or, in lieu thereof and to the extent set forth in the applicable award Agreement, the Fair Market
Value of such Share in cash, which shall be contingent upon the expiration of a specified Restriction Period and which may, in
addition thereto, be contingent upon the attainment of specified Performance Measures within a specified Performance Period.
“
Restricted Share Unit Award
”
shall
mean an award of Restricted Share Units under this Plan.
“
Restriction Period
”
shall mean any
period designated by the Committee during which (i) the Shares subject to a Restricted Share Award may not be sold, transferred,
assigned, pledged, hypothecated or otherwise encumbered or disposed of, except as provided in this Plan or the Agreement relating
to such award, or (ii) the conditions to vesting applicable to a Restricted Share Unit Award shall remain in effect.
“
SAR
”
shall mean a share appreciation
right which may be a Free-Standing SAR or a Tandem SAR.
“
Share
”
shall mean a share of the
Common Stock, $0.00001 par value per share, of the Company, and all rights appurtenant thereto.
“
Share Award
”
shall mean a Bonus Share
Award, Restricted Share Award or Restricted Share Unit Award.
“
Subsidiary
”
shall mean any corporation,
limited liability company, partnership, joint venture or similar entity in which the Company owns, directly or indirectly, an equity
interest possessing more than 50% of the combined voting power of the total outstanding equity interests of such entity.
“
Substitute Award
”
shall mean an award
granted under this Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company
or other entity in connection with a corporate transaction, including a merger, combination, consolidation or acquisition of property
or stock;
provided
,
however
, that in no event shall the term “Substitute Award” be construed to refer
to an award made in connection with the cancellation and repricing of an option or SAR.
“
Tandem SAR
”
shall mean an SAR which
is granted in tandem with, or by reference to, an option (including a Nonqualified Option granted prior to the date of grant of
the SAR), which entitles the holder thereof to receive, upon exercise of such SAR and surrender for cancellation of all or a portion
of such option, Shares (which may be Restricted Shares) or, to the extent provided in the applicable Agreement, cash or a combination
thereof, with an aggregate value equal to the excess of the Fair Market Value of one Share on the date of exercise over the base
price of such SAR, multiplied by the number of Shares subject to such option, or portion thereof, which is surrendered.
“
Tax Date
”
shall have the meaning
set forth in Section 6.5.
“
Ten Percent Holder
”
shall have the
meaning set forth in Section 2.1(a).
1.3
Administration
.
This Plan shall be administered
by the Committee. Any one or a combination of the following awards may be made under this Plan to eligible persons: (i) options
to purchase Shares in the form of Incentive Stock Options or Nonqualified Options, (ii) SARs in the form of Tandem SARs or Free-Standing
SARs, (iii) Share Awards in the form of Bonus Shares, Restricted Shares or Restricted Share Units, (iv) Performance Units and (v)
Cash-Based Awards. The Committee shall, subject to the terms of this Plan, select eligible persons for participation in this Plan
and determine the form, amount and timing of each award to such persons and, if applicable, the number of Shares, the number of
SARs, the number of Restricted Share Units, the value of Cash-Based Awards and the number of Performance Units subject to such
an award, the exercise price or base price associated with the award, the time and conditions of exercise or settlement of the
award and all other terms and conditions of the award, including, without limitation, the form of the Agreement evidencing the
award. The Committee may, in its sole discretion and for any reason at any time, take action such that (i) any or all outstanding
options and SARs shall become exercisable in part or in full, (ii) all or a portion of the Restriction Period applicable to any
outstanding Restricted Shares or Restricted Share Units shall lapse, (iii) all or a portion of the Performance Period applicable
to any outstanding award shall lapse and (iv) the Performance Measures (if any) applicable to any outstanding award shall be deemed
to be satisfied at the target or any other level. The Committee shall, subject to the terms of this Plan, interpret this Plan and
the application thereof, establish rules and regulations it deems necessary or desirable for the administration of this Plan and
may impose, incidental to the grant of an award, conditions with respect to the award. All such interpretations, rules, regulations
and conditions shall be conclusive and binding on all parties.
The Committee may delegate some or all of its power and authority
hereunder to the Board or, subject to applicable law, to the Chief Executive Officer and President or such other executive officer
as the Committee deems appropriate;
provided
,
however
, that (i) the Committee may not delegate its power and authority
to the Board or the President and Chief Executive Officer or other executive officer of the Company with regard to the grant of
an award to any person who is a Covered Employee or who, in the Committee’s judgment, is likely to be a Covered Employee
at any time during the period an award hereunder to such employee would be outstanding and (ii) the Committee may not delegate
its power and authority to the President and Chief Executive Officer or other executive officer of the Company with regard to the
selection for participation in this Plan of an officer, director or other person subject to Section 16 of the Exchange Act or decisions
concerning the timing, pricing or amount of an award to such an officer, director or other person.
No member of the Board or Committee, and neither the Chief Executive
Officer and President or any other executive officer to whom the Committee delegates any of its power and authority hereunder,
shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good
faith, and the members of the Board and the Committee and the Chief Executive Officer and President and any other executive officer
shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including
attorneys’ fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company’s
Certificate of Incorporation or By-Laws, each as may be amended from time to time) and under any directors’ and officers’
liability insurance that may be in effect from time to time.
A majority of the Committee shall constitute a quorum. The acts
of the Committee shall be either (i) acts of a majority of the members of the Committee present at any meeting at which a quorum
is present or (ii) acts approved in writing by all of the members of the Committee without a meeting.
1.4
Eligibility
.
Participants in this Plan shall
consist of such officers, Non-Employee Directors, employees, consultants, agents and independent contractors, and persons expected
to become officers, Non-Employee Directors, employees, consultants, agents, and independent contractors of the Company and its
Subsidiaries as the Committee in its sole discretion may select from time to time. The Committee’s selection of a person
to participate in this Plan at any time shall not require the Committee to select such person to participate in this Plan at any
other time. For purposes of this Plan and except as otherwise provided for in an Agreement, references to employment by the Company
shall also mean employment by a Subsidiary, and references to employment shall include service as a Non-Employee Director or independent
contractor. The Committee shall determine, in its sole discretion, the extent to which a participant shall be considered employed
during any periods during which such participant is on an approved leave of absence.
1.5
Shares and Cash Available
.
Subject to adjustment as provided in Section 6.7 and to all other limits set forth in this Section 1.5, 3,000,000 Shares shall
be available for awards under this Plan. The number of Shares that remain available for future grants under the Plan shall be
reduced by the sum of the aggregate number of Shares which become subject to outstanding options, outstanding Free-Standing SARs
and outstanding Share Awards and delivered upon the settlement of Performance Units. As of the first day of each calendar year
beginning on or after January 1, 2021, the number of Shares available for all awards under the Plan, other than Incentive Stock
Options, shall automatically increase by a number equal to the least of (x) 300,000 Shares, (y) 5% of the number of Shares that
are issued and outstanding as of such date, or (z) a lesser number of Shares determined by the Committee. To the extent that Shares
subject to an outstanding option, SAR, Share Award or other award granted under the Plan are not issued or delivered by reason
of (i) the expiration, termination, cancellation or forfeiture of such award (excluding Shares subject to an option cancelled
upon settlement in Shares of a related tandem SAR or Shares subject to a tandem SAR cancelled upon exercise of a related option)
or (ii) the settlement of such award in cash, then such Shares shall again be available under this Plan, other than for grants
of Incentive Stock Options. Notwithstanding the foregoing and, subject to adjustment as provided in Section 6.7, the maximum number
of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section
1.5, plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgated thereunder, any Shares
that become available for issuance under the Plan pursuant this Section 1.5.
To the extent not prohibited by the listing requirements of
the Nasdaq Capital Market or any other stock exchange on which Shares are then traded or applicable laws, any Shares covered by
an award which are surrendered (i) in payment of the award exercise or purchase price (including pursuant to the “net exercise”
of an option pursuant to Section 2.1(c), or the “net settlement” or “net exercise” of a Share-settled SAR
pursuant to Section 2.2(c)) or (ii) in satisfaction of tax withholding obligations incident to the grant, exercise, vesting or
settlement of an award shall be deemed not to have been issued for purposes of determining the maximum number of Shares which may
be issued pursuant to all awards under the Plan, unless otherwise determined by the Committee. Notwithstanding anything in this
Section 1.5 to the contrary, Shares subject to an award under this Plan may not be made available for issuance under this Plan
if such shares are shares repurchased on the open market with the proceeds of an option exercise.
The number of Shares for awards under this Plan shall not be
reduced by (i) the number of Shares subject to Substitute Awards or (ii) available shares under a stockholder approved plan of
a company or other entity which was a party to a corporate transaction with the Company (as appropriately adjusted to reflect such
corporate transaction) which become subject to awards granted under this Plan (subject to applicable stock exchange requirements).
Shares to be delivered under this Plan shall be made available
from authorized and unissued Shares, or authorized and issued Shares reacquired and held as treasury shares or otherwise or a combination
thereof.
1.6
Per Person Limits
The aggregate grant date
fair value of Shares that may be granted during any fiscal year of the Company to any Non-Employee Director shall not exceed $150,000;
provided, however, that (i) the limit set forth in this sentence shall be $150,000 in the year in which a Non-Employee Director
commences service on the Board and (ii) the limits set forth in this sentence shall not apply to awards made pursuant to an election
to receive the award in lieu of all or a portion of fees received for service on the Board or any committee thereunder.
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II.
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OPTIONS AND SHARE APPRECIATION RIGHTS
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2.1
Options
.
The Committee may, in its discretion,
grant options to purchase Shares to such eligible persons as may be selected by the Committee. Each option, or portion thereof,
that is not an Incentive Stock Option, shall be a Nonqualified Option. To the extent that the aggregate Fair Market Value (determined
as of the date of grant) of Shares with respect to which options designated as Incentive Stock Options are exercisable for the
first time by a participant during any calendar year (under this Plan or any other plan of the Company, or any parent or Subsidiary)
exceeds the amount (currently $100,000) established by the Code, such options shall constitute Nonqualified Options.
Options shall be subject to the following terms and conditions
and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem
advisable:
(a)
Number of Shares and Purchase Price
. The number of
Shares subject to an option and the purchase price per Share purchasable upon exercise of the option shall be determined by the
Committee;
provided
,
however
, that the purchase price per Share purchasable upon exercise of an option shall not
be less than 100% of the Fair Market Value of a Share on the date of grant of such option;
provided further
, that if an
Incentive Stock Option shall be granted to any person who, at the time such option is granted, owns capital stock possessing more
than 10 percent of the total combined voting power of all classes of capital stock of the Company (or of any parent or Subsidiary)
(a “
Ten Percent Holder
”), the purchase price per Share shall not be less than the price (currently 110% of Fair
Market Value) required by the Code in order to constitute an Incentive Stock Option.
Notwithstanding the foregoing, in the case of an option that
is a Substitute Award, the purchase price per Share of the Shares subject to such option may be less than 100% of the Fair Market
Value per Share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute
Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate purchase price thereof does not exceed
the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute
Award, such fair market value to be determined by the Committee) of the shares of the predecessor company or other entity that
were subject to the grant assumed or substituted for by the Company, over (y) the aggregate purchase price of such shares.
(b)
Option Period and Exercisability
. The period during
which an option may be exercised shall be determined by the Committee;
provided
,
however
, that no option shall be
exercised later than ten years after its date of grant;
provided further
, that if an Incentive Stock Option shall be granted
to a Ten Percent Holder, such option shall not be exercised later than five years after its date of grant. The Committee may, in
its discretion, establish Performance Measures which shall be satisfied or met as a condition to the grant of an option or to the
exercisability of all or a portion of an option. The Committee shall determine whether an option shall become exercisable in cumulative
or non-cumulative installments and in part or in full at any time. An exercisable option, or portion thereof, may be exercised
only with respect to whole Shares. Prior to the exercise of an option, the holder of such option shall have no rights as a stockholder
of the Company with respect to the Shares subject to such option.
(c)
Method of Exercise
. An option may be exercised (i)
by giving written notice to the Company specifying the number of whole Shares to be purchased and accompanying such notice with
payment therefor in full (or arrangement made for such payment to the Company’s satisfaction) either (A) in cash, (B) by
delivery (either actual delivery or by attestation procedures established by the Company) of Shares having a Fair Market Value,
determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (C) authorizing
the Company to withhold whole Shares which would otherwise be delivered having an aggregate Fair Market Value, determined as of
the date of exercise, equal to the amount necessary to satisfy such obligation, (D) in cash by a broker-dealer acceptable to the
Company to whom the optionee has submitted an irrevocable notice of exercise or (E) a combination of (A), (B) and (C), in each
case to the extent set forth in the Agreement relating to the option, (ii) if applicable, by surrendering to the Company any Tandem
SARs which are cancelled by reason of the exercise of the option and (iii) by executing such documents as the Company may reasonably
request. Any fraction of a Share which would be required to pay such purchase price shall be disregarded and the remaining amount
due shall be paid in cash by the optionee. No Shares shall be issued and no certificate representing Shares shall be delivered
until the full purchase price therefor and any withholding taxes thereon, as described in Section 6.5, have been paid (or arrangement
made for such payment to the Company’s satisfaction).
2.2
Share Appreciation Rights
.
The Committee may,
in its discretion, grant SARs to such eligible persons as may be selected by the Committee. The Agreement relating to an SAR shall
specify whether the SAR is a Tandem SAR or a Free-Standing SAR.
SARs shall be subject to the following terms and conditions
and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem
advisable:
(a)
Number of SARs and Base Price
. The number of SARs
subject to an award shall be determined by the Committee. Any Tandem SAR related to an Incentive Stock Option shall be granted
at the same time that such Incentive Stock Option is granted. The base price of a Tandem SAR shall be the purchase price per Share
of the related option. The base price of a Free-Standing SAR shall be determined by the Committee;
provided
,
however
,
that such base price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such SAR.
Notwithstanding the foregoing, in the case of an SAR that is
a Substitute Award, the base price per Share of the Shares subject to such SAR may be less than 100% of the Fair Market Value per
Share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award
is granted) of the Shares subject to the Substitute Award, over (b) the aggregate base price thereof does not exceed the excess
of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award,
such fair market value to be determined by the Committee) of the shares of the predecessor company or other entity that were subject
to the grant assumed or substituted for by the Company, over (y) the aggregate base price of such shares.
(b)
Exercise Period and Exercisability
. The period for
the exercise of an SAR shall be determined by the Committee;
provided
,
however
, that no Tandem SAR shall be exercised
later than the expiration, cancellation, forfeiture or other termination of the related option and no Free- Standing SAR shall
be exercised later than ten years after its date of grant. The Committee may, in its discretion, establish Performance Measures
which shall be satisfied or met as a condition to the grant of an SAR or to the exercisability of all or a portion of an SAR. The
Committee shall determine whether an SAR may be exercised in cumulative or non-cumulative installments and in part or in full at
any time. An exercisable SAR, or portion thereof, may be exercised, in the case of a Tandem SAR, only with respect to whole Shares
and, in the case of a Free-Standing SAR, only with respect to a whole number of SARs. If an SAR is exercised for shares of Restricted
Shares, a certificate or certificates representing such Restricted Shares shall be issued in accordance with Section 3.3(c), or
such shares shall be transferred to the holder in book entry form with restrictions on the Shares duly noted, and the holder of
such Restricted Shares shall have such rights of a stockholder of the Company as determined pursuant to Section 3.3(d). Prior to
the exercise of an SAR, the holder of such SAR shall have no rights as a stockholder of the Company with respect to the Shares
subject to such SAR.
(c)
Method of Exercise
. A Tandem SAR may be exercised
(i) by giving written notice to the Company specifying the number of whole SARs which are being exercised, (ii) by surrendering
to the Company any options which are cancelled by reason of the exercise of the Tandem SAR and (iii) by executing such documents
as the Company may reasonably request. A Free-Standing SAR may be exercised (A) by giving written notice to the Company specifying
the whole number of SARs which are being exercised and (B) by executing such documents as the Company may reasonably request. No
Shares shall be issued and no certificate representing Shares shall be delivered until any withholding taxes thereon, as described
in Section 6.5, have been paid (or arrangement made for such payment to the Company’s satisfaction).
2.3
Termination of Employment or Service
.
All
of the terms relating to the exercise, cancellation or other disposition of an option or SAR (i) upon a termination of employment
with or service to the Company of the holder of such option or SAR, as the case may be, whether by reason of disability, retirement,
death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth
in the applicable award Agreement.
2.4
Repricing of Options and SARs
.
The Committee
may reduce, in each case, in its sole discretion and without the approval of the stockholders of the Company, the exercise price
of any option awarded under the Plan and the base appreciation amount of any SAR awarded under the Plan and to cancel, in each
case, without stockholder approval, an option or SAR at a time when its exercise price or base appreciation amount (as applicable)
exceeds the Fair Market Value of the underlying Shares, in exchange for another option, SAR, Restricted Shares, or other award
or for cash.
3.1
Share Awards
.
The Committee may, in its discretion,
grant Share Awards to such eligible persons as may be selected by the Committee. The Agreement relating to a Share Award shall
specify whether the Share Award is a Bonus Share Award, Restricted Share Award or Restricted Share Unit Award.
3.2
Terms of Bonus Share Awards
.
The number of
Shares subject to a Bonus Share Award shall be determined by the Committee. Bonus Share Awards shall not be subject to any Restriction
Periods or Performance Measures. Upon the grant of a Bonus Share Award, subject to the Company’s right to require payment
of any taxes in accordance with Section 6.5, a certificate or certificates evidencing ownership of the requisite number of Shares
shall be delivered to the holder of such award.
3.3
Terms of Restricted Share Awards
.
Restricted
Share Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a)
Number of Shares and Other Terms
. The number of Shares
subject to a Restricted Share Award and the Restriction Period, Performance Period (if any) and Performance Measures (if any) applicable
to a Restricted Share Award shall be determined by the Committee.
(b)
Vesting and Forfeiture
. The
Agreement relating to a Restricted Share Award shall provide, in the manner determined by the Committee, in its discretion, and
subject to the provisions of this Plan, for the vesting of the Shares subject to such award (i) if the holder of such award remains
continuously in the employment or service of the Company during the specified Restriction Period and (ii) if specified Performance
Measures (if any) are satisfied or met during a specified Performance Period, and for the forfeiture of the Shares subject to
such award (x) if the holder of such award does not remain continuously in the employment or service of the Company during the
specified Restriction Period or (y) if specified Performance Measures (if any) are not satisfied or met during a specified Performance
Period.
(c)
Share Issuance
. During the Restriction Period, the
Restricted Shares shall be held by a custodian in book entry form with restrictions on such Shares duly noted or, alternatively,
a certificate or certificates representing a Restricted Share Award shall be registered in the holder’s name and may bear
a legend, in addition to any legend which may be required pursuant to Section 6.6, indicating that the ownership of the Shares
represented by such certificate is subject to the restrictions, terms and conditions of this Plan and the Agreement relating to
the Restricted Share Award. All such certificates shall be deposited with the Company, together with stock powers or other instruments
of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate,
which would permit transfer to the Company of all or a portion of the Shares subject to the Restricted Share Award in the event
such award is forfeited in whole or in part. Upon termination of any applicable Restriction Period (and the satisfaction or attainment
of applicable Performance Measures), subject to the Company’s right to require payment of any taxes in accordance with Section
6.5, the restrictions shall be removed from the requisite number of any Shares that are held in book entry form, and all certificates
evidencing ownership of the requisite number of Shares shall be delivered to the holder of such award.
(d)
Rights with Respect to Restricted Share Awards
. Unless
otherwise set forth in the Agreement relating to a Restricted Share Award, and subject to the terms and conditions of a Restricted
Share Award, the holder of such award shall have all rights as a stockholder of the Company, including, but not limited to, voting
rights, the right to receive dividends and the right to participate in any capital adjustment applicable to all holders of Shares;
provided
,
however
, that (i) a distribution with respect to Shares, other than a regular cash dividend, and (ii) a
regular cash dividend with respect to Shares that are subject to performance-based vesting conditions, in each case, shall be deposited
with the Company and shall be subject to the same restrictions as the Shares with respect to which such distribution was made.
3.4
Terms of Restricted Share Unit Awards
.
Restricted
Share Unit Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions,
not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a)
Number of Shares and Other Terms
. The number of Shares
subject to a Restricted Share Unit Award and the Restriction Period, Performance Period (if any) and Performance Measures (if any)
applicable to a Restricted Share Unit Award shall be determined by the Committee.
(b)
Vesting and Forfeiture
. The Agreement relating to
a Restricted Share Unit Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions
of this Plan, for the vesting of such Restricted Share Unit Award (i) if the holder of such award remains continuously in the employment
or service of the Company during the specified Restriction Period and (ii) if specified Performance Measures (if any) are satisfied
or met during a specified Performance Period, and for the forfeiture of the Shares subject to such award (x) if the holder of such
award does not remain continuously in the employment or service of the Company during the specified Restriction Period or (y) if
specified Performance Measures (if any) are not satisfied or met during a specified Performance Period.
(c)
Settlement of Vested Restricted Share Unit Awards
.
The Agreement relating to a Restricted Share Unit Award shall specify (i) whether such award may be settled in Shares or cash or
a combination thereof and (ii) whether the holder thereof shall be entitled to receive, on a current or deferred basis, dividend
equivalents, and, if determined by the Committee, interest on, or the deemed reinvestment of, any deferred dividend equivalents,
with respect to the number of Shares subject to such award. Any dividend equivalents with respect to Restricted Share Units that
are subject to performance-based vesting conditions shall be subject to the same restrictions as such Restricted Share Units. Prior
to the settlement of a Restricted Share Unit Award, the holder of such award shall have no rights as a stockholder of the Company
with respect to the Shares subject to such award.
3.5
Termination of Employment or Service
.
All
of the terms relating to the satisfaction of Performance Measures and the termination of the Restriction Period or Performance
Period relating to a Share Award, or any forfeiture and cancellation of such award (i) upon a termination of employment or service
with the Company of the holder of such award, whether by reason of disability, retirement, death or any other reason, or (ii) during
a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable award Agreement.
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IV.
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PERFORMANCE UNIT AWARDS
|
4.1
Performance Unit Awards
.
The Committee may,
in its discretion, grant Performance Unit Awards to such eligible persons as may be selected by the Committee.
4.2
Terms of Performance Unit Awards
.
Performance
Unit Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a)
Number of Performance Units and Performance Measures
.
The number of Performance Units subject to a Performance Unit Award and the Performance Measures and Performance Period applicable
to a Performance Unit Award shall be determined by the Committee.
(b)
Vesting and Forfeiture
. The Agreement relating to
a Performance Unit Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions
of this Plan, for the vesting of such Performance Unit Award if the specified Performance Measures are satisfied or met during
the specified Performance Period and for the forfeiture of such award if the specified Performance Measures are not satisfied or
met during the specified Performance Period.
(c)
Settlement of Vested Performance Unit Awards
. The
Agreement relating to a Performance Unit Award shall specify whether such award may be settled in Shares (including shares of Restricted
Shares) or cash or a combination thereof. If a Performance Unit Award is settled in Restricted Shares, such Restricted Shares shall
be issued to the holder in book entry form or a certificate or certificates representing such Restricted Shares shall be issued
in accordance with Section 3.3(c) and the holder of such Restricted Shares shall have such rights as a stockholder of the Company
as determined pursuant to Section 3.3(d). Any dividends or dividend equivalents with respect to a Performance Unit Award shall
be subject to the same restrictions as such Performance Unit Award. Prior to the settlement of a Performance Unit Award in Shares,
including Restricted Shares, the holder of such award shall have no rights as a stockholder of the Company.
4.3
Termination of Employment or Service
.
All
of the terms relating to the satisfaction of Performance Measures and the termination of the Performance Period relating to a Performance
Unit Award, or any forfeiture and cancellation of such award (i) upon a termination of employment or service with the Company of
the holder of such award, whether by reason of disability, retirement, death or any other reason, or (ii) during a paid or unpaid
leave of absence, shall be determined by the Committee and set forth in the applicable award Agreement.
5.1
Cash-Based Awards
.
The Committee may, in its
discretion, grant Cash-Based Awards to such eligible persons as may be selected by the Committee.
5.2
Terms of Cash-Based Awards
.
Cash-Based Awards
shall be subject to the terms and conditions, not inconsistent with the terms of this Plan, determined by the Committee and set
forth in the applicable award Agreement.
6.1
Effective Date and Term of Plan
.
This Plan
will become effective upon its adoption by the Board, provided that it must be approved by a majority of the outstanding securities
entitled to vote within twelve (12) months before or after the date of such adoption. Unless terminated earlier by the Board, this
Plan shall terminate on the tenth anniversary of the date it is adopted by the Board or approved by the Company’s stockholders,
whichever is earlier. Termination of this Plan shall not affect the terms or conditions of any award granted prior to termination.
Awards hereunder may be made at any time prior to the termination of this Plan, provided that no award may be made later than ten
(10) years after the effective date of this Plan.
6.2
Amendments
.
The Board may amend this Plan
as it shall deem advisable, subject to any requirement of stockholder approval required by applicable law, rule or regulation,
including any rule of the Nasdaq Capital Market or any other stock exchange on which Shares are then traded;
provided
,
however
,
that no amendment may materially impair the rights of a holder of an outstanding award without the consent of such holder.
6.3
Agreement
.
Each award under this Plan shall
be evidenced by an Agreement setting forth the terms and conditions applicable to such award. No award shall be valid until an
Agreement is executed by the Company and, to the extent required by the Company, either executed by the recipient or accepted by
the recipient by electronic means approved by the Company within the time period specified by the Company. Upon such execution
or execution and electronic acceptance, and delivery of the Agreement to the Company, such award shall be effective as of the effective
date set forth in the Agreement.
6.4
Non-Transferability
.
No award shall be transferable
other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company
or, to the extent expressly permitted in the Agreement relating to such award, to the holder’s family members, a trust or
entity established by the holder for estate planning purposes or a charitable organization designated by the holder, in each case,
without consideration. Except to the extent permitted by the foregoing sentence or the Agreement relating to an award, each award
may be exercised or settled during the holder’s lifetime only by the holder or the holder’s legal representative or
similar person. Except as permitted by the second preceding sentence, no award may be sold, transferred, assigned, pledged, hypothecated,
encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any award, such award
and all rights thereunder shall immediately become null and void.
6.5
Tax Withholding
.
The Company shall have the
right to require, prior to the issuance or delivery of any Shares or the payment of any cash pursuant to an award made hereunder,
payment by the holder of such award of any federal, state, local or other taxes which may be required to be withheld or paid in
connection with such award. An Agreement may provide that (i) the Company shall withhold whole Shares which would otherwise be
delivered to a holder, having an aggregate Fair Market Value determined as of the date the obligation to withhold or pay taxes
arises in connection with an award (the “
Tax Date
”), or withhold an amount of cash which would otherwise be
payable to a holder, in the amount necessary to satisfy any such obligation or (ii) the holder may satisfy any such obligation
by any of the following means: (A) a cash payment to the Company, (B) delivery (either actual delivery or by attestation procedures
established by the Company) to the Company of previously owned whole Shares having an aggregate Fair Market Value, determined as
of the Tax Date, equal to the amount necessary to satisfy any such obligation, (C) authorizing the Company to withhold whole Shares
which would otherwise be delivered having an aggregate Fair Market Value, determined as of the Tax Date, or withhold an amount
of cash which would otherwise be payable to a holder, equal to the amount necessary to satisfy any such obligation, (D) in the
case of the exercise of an option and except as may be prohibited by applicable law, a cash payment by a broker-dealer acceptable
to the Company to whom the optionee has submitted an irrevocable notice of exercise or (E) any combination of (A), (B) and (C),
in each case to the extent set forth in the Agreement relating to the award. Shares to be delivered or withheld may not have an
aggregate Fair Market Value in excess of the amount determined by the Committee not to have an adverse accounting impact on the
Company. Any fraction of a Share which would be required to satisfy such an obligation shall be disregarded and the remaining amount
due shall be paid in cash by the holder.
6.6
Restrictions on Shares
.
Each award made hereunder
shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification
of the Shares subject to such award upon any securities exchange or under any law, or the consent or approval of any governmental
body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of shares
thereunder, such shares shall not be delivered unless such listing, registration, qualification, consent, approval or other action
shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may require that certificates
evidencing Shares delivered pursuant to any award made hereunder bear a legend indicating that the sale, transfer or other disposition
thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
6.7
Adjustment
.
In the event
of any equity restructuring (within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic
718, Compensation—Stock Compensation) that causes the per Share value of Shares to change, such as a stock dividend, stock
split, spinoff, rights offering or recapitalization through an extraordinary dividend, the number and class of securities available
under this Plan, the terms of each outstanding option and SAR (including the number and class of securities subject to each outstanding
option or SAR and the purchase price or base price per share), the terms of each outstanding Restricted Stock Award and Restricted
Stock Unit Award (including the number and class of securities subject thereto), and the terms of each outstanding Performance
Unit Award shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding options and
SARs without an increase in the aggregate purchase price or base price and in accordance with Section 409A of the Code. In the
event of any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete
liquidation of the Company, such equitable adjustments described in the foregoing sentence may be made as determined to be appropriate
and equitable by the Committee to prevent dilution or enlargement of rights of participants. In either case, the decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.
6.8
Change in Control
.
(a) Subject to the terms of the applicable award Agreement,
in the event of a Change in Control, the Board (as constituted prior to such Change in Control) may, in its discretion:
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(i)
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provide that (A) some or all outstanding options and SARs shall become exercisable in full or in part, either immediately or upon a subsequent termination of employment or service, (B) the Restriction Period applicable to some or all outstanding Restricted Share Awards and Restricted Share Unit Awards shall lapse in full or in part, either immediately or upon a subsequent termination of employment or service, (C) the Performance Period applicable to some or all outstanding awards shall lapse in full or in part, and (D) the Performance Measures applicable to some or all outstanding awards shall be deemed to be satisfied at the target or any other level;
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(ii)
|
provide that some or all outstanding awards shall terminate without consideration as of the date of such Change in Control;
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(iii)
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require that shares of the corporation or other entity resulting from such Change in Control, or a parent thereof, be substituted for some or all of the Shares subject to an outstanding award, with an appropriate and equitable adjustment to such award as shall be determined by the Board in accordance with Section 6.7; and/or
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(iv)
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require outstanding awards, in whole or in part, to be surrendered to the Company by the holder, and to be immediately cancelled by the Company, and to provide for the holder to receive (A) a cash payment in an amount equal to (i) in the case of an option or an SAR, the number of Shares then subject to the portion of such option or SAR surrendered multiplied by the excess, if any, of the Fair Market Value of a Share as of the date of the Change in Control, over the purchase price or base price per Share subject to such option or SAR, (ii) in the case of a Share Award, the number of Shares then subject to the portion of such award surrendered multiplied by the Fair Market Value of a Share as of the date of the Change in Control, and (iii) in the case of a Performance Unit Award, the value of the Performance Units then subject to the portion of such award surrendered; (B) shares of the corporation or other entity resulting from such Change in Control, or a parent thereof, having a fair market value not less than the amount determined under clause (A) above; or (C) a combination of the payment of cash pursuant to clause (A) above and the issuance of shares pursuant to clause (B) above.
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(b) A “
Change in Control
” of the Company
shall be deemed to have occurred upon the occurrence of any of the following events:
(i) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either the then outstanding Shares of the Company or the combined
voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors,
but excluding, for this purpose, any such acquisition by the Company or any of its Subsidiaries, or any employee benefit plan (or
related trust) of the Company or its Subsidiaries, or any corporation with respect to which, following such acquisition, more than
50% of, respectively, the then outstanding Shares of such corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of all or substantially all directors is then beneficially
owned, directly or indirectly, by the individuals and entities who were the beneficial owners, respectively, of Shares and voting
securities of the Company immediately prior to such acquisition in substantially the same proportion as their ownership, immediately
prior to such acquisition, of the then outstanding Shares of the Company or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of directors, as the case may be;
(ii) The consummation of a reorganization, merger or consolidation
of the Company, in each case, with respect to which all or substantially all of the individuals and entities who were the respective
beneficial owners of Shares and voting securities of the Company immediately prior to such reorganization, merger or consolidation
do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of, respectively,
the then outstanding Shares and the combined voting power of the then outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation;
(iii) During any twenty-four (24) month period, individuals
who, as of the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute
at least a majority of the Board, provided that any person becoming a director subsequent to the beginning of such period whose
election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board
(either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for
director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially
elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors
or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall
be deemed to be an Incumbent Director; or
(iv) a complete liquidation or dissolution of the Company or
of the sale or other disposition of all or substantially all of the assets of the Company.
In no event shall a Change in Control include the Initial Public
Offering or any bona fide primary or secondary public offering following the occurrence of the Initial Public Offering.
6.9
Deferrals
.
The Committee may determine that
the delivery of Shares or the payment of cash, or a combination thereof, upon the exercise or settlement of all or a portion of
any award (other than awards of Incentive Stock Options, Nonqualified Options and SARs) made hereunder shall be deferred, or the
Committee may, in its sole discretion, approve deferral elections made by holders of awards. Deferrals shall be for such periods
and upon such terms as the Committee may determine in its sole discretion, subject to the requirements of Section 409A of the Code.
6.10
No Right of Participation, Employment or Service
.
Unless otherwise set forth in an employment agreement, no person shall have any right to participate in this Plan. Neither
this Plan nor any award made hereunder shall confer upon any person any right to continued employment by or service with the Company,
any Subsidiary or any affiliate of the Company or affect in any manner the right of the Company, any Subsidiary or any affiliate
of the Company to terminate the employment or service of any person at any time without liability hereunder.
6.11
Rights as Stockholder
.
No person shall have
any right as a stockholder of the Company with respect to any Shares or other equity security of the Company which is subject to
an award hereunder unless and until such person becomes a stockholder of record with respect to such Shares or equity security.
6.12
Designation of Beneficiary
.
A holder of an
award may file with the Committee a written designation of one or more persons as such holder’s beneficiary or beneficiaries
(both primary and contingent) in the event of the holder’s death or incapacity. To the extent an outstanding option or SAR
granted hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to exercise such option or SAR pursuant to
procedures prescribed by the Committee.
Each beneficiary designation shall become effective only when
filed in writing with the Committee during the holder’s lifetime on a form prescribed by the Committee. The spouse of a married
holder domiciled in a community property jurisdiction shall join in any designation of a beneficiary other than such spouse. The
filing with the Committee of a new beneficiary designation shall cancel all previously filed beneficiary designations.
If a holder fails to designate a beneficiary, or if all designated
beneficiaries of a holder predecease the holder, then each outstanding option and SAR hereunder held by such holder, to the extent
exercisable, may be exercised by such holder’s executor, administrator, legal representative or similar person.
6.13
Compliance With Section 409A of the Code
.
To
the extent applicable, awards will be designed and operated in such a manner that they are either exempt from the application of,
or comply with, the requirements of Section 409A of the Code. The Plan and each award Agreement are intended to meet the requirements
of Section 409A of the Code and will be construed and interpreted in accordance with such intent, except as otherwise determined
in the Committee’s sole discretion. Notwithstanding the foregoing, the Company makes no representation with respect to the
tax compliance of the Plan or any Award Agreement, including compliance with Section 409A of the Code.
6.14
Governing Law
.
This Plan, each award hereunder
and the related Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed
by the Code or the laws of the United States, shall be governed by the laws of the State of California and construed in accordance
therewith without giving effect to principles of conflicts of laws.
6.15
Non-U.S. Service Providers
.
Without amending
this Plan, the Committee may grant awards to eligible persons who are foreign nationals on such terms and conditions different
from those specified in this Plan as may in the judgment of the Committee be necessary or desirable to foster and promote achievement
of the purposes of this Plan and, in furtherance of such purposes the Committee may make such modifications, amendments, procedures,
subplans and the like as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in
which the Company or its Subsidiaries operates or has employees or service providers.
6.16
Awards Subject to Clawback
.
The awards granted
under this Plan and any cash payment or Shares delivered pursuant to an award are subject to forfeiture, recovery by the Company
or other action pursuant to the applicable Agreement or any clawback or recoupment policy which the Company may adopt from time
to time, including without limitation any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street
Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by law.
HYRECAR INC
2018 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (this “
Agreement
”)
is made and entered into as of the date set forth on the signature page hereto by and between Hyrecar Inc, a Delaware corporation
(the “
Company
”), and the undersigned participant (“
Participant
”). Unless otherwise
defined herein, capitalized terms used herein shall have the same defined meanings as set forth in the Hyrecar Inc. 2018 Equity
Incentive Plan attached hereto as
Exhibit A
(the “
Plan
”).
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I.
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NOTICE OF STOCK OPTION GRANT
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Participant has been granted an option to purchase Common Stock,
subject to the terms and conditions of the Plan and this Agreement, as follows:
Participant:
Address
:
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Grant Number:
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Grant Date:
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Vesting Commencement Date:
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Exercise Price per Share:
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Number of Shares Subject to Option:
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Total Exercise Price:
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Type of Option:
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ISO
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NSO
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Term/Expiration
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Date:
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, or earlier as provided
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in the Plan or this Agreement
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Vesting Schedule; Accelerated Vesting
:
This Option shall become vested and exercisable, in whole or
in part, according to the following vesting schedule:
Termination Period
:
This Option shall be exercisable for three months after Participant
ceases to be a service provider, unless such termination is due to Participant’s death or disability, in which case this
Option shall be exercisable for 12 months after Participant ceases to be a service provider. Notwithstanding the foregoing sentence,
in no event may this Option be exercised after the Term/Expiration Date as provided above, and this Option may be subject to earlier
termination as provided in the Plan.
1.
Grant of Option
. In consideration of the services
to be rendered by Participant to the Company or any Affiliate and subject to the terms and conditions of the Plan and this Agreement,
the Administrator hereby grants to Participant an option (this “
Option
”) to purchase the number of Shares
set forth in the Notice of Stock Option Grant in Part I of this Agreement, at the Exercise Price per Share set forth in the Notice
of Stock Option Grant in Part I of this Agreement (the “
Exercise Price
”).
If designated as an ISO in the Notice of Stock Option Grant
in Part I of this Agreement, this Option is intended to qualify as an Incentive Stock Option;
provided
,
however
,
that, to the extent that the aggregate Fair Market Value (determined at the time of grant) of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by Participant during any calendar year (under all plans of the Company
and any Affiliate) exceeds $100,000, such Options or portions thereof that exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options. Further, if for any reason this Option (or portion thereof) shall
not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, this Option (or portion thereof) shall
be regarded as a Nonstatutory Stock Option. In no event shall the Administrator, the Company or any Affiliate, or any of their
respective employees or directors, have any liability to Participant (or any other Person) due to the failure of this Option (or
portion thereof) to qualify for any reason as an Incentive Stock Option.
2.
Exercise of Option
.
(a)
Right to Exercise
. This Option shall be exercisable
during its term in accordance with (i) the Vesting Schedule set out in the Notice of Stock Option Grant in Part I of this Agreement
and (ii) the applicable provisions of the Plan and this Agreement. This Option may not be exercised for a fraction of a Share.
(b)
Method of Exercise
.
This Option shall be exercisable by delivery of an option exercise notice in the form attached hereto as
Exhibit B
(the
“
Option Exercise Notice
”) or in a manner and pursuant to such procedures as the Administrator may determine,
which shall state the election to exercise this Option, the whole number of Shares with respect to which this Option is being
exercised, and such other representations and agreements as may be required by the Company. If someone other than Participant
exercises this Option, as permitted by the Plan, then such Person must submit documentation reasonably acceptable to the Company
verifying that such Person has the legal right to exercise this Option. The Option Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all exercised Shares, together with any applicable tax withholding. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed Option Exercise Notice accompanied by the aggregate
Exercise Price, together with any applicable tax withholding.
3.
Participant’s Representations
. If the
Common Stock has not been registered under the Securities Act at the time this Option is exercised, Participant shall concurrently
with the exercise of all or any portion of this Option, if required by the Company, deliver to the Company Participant’s
Investment Representation Statement in the form attached hereto as
Exhibit C
.
4.
Lock-Up Period
. Participant will not, during
the period commencing on the date of the final prospectus relating to the registration by the Company for its own behalf of shares
of its Common Stock or any other equity securities under the Securities Act on a Form S-1 (excluding a registration relating solely
to employee benefit plans on Form S-1) or Form S-3 and ending on the date specified by the Company and the underwriter(s) (such
period not to exceed 180 days in the case of the Company’s IPO or 90 days in the case of any registration other than the
Company’s IPO, or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions
on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including the restrictions
contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4) (or any successor provisions or amendments thereto), as applicable), (A)
sell, dispose of, make any short sale of, offer, hypothecate, pledge, contract to sell, grant any option or contract to purchase,
purchase any option or contract to sell, grant any right or warrant to purchase, lend or otherwise transfer or encumber, directly
or indirectly, any Shares or other securities convertible into or exercisable or exchangeable (directly or indirectly) for shares
of Common Stock (whether such Shares or other securities are then held by Participant or thereafter acquired) (such Shares and
other securities, the “
Lock-Up Shares
”) or (B) enter into any swap, hedging or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of ownership of any Lock-Up Shares. The foregoing provisions
of this Section II.4 shall not prevent the exercise of any repurchase option in favor of the Company or apply to the sale of any
Lock-Up Shares to an underwriter pursuant to an underwriting agreement or to the Transfer (as defined in Section II.7) of any Lock-Up
Shares by Participant to any trust for the direct or indirect benefit of Participant or an Immediate Family Member (as defined
in the Option Exercise Notice) of Participant (
provided that
the trustee of the trust agrees, in writing, to be bound by
the restrictions set forth herein and
provided further that
any such Transfer (as defined in Section II.7) does not involve
a disposition for value). Participant shall execute such documents as may be reasonably requested by the Company or the underwriters
in connection with any registered offering described in this Section II.4 and that are consistent with this Section II.4 or necessary
to give further effect thereto.
5.
Method of Payment
. To the extent permitted
by Applicable Laws, payment of the aggregate Exercise Price as to all exercised Shares shall be by any of the following methods,
or a combination thereof, at Participant’s election:
(a) cash;
(b) check;
(c) surrender of other Shares which (i) shall be valued at their
Fair Market Value on the date of exercise and (ii) must be owned by Participant free and clear of any liens, claims, encumbrances
or security interests, if accepting such Shares, in the Administrator’s sole discretion, will not result in any adverse accounting
consequences to the Company; or
(d) consideration received by the Company under a cashless exercise
program (whether through a broker or otherwise) implemented by the Company in connection with the Plan.
Any fraction of a Share which would be required to pay such
aggregate Exercise Price shall be disregarded, and the remaining amount due shall be paid in cash by Participant.
6.
Restrictions on Exercise
. This Option may not
be exercised unless the issuance of Shares upon such exercise, or the method of payment of consideration for such Shares, complies
with Applicable Laws. Assuming such compliance, Shares shall be considered transferred to Participant, for income tax purposes,
on the date on which this Option is exercised with respect to such Shares.
7.
Non-Transferability of Option
. This Option
(or, prior to exercise, the Shares subject to this Option) may not be sold, pledged, assigned, hypothecated or otherwise transferred
in any manner, including by entering into any short position, any “
put equivalent position
” or any “
call
equivalent position
” (as defined in Rule 16a-1(h) and Rule 16a-1(b), respectively, of the Exchange Act), whether
by operation of law or otherwise (“
Transfer
”), other than by will or by the laws of descent and distribution,
and may be exercised, during the lifetime of Participant, only by Participant. The terms of the Plan and this Agreement shall be
binding upon the executors, administrators, heirs, successors and assigns of Participant.
8.
Term of Option
. This Option may be exercised
only (i) within the term set out in the Notice of Stock Option Grant in Part I of this Agreement and (ii) in accordance with the
terms and conditions of the Plan and this Agreement.
9.
Tax Obligations
.
(a)
Tax Withholding
. Participant agrees to make
appropriate arrangements satisfactory to the Company to pay or provide for the satisfaction of all federal, state, local, foreign
and other taxes (including Participant’s FICA obligation) required to be withheld with respect to the exercise of this Option.
Participant acknowledges and agrees that the Company may refuse to honor the exercise of this Option, and refuse to deliver the
Shares, if such withholding amounts are not delivered by Participant at the time of exercise.
(b)
Notice of Disqualifying Disposition of ISO Shares
.
If this Option is an Incentive Stock Option, and if Participant makes a “disposition” (as defined in Section 424 of
the Code) of all or any portion of the Shares acquired upon exercise of this Option within two years from the Grant Date set out
in the Notice of Stock Option Grant in Part I of this Agreement or within one year after issuance of the Shares acquired upon exercise
of this Option, then Participant shall immediately notify the Company in writing as to the occurrence of, and the price realized
upon, such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation
income recognized by Participant.
(c)
Section 409A of the Code
. Under Section 409A
of the Code, an Option that was granted with a per Share exercise price that is determined by the U.S. Internal Revenue Service
(the “
IRS
”) to be less than the Fair Market Value of a Share on the date of grant (a “
discount
option
”) may be considered “
deferred compensation
.” An Option that is a “
discount
option
” may result in (i) income recognition by Participant prior to the exercise of this Option, (ii) an additional
20% federal income tax, (iii) potential penalty and interest charges, and (iv) additional state income, penalty and interest tax
to Participant (collectively, “
409A Penalties
”). Participant acknowledges that the Company cannot guarantee,
and has not guaranteed, that the IRS will agree, in a later examination, that the per Share exercise price of this Option equals
or exceeds the Fair Market Value of a Share on the date of grant. Participant agrees that, if the IRS determines that this Option
is a “
discount option
,” Participant shall be solely responsible for Participant’s costs related
to such a determination, including any 409A Penalties.
10.
General Provisions
.
(a)
Power and Authority
. Participant hereby represents
to the Company that
(i) Participant has full power and authority and legal capacity
to enter into, execute and deliver this Agreement and to perform fully Participant’s obligations hereunder, (ii) the execution,
delivery and performance of this Agreement by Participant does not conflict with, constitute a breach of or violate any arrangement,
understanding or agreement to which Participant is a party or by which Participant is bound, and (iii) this Agreement has been
duly and validly executed and delivered by Participant and constitutes the legal, valid and binding obligation of Participant,
enforceable against Participant in accordance with its terms.
(b)
Survival
. The representations, warranties,
covenants and agreements made in or pursuant to this Agreement shall survive the execution and delivery hereof and shall not be
affected by any investigation made by or on behalf of any party hereto.
(c)
Governing Law
. This Agreement shall be governed
by and construed in accordance with the laws of the State of California without regard to conflict-of-law principles.
(d)
Entire Agreement
. This Agreement, together
with the attached Exhibits, sets forth the entire agreement and understanding between the parties hereto relating to the subject
matter hereof and supersedes all prior and contemporaneous understandings, agreements, discussions, representations and warranties,
both written and oral, between the parties hereto, including any representations made during any interviews or relocation negotiations,
with respect to such subject matter. In the event of a conflict between the terms and conditions of the Plan and this Agreement,
the terms and conditions of the Plan shall prevail.
(e)
Notices
. All notices or other communications
required or permitted hereunder shall be in writing and shall be deemed given or delivered (i) when delivered personally, (ii)
one business day after being deposited with an overnight courier service (costs prepaid), (iii) when sent by facsimile or e-mail
if sent during normal business hours and on the next business day if sent after normal business hours, in each case with confirmation
of transmission by the transmitting equipment, or (iv) when received or rejected by the addressee, if sent by certified mail, return
receipt requested, postage prepaid, in each case to the addresses, facsimile numbers or e-mail addresses and marked to the attention
of the persons designated (by name or title) on the signature page hereto, as applicable, or to such other address, facsimile number,
e-mail address or person as such party may designate by a notice delivered to the other party hereto.
(f)
Successors and Assigns; Transfers
.
The
Company may assign this Agreement, and its rights and obligations hereunder, in whole or in part, to any successor or assign (whether
direct or indirect, by purchase, merger, consolidation, sale of assets or stock or otherwise). Except as set forth herein, (x)
neither this Agreement nor any rights, duties and obligations hereunder shall be assigned, transferred, delegated or sublicensed
by Participant without the Company’s prior written consent and (y) any attempt by Participant to assign, transfer, delegate
or sublicense this Agreement or any rights, duties or obligations hereunder, without the Company’s prior written consent,
shall be void. Subject to any restrictions on transfer set forth herein, this Agreement shall be binding upon, and enforceable
against, (i) the Company and its successors and assigns and (ii) Participant and his or her heirs, executors, successors, assigns,
administrators and other legal representatives. Except as set forth herein, any transfer in violation of any restriction upon transfer
contained in any provision hereof shall be void, unless such restriction is waived in accordance with the terms hereof.
(g)
Modification and Waiver
. This Agreement may
not be amended, modified or supplemented except by a written instrument signed by an authorized representative of each party hereto.
Any term or provision hereof may be waived, or the time for its performance may be extended, by the party or parties entitled to
the benefit thereof. Any such waiver or extension shall be validly and sufficiently authorized for the purposes hereof if, as to
any party, it is authorized in writing by an authorized representative of such party. The failure or delay of any party to enforce
at any time any provision hereof shall not be construed to be a waiver of such provision, nor in any way to affect the validity
of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of
any breach hereof shall be held to constitute a waiver of any other or subsequent breach.
(h)
Further Assurances
. Participant shall execute
and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may reasonably
be necessary or desirable in the view of the Company to carry out the purposes or intent hereof, including the applicable Exhibits
attached hereto.
(i)
Severability
.
Should any provision
contained herein be held as invalid, illegal or unenforceable, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof
and treated as though originally set forth herein.
(j)
Interpretation
. For purposes of this Agreement,
(i) the words “include,” “includes” and “including” shall be deemed to be followed by the words
“without limitation,” (ii) the word “or” is not exclusive, (iii) the words “herein,” “hereof,”
“hereby,” “hereto,” “hereunder” and words of similar import refer to this Agreement as a whole,
and (iv) with respect to the determination of any period of time, “from” means “from and including” and
“to” means “to but excluding.” Unless the context otherwise requires, references herein: (A) to a Section
or an Exhibit mean a Section or an Exhibit of, or attached to, this Agreement; (B) to agreements, instruments and other documents
shall be deemed to include all subsequent amendments, supplements and other modifications thereto; (C) to statutes or regulations
are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation
referred to; (D) to any Person includes such Person’s successors and assigns, but, if applicable, only if such successors
and assigns are not prohibited by this Agreement; and (E) to any gender includes each other gender. The Exhibits attached hereto
shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.
The titles, captions and headings herein are for convenience of reference only and shall not affect the meaning or interpretation
hereof. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against
the party drafting an instrument or causing any instrument to be drafted.
(k)
Counterparts
. This Agreement may be executed
in counterparts, each of which shall be considered an original, but all of which, when taken together, shall be considered one
and the same agreement, and shall become binding when one or more counterparts have been signed by each party hereto and delivered
to the other party hereto. Delivery of an executed counterpart of a signature page to this Agreement shall be as effective as delivery
of a manually executed counterpart of this Agreement. The exchange of copies of this Agreement and of signature pages hereto by
facsimile transmission or e-mail shall constitute effective execution and delivery of this Agreement and may be used in lieu of
the original Agreement for all purposes. Signatures transmitted by facsimile or e-mail shall be deemed to be original signatures
for all purposes.
(l)
Service Relationship At Will
.
Participant
acknowledges and agrees that the vesting of this Option pursuant hereto is earned only by his or her continuing service as a service
provider at will (and not through the act of being hired, being granted this Option or acquiring Shares hereunder). Participant
further acknowledges and agrees that this Agreement, the transactions contemplated hereby and the vesting schedule set forth herein
do not constitute an express or implied promise of continued engagement as a service provider for the vesting period, or for any
period at all, and shall not interfere with the right of either the Company or Participant to terminate Participant’s relationship
as a service provider at any time, with or without cause or notice.
(m)
Third Party Beneficiary Rights
. No provisions
hereof are intended, nor shall be interpreted, to provide or create any third party beneficiary rights or any other rights of any
kind in any client, customer, affiliate, stockholder, partner or employee of any party hereto or any other Person, unless specifically
provided otherwise herein;
provided
,
however
, that Section II.4 is intended to benefit the underwriters for any registered
offering described in Section II.4, and such underwriters shall have the right, power and authority to enforce the provisions of
Section II.4 as though they were parties hereto.
(n)
Adjustments
.
In the event of any dividend
or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, reincorporation,
stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, reclassification, repurchase
or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the
Shares, the Administrator will appropriately adjust the number, class and price of Shares subject to this Option, with such adjustment
to be made in accordance with Section 409A of the Code.
(o)
No Impact on Other Benefits
.
The value
of this Option is not part of Participant’s normal or expected compensation for purposes of calculating any severance, retirement,
welfare, insurance or similar employee benefit.
(p)
Acceptance
.
Participant acknowledges
receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof and hereby accepts
this Option subject to all of the terms and provisions of the Plan and this Agreement (including all Exhibits attached hereto).
Participant has reviewed, and fully understands all provisions of, the Plan and this Agreement in their entirety (including all
Exhibits attached hereto) and has had an opportunity to obtain the advice of his or her own legal counsel, tax advisors and other
advisors prior to executing this Agreement. Any questions or disputes regarding the interpretation of the Plan or this Agreement
(including all Exhibits attached hereto), or arising hereunder or thereunder, shall be submitted by the Company or Participant
to the Administrator, and Participant hereby agrees to accept as final, binding and conclusive all decisions, determinations and
interpretations of the Administrator upon any such questions or disputes.
(q)
Equitable Relief
.
In the event of a
breach or threatened breach by Participant of any provision hereof, Participant hereby consents and agrees that the Company may
seek, in addition to other available remedies, injunctive or other equitable relief from any court of competent jurisdiction, without
the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity
of posting any bond or other security. Participant understands that any breach or threatened breach of this Agreement will cause
irreparable injury and that money damages will not provide an adequate remedy therefor, and Participant hereby consents to the
issuance of an injunction or other equitable relief. The aforementioned equitable relief shall be in addition to, and not in lieu
of, legal remedies, monetary damages or other available forms of relief.
(signature page follows)
IN WITNESS WHEREOF, the undersigned have
executed this Stock Option Agreement as of ________, 20__ .
COMPANY
Hyrecar Inc
By:
Name:
Title: Chief Executive Officer
Notice Address: 355 South Grand Avenue, Suite 1650
Los Angeles, California 90071
Facsimile:
E-mail:
Attention:
PARTICIPANT
Notice
Address:
Facsimile:
E-mail:
Attention:
Exhibits:
A – 2018 Equity Incentive Plan
B – Option Exercise Notice
[Signature Page to Stock Option Agreement]
EXHIBIT A
HYRECAR INC
2018 EQUITY INCENTIVE PLAN
EXHIBIT B
OPTION EXERCISE NOTICE
Hyrecar Inc.
355 South Grand Avenue, Suite 1650
Los Angeles, California 90071
Attention: Secretary
1.
Exercise of Option
. Effective as
of today,
, the undersigned (“
Participant
”) hereby elects to exercise Participant’s
option (the “
Option
”) to purchase shares (the “
Exercised Shares
”) of the common
stock of Hyrecar Inc, a Delaware corporation (the “
Company
”), under and pursuant to the Company’s
2018 Equity Incentive Plan (the “
Plan
”) and that certain Stock Option Agreement made and entered into
as of ________, 20__ by and between the Company and Participant (the “
Option Agreement
”).
2.
Delivery of Payment
. Participant herewith delivers
to the Company the full exercise price of the Exercised Shares, as set forth in the Option Agreement, and any and all withholding
taxes due in connection with the exercise of the Option.
3.
Representations of Participant
. Participant
acknowledges that Participant has received, read and understood the Plan and the Option Agreement and agrees to abide, and be bound,
by their terms and conditions.
4.
Rights as Stockholder
. Until the issuance of
the Exercised Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent
of the Company), no right to vote or receive dividends or other distributions or any other rights as a stockholder shall exist
with respect to the Exercised Shares, notwithstanding the exercise of the Option. The Exercised Shares shall be issued to Participant
as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a
dividend or distribution or other right for which the record date is prior to the date of issuance, except as provided in Section
13 of the Plan.
5.
Tax Consultation
. Participant understands that
Participant may suffer adverse tax consequences as a result of Participant’s purchase or disposition of the Exercised Shares.
Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the
purchase or disposition of the Exercised Shares and that Participant is not relying on the Company for any tax advice.
6.
Restrictive Legends and Stop-Transfer Orders
.
(a)
Legends
. Participant understands and agrees
that the Company shall cause the legends set forth below, or substantially equivalent legends, to be placed upon any certificate(s)
evidencing ownership of the Exercised Shares, together with any other legends that may be required by the Company or by applicable
federal or state securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER, A RIGHT OF FIRST REFUSAL AND A LOCK-UP PERIOD IN THE EVENT OF A PUBLIC OFFERING AS SET FORTH
IN AGREEMENTS BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, COPIES OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
OFFICE OF THE ISSUER. SUCH RESTRICTIONS ON TRANSFER, RIGHT OF FIRST REFUSAL AND LOCK-UP PERIOD ARE BINDING ON TRANSFEREES OF THESE
SECURITIES.
(b)
Stop-Transfer Notices
. In order to ensure
compliance with the restrictions referred to herein and in the Option Agreement, including the provisions of Section II.4 of the
Option Agreement, the Company may issue appropriate stop-transfer instructions to its transfer agent, if any, and, if the Company
transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c)
Refusal to Transfer
. The Company shall not
be required to transfer on its books any Exercised Shares that have been Transferred in violation of any provision hereof or to
treat as owner of such Exercised Shares, or otherwise to accord voting or dividend rights to, any purchaser or other transferee
to whom such Exercised Shares shall have been so Transferred. Any attempt to Transfer Exercised Shares in violation hereof shall
be null and void and shall be disregarded by the Company.
7.
Consent to Notices by Electronic Transmission
.
Upon becoming a stockholder of the Company and without limiting the manner by which notice otherwise may be given effectively to
Participant, Participant hereby consents in accordance with Section 232 of the Delaware General Corporation Law to stockholder
notices given by the Company to Participant by any of the following forms of electronic transmission: (i) by facsimile telecommunications
to the facsimile number set forth on the signature page to the Option Agreement or to such other facsimile number as Participant
may designate by a written notice delivered to the Company; (ii) by electronic mail to the e-mail address set forth on the signature
page to the Option Agreement or to such other e-mail address as Participant may designate by a written notice delivered to the
Company; (iii) by a posting on an electronic network together with separate notice to Participant of such specific posting; and
(iv) by any other form of electronic transmission when directed to Participant.
8.
Capitalized Terms
. Unless otherwise defined
herein, capitalized terms used herein shall have the same defined meanings as set forth in the Plan or, if not defined therein,
in the Option Agreement.
9.
Governing Law; Severability
. This Option Exercise
Notice shall be governed by and construed in accordance with the laws of the State of California without regard to conflict-of-law
principles. Should any provision contained herein be held as invalid, illegal or unenforceable, such holding shall not affect the
validity of the remainder of this Option Exercise Notice, the balance of which shall continue to be binding upon the parties with
any such modification to become a part hereof and treated as though originally set forth herein.
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Submitted by:
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Accepted by:
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PARTICIPANT
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COMPANY
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Signature
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By:
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Name:
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Title:
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Chief Executive Officer
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Date Received:
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Exhibit 10.8
SECURITY
AND PLEDGE AGREEMENT
This
SECURITY AND PLEDGE AGREEMENT, dated as of January 3, 2018 (this “
Agreement
”), is among Hyrecar Inc, a Delaware
corporation (the “Company”), any subsidiary of the Company that is a signatory hereto either now or joined in the
future, if any, (such subsidiaries, the “Guarantors,” and together with the Company, the “Debtors” and
each, a “
Debtor
”), and the holders of the Company’s 13% Senior Secured Convertible Promissory Notes (the
“
Lenders
”) , in the original aggregate principal amount of up to $2,300,000 (the “
Notes
”)
signatory hereto (including such Lenders that become a party to this Agreement subsequent to the date hereof), their endorsees,
transferees and assigns (collectively, the “
Secured Parties
”).
W
I T N E S S E T H:
WHEREAS,
pursuant to the Purchase Agreement (as defined in the Notes), the Secured Parties have severally agreed to extend the loans
to the Company evidenced by the Notes; and
WHEREAS,
pursuant to a certain Subsidiary Guarantee, if any, (the “
Guarantee
”), the Guarantors have jointly and
severally agreed to guarantee and act as surety for payment of such Notes; and
WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the Notes, the Debtor has agreed to execute and deliver
to the Secured Parties this Agreement and to grant the Secured Parties,
pari passu
with each other Secured Party and through
the Collateral Agent (as defined in Section 18 hereof), a security interest in certain property of such Debtor to secure the prompt
payment, performance and discharge in full of all of the Company’s obligations under the Notes and the Guarantors’
obligations under the Guarantee;
NOW,
THEREFORE,
in consideration of the agreements herein contained and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
1.
Certain
Definitions.
As used in this Agreement, the following terms shall have the meanings set forth in this Section 1. Terms used
but not otherwise defined in this Agreement that are defined in Article 9 of the UCC (such as “account”, “chattel
paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”,
“fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”,
“investment property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”)
shall have the respective meanings given such terms in Article 9 of the UCC.
(a) “
Collateral
”
means the collateral in which the Secured Parties are granted a security interest by this Agreement and which shall include all
personal property of the Debtors, whether presently owned or existing or hereafter acquired or coming into existence, wherever
situated, and all additions and accessions thereto and all substitutions and replacements thereof, and all proceeds, products
and accounts thereof, including, without limitation, all proceeds from the sale or transfer of the Collateral and of insurance
covering the same and of any tort claims in connection therewith, and all dividends, interest, cash, notes, securities, equity
interest or other property at any time and from time to time acquired, receivable or otherwise distributed in respect of, or in
exchange for, any or all of the Pledged Securities, if applicable (as defined below):
(i) All
goods, including, without limitation, (A) all machinery, equipment, computers, motor vehicles, trucks, tanks, rigs, ships, appliances,
furniture, special and general tools, fixtures, test and quality control devices and other equipment of every kind and nature
and wherever situated, together with all documents of title and documents representing the same, all additions and accessions
thereto, replacements therefor, all parts therefor, and all substitutes for any of the foregoing and all other items used and
useful in connection with any Debtor’s businesses and all improvements thereto, and (B) all inventory;
(ii) All
contract rights and other general intangibles, including, without limitation, all partnership interests, membership interests,
stock or other securities, rights under any of the Organizational Documents, agreements related to the Pledged Securities, licenses,
distribution and other agreements, computer software (whether “off-the-shelf’, licensed from any third party or developed
by any Debtor), computer software development rights, leases, franchises, customer lists, quality control procedures, grants and
rights, goodwill, Intellectual Property and income tax refunds;
(iii) All
accounts, together with all instruments, all documents of title representing any of the foregoing, all rights in any merchandising,
goods, equipment, motor vehicles and trucks which any of the same may represent, and all right, title, security and guaranties
with respect to each account, including any right of stoppage in transit;
(iv)
All documents, letter-of-credit rights, instruments and chattel paper;
(v)
All commercial tort claims;
(vi)
All deposit accounts and all cash (whether or not deposited in such deposit accounts);
(vii)
All investment property;
(viii)
All supporting obligations;
(ix)
All files, records, books of account, business papers, and computer programs; and
(x)
the products and proceeds of all of the foregoing Collateral set forth in clauses (i)-(ix) above.
Without
limiting the generality of the foregoing, the “
Collateral
” shall include all investment property and general
intangibles respecting ownership and/or other equity interests in each Guarantor, including, without limitation, the shares of
capital stock and the other equity interests listed on
Schedule H
hereto (as the same may be modified from time to time
pursuant to the terms hereof), and any other shares of capital stock and/or other equity interests of any other direct or indirect
subsidiary of any Debtor obtained in the future, and, in each case, all certificates representing such shares and/or equity interests
and, in each case, all rights, options, warrants, stock, other securities and/or equity interests that may hereafter be received,
receivable or distributed in respect of, or exchanged for, any of the foregoing and all rights arising under or in connection
with the Pledged Securities, including, but not limited to, all dividends, interest and cash.
Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any asset which, in the event of an assignment, becomes
void by operation of applicable law or the assignment of which is otherwise prohibited by applicable law (in each case to the
extent that such applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable
law);
provided
,
however,
that to the extent permitted by applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable law, this Agreement shall create a valid security interest in
the proceeds of such asset.
(b) “
Intellectual
Property
” means the collective reference to all rights, priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, (i) all copyrights
arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered
and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and applications in the United States Copyright Office, (ii) all
letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof,
and all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part
thereof, (iii) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade dress,
service marks, logos, domain names and other source or business identifiers, and all goodwill associated therewith, now existing
or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether
in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all common law rights related thereto, (iv) all trade
secrets arising under the laws of the United States, any other country or any political subdivision thereof, (v) all rights to
obtain any reissues, renewals or extensions of the foregoing, (vi) all licenses for any of the foregoing, and (vii) all causes
of action for infringement of the foregoing.
(c) “
Majority
in Interest
” means, at any time of determination, the majority in interest (based on then-outstanding principal amounts
of Notes at the time of such determination) of the Secured Parties.
(d) “
Necessary
Endorsements
” means undated stock powers endorsed in blank or other proper instruments of assignment duly executed and
such other instruments or documents as the Collateral Agent (as that term is defined below) may reasonably request.
(e) “
Organizational
Documents
” means with respect to any Debtor, the documents by which such Debtor was organized (such as a articles of
incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates
of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Debtor
(such as bylaws, a partnership agreement or an operating, limited liability or members agreement).
(f) “
Permitted
Liens
” means the following:
(i) Liens
imposed by law for taxes that are not yet due or are being contested in good faith, which in each case, have been appropriately
reserved for;
(ii) carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in
the ordinary course of business and securing obligations that are not overdue by more than thirty (30) days or are being contested
in good faith;
(iii) pledges
and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and
other social security laws or regulations;
(iv) deposits
to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course of business;
(v) Liens
under this Agreement; and
(vi) any
other liens in favor of the Lender.
(g) “
Pledged
Interests
” shall have the meaning ascribed to such term in Section 4(j).
(h) “
Pledged
Securities
” shall have the meaning ascribed to such term in Section 4(i).
(i) “
Secured
Obligations
” means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several)
due or to become due, or that are now or may be hereafter contracted or acquired, or owing to, of any Debtor to the Secured Parties,
including, without limitation, all obligations under this Agreement, the Notes, the Purchase Agreement, the Guarantee and any
other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith, in each case,
whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated,
whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment
is avoided or recovered directly or indirectly from any of the Secured Parties as a preference, fraudulent transfer or otherwise
as such obligations may be amended, supplemented, converted, extended or modified from time to time. Without limiting the generality
of the foregoing, the term “Secured Obligations” shall include, without limitation: (i) principal of, and interest
on the Notes and the loans extended pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations and liabilities
of the Debtor from time to time under or in connection with this Agreement, the Notes, the Guarantee and any other instruments,
agreements or other documents executed and/or delivered in connection herewith or therewith; and (iii) all amounts (including
but not limited to post-petition interest) in respect of the foregoing that would be payable but for the fact that the obligations
to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding
involving any Debtor.
(j) “
UCC
”
means the Uniform Commercial Code of the State of New York and or any other applicable law of any state or states which has jurisdiction
with respect to all, or any portion of, the Collateral or this Agreement, from time to time. It is the intent of the parties that
defined terms in the UCC should be construed in their broadest sense so that the term “Collateral” will be construed
in its broadest sense. Accordingly, if there are, from time to time, changes to defined terms in the UCC that broaden the definitions,
they are incorporated herein and if existing definitions in the UCC are broader than the amended definitions, the existing ones
shall be controlling.
2.
Grant
of Security Interest in Collateral.
As an inducement for the Secured Parties to extend the loans as evidenced by the Notes
and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Secured Obligations,
each Debtor hereby unconditionally and irrevocably pledges, grants and hypothecates to the Secured Parties a perfected, first
priority security interest in and to, a lien upon and a right of set-off against all of their respective right, title and interest
of whatsoever kind and nature in and to, the Collateral (a “
Security Interest
” and, collectively, the “
Security
Interests
”). The Lenders must consent to any and all Collateral distributions.
3.
Delivery
of Certain Collateral.
Contemporaneously or prior to the execution of this Agreement, each Debtor shall deliver or cause to
be delivered to the Collateral Agent (a) any and all certificates and other instruments representing or evidencing the Pledged
Securities, and (b) any and all certificates and other instruments or documents representing any of the other Collateral, in each
case, together with all Necessary Endorsements. The Debtors are, contemporaneously with the execution hereof, delivering to the
Collateral Agent, or have previously delivered to the Collateral Agent, a true and correct copy of each of the Organizational
Documents governing any of the Pledged Securities.
4.
Representations,
Warranties, Covenants and Agreements of the Debtor
. Except as set forth under the corresponding section of the
disclosure schedules delivered to the Secured Parties concurrently herewith (the “
Disclosure Schedules
”),
which Disclosure Schedules shall be deemed a part hereof, each Debtor represents and warrants to, and covenants and agrees
with, the Secured Parties as follows:
(a) Each
Debtor has the requisite corporate, partnership, limited liability company or other power and authority to enter into this Agreement
and otherwise to carry out its obligations hereunder. The execution, delivery and performance by each Debtor of this Agreement
and the filings contemplated therein have been duly authorized by all necessary action on the part of such Debtor and no further
action is required by such Debtor. This Agreement has been duly executed by each Debtor. This Agreement constitutes the legal,
valid and binding obligation of each Debtor, enforceable against each Debtor in accordance with its terms except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors and by general principles of equity.
(b) Each
Debtor has no place of business or offices where its respective books of account and records are kept (other than temporarily
at the offices of its attorneys or accountants) or places where Collateral is stored or located, except as set forth on
Schedule
A
attached hereto. Except as specifically set forth on
Schedule A,
each Debtor is the record owner of the real property
where such Collateral is located, and there exist no mortgages or other liens on any such real property except for Liens (as defined
in the Notes) as set forth on
Schedule A
. Except as disclosed on
Schedule A,
none of such Collateral is in the possession
of any consignee, bailee, warehouseman, agent or processor.
(c) Except
as set forth on
Schedule B
attached hereto, the Debtors are the sole owners of the Collateral (except for non-exclusive
licenses granted by any Debtor in the ordinary course of business), free and clear of any liens, security interests, encumbrances,
rights or claims, and are fully authorized to grant the Security Interests. Except as set forth on
Schedule C
attached
hereto, there is not on file in any governmental or regulatory authority, agency or recording office an effective financing statement,
security agreement, license or transfer or any notice of any of the foregoing (other than those that will be filed in favor of
the Secured Parties pursuant to this Agreement) covering or affecting any of the Collateral. Except as set forth on
Schedule
C
attached hereto and except pursuant to this Agreement, as long as this Agreement shall be in effect, the Debtors shall not
execute and shall not knowingly permit to be on file in any such office or agency any other financing statement or other document
or instrument (except to the extent filed or recorded in favor of the Secured Parties pursuant to the terms of this Agreement).
(d) No
written claim has been received that any Collateral or any Debtor’s use of any Collateral violates the rights of any third
party. There has been no adverse decision to any Debtor’s claim of ownership rights in or exclusive rights to use the Collateral
in any jurisdiction or to any Debtor’s right to keep and maintain such Collateral in full force and effect, and there is
no proceeding involving said rights pending or, to the best knowledge of any Debtor, threatened before any court, judicial body,
administrative or regulatory agency, arbitrator or other governmental authority.
(e) Each
Debtor shall at all times maintain its books of account and records relating to the Collateral at its principal place of business
and its Collateral at the locations set forth on
Schedule A
attached hereto and may not relocate such books of account
and records or tangible Collateral unless it delivers to the Secured Parties at least 30 days prior to such relocation (i) written
notice of such relocation and the new location thereof (which must be within the United States) and (ii) evidence that appropriate
financing statements under the UCC and other necessary documents have been filed and recorded and other steps have been taken
to perfect the Security Interests to create in favor of the Secured Parties a valid, perfected and continuing perfected first
priority lien in the Collateral.
(f) This
Agreement creates in favor of the Secured Parties a valid first priority security interest in the Collateral, securing the payment
and performance of the Secured Obligations. Upon making the filings described in the immediately following paragraph, all security
interests created hereunder in any Collateral which may be perfected by filing Uniform Commercial Code financing statements shall
have been duly perfected. Except for (i) the filing of the Uniform Commercial Code financing statements referred to in the immediately
following paragraph, (ii) the recordation of the Intellectual Property Security Agreement (as defined in Section 4(p) hereof)
with respect to copyrights and copyright applications in the United States Copyright Office referred to in paragraph 4(mm), (iii)
the recordation of the Intellectual Property Security Agreement (as defined in Section 4(p) hereof) with respect to patents and
trademarks of the Debtors in the United States Patent and Trademark Office referred to in paragraph 4(nn), (iv) the execution
and delivery of deposit account control agreements satisfying the requirements of Section 9-104(a)(2) of the UCC with respect
to each deposit account of the Debtor, (v) if there is any investment property or deposit account included as Collateral that
can be perfected by “control” through an account control agreement, the execution and delivery of securities account
control agreements satisfying the requirements of 9-106 of the UCC with respect to each such investment property of the Debtors,
and (vi) the delivery of the certificates and other instruments provided in Section 3, Section 4(aa) and Section 4(cc), no action
is necessary to create, perfect or protect the security interests created hereunder. Without limiting the generality of the foregoing,
except for the foregoing, no consent of any third parties and no authorization, approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for (x) the execution, delivery and performance of this
Agreement, (y) the creation or perfection of the Security Interests created hereunder in the Collateral or (z) the enforcement
of the rights of the Collateral Agent and the Secured Parties hereunder.
(g) Each
Debtor hereby authorizes the Collateral Agent to file one or more financing statements under the UCC, with respect to the Security
Interests, with the proper filing and recording agencies in any jurisdiction deemed proper by it.
(h) The
execution, delivery and performance of this Agreement by the Debtor does not (i) violate any of the provisions of any Organizational
Documents of any Debtor or any judgment, decree, order or award of any court, governmental body or arbitrator or any applicable
law, rule or regulation applicable to any Debtor 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, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing
any Debtor’s debt or otherwise) or other understanding to which any Debtor is a party or by which any property or asset
of any Debtor is bound or affected. If any, all required consents (including, without limitation, from stockholders or creditors
of any Debtor) necessary for any Debtor to enter into and perform its obligations hereunder have been obtained.
(i) The
capital stock and other equity interests listed on
Schedule H
hereto (if any) (the “
Pledged Securities
”)
represent all of the capital stock and other equity interests of the Guarantors, and represent all capital stock and other equity
interests owned, directly or indirectly, by the Company. All of the Pledged Securities, when issued, will be validly issued, fully
paid and nonassessable, and the Company will be the legal and beneficial owner of the Pledged Securities, free and clear of any
lien, security interest or other encumbrance except for the security interests created by this Agreement and except for Permitted
Liens.
(j) The
ownership and other equity interests in partnerships and limited liability companies (if any) included in the Collateral (the
“
Pledged Interests
”) by their express terms provide that they are securities governed by Article 8 of the UCC.
(k) Each
Debtor shall at all times maintain the liens and Security Interests provided for hereunder as valid and perfected, first priority
liens and security interests in the Collateral in favor of the Secured Parties until this Agreement and the Security Interest
hereunder shall be terminated pursuant to Section 14 hereof. Each Debtor hereby agrees to defend the same against the claims of
any and all persons and entities. Each Debtor shall safeguard and protect all Collateral for the account of the Secured Parties.
At the request of the Collateral Agent, each Debtor will sign and deliver to the Collateral Agent on behalf of the Secured Parties
at any time or from time to time one or more financing statements pursuant to the UCC in form reasonably satisfactory to the Collateral
Agent and will pay the cost of filing the same in all public offices wherever filing is, or is deemed by the Collateral Agent
to be, necessary or desirable to effect the rights and obligations provided for herein. Without limiting the generality of the
foregoing, each Debtor shall pay all fees, taxes and other amounts necessary to maintain the Collateral and the Security Interests
hereunder, and each Debtor shall obtain and furnish to the Collateral Agent from time to time, upon demand, such releases and/or
subordinations of claims and liens which may be required to maintain the priority of the Security Interests hereunder.
(l) No
Debtor will transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral (except for non-exclusive
licenses granted by a Debtor in its ordinary course of business, sales of inventory by a Debtor in its ordinary course of business
and the replacement of worn-out or obsolete equipment by a Debtor in its ordinary course of business) without the prior written
consent of a Majority in Interest.
(m) Each
Debtor shall keep and preserve its equipment, inventory and other tangible Collateral in good condition, repair and order and
shall not operate or locate any such Collateral (or cause to be operated or located) in any area excluded from insurance coverage.
(n) Each
Debtor shall maintain with financially sound and reputable insurers, insurance with respect to the Collateral, including Collateral
hereafter acquired, against loss or damage of the kinds and in the amounts customarily insured against by entities of established
reputation having similar properties similarly situated and in such amounts as are customarily carried under similar circumstances
by other such entities and otherwise as is prudent for entities engaged in similar businesses but in any event sufficient to cover
the full replacement cost thereof. Each Debtor shall cause each insurance policy issued in connection herewith to provide, and
the insurer issuing such policy to certify to the Collateral Agent, that (i) the Collateral Agent will be named as lender loss
payee and additional insured under each such insurance policy; (ii)if such insurance be proposed to be cancelled or materially
changed for any reason whatsoever, such insurer will promptly notify the Collateral Agent and such cancellation or change shall
not be effective as to the Collateral Agent for at least thirty (30) days after receipt by the Collateral Agent of such notice,
unless the effect of such change is to extend or increase coverage under the policy; and (iii) the Collateral Agent will have
the right (but no obligation) at its election to remedy any default in the payment of premiums within thirty (30) days of notice
from the insurer of such default. If no Event of Default (as defined in the Notes) exists and if the proceeds arising out of any
claim or series of related claims do not exceed $25,000, loss payments in each instance will be applied by the applicable Debtor
to the repair and/or replacement of property with respect to which the loss was incurred to the extent reasonably feasible, and
any loss payments or the balance thereof remaining, to the extent not so applied, shall be payable to the applicable Debtor;
provided,
however,
that payments received by any Debtor after an Event of Default occurs and is continuing or in excess of $25,000 for
any occurrence or series of related occurrences shall be paid to the Collateral Agent on behalf of the Secured Parties and, if
received by such Debtor, shall be held in trust for the Secured Parties and immediately paid over to the Collateral Agent unless
otherwise directed in writing by the Collateral Agent. Copies of such policies or the related certificates, in each case, naming
the Collateral Agent as lender loss payee and additional insured shall be delivered to the Collateral Agent at least annually
and at the time any new policy of insurance is issued.
(o) Each
Debtor shall, within five (5) days of obtaining knowledge thereof, advise the Secured Parties promptly, in sufficient detail,
of any material adverse change in the Collateral, and of the occurrence of any event which would have a material adverse effect
on the value of the Collateral or on the Secured Parties’ security interest, through the Collateral Agent, therein.
(p) Each
Debtor shall promptly execute and deliver to the Collateral Agent such further deeds, mortgages, confessions of judgment, assignments,
security agreements, financing statements or other instruments, documents, certificates and assurances and take such further action
as the Collateral Agent may from time to time request and may in its sole discretion deem necessary to perfect, protect or enforce
the Secured Parties’ security interest in the Collateral including, without limitation, if applicable, the execution and
delivery of a separate security agreement with respect to each Debtor’s Intellectual Property (“
Intellectual Property
Security Agreement
”) in which the Secured Parties have been granted a security interest hereunder, substantially in
a form reasonably acceptable to the Collateral Agent, which Intellectual Property Security Agreement, other than as stated therein,
shall be subject to all of the terms and conditions hereof.
(q) Upon
reasonable prior notice (so long as no Event of Default has occurred or continuing, which in either such event, no prior notice
is required), each Debtor shall permit the Collateral Agent and its representatives and agents to inspect the Collateral during
normal business hours and to make copies of records pertaining to the Collateral as may be reasonably requested by the Collateral
Agent from time to time.
(r) Each
Debtor shall take all steps reasonably necessary to diligently pursue and seek to preserve, enforce and collect any rights, claims,
causes of action and accounts receivable in respect of the Collateral.
(s) Each
Debtor shall promptly notify the Secured Parties in sufficient detail upon becoming aware of any attachment, garnishment, execution
or other legal process levied against any Collateral and of any other information received by such Debtor that may materially
affect the value of the Collateral, the Security Interest or the rights and remedies of the Secured Parties hereunder.
(t) All
information heretofore, herein or hereafter supplied to the Secured Parties by or on behalf of any Debtor with respect to the
Collateral is accurate and complete in all material respects as of the date furnished.
(u) The
Debtors shall at all times preserve and keep in full force and effect their respective valid existence and good standing and any
rights and franchises material to its business.
(v) No
Debtor will change its name, type of organization, jurisdiction of organization, organizational identification number (if it has
one), legal or corporate structure, or identity, or add any new fictitious name unless it provides at least 30 days prior written
notice to the Secured Parties of such change and, at the time of such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the perfection of the Security Interests granted and evidenced
by this Agreement.
(w) Except
in the ordinary course of business, no Debtor may consign any of its inventory or sell any of its inventory on bill and hold,
sale or return, sale on approval, or other conditional terms of sale without the consent of the Collateral Agent which shall not
be unreasonably withheld.
(x) No
Debtor may relocate its chief executive office to a new location without providing 30 days prior written notification thereof
to the Secured Parties and so long as, at the time of such written notification, such Debtor provides any financing statements
or fixture filings necessary to perfect and continue the perfection of the Security Interests granted and evidenced by this Agreement.
(y) Each
Debtor was organized and remains organized solely under the laws of the state set forth next to such Debtor’s name in
Schedule
D
attached hereto, which
Schedule D
sets forth each Debtor’s organizational identification number or, if any
Debtor does not have one, states that one does not exist.
(z) (i)
The actual name of each Debtor is the name set forth in
Schedule D
attached hereto; (ii) no Debtor has any trade names
except as set forth on
Schedule E
attached hereto; (iii) no Debtor has used any name other than that stated in the preamble
hereto or as set forth on
Schedule E
for the preceding five (5) years; and (iv) no entity has merged into any Debtor or
been acquired by any Debtor within the past five years except as set forth on
Schedule E
.
(aa) At
any time and from time to time that any Collateral consists of instruments, certificated securities or other items that require
or permit possession by the secured party to perfect the security interest created hereby, the applicable Debtor shall deliver
such Collateral to the Collateral Agent.
(bb) Each
Debtor, in its capacity as issuer, hereby agrees to comply with any and all orders and instructions of the Collateral Agent regarding
the Pledged Interests consistent with the terms of this Agreement without the further consent of any Debtor as contemplated by
Section 8-106 (or any successor section) of the UCC. Further, each Debtor agrees that it shall not enter into a similar agreement
(or one that would confer “control” within the meaning of Article 8 of the UCC) with any other person or entity.
(cc) Each
Debtor shall cause all tangible chattel paper constituting Collateral to be delivered to the Collateral Agent, or, if such delivery
is not possible, then to cause such tangible chattel paper to contain a legend noting that it is subject to the security interest
created by this Agreement. To the extent that any Collateral consists of electronic chattel paper, the applicable Debtor shall
cause the underlying chattel paper to be “marked” within the meaning of Section 9-105 of the UCC (or successor section
thereto).
(dd) If
there is any investment property or deposit account included as Collateral that can be perfected by “control” through
an account control agreement, the applicable Debtor shall cause such an account control agreement, in form and substance in each
case satisfactory to the Collateral Agent, to be entered into and delivered to Collateral Agent for the benefit of the Secured
Parties.
(ee) To
the extent that any Collateral consists of letter-of-credit rights, the applicable Debtor shall cause the issuer of each underlying
letter of credit to consent to an assignment of the proceeds thereof to the Secured Parties.
(ff) To
the extent that any Collateral is in the possession of any third party, the applicable Debtor shall join with the Collateral Agent
in notifying such third party of the Secured Parties’ security interest in such Collateral and shall use its best efforts
to obtain an acknowledgement and agreement from such third party with respect to the Collateral, in form and substance reasonably
satisfactory to the Collateral Agent.
(gg) If
any Debtor shall at any time hold or acquire a commercial tort claim, such Debtor shall promptly notify the Secured Parties in
a writing signed by such Debtor of the particulars thereof and grant to the Secured Parties in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory
to the Collateral Agent.
(hh) Each
Debtor shall immediately provide written notice to the Secured Parties of any and all accounts which arise out of contracts with
any governmental authority and, to the extent necessary to perfect or continue the perfected status of the Security Interests
in such accounts and proceeds thereof, shall execute and deliver to the Collateral Agent an assignment of claims for such accounts
and cooperate with the Collateral Agent in taking any other steps required, in its judgment, under the Federal Assignment of Claims
Act or any similar federal, state or local statute or rule to perfect or continue the perfected status of the Security Interests
in such accounts and proceeds thereof.
(ii) Each
Debtor shall vote the Pledged Securities to comply with the covenants and agreements set forth herein and in the Notes.
(jj) Each
Debtor shall register the pledge of the applicable Pledged Securities on the books of such Debtor. Each Debtor shall notify each
issuer of Pledged Securities to register the pledge of the applicable Pledged Securities in the name of the Secured Parties on
the books of such issuer. Further, except with respect to certificated securities delivered to the Collateral Agent, the applicable
Debtor shall deliver to the Collateral Agent an acknowledgement of pledge (which, where appropriate, shall comply with the requirements
of the relevant UCC with respect to perfection by registration) signed by the issuer of the applicable Pledged Securities, which
acknowledgement shall confirm that: (i) it has registered the pledge on its books and records; and (ii) at any time directed by
Collateral Agent during the continuation of an Event of Default, such issuer will transfer the record ownership of such Pledged
Securities into the name of any designee of Collateral Agent, will take such steps as may be necessary to effect the transfer,
and will comply with all other instructions of Collateral Agent regarding such Pledged Securities without the further consent
of the applicable Debtor.
(kk) In
the event that, upon an occurrence of an Event of Default, Collateral Agent shall sell all or any of the Pledged Securities to
another party or parties (herein called the “
Transferee
”) or shall purchase or retain all or any of the Pledged
Securities, each Debtor shall, to the extent applicable: (i) deliver to the Collateral Agent or the Transferee, as the case may
be, the articles of incorporation, bylaws, minute books, stock certificate books, corporate seals, deeds, leases, indentures,
agreements, evidences of indebtedness, books of account, financial records and all other Organizational Documents and records
of the Debtors and their direct and indirect subsidiaries (but not including any items subject to the attorney-client privilege
related to this Agreement or any of the transactions hereunder); (ii) use its best efforts to obtain resignations of the persons
then serving as officers and directors of the Debtors and their direct and indirect subsidiaries, if so requested; and (iii) use
its best efforts to obtain any approvals that are required by any governmental or regulatory body in order to permit the sale
of the Pledged Securities to the Transferee or the purchase or retention of the Pledged Securities by the Collateral Agent and
allow the Transferee or Collateral Agent to continue the business of the Debtor and their direct and indirect subsidiaries.
(ll) Without
limiting the generality of the other obligations of the Debtor hereunder, each Debtor shall promptly (i) cause to be registered
at the United States Copyright Office all of its material copyrights, (ii) cause the security interest contemplated hereby with
respect to all Intellectual Property registered at the United States Copyright Office or United States Patent and Trademark Office
to be duly recorded at the applicable office, and (iii) give the Collateral Agent notice whenever it acquires (whether absolutely
or by license) or creates any additional material Intellectual Property.
(mm) Each
Debtor will from time to time, at the joint and several expense of the Debtor, promptly execute and deliver all such further instruments
and documents, and take all such further action as may be necessary or desirable, or as the Collateral Agent may reasonably request,
in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Secured Parties
to exercise and enforce their rights and remedies hereunder and with respect to any Collateral or to otherwise carry out the purposes
of this Agreement.
(nn)
Schedule
F
attached hereto lists all of the patents, patent applications, trademarks, trademark applications, registered copyrights,
and domain names owned by any of the Debtor as of the date hereof.
Schedule F
lists all material licenses in favor of any
Debtor for the use of any patents, trademarks, copyrights and domain names as of the date hereof. All material patents and trademarks
of the Debtor have been duly recorded at the United States Patent and Trademark Office and all material copyrights of the Debtor
have been duly recorded at the United States Copyright Office.
(oo) Except
as set forth on
Schedule G
attached hereto, none of the account debtors or other persons or entities obligated on any of
the Collateral is a governmental authority covered by the Federal Assignment of Claims Act or any similar federal, state or local
statute or rule in respect of such Collateral.
(pp) Until
the Secured Obligations shall have been paid and performed in full, the Company covenants that it shall promptly direct any direct
or indirect subsidiary of the Company formed or acquired after the date hereof to enter into a Guarantee in favor of the Secured
Party, in such a form to be mutually agreed to by the parties.
(qq) Each
Debtor shall cause each subsidiary of such Debtor to immediately become a party hereto (an “
Additional Debtor
”),
by executing and delivering an Additional Debtor Joinder in substantially the form of
Annex B
attached hereto and comply
with the provisions hereof applicable to the Debtors. Concurrent therewith, the Additional Debtor shall deliver replacement schedules
for, or supplements to all other Schedules to (or referred to in) this Agreement, as applicable, which replacement schedules shall
supersede, or supplements shall modify, the Schedules then in effect. The Additional Debtor shall also deliver such opinions of
counsel, authorizing resolutions, good standing certificates, incumbency certificates, organizational documents, financing statements
and other information and documentation as the Collateral Agent may reasonably request. Upon delivery of the foregoing to the
Collateral Agent, the Additional Debtor shall be and become a party to this Agreement with the same rights and obligations as
the Debtors, for all purposes hereof as fully and to the same extent as if it were an original signatory hereto and shall be deemed
to have made the representations, warranties and covenants set forth herein as of the date of execution and delivery of such Additional
Debtor Joinder, and all references herein to the “Debtors” shall be deemed to include each Additional Debtor.
5.
Effect
of Pledge on Certain Rights.
If any of the Collateral subject to this Agreement consists of nonvoting equity or ownership
interests (regardless of class, designation, preference or rights) that may be converted into voting equity or ownership interests
upon the occurrence of certain events (including, without limitation, upon the transfer of all or any of the other stock or assets
of the issuer), it is agreed by Debtor that the pledge of such equity or ownership interests pursuant to this Agreement or the
enforcement of any of Secured Parties’ rights hereunder shall not be deemed to be the type of event which would trigger
such conversion rights notwithstanding any provisions in the Organizational Documents or agreements to which any Debtor is subject
or to which any Debtor is party.
6.
Defaults.
The following events shall be “
Events of Default
”:
(a) The
occurrence of an Event of Default (as defined in the Notes or in any other Transaction Document) under the Notes or any other
Transaction Document;
(b) Any
representation or warranty of any Debtor in this Agreement shall prove to have been incorrect in any material respect when made;
(c) The
failure by any Debtor to observe or perform any of its obligations hereunder for five (5) days after delivery to such Debtor of
notice of such failure by or on behalf of a Secured Party unless such default is capable of cure but cannot be cured within such
time frame and such Debtor is using best efforts to cure same in a timely fashion; or
(d) If
any provision of this Agreement shall at any time for any reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Debtor, or a proceeding shall be commenced by any Debtor, or by any governmental authority having
jurisdiction over any Debtor, seeking to establish the invalidity or unenforceability thereof, or any Debtor shall deny that any
Debtor has any liability or obligation purported to be created under this Agreement.
7.
Duty
to Hold in Trust
.
(a) Upon
the occurrence of any Event of Default and at any time thereafter, each Debtor shall, upon receipt of any revenue, income, dividend,
interest or other sums subject to the Security Interests, whether payable pursuant to the Notes or otherwise, or of any check,
draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same in trust for the
Secured Parties and shall forthwith endorse and transfer any such sums or instruments, or both, to the Secured Parties, pro-rata
in proportion to their respective then-currently outstanding principal amount of Notes for application to the satisfaction of
the Secured Obligations (and if any Notes is not outstanding, pro-rata in proportion to the initial purchases of the remaining
Notes).
(b) If
any Debtor shall become entitled to receive or shall receive any securities or other property (including, without limitation,
shares of Pledged Securities or instruments representing Pledged Securities acquired after the date hereof, or any options, warrants,
rights or other similar property or certificates representing a dividend, or any distribution in connection with any recapitalization,
reclassification or increase or reduction of capital, or issued in connection with any reorganization of such Debtor or any of
its direct or indirect subsidiaries) in respect of the Pledged Securities (whether as an addition to, in substitution of, or in
exchange for, such Pledged Securities or otherwise), such Debtor agrees to (i) accept the same as the agent of the Secured Parties;
(ii) hold the same in trust on behalf of and for the benefit of the Secured Parties; and (iii) to deliver any and all certificates
or instruments evidencing the same to Collateral Agent on or before the close of business on the fifth business day following
the receipt thereof by such Debtor, in the exact form received together with the Necessary Endorsements, to be held by Collateral
Agent subject to the terms of this Agreement as Collateral.
8.
Rights
and Remedies Upon Default
.
(a) Upon
the occurrence of any Event of Default and at any time thereafter, the Secured Parties, acting through the Collateral Agent, shall
have the right to exercise all of the remedies conferred hereunder and under the Notes, and the Secured Parties shall have all
the rights and remedies of a secured party under the UCC. Without limitation, the Collateral Agent, for the benefit of the Secured
Parties, shall have the following rights and powers:
(i) The
Collateral Agent shall have the right to take possession of the Collateral and, for that purpose, enter, with the aid and assistance
of any person, any premises where the Collateral, or any part thereof, is or may be placed and remove the same, and each Debtor
shall assemble the Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably
select, whether at such Debtor’s premises or elsewhere, and make available to the Collateral Agent, without rent, all of
such Debtor’s respective premises and facilities for the purpose of the Collateral Agent taking possession of, removing
or putting the Collateral in saleable or disposable form.
(ii) Upon
notice to the Debtors by the Collateral Agent, all rights of each Debtor to exercise the voting and other consensual rights which
it would otherwise be entitled to exercise and all rights of each Debtor to receive the dividends and interest which it would
otherwise be authorized to receive and retain, shall cease. Upon such notice, the Collateral Agent shall have the right to receive,
for the benefit of the Secured Parties, any interest, cash dividends or other payments on the Collateral and, at the option of
Collateral Agent, to exercise in such Collateral Agent’s discretion all voting rights pertaining thereto. Without limiting
the generality of the foregoing, the Collateral Agent shall have the right (but not the obligation) to exercise all rights with
respect to the Collateral as it were the sole and absolute owner thereof, including, without limitation, to vote and/or to exchange,
at its sole discretion, any or all of the Collateral in connection with a merger, reorganization, consolidation, recapitalization
or other readjustment concerning or involving the Collateral or any Debtor or any of its direct or indirect subsidiaries.
(iii) The
Collateral Agent shall have the right to operate the business of each Debtor using the Collateral and shall have the right to
assign, sell, lease or otherwise dispose of and deliver all or any part of the Collateral, at public or private sale or otherwise,
either with or without special conditions or stipulations, for cash or on credit or for future delivery, in such parcel or parcels
and at such time or times and at such place or places, and upon such terms and conditions as the Collateral Agent may deem commercially
reasonable, all without (except as shall be required by applicable statute and cannot be waived) advertisement or demand upon
or notice to any Debtor or right of redemption of a Debtor, which are hereby expressly waived. Upon each such sale, lease, assignment
or other transfer of Collateral, the Collateral Agent, for the benefit of the Secured Parties, may, unless prohibited by applicable
law which cannot be waived, purchase all or any part of the Collateral being sold, free from and discharged of all trusts, claims,
right of redemption and equities of any Debtor, which are hereby waived and released.
(iv) The
Collateral Agent shall have the right (but not the obligation) to notify any account debtors and any obligors under instruments
or accounts to make payments directly to the Collateral Agent, on behalf of the Secured Parties, and to enforce the Debtor’s
rights against such account debtors and obligors.
(v) The
Collateral Agent may (but is not obligated to) direct any financial intermediary or any other person or entity holding any investment
property to transfer the same to the Secured Parties or their designee.
(vi) The
Collateral Agent may (but is not obligated to) transfer any or all Intellectual Property registered in the name of any Debtor
at the United States Patent and Trademark Office and/or Copyright Office into the name of the Secured Parties or any designee
or any purchaser of any Collateral.
(b) The
Collateral Agent shall comply with any applicable law in connection with a disposition of Collateral and such compliance will
not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. The Collateral Agent may sell
the Collateral without giving any warranties and may specifically disclaim such warranties. If the Collateral Agent sells any
of the Collateral on credit, the Debtor will only be credited with payments actually made by the purchaser. In addition, each
Debtor waives (except as shall be required by applicable statute and cannot be waived) any and all rights that it may have to
a judicial hearing in advance of the enforcement of any of the Collateral Agent’s rights and remedies hereunder, including,
without limitation, its right following an Event of Default to take immediate possession of the Collateral and to exercise its
rights and remedies with respect thereto.
(c) For
the purpose of enabling the Collateral Agent to further exercise rights and remedies under this Section 8 or elsewhere provided
by agreement or applicable law, each Debtor hereby grants to the Collateral Agent, for the benefit of the Secured Parties, an
irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Debtor) to use, license
or sublicense following an Event of Default, any Intellectual Property now owned or hereafter acquired by such Debtor, and wherever
the same may be located, and including in such license access to all media in which any of the licensed items may be recorded
or stored and to all computer software and programs used for the compilation or printout thereof.
9.
Applications
of Proceeds.
The proceeds of any such sale, lease or other disposition of the Collateral hereunder or from payments made on
account of any insurance policy insuring any portion of the Collateral shall be applied first, to the expenses of retaking, holding,
storing, processing and preparing for sale, selling, and the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable attorneys’ fees and expenses incurred by the Collateral
Agent in enforcing the Secured Parties’ rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Secured Obligations pro rata among the Secured Parties (based on then-outstanding
principal amounts of Notes at the time of any such determination), and to the payment of any other amounts required by applicable
law, after which the Secured Parties shall pay to the applicable Debtor any surplus proceeds. If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Secured Parties are legally
entitled, the Debtor will be liable for the deficiency, together with interest thereon, at the rate of 18% per annum or the lesser
amount permitted by applicable law (the “
Default Rate
”), and the reasonable fees of any attorneys employed
by the Secured Parties to collect such deficiency. To the extent permitted by applicable law, each Debtor waives all claims, damages
and demands against the Secured Parties arising out of the repossession, removal, retention or sale of the Collateral, unless
due solely to the gross negligence or willful misconduct of the Secured Parties as determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction.
10.
Securities
Law Provision.
Each Debtor recognizes that the Collateral Agent may be limited in its ability to effect a sale to the public
of all or part of the Pledged Securities by reason of certain prohibitions in the Securities Act of 1933, as amended, or other
federal or state securities laws (collectively, the “
Securities Laws
”), and may be compelled to resort to one
or more sales to a restricted group of purchasers who may be required to agree to acquire the Pledged Securities for their own
account, for investment and not with a view to the distribution or resale thereof. Each Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged Securities were sold to the public, and that the Collateral Agent has
no obligation to delay the sale of any Pledged Securities for the period of time necessary to register the Pledged Securities
for sale to the public under the Securities Laws. Each Debtor shall cooperate with the Collateral Agent in its attempt to satisfy
any requirements under the Securities Laws (including, without limitation, registration thereunder if requested by the Collateral
Agent) applicable to the sale of the Pledged Securities by the Collateral Agent.
11.
Costs
and Expenses.
Each Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses incurred in connection with
any filing required hereunder, including without limitation, any financing statements pursuant to the UCC, continuation statements,
partial releases and/or termination statements related thereto or any expenses of any searches reasonably required by the Collateral
Agent. The Debtor shall also pay all other claims and charges which in the reasonable opinion of the Collateral Agent are reasonably
likely to prejudice, imperil or otherwise affect the Collateral or the Security Interests therein. The Debtor will also, upon
demand, pay to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees and expenses
of its counsel and of any experts and agents, which the Collateral Agent, for the benefit of the Secured Parties, may incur in
connection with the creation, perfection, protection, satisfaction, foreclosure, collection or enforcement of the Security Interest
and the preparation, administration, continuance, amendment or enforcement of this Agreement and pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents,
which the Collateral Agent, for the benefit of the Secured Parties, and the Secured Parties may incur in connection with (i) the
enforcement of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon,
any of the Collateral, or (iii) the exercise or enforcement of any of the rights of the Secured Parties under the Notes. Until
so paid, any fees payable hereunder shall be added to the principal amount of the Notes and shall bear interest at the Default
Rate.
12.
Responsibility
for Collateral.
The Debtor assume all liabilities and responsibility in connection with all Collateral, and the Secured Obligations
shall in no way be affected or diminished by reason of the loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason. Without limiting the generality of the foregoing and except as required by applicable law, (a)
neither the Collateral Agent nor any Secured Party (i) has any duty (either before or after an Event of Default) to collect any
amounts in respect of the Collateral or to preserve any rights relating to the Collateral, or (ii) has any obligation to cleanup
or otherwise prepare the Collateral for sale, and (b) each Debtor shall remain obligated and liable under each contract or agreement
included in the Collateral to be observed or performed by such Debtor thereunder. Neither the Collateral Agent nor any Secured
Party shall have any obligation or liability under any such contract or agreement by reason of or arising out of this Agreement
or the receipt by the Collateral Agent or any Secured Party of any payment relating to any of the Collateral, nor shall the Collateral
Agent or any Secured Party be obligated in any manner to perform any of the obligations of any Debtor under or pursuant to any
such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or
any Secured Party in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract
or agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts
which may have been assigned to the Collateral Agent or any Secured Party or to which the Collateral Agent or any Secured Party
may be entitled at any time or times.
13.
Security
Interests Absolute.
All rights of the Secured Parties and all obligations of each Debtor hereunder, shall be absolute and
unconditional, irrespective of: (a) any lack of validity or enforceability of this Agreement, the Notes or any agreement entered
into in connection with the foregoing, or any portion hereof or thereof, against any other Debtor or Guarantor; (b) any change
in the time, manner or place of payment or performance of, or in any other term of, all or any of the Secured Obligations, or
any other amendment or waiver of or any consent to any departure from the Notes or any other agreement entered into in connection
with the foregoing; (c) any exchange, release or nonperfection of any of the Collateral, or any release or amendment or waiver
of or consent to departure from any other collateral for, or any guarantee, or any other security, for all or any of the Secured
Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and cancel in their sole discretion any insurance
claims or matters made or arising in connection with the Collateral; or (e) any other circumstance which might otherwise constitute
any legal or equitable defense available to a Debtor, or a discharge of all or any part of the Security Interests granted hereby.
Until the Secured Obligations shall have been paid and performed in full, the rights of the Secured Parties shall continue even
if the Secured Obligations are barred for any reason, including, without limitation, the running of the statute of limitations.
Each Debtor expressly waives presentment, protest, notice of protest, demand, notice of nonpayment and demand for performance.
In the event that at any time any transfer of any Collateral or any payment received by the Secured Parties hereunder shall be
deemed by final order of a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under the
bankruptcy or insolvency laws of the United States, or shall be deemed to be otherwise due to any party other than the Secured
Parties, then, in any such event, each Debtor’s obligations hereunder shall survive cancellation of this Agreement, and
shall not be discharged or satisfied by any prior payment thereof and/or cancellation of this Agreement, but shall remain a valid
and binding obligation enforceable in accordance with the terms and provisions hereof. Each Debtor waives all right to require
the Secured Parties to proceed against any other person or entity or to apply any Collateral which the Secured Parties may hold
at any time, or to marshal assets, or to pursue any other remedy. Each Debtor waives any defense arising by reason of the application
of the statute of limitations to any obligation secured hereby.
14.
Term
of Agreement.
This Agreement and the Security Interests shall terminate on the date on which all payments under the Notes
have been indefeasibly paid in full and all other Secured Obligations have been paid or discharged; provided, however, that all
indemnities of the Debtor contained in this Agreement (including, without limitation, Annex A hereto) shall survive and remain
operative and in full force and effect regardless of the termination of this Agreement.
15.
Power
of Attorney; Further Assurances
.
(a) Each
Debtor authorizes the Collateral Agent, and does hereby make, constitute and appoint the Collateral Agent and its officers, agents,
successors or assigns with full power of substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in
the name of the Collateral Agent or such Debtor, to, after the occurrence and during the continuance of an Event of Default, (i)
endorse any note, checks, drafts, money orders or other instruments of payment (including payments payable under or in respect
of any policy of insurance) in respect of the Collateral that may come into possession of the Collateral Agent; (ii) to sign and
endorse any financing statement pursuant to the UCC or any invoice, freight or express bill, bill of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications and notices in connection with accounts, and other documents relating
to the Collateral; (iii) to pay or discharge taxes, liens, security interests or other encumbrances at any time levied or placed
on or threatened against the Collateral; (iv) to demand, collect, receipt for, compromise, settle and sue for monies due in respect
of the Collateral; (v) to transfer any Intellectual Property or provide licenses respecting any Intellectual Property; and (vi)
generally, at the option of the Collateral Agent, and at the expense of the Debtor, at any time, or from time to time, to execute
and deliver any and all documents and instruments and to do all acts and things which the Collateral Agent deems necessary to
protect, preserve and realize upon the Collateral and the Security Interests granted therein in order to effect the intent of
this Agreement and the Notes all as fully and effectually as the Debtor might or could do; and each Debtor hereby ratifies all
that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney is coupled with an interest
and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Secured Obligations shall be outstanding.
The designation set forth herein shall be deemed to amend and supersede any inconsistent provision in the Organizational Documents
or other documents or agreements to which any Debtor is subject or to which any Debtor is a party. Without limiting the generality
of the foregoing, after the occurrence and during the continuance of an Event of Default, each Secured Party is specifically authorized
to execute and file any applications for or instruments of transfer and assignment of any patents, trademarks, copyrights or other
Intellectual Property with the United States Patent and Trademark Office and the United States Copyright Office.
(b) On
a continuing basis, each Debtor will make, execute, acknowledge, deliver, file and record, as the case may be, with the proper
filing and recording agencies in any jurisdiction, including, without limitation, the jurisdictions indicated on
Schedule C
attached hereto, all such instruments, and take all such action as may reasonably be deemed necessary or advisable, or as
reasonably requested by the Collateral Agent, to perfect the Security Interests granted hereunder and otherwise to carry out the
intent and purposes of this Agreement, or for assuring and confirming to the Collateral Agent the grant or perfection of a perfected
security interest in all the Collateral under the UCC.
(c) Each
Debtor hereby irrevocably appoints the Collateral Agent as such Debtor’s attorney-in-fact, with full authority in the place
and instead of such Debtor and in the name of such Debtor, from time to time in the Collateral Agent’s discretion, to take
any action and to execute any instrument which the Collateral Agent may deem necessary or advisable to accomplish the purposes
of this Agreement, including the filing, in its sole discretion, of one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of such Debtor where permitted by law, which financing statements
may (but need not) describe the Collateral as “all assets” or “all personal property” or words of like
import, and ratifies all such actions taken by the Collateral Agent. This power of attorney is coupled with an interest and shall
be irrevocable for the term of this Agreement and thereafter as long as any of the Secured Obligations shall be outstanding.
16.
Notices.
All notices, requests, demands and other communications hereunder shall be subject to the notice provision of the Purchase
Agreement (as such term is defined in the Notes).
17.
Other
Security.
To the extent that the Secured Obligations are now or hereafter secured by property other than the Collateral or
by the guarantee, endorsement or property of any other person, firm, corporation or other entity, then the Collateral Agent shall
have the right, in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Parties’ rights and remedies hereunder.
18.
Appointment
of Collateral Agent.
The Secured Parties in their sole discretion may delegate certain of their rights hereunder to one or
more collateral agents. If and as applicable, the Secured Parties may insert the name of the selected collateral agent in this
Section 18. To this end, the Secured Parties hereby appoint Alexander Capital LP to act as their collateral agent (the “
Collateral
Agent
”) for purposes of exercising any and all rights and remedies of the Secured Parties hereunder. Such appointment
shall continue until revoked in writing by a Majority in Interest, at which time a Majority in Interest may appoint a new Collateral
Agent. The Collateral Agent shall have the rights, responsibilities and immunities set forth in
Annex A
hereto.
19.
Miscellaneous
.
(a) No
course of dealing between the Debtors and the Secured Parties, nor any failure to exercise, nor any delay in exercising, on the
part of the Secured Parties, any right, power or privilege hereunder or under the Notes shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
(b) All
of the rights and remedies of the Secured Parties with respect to the Collateral, whether established hereby or by the Notes or
by any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently.
(c) This
Agreement, together with the exhibits and schedules hereto and the other Transaction Documents (as defined in the Purchase Agreement),
contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into this Agreement
and the exhibits and schedules hereto. No provision of this Agreement may be waived, modified, supplemented or amended except
in a written instrument signed, in the case of an amendment, by the Debtors and the Secured Parties holding 67% or more of the
principal amounts of Notes then outstanding, or, in the case of a waiver, by the party against whom enforcement of any such waived
provision is sought.
(d) If
any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(e) No
waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
(f) This
Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company
and the Guarantors may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each
Secured Party (other than by merger). Any Secured Party may assign any or all of its rights under this Agreement to any Person
(as defined in the Purchase Agreement) to whom such Secured Party assigns or transfers any Secured Obligations, provided such
transferee agrees in writing to be bound, with respect to the transferred Secured Obligations, by the provisions of this Agreement
that apply to the “Secured Parties.”
(g) Each
party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order
to carry out the provisions and purposes of this Agreement.
(h) Except
to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, all questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Except to the extent
mandatorily governed by the jurisdiction or situs where the Collateral is located, each Debtor agrees that all proceedings concerning
the interpretations, enforcement and defense of the transactions contemplated by this Agreement and the Notes (whether brought
against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan. Except to
the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, each Debtor hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication
of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any proceeding, any claim that it is not personally subject to the jurisdiction
of any such court, that such proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such proceeding by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives,
to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
(i) This
Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and,
all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature
is executed) the same with the same force and effect as if such facsimile signature were the original thereof.
(j) All
Debtors shall jointly and severally be liable for the obligations of each Debtor to the Secured Parties hereunder.
(k) Each
Debtor shall indemnify, reimburse and hold harmless the Collateral Agent and the Secured Parties and their respective partners,
members, shareholders, officers, directors, employees and agents (and any other persons with other titles that have similar functions)
(collectively, “
Indemnitees
”) from and against any and all losses, claims, liabilities, damages, penalties,
suits, costs and expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the
foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise
from this Agreement or the Collateral, except any such losses, claims, liabilities, damages, penalties, suits, costs and expenses
which result from the gross negligence or willful misconduct of the Indemnitee as determined by a final, nonappealable decision
of a court of competent jurisdiction. This indemnification provision is in addition to, and not in limitation of, any other indemnification
provision in the Notes, the Purchase Agreement (as such term is defined in the Notes) or any other agreement, instrument or other
document executed or delivered in connection herewith or therewith.
(l) Nothing
in this Agreement shall be construed to subject the Collateral Agent or any Secured Party to liability as a partner in any Debtor
or any if its direct or indirect subsidiaries that is a partnership or as a member in any Debtor or any of its direct or indirect
subsidiaries that is a limited liability company, nor shall the Collateral Agent or any Secured Party be deemed to have assumed
any obligations under any partnership agreement or limited liability company agreement, as applicable, of any such Debtor or any
of its direct or indirect subsidiaries or otherwise, unless and until any such Secured Party exercises its right to be substituted
for such Debtor as a partner or member, as applicable, pursuant hereto.
(m) To
the extent that the grant of the security interest in the Collateral and the enforcement of the terms hereof require the consent,
approval or action of any partner or member, as applicable, of any Debtor or any direct or indirect subsidiary of any Debtor or
compliance with any provisions of any of the Organizational Documents, the Debtor hereby represents that all such consents and
approvals have been obtained.
[SIGNATURE
PAGE OF DEBTORS FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have caused this Security and Pledge Agreement to be duly executed on the day and year first
above written.
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HYRECAR INC
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By:
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Joseph
Furnari
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CEO and CFO
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[SIGNATURE
PAGE OF SECURED PARTIES FOLLOWS]
[SIGNATURE
PAGE OF SECURED PARTIES TO SECURITY AGREEMENT]
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Name
of Secured Party:
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Signature of Authorized Signatory of Secured Party:
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Name
of Authorized Signatory:
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Title
of Authorized Signatory:
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DISCLOSURE
SCHEDULES
(Security Agreement)
The
following are the Disclosure Schedules (the “
Disclosure Schedules
”) referred to in that certain Security and
Pledge Agreement, dated as of January 3, 2018 (the “
Agreement
”), by and among Hyrecar Inc, a Delaware corporation
(the “
Company
”), all of the subsidiaries of the Company (if any) (such subsidiaries, the “
Guarantors,
”
and together with the Company, the “
Debtors
”), and the holders of the Company’s 13% Senior Secured Convertible
Promissory Notes (the “
Notes
”) signatory thereto (including such Lenders that become a party to this Agreement
subsequent to the date hereof), their endorsees, transferees and assigns (collectively, the “
Secured Parties
”).
Schedule
A
Principal Place of Business of Debtor:
Locations Where Collateral is Located or Stored
None.
Schedule
B
Ownership Interest to Collateral
Debtors
are the sole owners of the Collateral.
Schedule
C
Filing Jurisdictions
State
of Delaware
Schedule
D
Legal
Names and Organizational Identification Numbers
Legal
Name of Debtor: Hyrecar Inc
Jurisdiction
of Incorporation: Delaware
Organization
Number 5645486
Schedule
E
Names; Mergers and Acquisitions
Hyrecar
Inc
Schedule
F
Intellectual Property
Patents/Patent
Applications
None.
Domain
Names
www.hyrecar.com
Copyrights
None.
Schedule
G
Account Debtor
No
account debtor of the Debtor is a governmental authority covered by the Federal Assignment of Claims Act or any similar federal,
state or local statute or rule in respect of the Collateral.
Schedule
H
Pledged Securities
As
of the date of this Agreement, none.
ANNEX
A to
SECURITY
AGREEMENT THE COLLATERAL AGENT
1.
Appointment.
The Secured Parties (all capitalized terms used herein and not otherwise defined shall have the respective meanings provided
in the Security and Pledge Agreement to which this
Annex A
is attached (the “
Agreement
”)), by their
acceptance of the benefits of the Agreement, hereby designate Alexander Capital LP (“
Alexander
” or the “
Collateral
Agent
”) as the Collateral Agent to act as specified herein and in the Agreement. Each Secured Party shall be deemed
irrevocably to authorize the Collateral Agent to take such action on its behalf under the provisions of the Agreement and any
other Transaction Document (as such term is defined in the Purchase Agreement) and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or required of the Collateral Agent by the terms hereof and thereof
and such other powers as are reasonably incidental thereto. The Collateral Agent may perform any of its duties hereunder by or
through its agents or employees.
2.
Nature
of Duties.
The Collateral Agent shall have no duties or responsibilities except those expressly set forth in the Agreement.
Neither the Collateral Agent nor any of its partners, members, shareholders, officers, directors, employees or agents shall be
liable for any action taken or omitted by it as such under the Agreement or hereunder or in connection herewith or therewith,
be responsible for the consequence of any oversight or error of judgment or answerable for any loss, unless caused solely by its
or their gross negligence or willful misconduct as determined by a final judgment (not subject to further appeal) of a court of
competent jurisdiction. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent
shall not have by reason of the Agreement or any other Transaction Document a fiduciary relationship in respect of any Debtor
or any Secured Party; and nothing in the Agreement or any other Transaction Document, expressed or implied, is intended to or
shall be so construed as to impose upon the Collateral Agent any obligations in respect of the Agreement or any other Transaction
Document except as expressly set forth herein and therein.
3.
Lack
of Reliance on the Collateral Agent.
Independently and without reliance upon the Collateral Agent, each Secured Party,
to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the
financial condition and affairs of the Company and its subsidiaries in connection with such Secured Party’s investment
in the Debtors, the creation and continuance of the Secured Obligations, the transactions contemplated by the Transaction
Documents, and the taking or not taking of any action in connection therewith, and (ii) its own appraisal of the
creditworthiness of the Company and its subsidiaries, and of the value of the Collateral from time to time, and the
Collateral Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Secured
Party with any credit, market or other information with respect thereto, whether coming into its possession before any
Secured Obligations are incurred or at any time or times thereafter. The Collateral
Agent shall not be responsible to
the Debtors or any Secured Party for any recitals, statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith, or for the execution, effectiveness, genuineness,
validity, enforceability, perfection, collectability, priority or sufficiency of the Agreement or any other
Transaction Document, or for the financial condition of the Debtors or the value of any of the Collateral, or be required to
make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of the
Agreement or any other Transaction Document, or the financial condition of the Debtors, or the value of any of the
Collateral, or the existence or possible existence of any default or Event of Default under the Agreement, the Notes or any
of the other Transaction Documents.
4.
Certain
Rights of the Collateral Agent.
The Collateral Agent shall have the right to take any action with respect to the Collateral,
on behalf of all of the Secured Parties. To the extent practical, the Collateral Agent shall request instructions from the Secured
Parties with respect to any material act or action (including failure to act) in connection with the Agreement or any other Transaction
Document, and shall be entitled to act or refrain from acting in accordance with the instructions of a Majority in Interest; if
such instructions are not provided despite the Collateral Agent’s request therefor, the Collateral Agent shall be entitled
to refrain from such act or taking such action, and if such action is taken, shall be entitled to appropriate indemnification
from the Secured Parties in respect of actions to be taken by the Collateral Agent; and the Collateral Agent shall not incur liability
to any person or entity by reason of so refraining. Without limiting the foregoing, (a) no Secured Party shall have any right
of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder
in accordance with the terms of the Agreement or any other Transaction Document, and the Debtors shall have no right to question
or challenge the authority of, or the instructions given to, the Collateral Agent pursuant to the foregoing and (b) the Collateral
Agent shall not be required to take any action which the Collateral Agent believes (i) could reasonably be expected to expose
it to personal liability or (ii) is contrary to this Agreement, the Transaction Documents or applicable law.
5.
Reliance.
The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by the proper person or entity, and, with respect to all legal matters pertaining to the Agreement and the
other Transaction Documents and its duties thereunder, upon advice of counsel selected by it and upon all other matters pertaining
to this Agreement and the other Transaction Documents and its duties thereunder, upon advice of other experts selected by it.
Anything to the contrary notwithstanding, the Collateral Agent shall have no obligation whatsoever to any Secured Party to assure
that the Collateral exists or is owned by the Debtors or is cared for, protected or insured or that the liens granted pursuant
to the Agreement have been properly or sufficiently or lawfully created, perfected, or enforced or are entitled to any particular
priority.
6.
Indemnification.
To the extent that the Collateral Agent is not reimbursed and indemnified by the Debtors, the Secured Parties will jointly
and severally reimburse and indemnify the Collateral Agent, in proportion to their initially purchased respective principal amounts
of Notes, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Collateral
Agent in performing its duties hereunder or under the Agreement or any other Transaction Document, or in any way relating to or
arising out of the Agreement or any other Transaction Document except for those determined by a final judgment (not subject to
further appeal) of a court of competent jurisdiction to have resulted solely from the Collateral Agent’s own gross negligence
or willful misconduct. Prior to taking any action hereunder as Collateral Agent, the Collateral Agent may require each Secured
Party to deposit with it sufficient sums as it determines in good faith is necessary to protect the Collateral Agent for costs
and expenses associated with taking such action.
7.
Resignation
by the Collateral Agent
.
(a) The
Collateral Agent may resign from the performance of all its functions and duties under the Agreement and the other Transaction
Documents at any time by giving 30 days’ prior written notice (as provided in the Agreement) to the Debtors and the Secured
Parties. Such resignation shall take effect upon the appointment of a successor Collateral Agent pursuant to clauses (b) and (c)
below.
(b) Upon
any such notice of resignation, the Secured Parties, acting by a Majority in Interest, shall appoint a successor Collateral Agent
hereunder.
(c) If
a successor Collateral Agent shall not have been so appointed within said 30-day period, the Collateral Agent shall then appoint
a successor Collateral Agent who shall serve as Collateral Agent until such time, if any, as the Secured Parties appoint a successor
Collateral Agent as provided above. If a successor Collateral Agent has not been appointed within such 30- day period, the Collateral
Agent may petition any court of competent jurisdiction or may interplead the Debtors and the Secured Parties in a proceeding for
the appointment of a successor Collateral Agent, and all fees, including, but not limited to, extraordinary fees associated with
the filing of interpleader and expenses associated therewith, shall be payable by the Debtors on demand.
8.
Rights
with Respect to Collateral.
Each Secured Party agrees with all other Secured Parties and the Collateral Agent (a) that it
shall not, and shall not attempt to, exercise any rights with respect to its security interest in the Collateral, whether pursuant
to any other agreement or otherwise (other than pursuant to this Agreement), or take or institute any action against the Collateral
Agent or any of the other Secured Parties in respect of the Collateral or its rights hereunder (other than any such action arising
from the breach of this Agreement) and (b) that such Secured Party has no other rights with respect to the Collateral other than
as set forth in this Agreement and the other Transaction Documents. Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Collateral Agent and the retiring Collateral Agent shall be discharged
from its duties and obligations under the Agreement. After any retiring Collateral Agent’s resignation or removal hereunder
as Collateral Agent, the provisions of the Agreement including this Annex A shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Collateral Agent.
ANNEX
B
to
SECURITY AND PLEDGE
AGREEMENT
FORM OF ADDITIONAL DEBTOR JOINDER
Reference
is made to the Security and Pledge Agreement, dated as of January 3, 2018, entered into by HyreCar Inc and its subsidiaries party
thereto from time to time, as Debtors to and in favor of the Secured Parties identified therein (the “
Security Agreement
”).
Capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in, or by reference
in, the Security Agreement.
The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder to the Secured Parties referred to above, the undersigned
shall (a) be an Additional Debtor under the Security Agreement, (b) have all the rights and obligations of the Debtors under the
Security Agreement as fully and to the same extent as if the undersigned was an original signatory thereto and (c) be deemed to
have made the representations and warranties set forth therein as of the date of execution and delivery of this Additional Debtor
Joinder. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY
INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY
TRIAL PROVISIONS SET FORTH THEREIN.
Attached
hereto are supplemental and/or replacement Disclosure Schedules to the Security Agreement, as applicable.
An
executed copy of this Additional Debtor Joinder shall be delivered to the Secured Parties, and the Secured Parties may rely on
the matters set forth herein on or after the date hereof. This Additional Debtor Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.
IN
WITNESS WHEREOF, the undersigned has caused this Additional Debtor Joinder to be executed in the name and on behalf of the undersigned.
[Name
of Additional Debtor]
By:
Name:
Title:
Address:
Dated:
B-1
Exhibit 10.9
INTELLECTUAL
PROPERTY SECURITY AGREEMENT
This
INTELLECTUAL PROPERTY SECURITY AGREEMENT
(this
Agreement
”), dated as of January 3, 2018, by Hyrecar Inc, a
Delaware corporation (the “
Grantor
”), in favor of Alexander Capital, LP as collateral agent (the “
Collateral
Agent
”) for the secured parties referred to below.
WHEREAS:
A. Reference
is made to that certain Security and Pledge Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise
modified from time to time, the “
Security Agreement
”), entered into by and among the Grantor, the other “Guarantors”
party thereto, and the Collateral Agent, which secures certain now existing and future arising obligations owing to the Secured
Parties (as defined in the Security Agreement) under the Transaction Documents as provided in the Security Agreement;
B. Pursuant
to the Security Agreement, the Grantor is required to execute and deliver to the Collateral Agent this Agreement; and
C. Pursuant
to the terms of the Security Agreement, the Grantor has granted to the Collateral Agent, for the benefit of the Secured Parties,
a security interest in substantially all the assets of the Grantor, including all right, title and interest of the Grantor in,
to and under all now owned and hereafter acquired (1) trademarks, patents, and copyrights; (2) trademark applications, patent
applications, and copyright applications; and (3) trademark licenses, patent licenses, and copyright licenses, and all products
and proceeds thereof, to secure the payment of the Obligations (as defined in the Security Agreement).
NOW,
THEREFORE,
in consideration of the mutual agreements set forth herein and for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Grantor hereby grants to the Collateral Agent, for the benefit of the Secured
Parties, to secure the Obligations, a continuing security interest in all of the Grantor’s right, title and interest in,
to and under the following, whether presently existing or hereafter created or acquired:
1. Each
United States and foreign trademark and trademark application, including, without limitation, each United States federally registered
trademark and trademark application referred to in
Schedule 1
annexed hereto, together with any reissues, continuations
or extensions thereof and all goodwill associated therewith;
2. Each
trademark license, including, without limitation, each trademark license listed on
Schedule 1
annexed hereto, together
with all goodwill associated therewith;
3. All
products and proceeds of the foregoing items 1 through 2, including, without limitation, any claim by the Grantor against third
parties for past, present or future infringement, misappropriation, dilution, violation or other impairment of any trademark,
including, without limitation, any trademark referred to in
Schedule 1
annexed hereto, any trademark issued pursuant to
a trademark application referred to in
Schedule 1
and any trademark licensed under any trademark license listed on
Schedule
1
annexed hereto (items 1 through 3 being herein collectively referred to as the “
Trademark Collateral
”).
4. Each
United States and foreign patent and patent application, including, without limitation, each United States federally registered
patent and patent application referred to in
Schedule 2
annexed hereto, together with any reissues, continuations or extensions
thereof and all goodwill associated therewith;
5. Each
patent license, including, without limitation, each patent license listed on
Schedule 2
annexed hereto, together with all
goodwill associated therewith;
6. All
products and proceeds of the foregoing items 4 through 5, including, without limitation, any claim by the Grantor against third
parties for past, present or future infringement, misappropriation, dilution, violation or other impairment of any patent, including,
without limitation, any patent referred to in
Schedule 2
annexed hereto, any trademark issued pursuant to a patent application
referred to in
Schedule 2
and any patent licensed under any patent license listed on
Schedule 2
annexed hereto (items
4 through 6 being herein collectively referred to as the “
Patent Collateral
”).
7. Each
United States and foreign copyright and copyright application, including, without limitation, each United States federally registered
copyright and copyright application referred to in
Schedule 3
annexed hereto, together with any reissues, continuations
or extensions thereof and all goodwill associated therewith;
8. Each
copyright license, including, without limitation, each copyright license listed on
Schedule 3
annexed hereto, together
with all goodwill associated therewith;
9. All
products and proceeds of the foregoing items 7 through 8, including, without limitation, any claim by the Grantor against third
parties for past, present or future infringement, misappropriation, dilution, violation or other impairment of any copyright,
including, without limitation, any copyright referred to in
Schedule 3
annexed hereto, any copyright issued pursuant to
a copyright application referred to in
Schedule 3
and any copyright licensed under any copyright license listed on
Schedule
3
annexed hereto (items 7 through 9 being herein collectively referred to as the “
Copyright Collateral
”;
items 1 through 9 being herein (i.e., the Trademark Collateral, the Patent Collateral, and the Copyright Collateral) collectively
referred to as the “
IP Collateral
”).
This
security interest is granted in conjunction with the security interests granted to the Collateral Agent, for itself and on behalf
of the other Secured Parties, pursuant to the Security Agreement. The Grantor hereby acknowledges and affirms that the rights
and remedies of the Collateral Agent with respect to the security interest in the IP Collateral made and granted hereby are more
fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully
set forth herein. Capitalized terms used but not defined herein have the respective meanings ascribed thereto in the Security
Agreement.
Grantor
shall give Collateral Agent prior written notice of no less than five (5) Business Days before filing any additional application
for registration of any trademark and prompt notice in writing of any additional trademark registrations, patent registration,
or copyright registrations granted therefor after the date hereof. Without limiting Grantor’s obligations under this paragraph,
Grantor hereby authorizes Collateral Agent unilaterally to modify this Agreement by amending Schedules 1, 2, or 3 to include any
future United States registered trademarks, patents, copyrights or applications therefor of Grantor. Notwithstanding the foregoing,
no failure to so modify this Agreement or amend Schedules 1, 2, or 3 shall in any way affect, invalidate or detract from Collateral
Agent’s continuing security interest in all Collateral, whether or not listed on Schedule 1, 2, or 3.
Grantor
hereby agrees that, anything herein to the contrary notwithstanding, such Grantor shall assume full and complete responsibility
for the prosecution, defense, enforcement or any other necessary or desirable actions in connection with their trademarks subject
to the security interest hereunder.
This
Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when
so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature
pages may be detached from multiple separate counterparts and attached to a single counterpart.
This
Agreement is a Transaction Document.
This
Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation
and performance of this Agreement and all disputes arising hereunder shall be governed by, the laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The parties
hereto (a) agree that any legal action or proceeding with respect to this Agreement or any other agreement, document, or other
instrument executed in connection herewith or therewith, shall be brought in any state or federal court located within the City
of New York, New York, (b) irrevocably waive any objections which either may now or hereafter have to the venue of any suit, action
or proceeding arising out of or relating to this Agreement, or any other agreement, document, or other instrument executed in
connection herewith, brought in the aforementioned courts and (c) further irrevocably waive any claim that any such suit, action,
or proceeding brought in any such court has been brought in an inconvenient forum.
[Remainder
of Page Intentionally Left Blank; Signature Page Follows]
The
Grantor has caused this Intellectual Property Security Agreement to be duly executed by its duly authorized officer thereunto
as of the date first set forth above.
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HYRECAR INC, a Delaware corporation
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By:
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Name: Joseph Furnari
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Title: CEO and CFO
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Acknowledged:
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ALEXANDER CAPITAL, LP
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as Collateral Agent
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By:
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Name:
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Title:
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SCHEDULE
1
to
INTELLECTUAL PROPERTY SECURITY AGREEMENT
Trademark
Collateral
SCHEDULE
2
to
INTELLECTUAL PROPERTY SECURITY AGREEMENT
Patent
Collateral
None.
SCHEDULE
3
to
INTELLECTUAL PROPERTY SECURITY AGREEMENT
Copyright
Collateral
Domain
Names
www.hyrecar.com
Copyrights
None.
7
Exhibit 23.1
Consent of Independent Registered Public
Accounting Firm
We consent to the use,
in this Registration Statement on Form S-1, of our report dated March 23, 2018 related to the financial statements of HyreCar,
Inc. as of December 31, 2017 and 2016 and for the years then ended, which includes an explanatory paragraph regarding the substantial
doubt about HyreCar, Inc.’s ability to continue as a going concern. We also consent to the reference to us in the “Experts”
section of the Registration Statement.
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Very truly yours,
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/s/ dbb
mckennon
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Newport Beach, California
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May 23, 2018
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