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): March 9, 2017
BTCS Inc.
(Exact Name of Registrant as Specified in Charter)
| Nevada | 000-55141 | 90-1096644 | ||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
|
9466 Georgia Avenue #124 Silver Spring, MD |
20901 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (202) 430-6576
(Former name or former address, if changed since last report)
1901 N Moore St, Suite 700
Arlington, VA 22209
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 DFR 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))
Item 3.02 Unregistered Sales of Equity Securities.
On March 9, 2017, BTCS Inc. (the “ Company ”) completed a securities exchange offer (the “ Note Offer ”) with its three convertible note holders (the “ Note Holders ”). Pursuant to the Note Offer the Note Holders agreed to exchange i) $868,897 of 5% Original Issue Discount 10% Senior Convertible Note Due September 16, 2016, originally issued in December 2015 and all accrued interest and liquidated damages owed (collectively the “ Senior Notes ”), ii) $175,000 of 20% Original Issue Discount Junior Convertible Notes Due December 5, 2016, originally issued in June 2016 and all accrued interest and liquidated damages owed (collectively the “ Junior Notes ”), iii) $220,000 of 8% Convertible Notes Due June 6, 2017, originally issued in December 2016 and all accrued interest owed (collectively the “ Convertible Notes ”), and iv) 97,423,579 warrants (the “ Senior Warrants ”) for 845,631 shares of Series B Convertible Preferred Stock (the “ Preferred ”). After giving effect to the Note Offer the Company no longer has any Senior Notes, Junior Notes or Convertible Notes outstanding. The Note Offer also provided the Note Holders with a three month right of first refusal to participate in the Company’s next financing and a one year participation right with respect to the Company next fully underwritten offering.
On March 9, 2017, as a result of the Note Offer becoming effective, a securities exchange offer made to the Company’s January 19, 2015 investors (the “ January Offer ”) was accepted by certain of those investors (the “ January Investors ”). Pursuant to the January Offer the January Investors agreed to exchange i) 12,052,344 shares of common stock owed pursuant to the favored nations provision of the January 19, 2015 subscription agreement (the “ January Agreement ”), and ii) 30,130,861 warrants owed pursuant to the favored nations provision of the January Agreement for 210,919 shares of Preferred.
On March 9, 2017, as a result of the Note Offer becoming effective, a securities exchange offer made to the Company’s April 19, 2015 investors (the “ April Offer ”) was accepted by certain of those investors (the “ April Investors ”). Pursuant to the April Offer, the April Investors agreed to exchange i) 20,110,699 shares of common stock owed pursuant to the favored nations provision of the April 19, 2015 subscription agreement (the “ April Agreement ”), and ii) 28,154,980 warrants owed pursuant to the favored nations provision of the April Agreement for 52,311 shares of Preferred.
The April Investors also agreed to: i) waive their right to their pro-rata portion of the remaining $240,216 payment under the May 27, 2016 amendment to the April Agreement (the “ Payment ”), ii) release the Company from its $50,000 management salary restriction as it relates to their pro-rata portion of the Payment, and iii) cancel their rights in the April Agreement to the favored nations provision. After giving effect to the April Investors release from the Payment, the Company is still obligated to pay those investors who participate in the April 2015 financing but did not accept the April Offer $187,330 prior to either Charles Allen, its Chief Executive Officer, Chief Financial Officer and Chairman and Michal Handerhan, its Chief Operating Officer and corporate secretary (collectively, the Company’s sole officers, directors and employees, the “ Officers ”) receiving disbursements towards their annual salaries or bonuses in excess of $50,000. As of March 1, 2017 the Company has a liability of $318,667 for accrued and unpaid cash compensation to the Officers.
On March 15, 2017, the Company filed a Certificate of Designation for the Preferred with the Secretary of State of the State of Nevada. The Preferred Certificate of Designation provides authorization for the issuance of 1,108,861 shares of Preferred, par value $0.001. Each holder of Preferred may, from time to time, convert any or all of such holder’s shares of Preferred into fully paid and non-assessable shares of common stock in an amount equal to two hundred (200) shares of common stock for each one (1) share of Preferred surrendered. However, at no time may all or a portion of shares of Preferred stock be converted if the number of shares of common stock to be issued pursuant to such conversion which would exceed, when aggregated with all other shares of common stock owned by such holder at such time, the number of shares of common stock which would result in such holder beneficially owning more than 4.99% of all of the common stock outstanding at such time.
The Preferred issued to the Note Holders, January Investors and April Investors was not registered under the Securities Act, and was issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “ Securities Act ”) and Rule 506 promulgated thereunder. Certificates representing these shares will contain a legend stating the restrictions applicable to such shares.
The following table details the Company’s capitalization after giving effect to the Note Offer, January Offer, April Offer (collectively the “ Offers ”) and shares and warrants issued to investors pursuant to the favored nations provisions of the January Agreement and April Agreement.
| Class of Security |
Shares of Common
Stock as Converted |
|||
| Common Stock Issued and Outstanding | 30,001,038 | |||
| Series B Preferred Stock (1,108,861 shares of Preferred at a 1:200 conversion ratio) | 221,770,698 | |||
| Warrants to Purchase Common Stock | 112,782,888 | |||
|
Total Shares Fully Diluted |
364,554,624 | |||
The 112,782,888 warrants include: i) 12,645,085 warrants with a strike price of $0.025 and an expiration date of January 21, 2020, and ii) 100,137,402 warrants with a strike price of $0.032 and an expiration date of April 16, 2020.
Each of the three Note Holders agreed to a leak-out agreement (the “ Note Leak-Out ”) with respect to the sale of common stock underlying the Preferred in the form attached hereto as Exhibit 99.1. The Note Leak-Out agreement restricts the number of shares of common stock that can be sold to 30% of the previous trading day’s volume until May 18, 2017 and thereafter to 20% of the previous day’s trading volume until February 6, 2018.
Each of the five January Investors agreed to a leak-out agreement (the “ January Leak-Out ”) with respect to the sale of common stock underlying the Preferred in the form attached hereto as Exhibit 99.2. The January Leak-Out agreement restricts the number of shares of common stock that can be sold to 7.8% of the previous trading day’s volume until February 6, 2018.
Each of the seven April Investors agreed to a leak-out agreement (the “ April Leak-Out ”) with respect to the sale of common stock underlying the Preferred in the form attached hereto as Exhibit 99.3. The April Leak-Out agreement restricts the number of shares of common stock that can be sold to 12.2% of the previous trading day’s volume until February 6, 2018.
Each of the five January Investors agreed to a lockup agreement (the “ January Lockup ”) with respect to the sale of the common stock underlying the Preferred in the form attached hereto as Exhibit 99.4, whereby they agreed not to sell the common stock underlying the Preferred until May 19, 2017.
Each of the seven April Investors agreed to a lockup agreement (the “ April Lockup ”) with respect to the sale of the common stock underlying the Preferred in the form attached hereto as Exhibit 99.5, whereby they agreed not to sell the common stock underlying the Preferred until May 19, 2017.
The foregoing does not purport to be a complete description of the terms of the securities exchange offers, Note Leak-Out agreement, January Leak-Out agreement, April Leak-Out agreement, January Lockup agreement, and April Lockup agreement and is qualified in its entirety by the full text of the forms of agreements, which are attached hereto to this Current Report on Form 8-K as Exhibits 99.1, 99.2, 99.3, 99.4 and 99.5 respectively and are incorporated herein by reference. Readers should review these agreements for a complete understanding of the terms and conditions associated with these transaction.
Item 5.03 Amendments To Articles Of Incorporation Or Bylaws; Change In Fiscal Year
See Item 3.02, incorporated by reference herein, disclosing the filing of the Certificate of Designation.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Exhibit | |
| 3.1 | Certificate of Designation of Series B Preferred Stock filed with the Nevada Secretary of State on March 15, 2017. | |
| 99.1 | Form of Note Leak-Out Agreement | |
| 99.2 | Form of January Leak-Out Agreement | |
| 99.3 | Form of April Leak-Out Agreement | |
| 99.4 | Form of January Lockup Agreement | |
| 99.5 | Form of April Lockup Agreement |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BTCS INC. | ||
| Dated: March 15, 2017 | By: | /s/ Charles W. Allen |
| Charles W. Allen | ||
| Chief Executive Officer | ||
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
The undersigned, Chief Executive Officer of BTCS INC., a Nevada corporation (the “Corporation”), DOES HEREBY CERTIFY that the following resolutions were duly adopted by the Board of Directors of the Corporation by unanimous written consent on March 15, 2017;
WHEREAS, the Board of Directors is authorized within the limitations and restrictions stated in the Articles of Incorporation of the Corporation, as amended, to provide by resolution or resolutions for the issuance of Twenty Million (20,000,000) shares of Preferred Stock, par value $0.001 per share, of the Corporation, in such series and with such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions as the Corporation’s Board of Directors shall fix by resolution or resolutions providing for the issuance thereof duly adopted by the Board of Directors; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of Preferred Stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED:
Section 1. Designation and Authorized Shares . The Corporation shall be authorized to issue one million one hundred and eight thousand and eight hundred and sixty one (1,108,861) shares of Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”).
Section 2. Stated Value . Each share of Series B Preferred Stock shall have a stated value of $0.001 per share (the “Stated Value”).
Section 3. Liquidation .
(a) Upon the liquidation, dissolution or winding up of the business of the Corporation, whether voluntary or involuntary, each holder of Series B Preferred Stock shall be entitled to receive, for each share thereof, out of assets of the Corporation legally available therefor, a distribution pro rata with the Corporation’s common stock, $0.001 par value per share (the “Common Stock”), calculated as if the Series B Preferred Stock had been converted into Common Stock as of the date immediately prior to the date fixed for determination of stockholders entitled to receive such distribution.
(b) Any distribution in connection with the liquidation, dissolution or winding up of the Corporation, or any bankruptcy or insolvency proceeding, shall be made in cash to the extent possible.
Section 4. Voting . Except as otherwise expressly required by law, each holder of Series B Preferred Stock shall be entitled to vote on all matters submitted to shareholders of the Corporation and shall be entitled to the number of votes for each share of Series B Preferred Stock owned at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited, equal to the number of shares of Common Stock such shares of Series B Preferred Stock are convertible into at such time, but not in excess of the conversion limitations set forth in Section 5 herein. Except as otherwise required by law, the holders of shares of Series B Preferred Stock shall vote together with the holders of Common Stock on all matters and shall not vote as a separate class.
| 1 |
Section 5. Conversion .
(a) Conversion Right. Each holder of Series B Preferred Stock may, from time to time, convert any or all of such holder’s shares of Series B Preferred Stock into fully paid and non-assessable shares of Common Stock in an amount equal to two hundred (200) shares of Common Stock for each one (1) share of Series B Preferred Stock surrendered (“Conversion Ratio”). Provided, however that no shares of Series B Preferred Stock may converted during the period beginning on date of issuance and ending on the date which is ten (10) Business Days following the date of issuance. A “Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.
(b) Conversion Procedure. In order to exercise the conversion privilege under this Section 5, the holder of any shares of Series B Preferred Stock to be converted shall give written notice to the Corporation at its principal office that such holder elects to convert such shares of Series B Preferred Stock or a specified portion thereof into shares of Common Stock as set forth in such notice (the “Conversion Notice”, and such date of delivery of the Conversion Notice to the Corporation, the “Conversion Notice Delivery Date”). Within three (3) business days following the Conversion Notice Delivery Date, subject to Section 5(a), the Corporation shall issue and deliver a certificate or certificates representing the number of shares of Common Stock determined pursuant to this Section 5 (the “Share Delivery Date”). In case of conversion under this Section 5 of only a part of the shares of Series B Preferred Stock represented by a certificate surrendered to the Corporation, the Corporation shall issue and deliver a new certificate for the number of shares of Series B Preferred Stock which have not been converted, upon receipt of the original certificate or certificates representing shares of Series B Preferred Stock so converted. Until such time as the certificate or certificates representing shares of Series B Preferred Stock which have been converted are surrendered to the Corporation and a certificate or certificates representing the Common Stock into which such shares of Series B Preferred Stock have been converted have been issued and delivered, the certificate or certificates representing the shares of Series B Preferred Stock which have been converted shall represent the shares of Common Stock into which such shares of Series B Preferred Stock have been converted. The Corporation shall pay all documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock issuable upon conversion of the Series B Preferred Stock.
(d) Maximum Conversion .
| (i) | Notwithstanding anything to the contrary set forth in this Certificate of Designation, at no time may all or a portion of shares of Series B Preferred Stock be converted if the number of shares of Common Stock to be issued pursuant to such conversion would cause the holder’s beneficial ownership to exceed, when aggregated with all other shares of Common Stock beneficially owned (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, (the “Exchange Act”) and the rules thereunder) by such holder at such time, the number of shares of Common Stock more than 4.99% of all of the Common Stock issued and outstanding at such time (. Additionally, in no event shall the Series B Preferred Stock be converted if after giving effect to the conversion, the holder would beneficially own more than 9.99% of all of the Common Stock issued and outstanding at such time. |
| 2 |
| (ii) | For purposes of this Section 5, in determining the number of outstanding shares of Common Stock, a holder of Series B Preferred Stock may rely on the number of outstanding shares of Common Stock as reflected in (1) the Corporation’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Corporation or (3) any other notice by the Corporation setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of a holder of Series B Preferred Stock, the Corporation shall within one (1) business day confirm orally and in writing 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 shares of Series B Preferred Stock, held by such holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported, which in any event are convertible or exercisable, as the case may be, into shares of the Corporation’s Common Stock within sixty (60) days’ of such calculation and which are not subject to a limitation on conversion or exercise analogous to the limitation contained herein. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 5 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitations herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. |
Section 6. Other Provisions.
(a) Reservation of Common Stock . The Corporation shall, at all times, reserve from its authorized Common Stock a sufficient number of shares to provide for conversion of all Series B Preferred Stock from time to time outstanding.
(b) Record Holders . The Corporation and its transfer agent, if any, for the Series B Preferred Stock may deem and treat the record holder of any shares of Series B Preferred Stock as reflected on the books and records of the Corporation as the sole true and lawful owner thereof for all purposes, and neither the Corporation nor any such transfer agent shall be affected by any notice to the contrary.
Section 7. Restriction and Limitations . Except as expressly provided herein or as required by law, so long as any shares of Series B Preferred Stock remain outstanding, the Corporation shall not, without the vote or written consent of the holders of at least a majority of the then outstanding shares of the Series B Preferred Stock, take any action which would adversely and materially affect any of the preferences, limitations or relative rights of the Series B Preferred Stock.
| 3 |
Section 8. Certain Adjustments .
(a) Stock Dividends and Stock Splits . If the Corporation, at any time while the Series B Preferred Stock is outstanding: (A) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation pursuant to the conversion of the Series B Preferred Stock), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of the Common Stock any shares of capital stock of the Corporation, each share of Series A Preferred Stock shall receive such consideration as if such number of shares of Series B Preferred had been, immediately prior to such foregoing dividend, distribution, subdivision, combination or reclassification, the holder of the number of shares of Common Stock into which it could convert at such time. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
Section 9. Equal Treatment of Holders . No consideration (including any modification of this Certificate of Designation or related transaction document) shall be offered or paid to any person or entity to amend or consent to a waiver or modification of any provision of this Certificate of Designation or related transaction document unless the same consideration is also offered to all of the holders of the outstanding shares of Series B Preferred Stock. For clarification purposes, this provision constitutes a separate right granted to each holder by the Corporation and negotiated separately by each holder, and is intended for the Corporation to treat all holders of the Series B Preferred Stock as a class and shall not in any way be construed as such holders acting in concert or as a group with respect to the purchase, disposition or voting of the Series B Preferred Stock or otherwise
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 15 day of March 2017.
| By: | /s/ Charles Allen | |
| Name: | Charles Allen | |
| Title: | Chief Executive Officer |
| 4 |
LEAK-OUT AGREEMENT
This leak-out agreement (the “ Agreement ”), dated as of March 2, 2017, is by and between BTCS Inc., a Nevada corporation (the “ Company ”) and those certain investors (the “ Holders ”) who hold Senior Secured Convertible Notes originally issued on December 16, 2015, Junior Secured Convertible Notes originally issued on June 6, 2016, and Convertible Notes originally issued on December 6, 2016 (collectively the “ Note Financings ”) and are signatories to that certain exchange agreement, dated as of February 16, 2017 (the “ Exchange Agreement ”), pursuant to which the Holders exchanged securities owed for shares of Series B Convertible Preferred Stock (the “ Preferred Stock ”), convertible into shares of the Company’s common stock, par value $0.001 per share (the “ Common Stock ”).
The undersigned holder of Preferred Stock (the “ Holder ”) agrees that during the period commencing on the date hereof and ending on February 6, 2018, neither the Holder nor any of its Affiliates (capitalized terms are defined below) shall sell any Common Stock underlying the Preferred Stock unless, as of the Measurement Time, the number of shares of Common Stock does not exceed the Holder’s Permitted Sales Amount. Notwithstanding the foregoing, with respect to any such sales by the Holder (or its Affiliate, if applicable), the Holder shall during the term of this Agreement deliver to the Company on a weekly basis (Friday after 4:05 P.M., New York time) proof of compliance by the Holder (or its Affiliate, if applicable) with the foregoing restrictions in the form of trade records from the Holders brokerage account or accounts (“ Proof of Compliance ”). The Company at its option may ask the Holder to instruct its broker to send trade records directly to the Company to ensure this Agreement is being complied with (the “ Brokerage Records ”).
For the purpose of this Agreement, the following definitions shall apply: (a) “ Sale Date ” means the date on which the Holder sells or otherwise disposes of Common Stock; (b) “ Measurement Time ” means 4:05 P.M., New York time, or later, on the trading day immediately preceding the Sale Date; (c) “ Affiliate ” means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person (as such terms are used in and construed under Rule 405 under the Securities Act of 1933, as amended); (d) “ Person ” means any individual, group, organization, corporation, partnership, joint venture, limited liability company, trust or entity of any kind; (e) “ Permitted Sales Amount ” means, as of any Measurement Time, the maximum number of shares of Common Stock which the Holder may sell on the Sale Date which is determined by the following equation:
| Permitted Sale Amount =SV × P × | H |
| T |
Where:
SV = Aggregate share volume of Common Stock traded during the trading day immediately prior to the Sale Date as reported by OTC Markets Inc.
P = Shall equal 0.3 (or 30 percent) up until and including May 18, 2017 and beginning on May 19, 2017 equal 0.2 (or 20 percent).
H = Number of shares of Preferred Stock issued to Holder in connection with the Exchange Agreement.
T = Aggregate number of shares of Preferred Stock issued to all Holders who participated in the Note Financings in connection with Exchange Agreements.
The Company will notify all Holders of the aggregate number of shares of Preferred Stock issued to all Holders who participated in the Note Financings when determinable.
Notwithstanding anything herein to the contrary, on or after the date hereof, the Holder may sell or transfer all, or any part, of the Holder’s Preferred Stock to any Person (an “ Assignee ”) without complying with (or otherwise limited by) the restrictions set forth in the second and third paragraphs of this Agreement; provided, that an authorized signatory of the Company and such Assignee duly executes and delivers an agreement in the form of this Agreement with respect to such transferred Preferred Stock (an “ Assignee Agreement ”) to the selling Holder.
The Holder shall pay the Company damages if the Holder breaches this Agreement in an amount equal to twenty five times the product of i) the number of shares sold in excess of the Permitted Sale Amount, and ii) the highest bid price as reported by OTC Markets Group Inc. on the Sale Date.
Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing.
No consideration (including any modification of any transaction document or this Agreement) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of the transaction documents or this Agreement unless the same consideration is also offered to all of the parties to this Agreement. For clarification purposes, this provision constitutes a separate right granted to each Holder by the Company and negotiated separately by each Holder, and is intended for the Company to treat the Holders as a class and shall not in any way be construed as the Holders acting in concert or as a group with respect to the purchase, disposition or voting of Preferred Stock or otherwise.
This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior negotiations, letters and understandings relating to the subject matter hereof and are fully binding on the parties.
This Agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. This Agreement may be executed and accepted by facsimile signature and any such signature shall be of the same force and effect as an original signature.
The terms of this Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto and their respective successors and assigns.
This Agreement may not be amended or modified except in writing signed by each of the parties hereto.
All questions concerning the construction, validity, enforcement and interpretation of this letter agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any 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.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this letter agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 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 letter agreement or any transaction contemplated hereby.
Each party hereto acknowledges that, in view of the uniqueness of the transactions contemplated by this Agreement, the other party hereto would not have an adequate remedy at law for money damages in the event that this Agreement has not been performed in accordance with its terms, and therefore agrees that such other parties shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which it may be entitled, at law or in equity.
| Very truly yours, | |
| Exact Name of Preferred Stock Holder | |
| Authorized Signature | |
| Title |
| Agreed to and Acknowledged: | ||
| BTCS Inc. | ||
| By: | ||
| Name: | ||
| Title: | ||
LEAK-OUT AGREEMENT
This leak-out agreement (the “ Agreement ”), dated as of February 8, 2017, is by and between BTCS Inc., a Nevada corporation (the “ Company ”) and those certain investors (the “ Holders ”) who both participated in the Company’s January 19, 2015 financing (the “ January 2015 Financing ”) and are signatories to that certain exchange agreement, dated as of February 8, 2017 (the “ Exchange Agreement ”), pursuant to which the Holders exchanged securities owed under a favored nations provision for shares of Series B Convertible Preferred Stock (the “ Preferred Stock ”), convertible into shares of the Company’s common stock, par value $0.001 per share (the “ Common Stock ”) .
The undersigned holder of Preferred Stock (the “ Holder ”) agrees that during the period commencing on the date hereof and ending on February 6, 2018, neither the Holder nor any of its Affiliates (capitalized terms are defined below) shall sell any Common Stock underlying the Preferred Stock unless, as of the Measurement Time, the number of shares of Common Stock does not exceed the Holder’s Permitted Sales Amount. Notwithstanding the foregoing, with respect to any such sales by the Holder (or its Affiliate, if applicable), the Holder shall during the term of this Agreement deliver to the Company on a weekly basis (Friday after 4:05 P.M., New York time) proof of compliance by the Holder (or its Affiliate, if applicable) with the foregoing restrictions in the form of trade records from the Holders brokerage account or accounts (“ Proof of Compliance ”). The Company at its option may ask the Holder to instruct its broker to send trade records directly to the Company to ensure this Agreement is being complied with (the “ Brokerage Records ”).
For the purpose of this Agreement, the following definitions shall apply: (a) “ Sale Date ” means the date on which the Holder sells or otherwise disposes of Common Stock; (b) “ Measurement Time ” means 4:05 P.M., New York time, or later, on the trading day immediately preceding the Sale Date; (c) “ Affiliate ” means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person (as such terms are used in and construed under Rule 405 under the Securities Act of 1933, as amended); (d) “ Person ” means any individual, group, organization, corporation, partnership, joint venture, limited liability company, trust or entity of any kind; (e) “ Permitted Sales Amount ” means, as of any Measurement Time, the maximum number of shares of Common Stock which the Holder may sell on the Sale Date which is determined by the following equation:
| Permitted Sale Amount =SV × P × | H |
| T |
Where:
SV = Aggregate share volume of Common Stock traded during the trading day immediately prior to the Sale Date as reported by OTC Markets Inc.
P = 0.78 (or 7.8 percent)
H = Number of shares of Preferred Stock issued to Holder in connection with the Exchange Agreement.
T = Aggregate number of shares of Preferred Stock issued to all Holders who participated in the January 2015 Financing in connection with Exchange Agreements.
The Company will notify all Holders of the aggregate number of shares of Preferred Stock issued to all Holders who participated in the January 2015 Financing when determinable.
Notwithstanding anything herein to the contrary, on or after the date hereof, the Holder may sell or transfer all, or any part, of the Holder’s Preferred Stock to any Person (an “ Assignee ”) without complying with (or otherwise limited by) the restrictions set forth in the second and third paragraphs of this Agreement; provided, that an authorized signatory of the Company and such Assignee duly executes and delivers an agreement in the form of this Agreement with respect to such transferred Preferred Stock (an “ Assignee Agreement ”) to the selling Holder.
The Company shall institute policies and procedures to review and reasonably corroborate the Proof of Compliance and shall not permit any conversion of the Preferred Stock except in compliance with the terms of this Agreement.
Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing.
No consideration (including any modification of any transaction document or this Agreement) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of the transaction documents or this Agreement unless the same consideration is also offered to all of the parties to this Agreement. For clarification purposes, this provision constitutes a separate right granted to each Holder by the Company and negotiated separately by each Holder, and is intended for the Company to treat the Holders as a class and shall not in any way be construed as the Holders acting in concert or as a group with respect to the purchase, disposition or voting of Preferred Stock or otherwise.
This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior negotiations, letters and understandings relating to the subject matter hereof and are fully binding on the parties.
This Agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. This Agreement may be executed and accepted by facsimile signature and any such signature shall be of the same force and effect as an original signature.
The terms of this Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto and their respective successors and assigns.
This Agreement may not be amended or modified except in writing signed by each of the parties hereto.
All questions concerning the construction, validity, enforcement and interpretation of this letter agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any 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.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this letter agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 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 letter agreement or any transaction contemplated hereby.
Each party hereto acknowledges that, in view of the uniqueness of the transactions contemplated by this Agreement, the other party hereto would not have an adequate remedy at law for money damages in the event that this Agreement has not been performed in accordance with its terms, and therefore agrees that such other parties shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which it may be entitled, at law or in equity.
| Very truly yours, | |
| Exact Name of Preferred Stock Holder | |
| Authorized Signature | |
| Title |
| Agreed to and Acknowledged: | ||
| BTCS Inc. | ||
| By: | ||
| Name: | ||
| Title: | ||
LEAK-OUT AGREEMENT
This leak-out agreement (the “ Agreement “), dated as of February 6, 2017, is by and between BTCS Inc., a Nevada corporation (the “ Company “) and those certain investors (the “ Holders “) who both participated in the Company’s April 19, 2015 financing (the “ April 2015 Financing “) and are signatories to that certain exchange agreement, dated as of February 6, 2017 (the “ Exchange Agreement “), pursuant to which the Holders exchanged securities owed under a favored nations provision for shares of Series B Convertible Preferred Stock (the “ Preferred Stock “), convertible into shares of the Company‘s common stock, par value $0.001 per share (the “ Common Stock “) .
The undersigned holder of Preferred Stock (the “ Holder “) agrees that during the period commencing on the date hereof and ending on February 6, 2018, neither the Holder nor any of its Affiliates (capitalized terms are defined below) shall sell any Common Stock underlying the Preferred Stock unless, as of the Measurement Time, the number of shares of Common Stock does not exceed the Holder’s Permitted Sales Amount. Notwithstanding the foregoing, with respect to any such sales by the Holder (or its Affiliate, if applicable), the Holder shall during the term of this Agreement deliver to the Company on a weekly basis (Friday after 4:05 P.M., New York time) proof of compliance by the Holder (or its Affiliate, if applicable) with the foregoing restrictions in the form of trade records from the Holders brokerage account or accounts (“ Proof of Compliance “). The Company at its option may ask the Holder to instruct its broker to send trade records directly to the Company to ensure this Agreement is being complied with (the “ Brokerage Records “).
For the purpose of this Agreement, the following definitions shall apply: (a) “ Sale Date “ means the date on which the Holder sells or otherwise disposes of Common Stock; (b) “ Measurement Time “ means 4:05 P.M., New York time, or later, on the trading day immediately preceding the Sale Date; (c) “ Affiliate “ means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person (as such terms are used in and construed under Rule 405 under the Securities Act of 1933, as amended); (d) “ Person “ means any individual, group, organization, corporation, partnership, joint venture, limited liability company, trust or entity of any kind; (e) “ Permitted Sales Amount “ means, as of any Measurement Time, the maximum number of shares of Common Stock which the Holder may sell on the Sale Date which is determined by the following equation:
| Permitted Sale Amount =SV × P × | H |
| T |
Where:
SV = Aggregate share volume of Common Stock traded during the trading day immediately prior to the Sale Date as reported by OTC Markets Inc.
P = 0.122 (or 12.2 percent)
H = Number of shares of Preferred Stock issued to Holder in connection with the Exchange Agreement.
T = Aggregate number of shares of Preferred Stock issued to all Holders who participated in the April 2015 Financing in connection with Exchange Agreements.
The Company will notify all Holders of the aggregate number of shares of Preferred Stock issued to all Holders who participated in the April 2015 Financing when determinable.
Notwithstanding anything herein to the contrary, on or after the date hereof, the Holder may sell or transfer all, or any part, of the Holder’s Preferred Stock to any Person (an “ Assignee “) without complying with (or otherwise limited by) the restrictions set forth in the second and third paragraphs of this Agreement; provided, that an authorized signatory of the Company and such Assignee duly executes and delivers an agreement in the form of this Agreement with respect to such transferred Preferred Stock (an “ Assignee Agreement “) to the selling Holder.
The Holder shall pay the Company damages if the Holder breaches this Agreement in an amount equal to twenty five times the product of i) the number of shares sold in excess of the Permitted Sale Amount, and ii) the highest bid price as reported by OTC Markets Group Inc. on the Sale Date.
Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing.
No consideration (including any modification of any transaction document or this Agreement) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of the transaction documents or this Agreement unless the same consideration is also offered to all of the parties to this Agreement. For clarification purposes, this provision constitutes a separate right granted to each Holder by the Company and negotiated separately by each Holder, and is intended for the Company to treat the Holders as a class and shall not in any way be construed as the Holders acting in concert or as a group with respect to the purchase, disposition or voting of Preferred Stock or otherwise.
This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior negotiations, letters and understandings relating to the subject matter hereof and are fully binding on the parties.
This Agreement may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. This Agreement may be executed and accepted by facsimile signature and any such signature shall be of the same force and effect as an original signature.
The terms of this Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto and their respective successors and assigns.
This Agreement may not be amended or modified except in writing signed by each of the parties hereto.
All questions concerning the construction, validity, enforcement and interpretation of this letter agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any 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.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this letter agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 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 letter agreement or any transaction contemplated hereby.
Each party hereto acknowledges that, in view of the uniqueness of the transactions contemplated by this Agreement, the other party hereto would not have an adequate remedy at law for money damages in the event that this Agreement has not been performed in accordance with its terms, and therefore agrees that such other parties shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which it may be entitled, at law or in equity.
| Very truly yours, | ||
| Exact Name of Preferred Stock Holder | ||
| Authorized Signature | ||
| Title |
Agreed to and Acknowledged:
| BTCS Inc. | ||
| By: | ||
| Name: | ||
| Title: | ||
LOCK-UP AGREEMENT
This lock-up agreement (the “ Agreement ”), dated as of February 8, 2017, is by and between BTCS Inc., a Nevada corporation (the “ Company ”) and those certain investors (the “ Holders ”) who both participated in the Company’s January 19, 2015 financing (the “ January 2015 Financing ”) and are signatories to that certain exchange agreement, dated as of February 8, 2017 (the “ Exchange Agreement ”), pursuant to which the Holders exchanged securities owed under a favored nations provision for shares of Series B Convertible Preferred Stock (the “ Preferred Stock ”), convertible into shares of the Company’s common stock, par value $0.001 per share (the “ Common Stock ”) .
1. Lockup . The undersigned, agrees, for the benefit of the Company and for good and valuable consideration, the receipt of which is hereby acknowledged, that, during the period beginning on the date hereof and ending on May 19, 2017 (the “ Lockup Period ”), the undersigned will not, directly or indirectly, (i) offer, sell, offer to sell, contract to sell, hedge, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or sell (or announce any offer, sale, offer of sale, contract of sale, hedge, pledge, sale of any option or contract to purchase, purchase of any option or contract of sale, grant of any option, right or warrant to purchase or other sale or disposition), or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future), any Common Stock underlying the Preferred Stock, beneficially owned, within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), by the undersigned or (ii) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of any Common Stock underlying the Preferred Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of any Preferred Stock (each of the foregoing, a “ Prohibited Sale ”). For avoidance of doubt, this Agreement shall only apply to the Common Stock underlying the Preferred Stock issued in connection with the Exchange Agreement.
2. Permitted Transfers . Notwithstanding the foregoing, the undersigned (and any transferee of the undersigned) may transfer any Shares: (i) as a bona fide gift or gifts, provided that prior to such transfer the donee or donees thereof agree in writing to be bound by the restrictions set forth herein, (ii) to any trust, partnership, corporation or other entity formed for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that prior to such transfer a duly authorized officer, representative or trustee of such transferee agrees in writing to be bound by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, (iii) to non-profit organizations qualified as charitable organizations under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, provided that prior to such transfer a duly authorized officer, representative or trustee of such organization agrees in writing to be bound by the restrictions set forth herein or (iv) if such transfer occurs by operation of law, such as rules of descent and distribution, statutes governing the effects of a merger or a qualified domestic order, provided that prior to such transfer the transferee executes an agreement stating that the transferee is receiving and holding Shares subject to the provisions of this Agreement. For purposes hereof, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. In addition, the foregoing shall not prohibit privately negotiated transactions, provided the transferees agree, in writing, to be bound to the terms of this Agreement for the balance of the Lockup Period.
3. Lockup Legend . Any Shares of the undersigned shall contain a restrictive “lock-up” legend governed by the terms of this Agreement.
4. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the New York.
5. Miscellaneous . This Agreement will become a binding agreement among the undersigned as of the date hereof. This Agreement (and the agreements reflected herein) may be terminated by the mutual agreement of the Company and the undersigned, and if not sooner terminated, will terminate upon the expiration date of the Lockup Period. This Agreement may be duly executed by facsimile and in any number of counterparts, each of which shall be deemed an original, and all of which together shall be deemed to constitute one and the same instrument. Signature pages from separate identical counterparts may be combined with the same effect as if the parties signing such signature page had signed the same counterpart. This Agreement may be modified or waived only by a separate writing signed by each of the parties hereto expressly so modifying or waiving such agreement.
| Very truly yours, | |
| Name: |
| Accepted and Agreed to: | ||
| BTCS Inc | ||
| By: | ||
| Name: | ||
| Title: | ||
LOCK-UP AGREEMENT
This lock-up agreement (the “ Agreement ”), dated as of February 6, 2017, is by and between BTCS Inc., a Nevada corporation (the “ Company ”) and those certain investors (the “ Holders ”) who both participated in the Company’s April 19, 2015 financing (the “ April 2015 Financing ”) and are signatories to that certain exchange agreement, dated as of February 6, 2017 (the “ Exchange Agreement ”), pursuant to which the Holders exchanged securities owed under a favored nations provision for shares of Series B Convertible Preferred Stock (the “ Preferred Stock ”), convertible into shares of the Company’s common stock, par value $0.001 per share (the “ Common Stock ”) .
1. Lockup . The undersigned, agrees, for the benefit of the Company and for good and valuable consideration, the receipt of which is hereby acknowledged, that, during the period beginning on the date hereof and ending on May 19, 2017 (the “ Lockup Period ”), the undersigned will not, directly or indirectly, (i) offer, sell, offer to sell, contract to sell, hedge, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or sell (or announce any offer, sale, offer of sale, contract of sale, hedge, pledge, sale of any option or contract to purchase, purchase of any option or contract of sale, grant of any option, right or warrant to purchase or other sale or disposition), or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future), any Common Stock underlying the Preferred Stock, beneficially owned, within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), by the undersigned or (ii) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of any Common Stock underlying the Preferred Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of any Preferred Stock (each of the foregoing, a “ Prohibited Sale ”). For avoidance of doubt, this Agreement shall only apply to the Common Stock underlying the Preferred Stock issued in connection with the Exchange Agreement.
2. Permitted Transfers . Notwithstanding the foregoing, the undersigned (and any transferee of the undersigned) may transfer any Shares: (i) as a bona fide gift or gifts, provided that prior to such transfer the donee or donees thereof agree in writing to be bound by the restrictions set forth herein, (ii) to any trust, partnership, corporation or other entity formed for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that prior to such transfer a duly authorized officer, representative or trustee of such transferee agrees in writing to be bound by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, (iii) to non-profit organizations qualified as charitable organizations under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, provided that prior to such transfer a duly authorized officer, representative or trustee of such organization agrees in writing to be bound by the restrictions set forth herein or (iv) if such transfer occurs by operation of law, such as rules of descent and distribution, statutes governing the effects of a merger or a qualified domestic order, provided that prior to such transfer the transferee executes an agreement stating that the transferee is receiving and holding Shares subject to the provisions of this Agreement. For purposes hereof, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. In addition, the foregoing shall not prohibit privately negotiated transactions, provided the transferees agree, in writing, to be bound to the terms of this Agreement for the balance of the Lockup Period.
3. Lockup Legend . Any Shares of the undersigned shall contain a restrictive “lock-up” legend governed by the terms of this Agreement.
4. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the New York.
5. Miscellaneous . This Agreement will become a binding agreement among the undersigned as of the date hereof. This Agreement (and the agreements reflected herein) may be terminated by the mutual agreement of the Company and the undersigned, and if not sooner terminated, will terminate upon the expiration date of the Lockup Period. This Agreement may be duly executed by facsimile and in any number of counterparts, each of which shall be deemed an original, and all of which together shall be deemed to constitute one and the same instrument. Signature pages from separate identical counterparts may be combined with the same effect as if the parties signing such signature page had signed the same counterpart. This Agreement may be modified or waived only by a separate writing signed by each of the parties hereto expressly so modifying or waiving such agreement.
| Very truly yours, | |
| Name: |
Accepted and Agreed to:
| BTCS Inc. | ||
| By: | ||
| Name: | ||
| Title: | ||