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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): September 30, 2021

 

MassRoots, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   000-55431   46-2612944
(State or other jurisdiction
of incorporation)
  (Commission File Number)   (IRS Employer
Identification No.)

 

1560 Broadway, Suite 17-105, Denver, CO   80202
(Address of principal executive offices)   (Zip Code)

 

(303) 816-8070
(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 

 

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

Settlement Agreement

 

On or about June 30, 2021, Iroquois Master Fund Ltd. (“IMF”) commenced an arbitration against MassRoots, Inc. (the “Company”); Isaac Dietrich (“Dietrich”); Danny Meeks (“Meeks”); and Empire Services, Inc. (“Empire”; together with the Company, Dietrich, Meeks, and Empire, the “Respondents”) before the American Arbitration Association, entitled Iroquois Master Fund Ltd. v. MassRoots, Inc, Isaac Dietrich, Daniel Meeks, and Empire Services, Inc. (Case No. 01-21-0004-5705) (the “Arbitration”), in which IMF asserted claims against the Respondents relating to a warrant, dated July 21, 2017, issued by the Company and subsequently purchased by, and re-issued by the Company to, IMF (the “Warrant”). On or about July 19, 2021, Dietrich, Meeks, and Empire commenced a lawsuit in the U.S. District Court for the Southern District of New York, entitled Isaac Dietrich, Danny Meeks and Empire Services, Inc. v. Iroquois Master Fund Ltd. (Case No. 21 cv 06167), seeking, inter alia, certain injunctive relief against IMF (the “Lawsuit”). On or about August 20, 2021, IMF asserted counterclaims against Dietrich, Meeks, and Empire in the Lawsuit.

 

On September 30, 2021, the Company entered into a Settlement Agreement (the “Settlement Agreement”) with IMF; Dietrich; Meeks; and Empire. Pursuant to the Settlement Agreement, in exchange for terminating any duties owed by the Company to IMF under the Warrant, the parties thereto agreed to execute:

 

  (a) a mutual release agreement  attached as an exhibit to the Settlement Agreement;
     
  (b) a Stipulation of Dismissal of the Arbitration with Prejudice attached as an exhibit to the Settlement Agreement;
     
  (c) a Stipulation of Dismissal of the Lawsuit with Prejudice attached as an exhibit to the Settlement Agreement;
     
  (d) an agreement relating to a loan by Meeks to the Company and an issuance of the Company’s preferred stock to Meeks;
     
  (e) an exchange agreement attached as an exhibit to the Settlement Agreement; and
     
  (f) a Certificate of Designations, Preferences and Rights of the Series Z Convertible Preferred Stock (the “Series Z COD”) defining the rights, privileges and limitations of the Series Z Convertible Preferred Stock attached as an exhibit to the Settlement Agreement.

 

In addition, the Company agreed to pay, on its own behalf and on behalf of Dietrich, Meeks, and Empire, one million dollars ($1,000,000) and issue shares of the Series Z Convertible Preferred Stock, par value $0.001 per share (the “Series Z”), sufficient in number such that if they are converted into the Company’s common stock, par value $0.001 per share (“Common Stock”) by IMF upon or after any closing of an acquisition of Empire by the Company, such shares of Common Stock will be equal in number to 9.99% of the issued and outstanding shares of Common Stock at the time of such acquisition.

 

The foregoing summary of the material terms of the Settlement Agreement is not complete and is qualified in its entirety by reference to the text of the Settlement Agreement, a copy of which is filed herewith as Exhibit 10.1, the terms of which are incorporated herein by reference.

 

Series Z Preferred Stock Issuance Agreement

 

Meeks and Empire agreed to loan one million dollars ($1,000,000) to the Company which represents the cash portion of the Settlement Agreement. In exchange for such loan, the Company entered into a Series Z Preferred Stock Issuance Agreement (the “Stock Issuance Agreement”), entered as of September 30, 2021, with Meeks and Empire. Pursuant to the Stock Issuance Agreement, the Company agreed to file the Series Z COD with the Delaware Secretary of State and issue Two Hundred Fifty (250) shares of Series Z to Meeks.

 

The foregoing summary of the material terms of the Stock Issuance Agreement is not complete and is qualified in its entirety by reference to the text of the Stock Issuance Agreement, a copy of which is filed herewith as Exhibit 10.2, the terms of which are incorporated herein by reference.

 

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Exchange Agreement

 

On September 30, 2021, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with IMF. Pursuant to the Exchange Agreement, IMF agreed to exchange the Warrant, entitling IMF to purchase One Hundred Fifty-Six Million Two Hundred Fifty Thousand Seventy-Nine (156,250,079) shares of Common Stock at a price of $0.0004 per share (the “Exchange Securities”) for Two Hundred Fifty (250) shares of Series Z. As part of this exchange, the Company agreed to file an amendment to the Company’s Second Amended and Restated Certificate of Incorporation increasing the total number of authorized shares of the Company approved by the Company’s shareholders on September 3, 2021 and effecting a reverse stock split on or before September 2021 in order to reserve a sufficient number of shares of Common Stock which may be issued in connection with the conversion of any outstanding securities or pursuant to any agreements, contracts, instruments or other commitments to issue shares of Common Stock .

 

The foregoing summary of the material terms of the Exchange Agreement is not complete and is qualified in its entirety by reference to the text of the Exchange Agreement, a copy of which is filed herewith as Exhibit 10.3, the terms of which are incorporated herein by reference.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The disclosure set forth above in Item 1.01 of this Current Report on Form 8-K with respect to the issuances of the Series Z shares pursuant to the Stock Issuance Agreement and the Exchange Agreement is incorporated by reference into this Item 3.02.

 

The Series Z shares issued in connection with the transactions contemplated by the Stock Issuance Agreement was not registered under the Securities Act, and were issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act.

 

The Series Z shares issued in connection with the transactions contemplated by the Exchange Agreement was not registered under the Securities Act, and were issued in reliance on the exemption from registration requirements thereof provided by Section 3(a)(9) of the Securities Act.

 

Item 3.03 Material Modification to Rights of Security Holders.

 

To the extent required by this Item 3.03, the information set forth in Item 5.03 below is incorporated herein by reference.

 

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

Certificate of Designations

 

On October 1, 2021, in connection with the Settlement Agreement, the Company filed the Series Z COD with the Secretary of State of Delaware, creating a series of Five Hundred (500) shares of preferred stock designated as Series Z Convertible Preferred Stock (the “Series Z”), with each Series Z share with a par value of $0.001. Amongst other things, the Series Z COD provides as follows:

 

(a) the Series Z shares will rank (i) junior to the Company’s Series X and Series Y Convertible Preferred Stock with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company, and (ii) senior with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company to all other shares of capital stock of the Company, including Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock.
     
(b) subject to the terms and conditions of the Series Z COD, each Series Z share will convert into that certain number of shares of Common Stock that constitutes 0.039600000% of then-outstanding shares of Common Stock on the date of a conversion notice.
     
(c) the holders of the Series Z shares will have a purchase right to acquire shares of Common Stock if at any time the Company grants, issues, or sells any options, convertible securities or rights to purchase stock, warrants, securities or other property as set forth in detail in the Series Z COD.

 

The foregoing summary of the material terms of the Series Z COD is not complete and is qualified in its entirety by reference to the text of the Series Z COD, a copy of which is filed herewith as Exhibit 3.1, the terms of which are incorporated herein by reference.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.   Description of Exhibit
     
3.1   Certificate of Designations, Preferences and Rights of the Series Z Convertible Preferred Stock.
10.1*   Settlement Agreement, dated September 30, 2021.
10.2   Stock Issuance Agreement, dated September 30, 2021.
10.3   Exchange Agreement, dated September 30, 2021.
104   Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document).

 

* Attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish copies of such omitted materials supplementally upon request by the U.S. Securities and Exchange Commission.

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: October 20, 2021 MassRoots, Inc.
     
  By: /s/ Danny Meeks
    Danny Meeks
    Chief Executive Officer

 

 

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Exhibit 3.1

 

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE
SERIES Z CONVERTIBLE PREFERRED STOCK OF
MASSROOTS, INC.

 

The undersigned, Isaac Dietrich, Chief Executive Officer of MassRoots, Inc. (the “Corporation”), a Delaware corporation, hereby does certify:

 

That pursuant to the authority expressly conferred upon the Board of Directors of the Corporation by the Corporation’s Second Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), the Board of Directors on October 20, 2021, adopted the following resolution determining it desirable and in the best interests of the Corporation and its stockholders for the Corporation to create a series of Five Hundred (500) shares of preferred stock designated as “Series Z Convertible Preferred Stock,” none of which shares have been issued.

 

RESOLVED, that the Board of Directors designates the Series Z Convertible Preferred Stock and the number of shares constituting such series, and fixes the rights, powers, preferences, privileges and restrictions relating to such series in addition to any set forth in the Certificate of Incorporation as follows:

 

TERMS OF SERIES Z CONVERTIBLE PREFERRED STOCK

 

1. Certain Defined Terms. For purposes of this Certificate of Designations, the following terms shall have the following meanings:

 

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

 

(b) “Additional Amount” means, as of the applicable date of determination, with respect to each share of Series Z, all dividends, whether declared or not, on such share of Series Z.

 

(c) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

(d) “Amendment” shall mean the amendment to the Company’s Second Amended and Restated Certificate of Incorporation to be filed with the Secretary of State of the State of Delaware increasing the number of authorized shares of the Company approved by the shareholders of the Company on September 3, 2021.

 

(e) “Authorized Failure Shares” shall have the meaning given to it in Section 9 hereto.

 

(f) “Authorized Share Allocation” shall have the meaning given to it in Section 9 hereto.

 

(g) “Authorized Share Failure” shall have the meaning given to it in Section 9 hereto.

 

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

 

(i) “Buy-In Price” shall have the meaning given to it in Section 4 hereto.

 

(j) “Certificate of Designations” means this Certificate of Designations, Preferences and Rights of the Series Z Convertible Preferred Stock of the Corporation.

 

 

 

 

(k) “Closing Sale Price” means, for any security as of any date, (i) the last closing price for such security on the Principal Market, as reported by Bloomberg, or, (2) if the foregoing does not apply, the lowest reported sale price for such date on the Principal Market, or (3) fair market value as determined by the Board of Directors of the Corporation.

 

(l) “Common Stock” means (i) the Corporation’s shares of common stock, $0.001 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.

 

(m) “Common Stock Equivalents” means any securities of the Corporation or its Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

(i) “Conversion Amount” means, with respect to each share of Series Z, as of the applicable date of determination, the sum of (i) the Stated Value thereof plus (ii) the Additional Amount thereon.

 

(n) “Conversion Date” shall have the meaning given to it in Section 4 hereto.

 

(o) “Conversion Failure” shall have the meaning given to it in Section 4 hereto.

 

(p) “Conversion Notice” shall have the meaning given to it in Section 4 hereto.

 

(q) “Conversion Rate” shall have the meaning given to it in Section 4 hereto.

 

(r) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

 

(s) “Corporate Event” shall have the meaning given to it in Section 6 hereto.

 

(t) “Corporation” shall have the meaning given to it in the preamble hereto.

 

(u) “Dispute Submission Deadline” shall have the meaning given to it in Section 19 hereto.

 

(v) “Distributions” shall have the meaning given to it in Section 11 hereto.

 

(w) “DGCL” means Delaware General Corporation Law.

 

(x) “DTC” shall have the meaning given to it in Section 4 hereto.

 

(y) “Excess Shares” shall have the meaning given to it in Section 4 hereto.

 

(z) “Exchange Agreements” means those certain Exchange Agreements by and among the Corporation and the holders of Series Z, as may be amended from time in accordance with the terms thereof.

 

(aa) “Fundamental Transaction” shall have the meaning given to it in Section 6.

 

(bb) “Holder” or “Holders” means a holder of Series Z.

 

(cc) “Initial Issuance Date” means the date the first share of Series Z is issued to any Holder hereof.

 

(dd) “Junior Stock” shall have the meaning given to it in Section 3 hereto.

 

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(ee) “Liquidation Event” means, whether in a single transaction or series of transactions, the voluntary or involuntary liquidation, dissolution or winding up of the Corporation or such Subsidiaries the assets of which constitute all or substantially all of the assets of the business of the Corporation and its Subsidiaries, taken as a whole.

 

(ff) “Liquidation Funds” shall have the meaning given to it in Section 10 hereto.

 

(gg) “Maximum Percentage” shall have the meaning given to it in Section 4 hereto.

 

(hh) “NASDAQ Listing” shall have the meaning given to it in Section 4 hereto.

 

(ii) “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

(jj) “Parity Stock” shall have the meaning given to it in Section 3 hereto.

 

(kk) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

(ll) “Principal Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, OTCPink, OTCQB, or OTCQX and any successor markets thereto.

 

(mm) “Purchase Rights” shall have the meaning given to it in Section 6 hereto.

 

(nn) “Register” shall have the meaning given to it in Section 4 hereto.

 

(oo) “Registered Series Z” shall have the meaning given to it in Section 4 hereto.

 

(pp) “Reported Outstanding Share Number” shall have the meaning given to it in Section 4 hereto.

 

(qq) “Required Dispute Documentation” shall have the meaning given to it in Section 21 hereto.

 

(rr) “Required Reserve Amount” shall have the meaning given to it in Section 9 hereto.

 

(ss) “SEC” means the Securities and Exchange Commission or the successor thereto.

 

(tt) “Senior Preferred Stock” shall have the meaning given to it in Section 3 hereto.

 

(uu) “Series Z” shall have the meaning given to it in Section 2 hereto.

 

(vv) “Series Z Certificates” shall have the meaning given to it in Section 4 hereto.

 

(ww) “Share Delivery Deadline” shall have the meaning given to it in Section 4 hereto.

 

(xx) “Stated Value” shall mean $20,000 per share of Series Z, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the Initial Issuance Date with respect to the Series Z (including any adjustment for a Triggering Event).

 

(yy) “Subsidiary” when used with respect to any Person, means any corporation or other organization, whether incorporated or unincorporated, of which (A) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person (through ownership of securities, by contract or otherwise) or (B) such Person or any subsidiary of such Person is a general partner of any general partnership or a manager of any limited liability company.

 

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(zz) “Trading Day” means any day on which the Common Stock is eligible to be traded on the Principal Market or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00 p.m., Eastern time) unless such day is otherwise designated as a Trading Day in writing by the Holder.

 

(aaa) “Transaction Documents” means the Exchange Agreements, this Certificate of Designations, and each of the other agreements and instruments entered into or delivered by the Corporation in connection with the transactions contemplated by the Exchange Agreements, all as may be amended from time to time in accordance with the terms thereof.

 

(bbb) “Transfer Agent” means Pacific Stock Transfer Company.

 

(ccc) “Triggering Event” shall have the meaning given to it in Section 5 hereto.

 

2. Designation and Number of Shares. There shall hereby be created and established a series of preferred stock of the Corporation designated as “Series Z Convertible Preferred Stock” (the “Series Z”). The authorized number of Series Z shall be Five Hundred (500) shares. Each share of Series Z shall have a par value of $0.001.

 

3. Ranking. The Series Z shall rank (i) junior to the Corporation’s Series X and Series Y Convertible Preferred Stock with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation, and (ii) senior with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation to all other shares of capital stock of the Corporation, including Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (such junior stock is referred to herein collectively as “Junior Stock”). The rights of all such Junior Stock shall be subject to the rights, powers, preferences and privileges of the Series Z, and the rights of the Series Z shall be subject to the rights, powers, preferences and privileges of the Senior Preferred Stock. Without limiting any other provision of this Certificate of Designations, without the prior express consent of at least a majority of the outstanding Series Z, the Corporation shall not hereafter authorize any additional series or other shares of capital stock that is (i) of senior rank to the Series Z in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation (collectively, and including the Series X and Y Convertible Preferred, the “Senior Preferred Stock”), or (ii) in parity with the Series Z (“Parity Stock”). Except as provided for herein, in the event of the merger or consolidation of the Corporation into another corporation, the Series Z shall maintain their relative rights, powers, designations, privileges and preferences provided for herein for a period of at least two (2) years following such merger or consolidation.

 

4. Conversion. At any time after six months from the Initial Issuance Date, each share of Series Z shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock, on the terms and conditions set forth in this Section 4.

 

(a) Holder’s Conversion Right.

 

(i) Subject to the provisions of Section 4(d), at any time or times on or after the Initial Issuance Date and the filing of the Amendment, each Holder shall be entitled to convert any portion of the outstanding Series Z held by such Holder into validly issued, fully paid and non-assessable shares of Common Stock in accordance with this Section 4. The Corporation shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Corporation shall round such fraction of a share of Common Stock up to the nearest whole share. The Corporation shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including fees and expenses of the Transfer Agent that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any shares of Series Z provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such conversion shares upon conversion in a name other than that of the Holder of such shares of Series Z and the Corporation shall not be required to issue or deliver such conversion shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. 

 

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(ii) Until such time that the Registration Statement is declared effective by the SEC or on and after the occurrence of an Anti-Dilution Extension Event as provided in Section 5(g) of the Exchange Agreement, each Series Z share will convert into that number of shares of Common Stock that constitutes 0.039600000% (“Conversion Rate”) of then-outstanding shares of Common Stock on the date of the Conversion Notice plus the Additional Amount, if any. For example, there are to be two intended holders of the Series Z shares, each to hold 250 shares, both will have, upon conversion, 9.99% of the issued and outstanding shares of the company on the date of the “NASDAQ Listing” which means the date upon which an S-1 Registration Statement is declared effective by the SEC in conjunction with a NASDAQ listing. After the NASDAQ Listing, provided that an Anti-Dilution Extension Event has not occurred, the Conversion Rate will be applied to the then-outstanding shares of Common Stock on the date of the NASDAQ Listing.

 

(b) Mechanics of Conversion. The conversion of each share of Series Z shall be conducted in the following manner:

 

(i) Optional Conversion. To convert a share of Series Z into shares of Common Stock on any date after the Initial Issuance Date and the filing of the Amendment (a “Conversion Date”), a Holder shall deliver, via electronic mail or otherwise, for receipt on or prior to 11:59 p.m., Eastern time, on such date, a copy of an executed notice of conversion of the share(s) of Series Z subject to such conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Corporation. If required by Section 4(c)(iii), within three (3) Trading Days following a conversion of any such Series Z as aforesaid, such Holder shall surrender to a nationally recognized overnight delivery service for delivery to the Corporation the original certificates representing the Series Z (the “Series Z Certificates”) so converted as aforesaid (or an indemnification undertaking with respect to the Series Z in the case of its loss, theft or destruction as contemplated by Section 14). On or before the first (1st) Trading Day following the date of receipt of a valid Conversion Notice, the Corporation shall transmit by electronic mail an acknowledgment of confirmation, in the form attached hereto as Exhibit II, of receipt of such Conversion Notice to such Holder and the Corporation’s Transfer Agent, which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the second Trading (2nd) Day following the date of receipt of a valid Conversion Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule, or regulation, including the rules of the Principal Market or other customary applicable policy for the settlement of a trade initiated on the applicable Conversion Date of such shares of Common Stock issuable pursuant to such Conversion Notice) (the “Share Delivery Deadline”), the Corporation shall (1) provided that the Transfer Agent is participating in The Depository Trust Corporation’s (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which such Holder shall be entitled to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to the address as specified in such Conversion Notice, a certificate, registered in the name of such Holder or its designee, for the number of shares of Common Stock to which such Holder shall be entitled. If the number of Series Z represented by the Series Z Certificate(s) submitted for conversion pursuant to Section 4(c)(i) is greater than the number of Series Z being converted, then the Corporation shall, as soon as practicable and in no event later than two (2) Trading Days after receipt of the Series Z Certificate(s) and at its own expense, issue and deliver to such Holder (or its designee) a new Series Z Certificate (in accordance with Section 14(d)) representing the number of Series Z not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of Series Z shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

 

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(ii) Corporation’s Failure to Timely Convert. If the Corporation shall fail, for any reason or for no reason, on or prior to the applicable Share Delivery Deadline, to issue to such Holder a certificate for the number of shares of Common Stock to which such Holder is entitled and register such shares of Common Stock on the Corporation’s share register or to credit such Holder’s or its designee’s balance account with DTC for such number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion of any shares of Series Z (as the case may be) (a “Conversion Failure”), then, in addition to all other remedies available to such Holder, (X) the Corporation shall pay in cash to such Holder on each day after the Share Delivery Deadline and during such Conversion Failure an amount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to such Holder on or prior to the Share Delivery Deadline and to which such Holder is entitled, multiplied by (B) the closing price of the Common Stock on the applicable Conversion Date and ending on the applicable Share Delivery Deadline, and (Y) such Holder, upon written notice to the Corporation, may void its Conversion Notice with respect to, and retain or have returned, as the case may be, all, or any portion, of such Series Z that has not been converted pursuant to such Conversion Notice; provided that the voiding of a Conversion Notice shall not affect the Corporation’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 4(c)(ii) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Deadline the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, the Corporation shall fail to issue and deliver to such Holder (or its designee) a certificate and register such shares of Common Stock on the Corporation’s share register or, if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, the Transfer Agent shall fail to credit the balance account of such Holder or such Holder’s designee with DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s exercise hereunder or pursuant to the Corporation’s obligation pursuant to clause (II) below and if on or after such Share Delivery Deadline such Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock, issuable upon such conversion that such Holder so is entitled to receive from the Corporation, then, in addition to all other remedies available to such Holder, the Corporation shall, within two (2)Trading Days after receipt of such Holder’s request and in such Holder’s discretion, either: (I) pay cash to such Holder in an amount equal to such Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including by any other Person in respect, or on behalf, of such Holder) (the “Buy-In Price”), at which point the Corporation’s obligation to so issue and deliver such certificate or credit such Holder’s balance account with DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (II) promptly honor its obligation to so issue and deliver to such Holder a certificate or certificates representing such shares of Common Stock or credit such Holder’s balance account with DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion hereunder (as the case may be) and pay cash to such Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (x) such number of shares of Common Stock to which such Holder is entitled multiplied by (y) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable Conversion Notice and ending on the date of such issuance and payment under this clause (ii).

 

(iii) Registration; Book-Entry. The Corporation shall maintain a register (the “Register”) for the recordation of the names and addresses of the Holders of each share of Series Z and the Stated Value of the Series Z (the “Registered Series Z”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Corporation and each Holder of the Series Z shall treat each Person whose name is recorded in the Register as the owner of a share of Series Z for all purposes (including the right to receive payments and dividends hereunder) notwithstanding notice to the contrary. A registered share of Series Z may be assigned, transferred or sold only by registration of such assignment or sale on the Register. Upon its receipt of a written request to assign, transfer or sell one or more Registered Series Z by such Holder thereof, the Corporation shall record the information contained therein in the Register and issue one or more new shares of Series Z in the same aggregate Stated Value as the Stated Value of the surrendered Series Z to the designated assignee or transferee pursuant to Section 13, provided that if the Corporation does not so record an assignment, transfer or sale (as the case may be) of such Series Z shares within two (2) Trading Days of such a request, then the Register shall be automatically deemed updated to reflect such assignment, transfer or sale (as the case may be). Notwithstanding anything to the contrary set forth in this Section 4, following conversion of any Series Z in accordance with the terms hereof, the applicable Holder shall not be required to physically surrender such Series Z to the Corporation unless (A) the full or remaining number of Series Z shares represented by the applicable Series Z Certificate are being converted (in which event such certificate(s) shall be delivered to the Corporation as contemplated by this Section 4(c)(iii)) or (B) such Holder has provided the Corporation with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of Series Z upon physical surrender of the applicable Series Z Certificate. Each Holder and the Corporation shall maintain records showing the Stated Value and dividends converted and/or paid (as the case may be) and the dates of such conversions and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to such Holder and the Corporation, so as not to require physical surrender of a Series Z Certificate upon conversion. If the Corporation does not update the Register to record such Stated Value and dividends converted and/or paid (as the case may be) and the dates of such conversions and/or payments (as the case may be) within two (2) Trading Days of such occurrence, then the Register shall be automatically deemed updated to reflect such occurrence. In the event of any dispute or discrepancy, such records of such Holder establishing the number of Series Z to which the record holder is entitled shall be controlling and determinative in the absence of manifest error. A Holder and any transferee or assignee, by acceptance of a certificate, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of any Series Z, the number of Series Z represented by such certificate may be less than the number of Series Z stated on the face thereof. Each Series Z Certificate shall bear the following legend:

 

ANY TRANSFEREE OR ASSIGNEE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE CORPORATION’S CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES Z CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE. THE NUMBER OF SHARES OF SERIES Z CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES Z CONVERTIBLE PREFERRED STOCK STATED ON THE FACE HEREOF

 

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(iv) Pro Rata Conversion; Disputes. In the event that the Corporation receives a valid Conversion Notice from more than one Holder for the same Conversion Date and the Corporation can convert some, but not all, of such Series Z submitted for conversion, the Corporation shall convert from each Holder electing to have Series Z converted on such date a pro rata amount of such Holder’s Series Z submitted for conversion on such date based on the number of Series Z submitted for conversion on such date by such Holder relative to the aggregate number of Series Z submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to a Holder in connection with a conversion of Series Z, the Corporation shall issue to such Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 19.

 

(c) Limitation on Beneficial Ownership. The Corporation shall not effect the conversion of any of the Series Z held by a Holder, and such Holder shall not have the right to convert any of the Series Z held by such Holder pursuant to the terms and conditions of this Certificate of Designations and any such conversion shall be null and void and treated as if never made, to the extent that after giving effect to such conversion, such Holder (together with such Holder’s Affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) (or, upon election by the Holder prior to the issuance of any Series Z shares, 9.99%) of the shares of Common Stock outstanding immediately after giving effect to such conversion A Holder, upon notice to the Corporation, may increase or decrease the Maximum Percentage provisions of this Section 4(c) applicable to the Series Z provided that the Maximum Percentage in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of the Series Z held by the Holder and the provisions of this Section 4(c) shall continue to apply. Any such increase in the Maximum Percentage will not be effective until the 61st day after such notice is delivered to the Corporation. For purposes of determining the Maximum Percentage, the aggregate number of shares of Common Stock beneficially owned by such Holder shall include the number of shares of Common Stock held by such Holder plus the number of shares of Common Stock issuable upon conversion of the Series Z with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted Series Z beneficially owned by such Holder and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Corporation (including any Convertible Securities and Options) beneficially owned by such Holder that, in the case of both (A) and (B), are subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 4(c). For purposes of this Section 4(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act and the rules thereunder. For purposes of determining the number of outstanding shares of Common Stock a Holder may acquire upon the conversion of such Series Z without exceeding the Maximum Percentage, such Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Corporation’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as the case may be, (y) a more recent public announcement by the Corporation or (z) any other written notice by the Corporation or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “Reported Outstanding Share Number”). Notwithstanding the preceding, the Holder may rely on the Transfer Agent’s records if the Reported Outstanding Share Number is different than what the Corporation reports. If the Corporation receives a Conversion Notice from a Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Corporation shall notify such Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Conversion Notice would otherwise cause such Holder’s beneficial ownership, as determined pursuant to this Section 4(c), to exceed the Maximum Percentage, such Holder must notify the Corporation of a reduced number of shares of Common Stock to be purchased pursuant to such Conversion Notice. For any reason at any time, upon the written or oral request of any Holder, the Corporation shall within one (1) Trading Day confirm orally and in writing or by electronic mail to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including such Series Z, by such Holder since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to a Holder upon conversion of such Series Z results in such Holder being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which such Holder’s beneficial ownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and such Holder shall not have the power to vote or to transfer the Excess Shares. For purposes of clarity, the shares of Common Stock issuable to a Holder pursuant to the terms of this Certificate of Designations in excess of the Maximum Percentage shall not be deemed to be beneficially owned by such Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to convert such Series Z pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(c) to the extent necessary to correct this paragraph (or any portion of this paragraph) which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 4(c)) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The provisions of this Section 4(c)) shall be of no further force or effect if the Holder participates in a subsequent transaction with the Corporation which results in the Holder beneficially owning in excess of 4.99% of the number of shares of the Common Stock outstanding which shall include securities convertible into Common Stock which do not contain a beneficial ownership limitation. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a Conversion Notice that such Conversion Notice has not violated the restrictions set forth in this Section 4(c) and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. The limitations contained in this Section 4(c) shall apply to a successor holder of Series Z.

 

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(d) Triggering Event Conversion. Subject to Section 4(c) and provided that the Amendment has been filed, at any time during the period commencing on the date of the occurrence of a Triggering Event and ending on the date of the cure of such Triggering Event, a Holder may, at such Holder’s option, by delivery of a valid Conversion Notice to the Corporation to convert all, or any number of Series Z into shares of Common Stock pursuant to Section 4(a). For the avoidance of doubt, no Conversion Notice shall be valid, and no conversion of Series Z into Common Stock shall be effected, regardless of the occurrence of a Triggering Event, before the filing of the Amendment.

 

5. Triggering Events.

 

(a) Triggering Event. Each of the following events shall constitute a “Triggering Event”:

 

(i) the Corporation does not meet the current public information requirements under Rule 144 in respect of the shares of Common Stock issuable upon conversion of the Series Z;

 

(ii) the Corporation ceases to be subject to the periodic reporting provisions of the 1934 Act;

 

(iii) the suspension from trading or failure of the Common Stock to be trading or listed (as applicable) on a Principal Market for a period of ten (10) consecutive Trading Days;

 

(iv) the Corporation’s written notice to any holder of Series Z, including, without limitation, by way of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for conversion of any Series Z into shares of Common Stock that is requested in accordance with the provisions of this Certificate of Designations, other than pursuant to Section 4(d) hereof;

 

(v) at any time following the tenth (10th) consecutive day that a Holder’s Authorized Share Allocation is less than 100% of the number of shares of Common Stock that such Holder would be entitled to receive upon a conversion, in full, of all of the Series Z then held by such Holder (without regard to any limitations on conversion set forth in this Certificate of Designations);

 

(vi) the Corporation’s failure to pay to any Holder any dividend on any dividend date declared by the Board or any other amount when and as due under this Certificate of Designation, or any other Transaction Document, except, in the case of a failure to pay dividends when and as due, in each such case only if such failure remains uncured for a period of at least ten (10) consecutive Trading Days;

 

(vii) the Corporation either (A) fails to cure a Conversion Failure by delivery of the required number of shares of Common Stock within two (2) Trading Days after the applicable Conversion Date on two (2) or more occasions or (B) fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to such Holder upon conversion of any Series Z or as and when required by this Certificate of Designations unless otherwise then prohibited by applicable federal securities laws, and any such failure to remove the legend remains uncured for at least five (5) consecutive Trading Days;

 

(viii) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Corporation or any Subsidiary which shall not be dismissed within sixty (60) days of their initiation;

 

(ix) the commencement by the Corporation or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Corporation or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Corporation or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, the taking of corporate action by the Corporation or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a Uniform Commercial Code foreclosure sale or any other similar action under federal, state or foreign law;

 

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(x) the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Corporation or any Subsidiary of an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Corporation or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Corporation or any Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Corporation or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs;

 

(xi) other than as specifically set forth in another clause of Section 5(a), the Corporation or any Subsidiary breaches any representation or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality, which may not be breached in any respect) or any covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other term or condition that is curable, only if such breach remains uncured for a period of five (5) consecutive Trading Days;

 

(xii) failing to comply in any material respect with the reporting requirements of the 1934 Act (including, but not limited to, becoming delinquent in its filings);

 

(xiii) providing material non-public information to a Holder of Series Z without their prior written consent;

 

(xiv) any change in the Corporation’s Transfer Agent; or

 

(xv) a false or inaccurate certification (including a false or inaccurate deemed certification) by the Corporation as to whether any Triggering Event has occurred.

 

(b) Notice of a Triggering Event. Upon the occurrence of a Triggering Event with respect to the Series Z, the Corporation shall within three (3) Trading Days deliver written notice thereof via facsimile, electronic mail or overnight courier (with next day delivery specified) to each Holder.

 

6. Rights Upon Issuance of Purchase Rights and Other Corporate Events.

 

(a) Purchase Rights. In addition to any required adjustments to the number of shares of Common Stock issuable hereunder, if at any time the Corporation grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of Common Stock (the “Purchase Rights”), then each Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of all the Series Z (without taking into account any limitations or restrictions on the convertibility of the Series Z) held by such Holder immediately prior to the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that such Holder’s right to participate in any such Purchase Right would result in such Holder exceeding the Maximum Percentage, then such Holder shall not be entitled to participate in such Purchase Right to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (and beneficial ownership) to the extent of any such excess) and such Purchase Right to such extent shall be held in abeyance for such Holder until such time or times, if ever, as its right thereto would not result in such Holder exceeding the Maximum Percentage), at which time or times such Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right to be held similarly in abeyance) to the same extent as if there had been no such limitation.

 

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(b) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Corporation shall make appropriate provision to insure that each Holder will thereafter have the right to receive upon a conversion of all the Series Z held by such Holder (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which such Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by such Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of the Series Z contained in this Certificate of Designations) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as such Holder would have been entitled to receive had the Series Z held by such Holder initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. The provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section 6 shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion of the Series Z contained in this Certificate of Designations. “Fundamental Transaction” means the occurrence of the Corporation (i) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (A) consolidating or merging with or into (whether or not the Corporation is the surviving corporation) another Person, (B) selling, assigning, transferring, conveying or otherwise disposing of all or substantially all of the properties or assets of the Corporation or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Persons, (C) making, or allowing one or more Persons to make, or allowing the Corporation to be subject to or have its Common Stock be subject to or party to one or more Persons making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Persons making or party to, or affiliated with any Persons making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Persons making or party to, or affiliated with any Person making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, (D) consummating a stock or share purchase agreement or other business combination (including a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Persons whereby all such Persons, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Persons making or party to, or affiliated with any Persons making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Persons become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (E) reorganize, recapitalize or reclassify its Common Stock.

 

7. Intentionally Omitted.

 

8. Noncircumvention. The Corporation hereby covenants and agrees that the Corporation will not, by amendment of its Certificate of Incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Certificate of Designations, and will at all times in good faith carry out all the provisions of this Certificate of Designations and take all action as may be required to protect the rights of the Holders. Without limiting the generality of the foregoing or any other provision of this Certificate of Designations, the Corporation (a) shall not increase the number of authorized shares of Series Z, (b) shall take all such actions as may be necessary or appropriate in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock upon the conversion of Series Z and (c) shall, so long as any Series Z are outstanding, and upon the filing of an amendment to the Corporation’s Certificate of Incorporation to increase the number of shares of the Corporation’s Common Stock that the Corporation is authorized to issue with the Secretary of State of the State of Delaware, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Series Z, two (2) times the maximum number of shares of Common Stock as shall from time to time be necessary to effect the conversion of the Series Z then outstanding (without regard to any limitations on conversion contained herein).

 

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9. Authorized Shares.

 

(a) Reservation. So long as any Series Z remain outstanding, and upon the filing of the Amendment, the Corporation shall at all times reserve at least two (2) times the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Series Z then outstanding (without regard to any limitations on conversions) (the “Required Reserve Amount”). The Required Reserve Amount (including each increase in the number of shares so reserved) shall be allocated pro rata among the Holders based on the number of the Series Z held by each Holder (the “Authorized Share Allocation”). In the event that a Holder shall sell or otherwise transfer any of such Holder’s Series Z, each transferee shall be allocated a pro rata portion of such Holder’s Authorized Share Allocation. If the Required Reserve Amount is not met at such time, any shares of Common Stock reserved and allocated to any Person which ceases to hold any Series Z shall be allocated to the remaining Holders of Series Z, pro rata based on the number of the Series Z then held by the Holders.

 

(b) Insufficient Authorized Shares. If, notwithstanding Section 9(a) and not in limitation thereof, beginning ninety (90) days from the Initial Issuance Date, while any of the Series Z remain outstanding the Corporation does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Series Z at least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Corporation shall immediately take all action necessary to increase the Corporation’s authorized shares of Common Stock to an amount sufficient to allow the Corporation to reserve the Required Reserve Amount for the Series Z then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than one hundred and twenty (120) days after the occurrence of such Authorized Share Failure, the Corporation shall use its best efforts to hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Corporation shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its Board of Directors to recommend to the stockholders that they approve such proposal. In lieu of a meeting of stockholders, the Corporation may effect such action by written consent in accordance with Section 14(c) of the 1934 Act. Except as provided in the first sentence of Section 9(a), in the event that the Corporation is prohibited from issuing shares of Common Stock to a Holder upon any conversion due to the failure by the Corporation to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the “Authorized Failure Shares”), in lieu of delivering such Authorized Failure Shares to such Holder, the Corporation shall pay cash in exchange for the redemption of such portion of the number of Series Z shares which are convertible into such Authorized Failure Shares at a price equal to the sum of (i) the product of (x) such number of Authorized Failure Shares and (y) the average of the Closing Sale Price of the Common Stock based upon the five (5) Trading Days during the period commencing on the date such Holder delivers the applicable Conversion Notice with respect to such Authorized Failure Shares to the Corporation and ending on the date of such issuance under this Section 9(b). Nothing contained in this Section shall limit any obligations of the Corporation under any provision of the Transaction Documents.

 

10. Liquidation, Dissolution, Winding-Up. In the event of a Liquidation Event, the Holders shall be entitled to receive in cash out of the assets of the Corporation, whether from capital or from earnings available for distribution to its stockholders (the “Liquidation Funds”), after any amount shall be paid to the holders of any of shares of Senior Preferred Stock, but before any amount shall be paid to the holders of any of shares of Junior Stock, and pari passu with any Parity Stock then outstanding, an amount per share of Series Z equal to the greater of (A) the Conversion Amount thereof on the date of such payment or (B) the amount per share such Holder would receive if such Holder converted such Series Z into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the Holders and holders of shares of Parity Stock, then each Holder and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such Holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series Z and all holders of shares of Parity Stock. To the extent necessary, the Corporation shall cause such actions to be taken by each of its Subsidiaries so as to enable, to the maximum extent permitted by law, the proceeds of a Liquidation Event to be distributed to the Holders in accordance with this Section 10. All the preferential amounts to be paid to the Holders under this Section 10 shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Corporation to the holders of shares of Junior Stock in connection with a Liquidation Event as to which this Section 10 applies.

 

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11. Distribution of Assets. In addition to any required adjustments to the number of shares of Common Stock issuable hereunder, if the Corporation shall declare or make any dividend or other distributions of its assets (or rights to acquire its assets) to any or all holders of shares of Common Stock, by way of return of capital or otherwise (including any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (the “Distributions”), then each Holder, as holders of Series Z, will be entitled to such Distributions as if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of the Series Z (without taking into account any limitations or restrictions on the conversion of the Series Z) immediately prior to the date on which a record is taken for such Distribution or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for such Distributions (provided, however, that to the extent that such Holder’s right to participate in any such Distribution would result in such Holder exceeding the Maximum Percentage, then such Holder shall not be entitled to participate in such Distribution to the extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to the extent of any such excess) and the portion of such Distribution shall be held in abeyance for such Holder until such time or times as its right thereto would not result in such Holder exceeding the Maximum Percentage, at which time or times, if any, such Holder shall be granted such rights (and any rights under this Section 11 on such initial rights or on any subsequent such rights to be held similarly in abeyance) to the same extent as if there had been no such limitation).

 

12. Voting.

 

(a) No Right to Vote with Common Stock. Except as provided in Section 12(b), the Series Z shall not be entitled to vote on any matter except as required by the DGCL. As to all matters for which voting by class is specifically required by the DGCL, each outstanding share of Series Z shall be entitled to one vote.

 

(b) Protective Provisions. In addition to any other rights provided by law, except where the vote or written consent of the holders of a greater number of shares is required by law, without first obtaining the affirmative vote at a meeting duly called for such purpose, or the written consent without a meeting, of a majority of the outstanding Series Z, including the Required Holder, voting together as a single class, the Corporation shall not: (a) amend or repeal any provision of, or add any provision to, its Certificate of Incorporation or bylaws, or file any certificate of designations or articles of amendment of any series of shares of preferred stock, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit, of the Series Z, regardless of whether any such action shall be by means of amendment to the Certificate of Incorporation or by merger, consolidation or otherwise; (b) increase or decrease (other than by conversion) the authorized number of Series Z; (c) without limiting any provision of Section 3, create or authorize (by reclassification or otherwise) any new class or series of shares that has a preference over or is on a parity with the Series Z with respect to dividends or the distribution of assets on the liquidation, dissolution or winding up of the Corporation; (d) pay dividends or make any other distribution on any shares of any capital stock of the Corporation junior in rank to the Series Z; (e) issue any Series Z other than as provided in Section 2; or (f) without limiting any provision of Section 10, whether or not prohibited by the terms of the Series Z, circumvent a right of the Series Z.

 

13. Transfer of Series Z. A Holder may transfer some or all of its Series Z without the consent of the Corporation subject to compliance with securities laws.

 

14. Reissuance of Preferred Certificates.

 

(a) Transfer. If any Series Z are to be transferred, the applicable Holder shall surrender the applicable Series Z Certificate to the Corporation, whereupon the Corporation will forthwith issue and deliver upon the order of such Holder a new Series Z Certificate (in accordance with Section 14(d)), registered as such Holder may request, representing the outstanding number of Series Z being transferred by such Holder and, if less than the entire outstanding number of Series Z is being transferred, a new Series Z Certificate (in accordance with Section 14(d)) to such Holder representing the outstanding number of Series Z not being transferred. Such Holder and any assignee, by acceptance of the Series Z Certificate, acknowledge and agree that, by reason of the provisions of Section 4(c)(i) following conversion of any of the Series Z, the outstanding number of Series Z represented by the Series Z may be less than the number of Series Z stated on the face of the Series Z Certificate.

 

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(b) Lost, Stolen or Mutilated Series Z Certificate. Upon receipt by the Corporation of evidence reasonably satisfactory to the Corporation of the loss, theft, destruction or mutilation of a Series Z Certificate (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the applicable Holder to the Corporation in customary and reasonable form without the requirement to post a bond or other security and, in the case of mutilation, upon surrender and cancellation of such Series Z Certificate, the Corporation shall execute and deliver to such Holder a new Series Z Certificate (in accordance with Section 14(d)) representing the applicable outstanding number of Series Z.

 

(c) Series Z Certificate Exchangeable for Different Denominations. Each Series Z Certificate is exchangeable, upon the surrender hereof by the applicable Holder at the principal office of the Corporation, for a new Series Z Certificate or Series Z Certificate(s) (in accordance with Section 14(d)) representing in the aggregate the outstanding number of the Series Z in the original Series Z Certificate, and each such new certificate will represent such portion of such outstanding number of Series Z from the original Series Z Certificate as is designated by such Holder at the time of such surrender.

 

(d) Issuance of New Series Z Certificate. Whenever the Corporation is required to issue a new Series Z Certificate pursuant to the terms of this Certificate of Designations, such new Series Z Certificate (i) shall represent, as indicated on the face of such Series Z Certificate, the number of Series Z remaining outstanding (or in the case of a new Series Z Certificate being issued pursuant to Section 14(a) or Section 14(c), the number of Series Z designated by such Holder which, when added to the number of Series Z represented by the other new Series Z Certificates issued in connection with such issuance, does not exceed the number of Series Z remaining outstanding under the original Series Z Certificate immediately prior to such issuance of new Series Z Certificate), and (ii) shall have an issuance date, as indicated on the face of such new Series Z Certificate, which is the same as the issuance date of the original Series Z Certificate.

 

(e) Book Entry. If the Corporation’s Transfer Agent issues the Series Z in book entry format, all provisions of this Certificate of Designations as to delivery of Series Z certificates shall be disregarded, and the Transfer Agent shall make entries in the stock transfer records in connection with conversions and transfers, as appropriate.

 

15. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Certificate of Designations shall be cumulative and in addition to all other remedies available under this Certificate of Designations 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 any Holder’s right to pursue actual and consequential damages for any failure by the Corporation to comply with the terms of this Certificate of Designations. The Corporation covenants to each 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 a Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Corporation (or the performance thereof). The Corporation acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders and that the remedy at law for any such breach may be inadequate. The Corporation therefore agrees that, in the event of any such breach or threatened breach, each Holder shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The Corporation shall provide all information and documentation to a Holder that is requested by such Holder to enable such Holder to confirm the Corporation’s compliance with the terms and conditions of this Certificate of Designations.

 

16. Attorneys’ Fees.

 

(a) If (i) any shares of Series Z are placed in the hands of an attorney to enforce the provisions of this Certificate of Designations or (ii) there occurs any bankruptcy, reorganization, receivership of the Corporation or other proceedings affecting Corporation creditors’ rights and involving a claim under this Certificate of Designations, then the Corporation shall pay the costs incurred by such Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including attorneys’ fees and disbursements.

 

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17. Construction; Headings. This Certificate of Designations shall be deemed to be jointly drafted by the Corporation and the Holders and shall not be construed against any such Person as the drafter hereof. The headings of this Certificate of Designations are for convenience of reference and shall not form part of, or affect the interpretation of, this Certificate of Designations. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Certificate of Designations instead of just the provision in which they are found. Unless expressly indicated otherwise, all section references are to sections of this Certificate of Designations.

 

18. Failure or Indulgence Not Waiver. No failure or delay on the part of a Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. Notwithstanding the foregoing, nothing contained in this Section 18 shall permit any waiver of any provision of Section 15.

 

19. Dispute Resolution.

 

(a) In the case of a dispute relating to the Closing Sale Price, a calculation of the shares issuable upon conversion or a fair market value (including a dispute relating to the determination of any of the foregoing), the Corporation or the applicable Holder (as the case may be) shall submit the dispute to the other party via electronic mail (A) if by the Corporation, within two (2) Trading Days after the occurrence of the circumstances giving rise to such dispute or (B) if by such Holder at any time after such Holder learned of the circumstances giving rise to such dispute. If such Holder and the Corporation are unable to promptly resolve such dispute relating to such Closing Sale Price, such fair market value, or the arithmetic calculation of any conversion, at any time after the second (2nd) Trading Day following such initial notice by the Corporation or such Holder (as the case may be) of such dispute to the Corporation or such Holder (as the case may be), then such Holder may, at its sole option, select an independent, reputable investment bank to resolve such dispute.

 

(b) Such Holder and the Corporation shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 19(a) and (B) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (Eastern time) by the fifth (5th) Trading Day immediately following the date on which such Holder selected such investment bank (the “Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the “Required Dispute Documentation”) (it being understood and agreed that if either such Holder or the Corporation fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Corporation and such Holder or otherwise requested by such investment bank, neither the Corporation nor such Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).

 

(c) The Corporation and such Holder shall cause such investment bank to determine the resolution of such dispute and notify the Corporation and such Holder of such resolution no later than ten (10) Trading Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne solely by the Corporation, and such investment bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error.

 

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20. Notices. The Corporation shall provide each Holder of Series Z with prompt written notice of all actions taken pursuant to the terms of this Certificate of Designations, including in reasonable detail a description of such action and the reason therefor. Whenever notice is required to be given under this Certificate of Designations, unless otherwise provided herein, such notice must be in writing and shall be given in accordance with Section 9(e) of the Exchange Agreements or in accordance with any other instructions provided by the Holder to the Corporation. The Corporation shall provide each Holder with prompt written notice of all actions taken pursuant to this Certificate of Designations, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Corporation shall give written notice to each Holder at least fifteen (15) days prior to the date on which the Corporation closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grant, issuances, or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to such Holder. All notices shall be by email or recognized overnight delivery service, next Trading Day delivery using the addresses of the Corporation as provided to the Holders and the addresses of any Holder as provided by such Holder to the Corporation. The Corporation and the Holders may change their addresses by notice by the Corporation to all Holders or any Holder to the Corporation.

 

21. Governing Law; Exclusive Jurisdiction. This Certificate of Designations shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Certificate of Designations shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware. Except as otherwise required by this Certificate of Designations, the Corporation hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in New York County, New York, 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 suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein (i) shall be deemed or operate to preclude any Holder from bringing suit or taking other legal action against the Corporation in any other jurisdiction to collect on the Corporation’s obligations to such Holder, or to enforce a judgment or other court ruling in favor of such Holder or (ii) shall limit, or shall be deemed or construed to limit, any provision of Section 19. The Corporation and each Holder 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 Certificate of Designations or the transactions contemplated hereby. 

 

22. Severability. If any provision of this Certificate of Designations is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Certificate of Designations so long as this Certificate of Designations as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

23. Amendment. This Certificate of Designations or any provision hereof (other than Section 4(c)) may be modified or amended or the provisions hereof waived with the written consent of the Corporation and the Holders of a majority of the Series Z then outstanding, which must include the Required Holder as long as Required Holder (or any of its Affiliates) owns at least five percent (5%) of the Series Z issued as of the date of the amendment. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

 

* * * * *

 

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IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations of Series Z Convertible Preferred Stock of MassRoots, Inc. to be signed by its Chief Executive Officer on this 30th day of September, 2021.

 

  MASSROOTS, INC.
   
By: /s/ Isaac Dietrich
    Isaac Dietrich, Chief Executive Officer

 

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EXHIBIT I

 

MASSROOTS, INC.

CONVERSION NOTICE

 

Reference is made to the Certificate of Designations, Preferences and Rights of the Series Z Convertible Preferred Stock of MassRoots, Inc. (the “Certificate of Designations”). In accordance with and pursuant to the Certificate of Designations, the undersigned hereby elects to convert the number of shares of Series Z Convertible Preferred Stock, $0.001 par value per share (the “Series Z”), of MassRoots, Inc., a Delaware corporation (the “Corporation”), indicated below into shares of common stock, $0.001 par value per share (the “Common Stock”), of the Corporation, as of the date specified below. This Conversion Notice shall not be valid until the Amendment has been accepted by the Secretary of State of the State of Delaware and is effective.

 

Date of Conversion:  
   

Aggregate number of Series Z to be converted

 
   

Aggregate Stated Value of such Series Z to be converted:

 
   

Aggregate accrued and unpaid dividends and accrued with respect to such Series Z and such aggregate dividends to be converted:

 
   

AGGREGATE CONVERSION AMOUNT TO BE CONVERTED:

 
   

Please confirm the following information:

   
   

Number of shares of Common Stock to be issued:

 

 

Please issue the Common Stock into which the applicable Series Z are being converted to Holder, or for its benefit, as follows:

 

☐ Check here if requesting delivery as a certificate to the following name and to the following address:

 

Issue to:  
   
   
   
Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:
DTC Participant:  
DTC Number:  
Account Number:  
           

Date: _____________ __, ___  
   
Name of Registered Holder  

 

By:    
  Name:  
  Title:  
     
  Tax ID: ____________________________  
  Facsimile: __________________________  
E-mail Address:  

 

Exhibit I

 

EXHIBIT II

 

ACKNOWLEDGMENT

 

The Corporation hereby acknowledges this Conversion Notice and hereby directs _________________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _____________, 20__ from the Corporation and acknowledged and agreed to by ________________________.

 

 

  MASSROOTS, INC.
   
  By:  
    Name:
    Title:

  

 

Exhibit II

 

 

Exhibit 10.2

 

SERIES Z PREFERRED

STOCK ISSUANCE AGREEMENT

 

This Series Z Preferred Stock Issuance Agreement (this “Agreement”), being entered into as of this 30th day of September 2021 by and among: Danny Meeks, an individual residing in Virginia (“Meeks”); Empire Services, Inc., a Virginia corporation (“Empire”); and MassRoots, Inc. a Delaware corporation (the “Company”) (together hereafter referred to as “the Parties” and each individually as “the Party”) and shall be made effective the date upon which a certain Settlement Agreement is entered into by and among Iroquois Mater Fund Ltd, MassRoots, Inc., Isaac Dietrich, Danny Meeks and Empire Services, Inc., (the “Effective Date”).

 

R E C I T A L S

 

A. The Company, Danny Meeks and Empire Services, Inc. intend to merge Empire Services, Inc. with MassRoots, Inc. on or prior to December 31, 2021;

 

B. Pursuant to that certain Settlement Agreement, the Company will issue to Iroquois Master Fund Ltd.(“Iroquois) Two Hundred Fifty (250) shares of the Company’s Series Z Preferred Stock (“Series Z Shares”) and will remit $1,000,000 (“Cash Portion”) to Iroquois as part of that agreement (the Settlement Agreement”).

 

C. Meeks and/or Empire Services, Inc. has agreed to loan $1,000,000 to MassRoots, Inc. (“Settlement Loan”) that will represent the Cash Portion of the Settlement Agreement

 

D. For providing the Settlement Loan, the Company desires to issue to Meeks 250 shares of Series Z Preferred Stock (the “Series Z Shares”).

 

AGREEMENT

 

The Company and Meeks hereby agree as follows:

 

1. Issuance

 

Subject to the terms and conditions of this Agreement, the undersigned agrees to provide the Settlement Loan to the Company on the date the Settlement Agreement is entered into, substantially in the form of the Promissory Note attached hereto as Exhibit A. A Certificate of Designation for the Series Z Shares (“Series Z COD”) will be filed with the Delaware Secretary of State prior to, or within 48 hours of entering into this Agreement.

 

2. Closing.

 

The issuance of the Series Z Shares shall take place at a closing (the “Closing”) the location of which shall be at the discretion of the Parties, either at the offices of Mitchell Silberberg & Knupp LLP, 437 Madison Ave., 25th Floor, New York, NY 10022, or remotely via the exchange of documents and signatures on the date hereof.

 

 

 

 

3. Representations and Warranties of the Company. The Company hereby represents and warrants to Meeks, as of the Closing, the following:

 

a. Organization and Qualification. The Company and each of its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of Delaware, and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company and each of its subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the assets, business, financial condition, results of operations of the Company and its subsidiaries taken as a whole (a “Material Adverse Effect”).

 

b. Authorization. All corporate action required to be taken by the Company’s Board of Directors and stockholders in order to authorize the Company to enter into this Agreement, and to issue the Series Z Shares at the Closing has been taken or will be taken prior to the Closing. All action on the part of the officers of the Company necessary for the execution and delivery of this Agreement, the performance of all obligations of the Company under this Agreement to be performed as of the Closing, and the issuance and delivery of the Series Z Shares has been taken or will be taken prior to the Closing.

 

c. Issuance of Shares. The Series Z Shares that are being issued to Meeks hereunder, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be duly and validly issued, fully paid and nonassessable, and free of restrictions on transfer other than restrictions on transfer under this Agreement, applicable state and federal securities laws and liens or encumbrances created by or imposed by Meeks.

 

4. Representations, Warranties and Agreements of Meeks and Empire. Meeks and Empire, individually and together represent and warrant to the Company the following:

 

a. Meeks and Empire individually and together have the knowledge and experience in financial and business matters necessary to evaluate the merits and risks of its Settlement Loan to the Company, and has carefully reviewed and understands the risks of, and other considerations relating to, the acquisition of Series Z Preferred Shares and the related tax consequences, and has the ability to bear the economic risks related to or in connection with the issuance.

 

b. Meeks is acquiring the Series Z Shares for his own account and not with the view to, or for resale in connection with, any distribution thereof. Meeks understands and acknowledges that the Series Z Shares have not been registered under the Securities Act or any state securities laws, by reason of a specific exemption from the registration provisions of the Securities Act and applicable state securities laws, which depends upon, among other things, the bona fide nature of the issuance made to Meeks as expressed herein. Meeks further represents that he does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to any third person with respect to any of the Series Z Shares. Meeks understands and acknowledges that the Series Z Shares will not be registered under the Securities Act nor under the state securities laws on the ground that the sale of the Series Z Shares to Meeks as provided for in this Agreement and the issuance of securities hereunder is exempt from the registration requirements of the Securities Act and any applicable state securities laws, which depends upon, among other things the bona fide nature of Meeks’ Settlement as expressed herein. Meeks is an “accredited investor” as defined in Rule 501 of Regulation D as promulgated by the U.S. Securities and Exchange Commission (“SEC”) under the Securities Act.

 

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c. Meeks (i) represents that he is the greater of (A) 21 years of age or (B) the age of legal majority in his or her jurisdiction of residence, and has full power and authority to execute and deliver this Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof; (ii) if a corporation, partnership, limited liability company, association, joint stock company, trust, unincorporated organization or other entity, represents that such entity was not formed for the specific purpose of acquiring the Series Z Shares, such entity is duly organized, validly existing and in good standing under the laws of the state or jurisdiction of its organization, the consummation of the transactions contemplated hereby is authorized by, and will not result in a violation of state law or its charter or other organizational documents, such entity has full power and authority to execute and deliver this Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof and to acquire and hold the Series Z Shares, the execution and delivery of this Agreement has been duly authorized by all necessary action, this Agreement has been duly executed and delivered on behalf of such entity and is a legal, valid and binding obligation of such entity; or (iii) if executing this Agreement in a representative or fiduciary capacity, represents that he has full power and authority to execute and deliver this Agreement in such capacity and on behalf of the subscribing individual, ward, partnership, trust, estate, corporation, or limited liability company or partnership, or other entity for whom Meeks is executing this Agreement, and such individual, partnership, ward, trust, estate, corporation, or limited liability company or partnership, or other entity has full right and power to perform pursuant to this Agreement and make a loan to the Company, and represents that this Agreement constitutes a legal, valid and binding obligation of such entity. The execution and delivery of this Agreement will not violate or be in conflict with any order, judgment, injunction, agreement or controlling document to which Meeks is a party or by which it is bound.

 

d. Meeks understands that the Series Z Shares are being offered and issued to him, her or it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Meeks’ compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Meeks set forth herein in order to determine the availability of such exemptions and the eligibility of such Meeks to acquire such securities. Meeks further acknowledges and understands that the Company is relying on the representations and warranties made by Meeks hereunder and that such representations and warranties are a material inducement to the Company to sell the Series Z Shares to Meeks. Meeks further acknowledges that without such representations and warranties of Meeks made hereunder, the Company would not enter into this Agreement with Meeks.

 

e. Meeks understands that the Company does not currently intend to register the Series Z Shares under the Securities Act at any time in the future; and Meeks will not immediately be entitled to the benefits of Rule 144 with respect to the Series Z Shares.

 

f. As of the Closing, all actions on the part of Meeks, and its officers, directors and partners, if applicable, necessary for the authorization, execution and delivery of this Agreement and the performance of all obligations of Meeks hereunder shall have been taken, and this Agreement, assuming due execution by the parties hereto, constitute valid and legally binding obligations of Meeks, enforceable in accordance with their respective terms, subject to: (i) judicial principles limiting the availability of specific performance, injunctive relief, and other equitable remedies and (ii) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect generally relating to or affecting creditors’ rights.

 

g. Meeks has adequate means of providing for its current and anticipated financial needs and contingencies, is able to bear the economic risk for an indefinite period of time and has no need for liquidity of the Series Z Shares and could afford complete loss of such moneys loaned.

 

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h. Meeks acknowledges that no U.S. federal or state agency or any other government or governmental agency has passed upon the Series Z Shares or made any finding or determination as to the fairness, suitability or wisdom of any loans made to the Company.

 

i. Meeks acknowledges that Iroquois is also receiving 250 shares of Series Z Preferred Stock as part of the Settlement Agreement and that he and Iroquois will be the only holders of the Series Z Preferred Stock.

 

j. All of the information concerning Meeks set forth herein, and any other information furnished by Meeks in writing to the Company, is true, correct and complete in all material respects as of the date of this Agreement, and, if there should be any material change in such information prior to the Company’s issuance to Meeks of the Series Z Shares, Meeks will promptly furnish revised or corrected information to the Company.

 

k. Meeks has reviewed with its own tax advisors the U.S. federal, state, local and foreign tax consequences of this issuance and the transactions contemplated by this Agreement. With respect to such matters, such Meeks relies solely on such advisors and not on any statements or representations of the Company or any of its agents, written or oral. Meeks understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this issuance or the transactions contemplated by this Agreement.

 

l. Meeks understands that there are substantial restrictions on the transferability of the Series Z Shares and that the certificates representing the Series Z Shares shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such certificates or other instruments):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS OR (3) SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.

 

In addition, since Meeks will be considered an Affiliate of the Company, certificates evidencing the Series Z Shares issued to such Meeks may bear a customary “Affiliates” legend.

 

The Company shall be obligated to promptly reissue unlegended certificates upon the request of any holder thereof (x) at such time as the holding period under Rule 144 or another applicable exemption from the registration requirements of the Securities Act has been satisfied or (y) at such time as a registration statement is available for the transfer of the Series Z Shares. The Company is entitled to request from any holder requesting unlegended certificates under clause (x) of the foregoing sentence an opinion of counsel reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend.

 

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5. Conditions to Company’s Obligations at the applicable Closing. The Company’s obligation to complete the issuance of the Series Z Shares and deliver the Series Z Shares to Meeks at the Closing shall be subject to the following conditions to the extent not waived by the Company:

 

a. Representations and Warranties. The representations and warranties made by Meeks in Section 4 hereof shall be true and correct in all respects when made, and shall be true and correct in all respects on the Closing date with the same force and effect as if they had been made on and as of said date.

 

b. Performance. Meeks shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to the Closing.

 

c. Qualifications. All authorizations, approvals or permits, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Series Z Shares pursuant to this Agreement at the Closing shall be obtained and effective as the Closing except for Blue Sky law permits and qualifications that may be properly obtained after the Closing.

 

6. Miscellaneous.

 

a. ModificationThis Agreement shall not be amended, modified or waived except by an instrument in writing signed by the Company and Meeks.

 

b. Notices. Any notice, consents, waivers or other communication required or permitted to be given hereunder shall be in writing and will be deemed to have been delivered: (i) upon receipt, when personally delivered; (ii) upon receipt when sent by certified mail, return receipt requested, postage prepaid; (iii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party; (iv) when sent, if by e-mail, (provided that such sent e-mail is kept on file (whether electronically or otherwise) by the sending party and the sending party does not receive an automatically generated message from the recipient’s e-mail server that such e-mail could not be delivered to such recipient); or (v) one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. The addresses, facsimile numbers and email addresses for such communications shall be:

 

(a) if to the Company, at

 

MassRoots, Inc.

1560 Broadway, Suite 17-105

Denver, CO 80202

 

Attention: Isaac Dietrich, CEO

Email:  isaacdietrich@gmail.com

 

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with copies (which shall not constitute notice) to:

 

Mitchell Silberberg & Knupp LLP

437 Madison Ave, 25th Floor

New York, NY 10022

Attention: Andrea Cataneo, Esq.

Email: ajc@msk.com

 

or

 

(b) if to Empire, at the address set forth on the signature page hereof;

 

or

 

(c) if to Meeks, at the address set forth on the signature page hereof

 

or, in any case, to such other address as the party shall have furnished in writing in accordance with the provisions of this Section). Any notice or other communication given by certified mail shall be deemed given at the time of certification thereof, except for a notice changing a party’s address which shall be deemed given at the time of receipt thereof.

 

c. AssignabilityThis Agreement and the rights, interests and obligations hereunder are not transferable or assignable by Meeks, and the transfer or assignment of the Series Z Shares shall be made only in accordance with all applicable laws including securities laws.

 

d. Applicable LawThis Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to the principles thereof relating to the conflict of laws.

 

e. Arbitration All disputes arising out of or in connection with this Agreement shall be submitted to the International Court of Arbitration of the International Chamber of Commerce and shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. The place of arbitration shall be New York, New York.

 

f. Use of PronounsAll pronouns and any variations thereof used herein shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or persons referred to may require.

 

g. This Agreement and all exhibits, schedules and attachments hereto and thereto and the Promissory Note constitute the entire agreement between Meeks and the Company with respect to the subject matter hereof and supersede all prior oral or written agreements and understandings, if any, relating to the subject matter hereof.

 

h. If the Series Z Shares are certificated and any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company and the Company’s transfer agent of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company and the Company’s transfer agent for any losses in connection therewith or, if required by the transfer agent, a bond in such form and amount as is required by the transfer agent. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares. If a replacement certificate or instrument evidencing any Shares is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.

 

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i. Each of the parties hereto shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby, whether or not the transactions contemplated hereby are consummated.

 

j. This Agreement may be executed in one or more original or facsimile or by an e-mail which contains a portable document format (.pdf) file of an executed signature page counterpart, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument and which shall be enforceable against the parties actually executing such counterparts. The exchange of copies of this Agreement and of signature pages by facsimile transmission or in .pdf format shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile or by e-mail of a document in pdf format shall be deemed to be their original signatures for all purposes.

 

k. Each provision of this Agreement shall be considered separable and, if for any reason any provision or provisions hereof are determined to be invalid or contrary to applicable law, such invalidity or illegality shall not impair the operation of or affect the remaining portions of this Agreement.

 

l. Paragraph titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text.

 

m. Meeks hereby agrees to furnish the Company such other information as the Company may request prior to the applicable Closing with respect to its loan hereunder.

 

n. Waiver of Conflicts. Each party to this Agreement acknowledges that Mitchell Silberberg & Knupp LLP, counsel for the Company, may have in the past performed and may continue to perform legal services Meeks in matters unrelated to the transactions described in this Agreement, including financings and other matters.  Accordingly, each party to this Agreement hereby (a) acknowledges that they have had an opportunity to ask for information relevant to this disclosure; (b) acknowledges that Mitchell Silberberg & Knupp LLP represented the Company in the transaction contemplated by this Agreement and has not represented Meeks in connection with such transaction; and (c) gives its informed consent to Mitchell Silberberg & Knupp LLP’s representation of Meeks in such unrelated matters and to Mitchell Silberberg & Knupp LLP’s representation of the Company, respectively, in connection with this Agreement and the transactions contemplated hereby.

 

[Signature page follows.]

 

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IN WITNESS WHEREOF, the Company has duly executed this Agreement as of the 30th day of September, 2021.

 

  MASSROOTS, INC.
           
  By: /s/ Isaac Dietrich
  Name: Isaac Dietrich
  Title: Chief Executive Officer
     
  By: /s/ Danny Meeks
  Name: Danny Meeks
  Address:  505 Crawford Street
    Portsmouth, VA 23703
     
  EMPIRE SERICES, INC.
     
  By: /s/ Danny Meeks
  Name: Danny Meeks
  Title: President
  Address:
     

 

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EXHIBIT A

 

MASSROOTS

 

PROMISSORY NOTE

 

 

 

Exhibit 10.3

 

EXCHANGE AGREEMENT

 

This Exchange Agreement (this “Agreement”), dated as of September 30, 2021, is made by and among MassRoots, Inc., a Delaware corporation (the “Company”), and Iroquois Master Fund Ltd. as the holder of the Exchange Securities (as defined below) (the “Holder”).

 

WHEREAS, the Company desires to enter into exchange agreements, similar in form to this Agreement, with holders of certain securities of the Company, pursuant to which such holders shall exchange their securities of the Company pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), for shares of the Company’s Series Z Convertible Preferred Stock (the “Series Z”), convertible into the Company’s common stock, par value $0.001 per share (the “Common Stock”), with such designations, rights, preferences, limitations and restrictions as set forth in the Certificate of Designation contained in Exhibit A attached hereto (the “Certificate of Designation”);

 

WHEREAS, the Holder holds Warrant dated July 21, 2017 entitling the Holder to purchase 156,250,079 shares of Common Stock at a price of $0.0004 per share(the “Exchange Securities”); and

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 3(a)(9) of the Securities Act, the Company desires to exchange with the Holder, and the Holder desires to exchange with the Company, the Exchange Securities for 250 shares of Series Z (“Series Z Exchange Shares”).

 

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

 

1. Terms of the Exchange. The Company will issue the Series Z Exchange Shares to the Holder, without further consideration, in exchange for the Exchange Securities held by the Holder.

 

2. Closing.

 

a. General. Upon the satisfaction or waiver of the conditions set forth herein, a closing shall occur at the principal offices of the Company, or such other location as the parties shall mutually agree. At the closing, the Company shall deliver to the Holder the Series Z Exchange Shares. Upon the closing, any and all obligations of the Company to Holder under the Exchange Securities shall be fully satisfied, the certificates and/or warrants evidencing the Exchange Securities shall be cancelled and the Holder will have no remaining rights, powers, privileges, remedies or interests under the Exchange Securities.

 

b. Conditions to Closing. The following shall be conditions precedent to the closing: (i) the Company shall have filed the Certificate of Designation with the Secretary of State of Delaware, and (ii) the parties shall have executed this Agreement and the Exchange Securities shall be null and void.

 

3. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby, including (i) the filing with the Delaware Division of Corporations on or before September [ ], 2021 of the amendment to the Company’s Second Amended and Restated Certificate of Incorporation (the “Amendment”) increasing the number of authorized shares of the Company approved by the shareholders of the Company on September 3, 2021 and (ii) effecting a reverse stock split on or before September [ ], 2021 in order reserve a sufficient number of shares of Common Stock which may be issued on connection with the conversion of any outstanding securities or pursuant to any agreements, contracts, instruments or other commitments to issue shares of Common Stock (the “Reverse Stock Split”).

 

 

 

 

4. Representations and Warranties of the Holder. The Holder represents and warrants as of the date hereof and as of the closing to the Company as follows:

 

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

 

b. Tax Advisors. The Holder has reviewed with its own tax advisors the U.S. federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. With respect to such matters, the Holder relied solely on such advisors and not on any statements or representations of the Company or any of its agents, written or oral. The Holder understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

 

c. Information Regarding Holder. The Holder is an “accredited investor,” as such term is defined in Rule 501 of Regulation D promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable the Holder to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed purchase, which represents a speculative investment. The Holder has the authority and is duly and legally qualified to purchase and hold the Series Z Exchange Shares. The Holder is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof.

 

d. Legend. The Holder understands that the Series Z Exchange Shares and the Underlying Shares (as defined herein) will be issued pursuant to an exemption from registration or qualification under the Securities Act and applicable state securities laws, and except as set forth below, the Series Z Exchange Shares and the Underlying Shares shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

 

THESE SECURITIES [AND THE SECURITIES ISSUABLE UPON THEIR CONVERSION] HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, A “NO-ACTION” LETTER FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

 

e. Removal of Legends. Certificates evidencing shares of Series Z Exchange Shares and shares of Common Stock issuable upon the conversion of the Series Z Exchange Shares (the “Underlying Shares”) shall not be required to contain the legend set forth in Section 4(d) above or any other legend (i) while a registration statement covering the resale of such securities is effective under the Securities Act, (ii) following any sale of such shares pursuant to Rule 144 (as defined below), assuming the transferor is not an affiliate of the Company, (iii) if such shares are eligible to be sold, assigned or transferred under Rule 144 and the Holder is not an affiliate of the Company (provided that the Holder provides the Company with reasonable assurances that such shares are eligible for sale, assignment or transfer under Rule 144 which shall include an opinion of the Holder’s counsel), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that the Holder provides the Company with an opinion of counsel to the Holder, in a generally acceptable form, to the effect that such sale, assignment or transfer of the shares may be made without registration under the applicable requirements of the Securities Act or (v) if such legend is not required under applicable requirements of the Securities Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the Commission).

 

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f. Restricted Securities. The Holder understands that: (i) the Series Z Exchange Shares and the Underlying Shares have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Holder shall have delivered to the Company (if requested by the Company) an opinion of counsel to the Holder, in a form reasonably acceptable to the Company, to the effect that such Series Z Exchange Shares or the Underlying Shares, as applicable, to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) the Holder provides the Company with reasonable assurance that such Series Z Exchange Shares or the Underlying Shares, as applicable can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto) (collectively, “Rule 144”); and (ii) any sale of the Series Z Exchange Shares or Underlying Shares, as applicable, made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the Series Z Exchange Shares or Underlying Shares, as applicable, under circumstances in which the seller (or the Person (as defined herein) through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the Commission promulgated thereunder.

 

g. Limitations on Conversion. The Holder understands that the Series Z Exchange Shares shall not be convertible into Common Stock for any reason until the increase to the Authorized Shares is effectuated.

 

5. Representations and Warranties of the Company. The Company represents and warrants as of the date hereof and as of the closing to the Holder as follows:

 

a. Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into this Agreement to consummate the transactions contemplated by this Agreement, the Certificate of Designation, and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Exchange Documents”), and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company no further action is required by the Company, the board of directors of the Company or the Company’s stockholders in connection therewith, including, without limitation, the issuance of the Series Z Exchange Shares and the Underlying Shares have been duly authorized by the Company’s board of directors and, with the exception of the filing of the Amendment and any filings required to implement the Reverse Stock Split, no further filing, consent, or authorization is required by the Company, its board of directors or its stockholders. This Agreement has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

b. Organization and Qualification. Each of the Company and its subsidiaries (the “Subsidiaries”) are entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any Subsidiary, individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the other Exchange Documents or (iii) the authority or ability of the Company to perform any of its obligations under any of the Exchange Documents. Other than its Subsidiaries, there is no Person in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest. “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.

 

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c. No Conflict. The execution, delivery and performance of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Series Z Exchange Shares) will not, following the filing of the Amendment and the effectiveness of the Reverse Stock Split (i) result in a violation of the Company’s certificate of incorporation or other organizational documents of the Company or any of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries or bylaws of the Company or any of its Subsidiaries, (ii) conflict with, or constitute a default (or an event which 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 of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of The OTC Markets Group (the “Principal Market”) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations that could not reasonably be expected to have a Material Adverse Effect.

 

d. No Consents. Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated by the Exchange Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company or any Subsidiary is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date of this Agreement, and neither the Company nor any of its Subsidiaries is aware of any facts or circumstances which might prevent the Company or any of its Subsidiaries from obtaining or effecting any of the registration, application or filings contemplated by the Exchange Documents. The Company is not in violation of the requirements of the Principal Market and has no knowledge of any facts or circumstances which could reasonably lead to delisting or suspension of the Common Stock in the foreseeable future.

 

e. Securities Law Exemptions. Assuming the accuracy of the representations and warranties of the Holder contained herein, the offer and issuance by the Company of the Series Z Exchange Shares is exempt from registration under the Securities Act pursuant to the exemption provided by Section 3(a)(9) thereof. The Company covenants and represents to the Holder that neither the Company nor any of its Subsidiaries has received, anticipates receiving, has any agreement to receive or has been given any promise to receive any consideration from the Holder or any other Person in connection with the transactions contemplated by the Exchange Documents.

 

f. Issuance of the Series Z Exchange Shares. The issuance of the Series Z Exchange Shares is duly authorized by the Company. The issuance of the Underlying Shares upon conversion of the Series Z Exchange Shares is duly authorized and, when issued in accordance with the Series Z Exchange Shares, will be duly and validly issued, fully paid and non-assessable, free from all taxes, liens, charges and other encumbrances imposed by the Company other than restrictions on transfer provided for in such documents.

 

g. Anti-Dilution. Irrespective of any subsequent issuances of any convertible debt or equity in the Company, the Holder of these 250 Series Z Exchange Shares will be entitled to receive such number of Underlying Shares upon the conversion representing 9.99% of the issued and outstanding shares of Common Stock at the time of such conversion (the “Holder Anti-Dilution Right”) until such time as the Company’s “NASDAQ Listing” which means at the time the SEC declares the Company’s S-1 Registration Statement effective in conjunction with a NASDAQ listing, provided that in the event that (i) the Company withdraws the Registration Statement from the Commission, (ii) the Company sells registered securities without selling those securities on NASDAQ, or (iii) the Registration Statement, once effective, ceases to be effective for any reason without the commencement of sale of the registered securities, then the Company shall continue to provide the Holder with the Anti-Dilution Right (any of the foregoing events, an “Anti-Dilution Extension Event”). On and after the occurrence of an Anti-Dilution Extension Event, the Holder will continue to be entitled to receive such number of Underlying Shares upon the conversion of its the Series Z Exchange Shares representing 9.99% of the issued and outstanding shares of Common Stock at the time of such conversion.

 

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h. Equity Capitalization. Except as disclosed in the SEC Reports (as defined below), or pursuant to the Exchange Documents: (i) none of the Company’s or any Subsidiary’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company or any Subsidiary; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries; (iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there are no financing statements securing obligations in any amounts filed in connection with the Company or any of its Subsidiaries; (v) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the Securities Act; (vi) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Series Z Exchange Shares; (viii) neither the Company nor any Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (ix) neither the Company nor any of its Subsidiaries have any liabilities or obligations required to be disclosed in the Company’s filings with the Commission which are not so disclosed in such documents, other than those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses and which, individually or in the aggregate, do not or could not have a Material Adverse Effect. “SEC Reports” shall mean all reports, schedules, forms, statements and other documents filed by the Company under the Securities Act and the Exchange Act, including the exhibits thereto and documents incorporated by reference therein.

 

i. Shell Company Status. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i) of the Securities Act.

 

6. Additional Acknowledgments. The Holder and the Company confirm that the Company has not received any consideration for the transactions contemplated by this Agreement. Pursuant to Rule 144 promulgated by the Commission pursuant to the Securities Act and the rules and regulations promulgated thereunder as such Rule 144 may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule 144, the holding period of the Series Z Exchange Shares (and Underlying Shares) tacks back to the issue date of the Exchange Securities. The Company hereby confirms that the Holder currently is not and will not be upon closing of this Agreement (individually or together as a group) deemed an “affiliate” as defined in Rule 144. The Company agrees not to take a position contrary to this paragraph.

 

7. Release by Holder. In consideration of the foregoing, the Holder releases and discharges Company, Company’s officers, directors, principals, control persons, past and present employees, insurers, successors, and assigns (“Company Parties”) from all actions, cause of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, which against Company Parties ever had, now have or hereafter can, shall or may, have for, upon, or by reason of any matter, cause or thing whatsoever, whether or not known or unknown, arising under the Exchange Securities. It being understood that this Section 7 shall be limited in all respects to only matters arising under or related to the Exchange Securities and shall under no circumstances constitute a release, waiver or discharge with respect to the Series Z Exchange Shares or any Exchange Documents or limit the Holder from taking action for matters with respect to the Series Z Exchange Shares or any Exchange Document or events that may arise in the future.

 

8. Disclosure. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Agreement, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company or any of its Subsidiaries, the Company shall within one (1) Trading Day after any such receipt or delivery publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, such Holder shall be allowed to presume that all matters relating to such notice do not constitute material, non-public information relating to the Company or any of its Subsidiaries. If the Company or any of its Subsidiaries provides material non-public information to a Holder that is not simultaneously filed in a Current Report on Form 8-K and such Holder has not agreed to receive such material non-public information, the Company hereby covenants and agrees that such Holder shall not have any duty of confidentiality to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agents with respect to, or a duty to any of the foregoing not to trade on the basis of, such material non-public information. Nothing contained in this Section 8 shall limit any obligations of the Company, or any rights of any Holder, under the Exchange Documents. “Trading Day” means any day on which the Common Stock is eligible to be traded on the Principal Market or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00 p.m., Eastern time) unless such day is otherwise designated as a Trading Day in writing by the Holder.

 

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9. Miscellaneous.

 

a. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.

 

b. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by and construed under the laws of the State of New York, without regard to the choice of law principles thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of New York, City of New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby, and hereby irrevocably waives any objection that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

c. Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

 

d. Counterparts/Execution. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains an electronic file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or electronic file signature page (as the case may be) were an original thereof.

 

e. Notices. Any notice or communication permitted or required hereunder shall be in writing and shall be deemed sufficiently given if hand-delivered or sent (i) postage prepaid by registered mail, return receipt requested, or (ii) by email, to the respective parties as set forth below, or to such other address as either party may notify the other in writing.

 

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If to the Company, to:

 

MassRoots, Inc.

1560 Broadway, Office 17-105

Denver, CO 80202

Attn: Isaac Dietrich

Email: isaacdietrich@gmail.com

 

With a copy to (which shall not constitute notice):

 

Mitchell Silberberg & Knupp LLP

437 Madison Avenue, 25th Floor

New York, NY 10022

Attn: Andrea Cataneo, Esq.

Email: ajc@msk.com

 

If to the Holder, to the address set forth on the signature page of the Holder.

 

f. Expenses. Each party shall pay its own legal fees and expenses in connection with this Agreement and the transactions contemplated hereby.

 

g. Entire Agreement; Amendments. This Agreement constitutes the entire agreement between the parties with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between the parties. This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by all parties, or, in the case of a waiver, by the party waiving compliance. Except as expressly stated herein, no delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or future exercise of any other right, power or privilege hereunder.

 

h. Headings. The headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

i. Pledge of Series Z. The Company acknowledges and agrees that the Series Z Exchange Shares may be pledged by the Holder in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Series Z Exchange Shares. The pledge of the Series Z Exchange Shares shall not be deemed to be a transfer, sale or assignment of the Series Z Exchange Shares hereunder, and if the Holder effects a pledge of the Series Z Exchange Shares it shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Series Z Exchange Shares may reasonably request in connection with a pledge of the Series Z Exchange Shares to such pledgee by the Holder.

 

k. No Change in Transfer Agent. From the date of the closing until such time as there are no Series Z Exchange Shares outstanding, the Company covenants and agrees that it shall not change its transfer agent.

 

[SIGNATURE PAGE FOLLOW]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written.

 

  MASSROOTS, INC.
     
  By: /s/ Isaac Dietrich
  Name: Isaac Dietrich
  Title: Chief Executive Officer
     
  HOLDER
     
  By:

/s/ Richard Abbe

  Name:

Richard Abbe

  Title:

Managing Member of its Investment Manager, Iroquois Capital Management, LLC

  Email:  
  Address  

 

8

 

 

EXHIBIT A

Certificate of Designation of Series Z

 

[Attached]