UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

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

 

Date of Report (Date of Earliest Event Reported): July 22, 2020

 

Transportation and Logistics Systems, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   001-34970   26-3106763

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

5500 Military Trail, Suite 22-357

Jupiter, Florida 33458

(Address of Principal Executive Offices)

 

(833) 764-1443

(Issuer’s telephone number)

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation to 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 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:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.001   TLSS   OTC US

 

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. [  ]

 

 

 

 
 

 

Forward Looking Statements

 

Statements in this report regarding Transportation and Logistics Systems, Inc. (the “Company”) that are not historical facts are forward-looking statements and are subject to risks and uncertainties that could cause actual future events or results to differ materially from such statements. Any such forward-looking statements, including, but not limited to, financial guidance, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not directly or exclusively relate to historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “intend,” “plan,” “goal,” “seek,” “strategy,” “future,” “likely,” “believes,” “estimates,” “projects,” “forecasts,” “predicts,” “potential,” or the negative of those terms, and similar expressions and comparable terminology. These include, but are not limited to, statements relating to future events or our future financial and operating results, plans, objectives, expectations and intentions. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these expectations may not be achieved. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to known and unknown risks, uncertainties and other factors outside of our control that could cause our actual results, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. In addition to the risks described above, these risks and uncertainties include: our ability to successfully execute our business strategies, including integration of acquisitions and the future acquisition of other businesses to grow our Company; customers’ cancellation on short notice of master service agreements from which we derive a significant portion of our revenue or our failure to renew such master service agreements on favorable terms or at all; our ability to attract and retain key personnel and skilled labor to meet the requirements of our labor-intensive business or labor difficulties which could have an effect on our ability to bid for and successfully complete contracts; the ultimate geographic spread, duration and severity of the coronavirus outbreak and the effectiveness of actions taken, or actions that may be taken, by governmental authorities to contain the outbreak or ameliorate its effects; our failure to compete effectively in our highly competitive industry could reduce the number of new contracts awarded to us or adversely affect our market share and harm our financial performance; our ability to adopt and master new technologies and adjust certain fixed costs and expenses to adapt to our industry’s and customers’ evolving demands; our history of losses, deficiency in working capital and a stockholders’ deficit and our ability to achieve sustained profitability; material weaknesses in our internal control over financial reporting and our ability to maintain effective controls over financial reporting in the future; our substantial indebtedness could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations; the impact of new or changed laws, regulations or other industry standards that could adversely affect our ability to conduct our business; and changes in general market, economic, social and political conditions in the United States and global economies or financial markets, including those resulting from natural or man-made disasters.

 

These forward-looking statements represent our estimates and assumptions only as of the date of this report and, except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this report. Given these uncertainties, you should not place undue reliance on these forward-looking statements and should consider various factors, including the risks described, among other places, in our most recent Annual Report on Form 10-K and in our Quarterly Reports on Form 10-Q, as well as any amendments thereto, filed with the Securities and Exchange Commission.

 

 
 

 

Item 3.02 Unregistered Sales of Equity Securities.

 

Issuance of Series D Convertible Preferred Stock

 

On August 30, 2019, Transportation and Logistics Systems, Inc. (the “Company”) issued and sold to investors convertible promissory notes (the “Notes”), and warrants (the “Warrants”) to purchase shares of our common stock, par value $0.001 per share (the “Common Stock”) pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) with the accredited investors (together with their respective heirs, successors and assigns, the “Investors”). These Notes and Warrants include down-round provisions under which the Note conversion price and Warrant exercise price were reduced, on a full-ratchet basis, to a fraction of a penny due to Company defaults on the Notes and other convertible debt securities.

 

As previously disclosed by the Company on the Current Report on Form 8-K filed by the Company on July 21, 2020, the Company entered into an Exchange Agreement with one of the Investors to exchange outstanding Notes and Warrants for Series D Convertible Preferred Stock (the “Series D”). In connection with this exchange the Company and the Investor also entered into a Leak-Out Agreement whereby the Investor agreed to limit sale volume for a period of time. In compliance with the Purchase Agreement, the Company offered to exchange the Notes and Warrants held by the other Investors for Series D on substantially similar terms and conditions pursuant to one or more Exchange Agreements in substantially the form of the initial Exchange Agreement (“Exchange Agreements”) and one or more Leak-Out Agreements in substantially the form of the initial Leak-Out Agreement (“Leak-Out Agreements”).

 

On July 22, 2020, the Company entered an Exchange Agreement (the “Puritan Exchange Agreement”) with another Investor, Puritan Partners LLC (“Puritan”) to exchange outstanding Notes and Warrants for Series D. Pursuant to the Puritan Exchange Agreement, Puritan exchanged Notes with an aggregate remaining principal amount outstanding of $265,843.79 and Warrants to purchase 194,445,417 shares of Common Stock for 221,269 shares of Series D (the “Exchange”).

 

In connection with the Exchange, the Company and Puritan entered into a Leak-Out Agreement, dated as of July 22, 2020 (the “Puritan Leak-Out Agreement”), whereby Puritan agreed that, until the earliest to occur of (a) 120 days from July 22, 2020, (b) the Common Stock trading at an average reported volume of at least 100,000,001 shares for three consecutive trading days, (c) the price per share of the Common Stock exceeding $0.10 in a transaction, (d) the time of release (whether by termination of an applicable leak-out agreement or otherwise), in whole or in part, of any leak-out agreement with any other holder of securities, or (e) any breach by the Company of any term of the Puritan Leak-Out Agreement that is not cured within five trading days following delivery of written notice of such breach by Puritan to the Company, neither Puritan, nor any of its Affiliates (as defined in the Puritan Leak-Out Agreement), collectively, shall sell, on any trading day, more than 10% of the Common Stock sold on such trading day.

 

A copy of the form of Exchange Agreement is attached as Exhibit 4.1 to this Current Report on Form 8-K. The above description is qualified by reference to the complete text of the form of Exchange Agreement. A copy of the form of Leak-Out Agreement is attached as Exhibit 10.1 to this Current Report on Form 8-K. The above description is qualified by reference to the complete text of the form of Leak-Out Agreement.

 

In connection with the Exchange, the Board of Directors (the “Board”) created the Series D pursuant to the authority vested in the Board by the Company’s Amended and Restated Articles of Incorporation to issue up to 10,000,0000 shares of preferred stock, $0.001 par value per share. The Company’s Amended and Restated Articles of Incorporation explicitly authorize the Board to issue any or all of such shares of preferred stock in one (1) or more classes or series and to fix the designations, powers, preferences and rights, the qualifications, limitations or restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any class or series, without further vote or action by the stockholders.

 

 
 

 

On July 20, 2020, the Board filed the Certificate of Designation of Preferences, Rights and Limitations of Series D Preferred Stock (the “Series D COD”) with the Secretary of State of the State of Nevada designating 1,250,000 shares of preferred stock as Series D. The Series D does not have the right to vote. The Series D has a stated value of $6.00 per share (the “Stated Value”). Subject only to the liquidation rights of the holders of Series B Preferred Stock that is currently issued and outstanding, upon the liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, the Series D is entitled to receive an amount per share equal to the Stated Value and then receive a pro-rata portion of the remaining assets available for distribution to the holders of Common Stock on an as-converted to Common Stock basis. Until July 20, 2021, the holders of Series D have the right to participate, pro rata, in each subsequent financing in an amount up to 25% of the total proceeds of such financing on the same terms, conditions and price otherwise available in such subsequent financing.

Subject to a beneficial ownership limitation and customary adjustments for stock dividends and stock splits, each share of Series D is convertible into 1,000 shares of Common Stock. A holder of Series D may not convert any shares of Series D into Common Stock if the holder (together with the holder’s affiliates and any persons acting as a group together with the holder or any of the holder’s affiliates) would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the conversion, as such percentage ownership is determined in accordance with the terms of the Series D COD. However, upon notice from the holder to the Company, the holder may decrease or increase the beneficial ownership limitation, which may not exceed 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Series D COD, provided that any such increase or decrease in the beneficial ownership limitation will not take effect until 61 days following notice to the Company.

Approval of at least a majority of the outstanding Series D is required to: (a) amend or repeal any provision of, or add any provision to, the Company’s Articles of Incorporation or bylaws, or file any Certificate of Designation (however such document is named) or articles of amendment to create any class or any series 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 D, regardless of whether any such action shall be by means of amendment to the Articles of Incorporation or bylaws or by merger, consolidation or otherwise or filing any Certificate of Designation, it being understood that the creation of a new security having rights, preferences or privileges senior to or on parity with the Series D in a future financing will not constitute an amendment, addition, alteration, filing, waiver or repeal for these purposes; (b) increase or decrease (other than by conversion) the authorized number of Series D; (c) issue any Series D, other than to the Investors; or (d) without limiting any provision hereunder, whether or not prohibited by the terms of the Series D, circumvent a right of the Series D.

The description of the Series D and the Series D COD are qualified in their entirety by reference to the full text of such waiver, a copy of which is attached hereto as Exhibit 3.1.

 

Item 3.03 Material Modification to Rights of Security Holders.

 

The information contained in Item 3.02 is incorporated by reference herein.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit
No.
  Description
     
3.1   Certificate of Designation of Preferences, Rights and Limitations of Series D Preferred Stock of the Company, filed on July 20, 2020.
4.1*   Form of Exchange Agreement.
10.1   Form of Leak-Out Agreement.

 

 

* Exhibit B to this document has been separately filed as Exhibit 3.1 to this Current Report on Form 8-K.

 

 
 

 

SIGNATURES

 

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

 

Dated: July 24, 2020 Transportation and Logistics Systems, Inc.
     
  By: /s/ John Mercadante
  Name: John Mercadante
  Title: Chief Executive Officer

 

 

 

Exhibit 3.1

 

CERTIFICATE OF DESIGNATION, PREFERENCES, RIGHTS AND

LIMITATIONS OF SERIES D CONVERTIBLE PREFERRED STOCK OF TRANSPORTATION AND LOGISTICS SYSTEMS, INC.

 

I, John Mercadante, hereby certify that I am the Chief Executive Officer of Transportation and Logistics Systems, Inc. (the “Corporation”), a corporation organized and existing under the Nevada Revised Statutes and further do hereby certify:

 

That pursuant to the authority expressly conferred upon the Board of Directors of the Corporation (the “Board”) by the Corporation’s Articles of Incorporation (the “Articles of Incorporation), the Board on July 14, 2020 adopted the following resolutions creating a series of shares of preferred stock designated as Series D Convertible Preferred Stock, none of which shares have been issued:

 

RESOLVED, that the Board hereby designates the Series D 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 Articles of Incorporation as follows:

 

Series D Convertible Preferred Stock

 

The Corporation shall designate a series of preferred stock, consisting of 1,250,000 shares, with a stated value of $6.00 per share (the “Stated Value”), as Series D Convertible Preferred Stock (the “Series D”) which shall have the following designations, rights and preferences:

 

1. Redemption. The shares of the Series D are not redeemable.

 

2. Voting Rights. The Holders of shares of Series D (the “Holders”) shall not have any voting rights.

 

3. Liquidation. Upon the liquidation, dissolution or winding up of the business of the Corporation, whether voluntary or involuntary, each Holder shall be entitled to receive out of assets of the Corporation legally available therefor (i) an amount per share equal to the Stated Value of cash and/or other property received by the Corporation pursuant to such liquidation, dissolution or winding up, and (ii) the same amount that a holder of the Corporation’s common stock, par value $0.001 per share (the “Common Stock”) would receive on an as-converted basis (without regard to the Beneficial Ownership Limitation or any other conversion limitations hereunder), subject in each case only to the liquidation rights of the holders of the Series B Preferred Stock of the Corporation currently issued and outstanding. 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.

 

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4. Participation Rights.

 

(a) From the date that shares of the Series D are first issued to a Holder (the “Initial Issuance Date”) until the date that is the 12 month anniversary of the Initial Issuance Date, upon any issuance by the Corporation or any of its subsidiaries of Common Stock or securities which would entitle the holder thereof to acquire Common Stock at any time, 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 (“Common Stock Equivalents”), for cash consideration, indebtedness or a combination of the foregoing in a transaction exempt from registration under the Securities Act of 1933 (a “Subsequent Financing”), the Holders on a pro rata basis based on the number of shares of Series D held by them shall have the right to participate in up to an amount of the Subsequent Financing equal to 25% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions and price provided for in the Subsequent Financing. At least 10 Trading Days (as defined in Section 7) prior to the closing of the Subsequent Financing, the Corporation shall deliver to each Holder a written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Holder if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”). Upon the request of a Holder, and only upon a request by such Holder, for a Subsequent Financing Notice, the Corporation shall promptly, but no later than one Trading Day after such request, deliver a Subsequent Financing Notice to such Holder. The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the nature of the person or persons through or with whom such Subsequent Financing is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment. At least two Trading Days prior to sending the Pre-Notices, the Corporation shall provide the Holders with the consent attached as Exhibit B (the “Consent”). No Pre-Notices or Subsequent Financing Notices will be sent to any Holders who do not return to the Corporation executed Consents prior to the distribution of the Pre-Notices.

 

(b) Any Holder desiring to participate in such Subsequent Financing must provide written notice to the Corporation by not later than 5:30 p.m. (New York City time) on the fifth Trading Day after all of the Holders that returned to the Corporation executed Consents have received the Pre-Notice that such Holder is willing to participate in the Subsequent Financing, the amount of such Holder’s participation, and representing and warranting that such Holder has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice. If the Corporation receives no such notice from a Holder as of such fifth Trading Day, such Holder shall be deemed to have notified the Corporation that it does not elect to participate. For the purposes of this Section 4, a Holder shall be deemed to have received a Consent, Pre Notice or Subsequent Financing Notice, as applicable, upon the earlier of actual receipt or (a) personal delivery to the Holder to be notified, (b) when sent, if sent by electronic mail during normal business hours of the Holder, and if not sent during normal business hours, then on the Holder’s next business day, or (c) one (1) Trading Day after the Trading Day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt.

 

(c) If by 5:30 p.m. (New York City time) on the fifth Trading Day after all of the Holders that returned to the Corporation executed Consents have received the Pre-Notice, notifications by the Holders of their willingness to participate in the Subsequent Financing is, in the aggregate, less than the total amount of the Participation Maximum, then the Corporation may effect the remaining portion of such Subsequent Financing on the terms and with the persons set forth in the Subsequent Financing Notice.

 

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(d) If by 5:30 p.m. (New York City time) on the fifth Trading Day after all of the Holders that returned to the Corporation executed Consents have received the Pre-Notice, the Corporation receives responses to a Subsequent Financing Notice from Holders seeking to purchase more than the aggregate amount of the Participation Maximum, each such Holder shall have the right to purchase its Pro Rata Portion (as defined below) of the Participation Maximum. “Pro Rata Portion” means the ratio of (x) the number of shares of Series D held by such Holder participating under this Section 4(d) and (y) the sum of the aggregate shares of Series D held by all the Holders participating under this Section 4(d).

 

(e) The Corporation must provide the Holders with a second Subsequent Financing Notice, and the Holders will again have the right of participation set forth above in this Section 4, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within 30 Trading Days after the date of the initial Subsequent Financing Notice.

 

(f) The Corporation and each Holder agree that if any Holder elects to participate in a Subsequent Financing, the transaction documents related to the Subsequent Financing shall not include any term or provision whereby such Holder shall be required to agree to any restrictions on trading as to any of the Series D or shares of Common Stock issuable upon conversion of the Series D, or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, this Certificate of Designation, without the prior written consent of such Holder.

 

(g) Notwithstanding anything to the contrary in this Section 4 and unless otherwise agreed to by such Holder, the Corporation shall either confirm in writing to such Holder that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Holder will not be in possession of any material, non-public information, by the end of the 30th Trading Day following delivery of the Subsequent Financing Notice. If by such 30th Trading Day, no public disclosure regarding a transaction with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received by such Holder, such transaction shall be deemed to have been abandoned and such Holder shall not be deemed to be in possession of any material, non-public information with respect to the Corporation or any of its subsidiaries relating to the Subsequent Financing.

 

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(h) Notwithstanding the foregoing, this Section 4 shall not apply in respect of (i) an Exempt Issuance or (ii) in a transaction involving the public offering of the Corporation’s securities. “Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Corporation, in an aggregate amount not to exceed 10% of shares of Common Stock outstanding pursuant to any stock or option plan duly adopted for such purpose by the Board, (b) securities issuable upon the exercise or exchange of or conversion of the Series D and/or other securities issuable pursuant to existing agreements, exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the Initial Issuance Date, provided that such securities have not been amended since the Initial Issuance Date to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock dividends, stock splits or combinations) or to extend the term of such securities, (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the directors of the Corporation, provided that any such issuance shall only be to an entity (or to the equity holders of an entity) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Corporation and shall provide to the Corporation additional benefits in addition to the investment of funds, but shall not include a transaction in which the Corporation is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, or (d) securities issued for bona fide services provided to the Corporation not for the purpose of raising capital or to an entity whose primary business is investing in securities.

 

5. Remedies, Characterizations. Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Certificate of Designation, Preferences, Rights and Limitations (“Certificate of Designation”), shall be cumulative and in addition to all other remedies available under this Certificate of Designation, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy, and nothing herein shall limit a Holder’s right to pursue actual damages for any failure by the Corporation to comply with the terms of this Certificate of Designation.

 

6. Conversion. Each share of Series D shall be convertible into 1,000 shares of Common Stock (the “Conversion Ratio”). At the option of the Holder, the Series D may be converted into Common Stock based upon the Conversion Ratio without exceeding the Beneficial Ownership Limitation (as defined below). The Common Stock shall be validly issued, fully paid and non-assessable.

 

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7. Conversion Limitations. The Corporation shall not affect any conversion of the Series D, and a Holder shall not have the right to convert such Series D, to the extent that after giving effect to the proposed conversion, the Holder (together with the Holder’s affiliates and any persons acting as a group together with the Holder or any of the Holder’s affiliates) would beneficially own in excess of the Beneficial Ownership Limitation. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of the Series D with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Series D owned by the Holder or any of its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 7, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 7 applies, the determination of whether any Series D is convertible shall be in the sole discretion of the Holder, and the submission of a notice of conversion shall be deemed to be the Holder’s determination of whether the Series D may be converted, in each case subject to the Beneficial Ownership Limitation. For purposes of this Section 7, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (ii) a more recent public announcement by the Corporation, or (iii) a more recent written notice by the Corporation or the Corporation’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Series D held by the Holder. The Holder, upon not less than sixty-one (61) days’ prior notice to the Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 7, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of the Series D held by the Holder and the Beneficial Ownership Limitation provisions of this Section 7 shall continue to apply. Any such increase or decrease will not be effective until the sixty-first (61st) day after such notice is delivered to the Corporation. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 7 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this Section 7 shall apply to a successor Holder of the Series D. For the purposes of this Certificate of Designation, the term “Trading Day” shall mean any day on which the Common Stock is eligible to be traded on the securities exchange or 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 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder.

 

8. Stock Dividends and Stock Splits. If the Corporation, at any time while any Series D shares are outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Ratio shall be adjusted proportionately. Any adjustment made pursuant to this Section 8 shall become effective immediately after the record date for the determination of shareholders 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.

 

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9. Noncircumvention. The Corporation hereby covenants and agrees that the Corporation will not, by amendment of its Articles of Incorporation including by the filing of any Certificate of Designation (however such document is named), 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 Designation, and will at all times in good faith carry out all the provisions of this Certificate of Designation and take all action as may be required to protect the rights of the Holders.

 

10. Vote to Change the Terms of or Issue Preferred Shares. In addition to any other rights provided by law, without first obtaining the written consent of at least a majority of the outstanding Series D, the Corporation shall not:

 

(a) amend or repeal any provision of, or add any provision to, its Articles of Incorporation or bylaws, or file any Certificate of Designation (however such document is named) or articles of amendment to create any class or any series 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 D, regardless of whether any such action shall be by means of amendment to the Articles of Incorporation or bylaws or by merger, consolidation or otherwise or filing any Certificate of Designation, it being understood that the creation of a new security having rights, preferences or privileges senior to or on parity with the Series D in a future financing will not constitute an amendment, addition, alteration, filing, waiver or repeal for these purposes; (b) increase or decrease (other than by conversion) the authorized number of Series D; (c) issue any Series D, other than to the permitted recipients set forth on Exhibit B; or (d) without limiting any provision hereunder, whether or not prohibited by the terms of the Series D, circumvent a right of the Series D.

 

11. Amendment. Except for the conversion limitations set forth in Section 7 of this Certificate of Designation, as otherwise set forth in Section 10 of this Certificate of Designation and as otherwise required by law, this Certificate of Designation may be amended by the written consent or affirmative vote of at least a majority of the outstanding Series D.

 

12. Waiver. Except for the conversion limitations set forth in Section 7 of this Certificate of Designation and as otherwise set forth in Section 10 of this Certificate of Designation, any of the rights, powers, preferences, privileges, restrictions, qualifications, limitations and other terms of the Series D set forth herein may be waived on behalf of all holders of Series D by the written consent or affirmative vote of at least a majority of the outstanding Series D.

 

13. Specific Shall Not Limit General. No specific provision contained in this Certificate of Designation shall limit or modify any more general provision contained herein

 

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IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be duly executed by its Chief Executive Officer as of this 20th day July, 2020.

 

  TRANSPORTATION AND LOGISTICS SYSTEMS, INC.
   
  By: /s/ John Mercadante
  Name: John Mercadante
  Title: Chairman and CEO

 

 
 

 

Exhibit A

 

Form of Information Consent

 

Transportation and Logistics Systems, Inc. (the “Corporation”) has information or notice of a proposed event (collectively, the “Information”) that it is either required to provide you pursuant to its Certificate of Designation, Preferences, Rights and Limitations of Series D Convertible Preferred Stock (the “Certificate of Designation”) or believes that you would be interested in obtaining.

 

If the Corporation is required to provide this Information to you under the Certificate of Designation, you acknowledge that receipt of this Information may restrict you from trading in the Company’s securities until this Information is made public.

 

If the Corporation is not required to provide this Information to you under the Certificate of Designation, you acknowledge that this may restrict you from trading in the Corporation’s securities until this Information is made public in accordance with the Certificate of Designation.

 

Please respond in writing if you do or do not want to be provided with the Information. If the Corporation does not receive your response within three business days, we will have the right to assume that you have chosen not to receive the Information and, if applicable, waived your right to any subsequent offering rights provided for under Section 4 of the Certificate of Designation that require notice, for which this Information (including notice) is being given.

 

Please sign below and check the appropriate box below.

 

  Sincerely,
   
  TRANSPORTATION AND LOGISTICS, INC.
   
  By:  
  Name:  
  Title: Chief Executive Officer

 

___ Yes. Please provide we with the Information

___ No. Do not provide me with the Information

__________________________

__________________________

 

 
 

 

Exhibit B

 

Permitted Recipients of Series D Convertible Preferred Stock

 

The following shall be permitted recipients of Series D Convertible Preferred Stock:

 

Any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind who now or hereafter holds either or both of the following securities of Transportation and Logistics Systems, Inc., originally issued on August 30, 2019:

 

(i) original issue discount senior secured convertible notes; and

 

(ii) common stock purchase warrants.

 

 

 

Exhibit 4.1

 

EXCHANGE AGREEMENT

 

This Exchange Agreement (this “Agreement”), dated as of _________ __, 2020, is made by and among Transportation and Logistics Systems Inc., a Nevada corporation (the “Company”), and _______________ as the holder of the Exchange Securities (as defined below) (the “Holder”).

 

WHEREAS, the Holder holds Original Issue Discount Senior Secured Convertible Promissory Notes and Warrants to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) as more specifically set forth on Exhibit A attached hereto (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 of 1933 (the “Securities Act”), the Company desires to exchange with the Holder, and the Holder desires to exchange with the Company, the Exchange Securities for ______________ shares of the Company’s Series D Convertible Preferred Stock (the “Series D”), with such designations, rights, preferences, limitations and restrictions as set forth in the Certificate of Designation contained in Exhibit B attached hereto.

 

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 and the Holder agree that the Holder will exchange the Exchange Securities held by the Holder and will relinquish any and all other rights it may have under the Exchange Securities in exchange for the Series D.

 

2. Closing. Upon 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.

 

a. General. At closing, the Company shall deliver to the Holder the Series D. Upon closing, any and all obligations of the Company to Holder under the Exchange Securities shall be fully satisfied, the Holder will have no remaining rights, powers, privileges, remedies or interests under the Exchange Securities. On the closing date, the Company shall execute and cause its Transfer Agent to execute the form of reserve letter attached as Exhibit C.

 

b. Withdrawal of Series A. As a condition precedent to the closing, the Company shall have filed a certificate of withdrawal with the Secretary of State of Nevada withdrawing its Series A Convertible Preferred Stock.

 

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.

 

 
 

 

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 D. The Holder is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof.

 

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d. Legend. The Holder understands that the Series D (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 D 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 EXERCISE 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 Common Stock issuable upon the conversion of the Series D (the “Underlying Shares”) shall not be required to contain the legend set forth in Section 4(d) above or any other legend.

 

f. Restricted Securities. The Holder understands that: (i) the Series D (and the Underlying Securities) 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 D 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 D (or Underlying Securities, 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 D (or Underlying Securities) 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 D (or Underlying Securities) under circumstances in which the seller (or the Person 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.

 

5. Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to the Holder:

 

a. Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other 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 and 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 D has been duly authorized by the Company’s board of directors and 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.

 

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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 (as defined below) 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.

 

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 D will not (i) result in a violation of the Certificate of Incorporation (as defined herein) 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 (as defined herein) of the Company or any of its Subsidiaries, (ii) except as set forth in the SEC Documents (as defined herein), 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.

 

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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 D is exempt from registration under the Securities Act. The offer and issuance of the Series D 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. The Company hereby acknowledges that the holding period of the Series D (and Underlying Shares) shall tack back to the date the Exchanged Securities were originally issued by the Company to the Holder (or its assignor) and it covenants not to take any position to the contrary.

 

f. Issuance of the Series D. The issuance of the Series D is duly authorized by the Company. The issuance of shares of the Underlying Shares upon conversion of the Series D is duly authorized and, when issued in accordance with the Series D, 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. [Intentionally Omitted].

 

5
 

 

h. Equity Capitalization. Except as disclosed in the SEC 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 D; (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 (the “SEC Documents”) which are not so disclosed in the SEC 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. The Company has furnished to the Holder true, correct and complete copies of the Company’s Amended and Restated Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s Amended and Restated Bylaws and as in effect on the date hereof (the “Bylaws”), and the terms of all securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof in respect thereto that have not been disclosed in the SEC Documents.

 

i. Shell Company Status. The Company is not, and has not been in the last three years, 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 D (and Underlying Shares) tacks back to the issue date of the Exchange Securities. The Company hereby confirms that the Holder (who is exchanging the Exchange Securities) 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 Each Holders. 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, against Company Parties which Holder ever had, now has 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 D or any Exchange Documents or limit the Holder from taking action for matters with respect to the Series D or any Exchange Document or events that may arise in the future.

 

6
 

 

8. 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:

 

Transportation and Logistics Systems, Inc.

5500 Military Trail

Suite 22—357

Jupiter, FL 33458

Attn: John Mercandante, CEO

john@primeefs.com

 

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

 

K&L Gates LLP

599 Lexington Avenue

New York, NY 10022

Attn: Robert S. Matlin, Esq.

Robert.matlin@klgates.com

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

 

f. Expenses. The parties hereto shall pay their own costs and expenses in connection herewith.

 

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 D. The Company acknowledges and agrees that the Series D 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 D. The pledge of the Series D shall not be deemed to be a transfer, sale or assignment of the Series D hereunder, and if the Holder effects a pledge of the Series D 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 D may reasonably request in connection with a pledge of the Series D to such pledgee by the Holder.

 

[SIGNATURE PAGES 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.

 

  TRANSPORTATION AND LOGISTICS SYSTEMS, INC.
     
  By:  
  Name: John Mercadante
  Title: Chief Executive Officer
     
  [INVESTOR]
     
  By:  
  Name:                                
  Title:  
     
  Address for Notices and delivery of Series D:

 

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EXHIBIT A

 

Exchange Securities

 

Holder   Principal Amount of Original Issue Discount Senior Secured Convertible Promissory Notes   Warrants to Purchase
Common Stock
         

[Investor]

 

$[●]

 

[●]

 

10
 

 

EXHIBIT B

 

Certificate of Designation of Series D

 

[Attached]

 

11
 

 

EXHIBIT C

 

Reserve Letter

 

[Attached]

 

12
 

 

TRANSPORTATION & LOGISTICS SYSTEMS, INC.

5500 Military Trail, Suite 22-357

Jupiter, Florida 33458

 

Equiniti Trust Company

Attention: EQ Shareowner Services

1100 Centre Pointe Curve, Suite 101

Mendota Heights, MN 55120

 

July ___, 2020

 

Ladies and Gentlemen:

 

Transportation and Logistics Systems, Inc. (“Issuer”) a Nevada corporation and [INVESTOR] (“Investor”) have entered into an Exchange Agreement dated as of July 20, 2020 (the “Agreement”) providing for the issuance of [●] shares of the Company’s Series D Convertible Preferred Stock (the “Preferred Shares”).

 

A copy of the Certificate of Designations, Preferences, Rights and Limitations of the Preferred Shares is attached hereto (the “Certificate of Designation”). Equiniti Trust Company (“You” or “Equiniti”) should familiarize yourself with your issuance and delivery obligations, as Transfer Agent, contained herein. The shares to be issued are to be registered in the name of the registered holder of the Preferred Shares submitted for conversion or exercise.

 

In accordance with this Irrevocable Transfer Instruction Agreement, you are hereby irrevocably authorized and instructed to reserve [●] shares of common stock (“Common Stock”) of the Company for issuance upon conversion of the Preferred Shares. The amount of Common Stock so reserved may be increased, from time to time, by written instructions of the Company so long as there are sufficient authorized and unissued shares of the Company not otherwise reserved available to do so. In addition, you are hereby directed, upon being notified by the Company, to adjust the share reserve in accordance with Section 8 of the Certificate of Designation. Notwithstanding anything to the contrary in this Agreement, Equiniti has no obligation to confirm the accuracy of a notice of conversion (a “Conversion Notice”).

 

Equiniti is hereby irrevocably authorized and instructed to issue shares of Common Stock of the Company to the Investor, and remove all stop-transfer instructions relating to such shares, upon Equiniti’s receipt from the Investor of a Conversion Notice or notice by Investor’s counsel that the shares have been registered under the Securities Act of 1933 (“1933 Act”) or otherwise may be sold pursuant to Rule 144 without any restriction, and the Company or its counsel or Investor’s counsel provides an opinion of counsel to that effect in form, substance and scope customary for opinions of counsel in comparable transactions (and satisfactory to Equiniti), together with other documentation that may reasonably be requested, and the number of shares to be issued are less than 9.99% of the total issued and outstanding common stock of the Company (unless this requirement has been waived by the Company and the Investor in accordance with the Certificate of Designation), such shares shall be issued to the account of the Investor either (i) electronically by crediting the account of a Prime Broker with the Depository Trust Company through its Deposit/Withdrawal Agent Commission system, provided that the Company has been made FAST/DRS eligible by DTCC (DWAC), or (ii) in certificated form without any legend which would restrict the transfer of the shares, and you should remove all stop-transfer instructions relating to such shares (such shares shall be issued from the reserve, and the number of shares reserved shall be reduced on a one-for-one basis with the shares issued, but in the event there are insufficient reserve shares of Common Stock to accommodate a Conversion Notice, Equiniti and the Company agree that the Conversion Notice should be completed using authorized but unissued shares of Common Stock that the Company has in its treasury that are not otherwise reserved). If the shares of Common Stock are eligible to be electronically delivered via DWAC ((i) above), the shares of Common Stock shall be delivered in that manner. Equiniti is not responsible for the accuracy set forth in the Conversion Notice.

 

 
 

 

The Company hereby requests that your firm act promptly, without unreasonable delay and without the need for any action or confirmation by the Company with respect to the issuance of Common Stock pursuant to any Conversion Notices received from the Investor.

 

The Company shall indemnify you and your officers, directors, principals, partners, agents and representatives, and hold each of them harmless from and against any and all loss, liability, damage, claim or expense (including the reasonable fees and disbursements of its attorneys) incurred by or asserted against you or any of them arising out of or in connection with the instructions set forth herein, the performance of your duties hereunder and otherwise in respect hereof, including the costs and expenses of defending yourself or themselves against any claim or liability hereunder, including claims that may be asserted by the Company, except that the Company shall not be liable hereunder as to matters in respect of which it is determined that you have acted with gross negligence or in bad faith. You shall have no liability to the Company in respect to any action taken or any failure to act in respect of this if such action was taken or omitted to be taken in good faith, and you shall be entitled to rely in this regard on the advice of counsel.

 

The Board of Directors of the Company has approved this Irrevocable Transfer Instruction Agreement including the irrevocable instructions and does hereby extend the Company’s irrevocable agreement to indemnify Equiniti for all loss, liability or expense in carrying out the authority and direction herein contained on the terms herein set forth.

 

All processing fees will be expected and payable upon receipt of the request from the presenter of such request. The Company and Investor understand and agree that Equiniti’s fee schedule is subject to change and the Company agrees to pay the full amount of any such conversion according to the Equiniti fee schedule then in force. Equiniti shall not be obligated to process any request until and unless its fees are paid. Further, the Company and Investor understand and acknowledge that in the event that the Company is delinquent in payment of fees due Equiniti in an amount less than $1,500, Equiniti will honor conversion requests with the additional payment of $200.00 per request. In the event that the Company is suspended with Equiniti due to non-payment with an account balance owing in excess of $2,500, Investor or Company will be required to bring the account balance current before any transactions will be processed.

 

The Company agrees that the Equiniti may resign as the Company’s Transfer Agent. In that event, or in the event that the Company terminates Equiniti, Equiniti reserves the right to and may complete any issuance or transfer requests then pending. The Company shall engage a suitable replacement transfer agent that will agree to serve as transfer agent for the Company and be bound by the terms and conditions of these Irrevocable Instructions within five business days. In the event that the Company decides to terminate Equiniti, 30 days’ notice of termination must be given and a fee of $350 per irrevocable instruction letter must be paid prior to termination. Equiniti shall abide by the obligations under this Agreement during the 30 day termination period.

 

 
 

 

The Company hereby authorizes the issuance of such number of shares under the terms of the Certificate of Designation and any such shares shall be considered fully paid and non-assessable at the time of their issuance. The Company and the Investor agree that Equiniti will be notified in writing by the Company and the Investor when the Preferred Shares have been fully converted and if there are any remaining shares in the reservation that are to be released and returned to the Company’s authorized shares.

 

The Investor and Company expressly understand and agree that nothing in this Irrevocable Transfer Instruction Agreement shall require or be construed in any way to require Equiniti, in its sole discretion, to do, take or not do or take any action that would be contrary to any court order, any Federal or State law, rule, or regulation including but expressly not limited to both the 1933 Act and the Securities Exchange Act of 1934 as amended, the rules and regulations promulgated thereunder by the Securities and Exchange Commission, or the transfer agent agreement with the Company.

 

The Company hereby directs you, upon request by the Investor to immediately provide any capitalization structure information pertaining to the number of common shares of the Company that are issued and outstanding and the amount reserved for the Investor without any further action or confirmation by the Company.

 

The Investor is intended to be and is a third party beneficiary hereof, and no amendment or modification to the instructions set forth herein may be made without the consent of the Investor.

 

Transportation and Logistics Systems, Inc.   [Investor]
         
By:     By:        
Name: John Mercadante, Jr.   Name:  
Title: Chief Executive Officer   Title:  
         
Acknowledged and Agreed:      
Equiniti Trust Company      
         
By:        
Name:        
Title:        

 

 

 

Exhibit 10.1

 

TRANSPORTATION & LOGISTICS SYSTEMS, INC.

5500 Military Trail, Suite 22-357

Jupiter, Florida 33458

 

July __, 2020

 

[Investor]

 

Dear Sirs:

 

This agreement (the “Leak-Out Agreement”) by and between Transportation & Logistics Systems, Inc., a Nevada corporation (the “Company”) and the undersigned (the “Holder”) is being delivered to you in connection with that certain Exchange Agreement between the Company and the Holder dated the date of this Leak-Out Agreement.

 

The Holder is acquiring Preferred Shares under the Exchange Agreement which convert into common stock of the Company, par value $0.001 per share (the “Common Stock”). For good and valuable consideration, the receipt and sufficiency of which his hereby acknowledged, the Holder and the Company hereby agree as follows:

 

During the period commencing on the date hereof (“Execution Date”) and ending on the earlier to occur of: (a) 120 days from the Execution Date, (b) the Common Stock trading at an average reported volume of at least 100,000,001 shares for three consecutive trading days, (c) the price per share of the Common Stock exceeding $0.10 in a transaction, (d) the time of release (whether by termination of an applicable leak-out agreement or otherwise), in whole or in part, of any leak-out agreement with any other holder of securities (each, an “Other Holder”), or (e) any breach by the Company of any term of this Leak-Out Agreement that is not cured within five trading days following delivery of written notice of such breach by the Holder to the Company, neither the Holder, nor any of its Affiliates, collectively, shall sell, on any trading day, more than 10% of the Common Stock sold on such trading day.

 

For the purpose of this Leak-Out Agreement, the following definitions shall apply:

 

Affiliate” means, with respect to any specified person or entity (each, a “Person”), (x) any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including, without limitation, any partner, officer, director, member of such Person and any fund now or hereafter existing that is controlled by or under common control with one or more general partners or managing members of, or shares the same management company with, such Person or (y) if such Person is a natural person, such Person’s spouse, lineal descendant (including any adopted child or adopted grandchild) or other family member, or a custodian or trustee of any trust, partnership or limited liability company for the benefit of, in whole or in part, or the ownership interests of which are, directly or indirectly, controlled by, such Person or any other member or members of such Person’s family.

 

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Restricted Securities” means the securities of the Company specified on Schedule I to this Leak-Out Agreement.

 

Notwithstanding anything herein to the contrary, on or after the Execution Date, the Holder may, directly or indirectly, sell or transfer all, or any part, of the Restricted Securities (or any securities convertible or exercisable into Restricted Securities, as applicable) to any Person (an “Assignee”) without complying with (or otherwise limited by) the restrictions set forth in this Leak-Out Agreement; provided, that as a condition to any such sale or transfer an authorized signatory of the Company and such Assignee duly execute and deliver a leak-out agreement in the form of this Leak-Out Agreement with respect to such transferred Restricted Securities (or such securities convertible or exercisable into Restricted Securities, as applicable) (an “Assignee Agreement”) and sales of the Holder and its Affiliates and all Assignees shall be aggregated for all purposes of this Leak-Out Agreement and all Assignee Agreements.

 

The Company further represents and warrants as of the Execution Date and covenants and agrees from and after the Execution Date that none of the terms offered to any Other Holder with respect to any consent, release, amendment, settlement or waiver of the terms, conditions or transactions herein or in any agreement with any Other Holder related to the subject matter hereof, is or will be more favorable to such person or entity than those set forth in this Leak-Out Agreement or provided to any Person unless the provisions of this paragraph are complied with. If, and whenever on or after the Execution Date, the Company desires to provide terms which might affect any of the actions prohibited in the immediately preceding sentence, then (i) the Company shall provide the Holder with notice thereof at least two (2) business days prior to such date and (ii) upon the consummation thereof the terms and conditions of this Leak-Out Agreement shall be, without any further action by the Holder or the Company, automatically amended and modified in an economically and legally equivalent manner such that the Holder shall receive the benefit of the more favorable terms and/or conditions (as the case may be), provided that upon written notice to the Company at any time prior to the expiration of such two business day period the Holder may elect not to accept the benefit of any such amended or modified term or condition, in which event the term or condition contained in this Leak-Out Agreement shall continue to apply to the Holder as it was in effect immediately prior to such amendment or modification as if such amendment or modification never occurred with respect to the Holder.

 

This Leak-Out Agreement shall not become effective until, and expressly shall only become effective upon, the Company’s successful completion, in the Holder’s sole determination and to its satisfaction, of (1) the reservation with the Company’s transfer agent of [●] shares of the Common Stock created solely for the issuance of shares of Common Stock to the Holder and the delivery of irrevocable transfer agent instructions to the transfer agent, in form acceptable to the Holder, regarding the same and (2) delivery of shares of Common Stock to the Holder within two days of the date hereof upon the Company’s successful processing of conversion notices previously delivered by the Holder to the Company with respect to certain convertible securities held by the Holder. In the event that the Company does not (1) reserve enough shares of Common Stock to afford the conversion of all securities held by the Holder and the issuance of shares of Common Stock thereunder and (2) deliver any shares of Common Stock to the Holder under such instruments in compliance with the time periods set forth in such securities, herein, and the definitive agreements pursuant to which they were issued, the leak-out restrictions in this Leak-Out Agreement regarding the Holder, nor any of its Affiliates, selling, on any trading day, more than 10% of the Common Stock sold on such trading day, shall terminate immediately.

 

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Notwithstanding anything to the contrary herein or in any reservation letter, transfer agent instructions or the definitive agreements pursuant to which Preferred Stock and/or Common Stock are issued to the Holder, for every share of Common Stock delivered to the Holder upon conversion of the Preferred Stock, the number of shares of Common Stock that the Company is required to keep reserved for issuance to the Holder shall be reduced by one share (such reductions “Conversion Reserve Reductions”). Conversion Reserve Reductions shall not be a breach by the Company of this Leak-Out Agreement. Only when necessary to reflect shares of Common Stock delivered to the Holder upon conversion of the Preferred Stock, the Company shall be entitled to instruct the transfer agent to effect a Conversion Reserve Reduction without any further action by the Holder.

 

Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Leak-Out Agreement must be in writing.

 

This Leak-Out 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 hereto.

 

This Leak-Out 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 Leak-Out Agreement may be executed and accepted by facsimile or PDF signature and any such signature shall be of the same force and effect as an original signature.

 

The terms of this Leak-Out Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto and their respective successors and assigns.

 

This Leak-Out 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 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.

 

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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 set forth in the Exchange Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY 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 Leak-Out Agreement, the other parties hereto would not have an adequate remedy at law for money damages in the event that this Leak-Out 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.

 

The obligations of the Holder under this Leak-Out Agreement are several and not joint with the obligations of any Other Holder under any other agreement, and the Holder shall not be responsible in any way for the performance of the obligations of any Other Holder under any such other agreement. Nothing contained herein or in this Leak-Out Agreement, and no action taken by the Holder pursuant hereto, shall be deemed to constitute the Holder and Other Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holder and any Other Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Leak-Out Agreement and the Company acknowledges that the Holder and the Other Holders are not acting in concert or as a group with respect to such obligations or the transactions contemplated by this Leak-Out Agreement or any other agreement. The Company and the Holder confirm that the Holder has independently participated in the negotiation of the transactions contemplated hereby with the advice of its own counsel and advisors. The Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Leak-Out Agreement, and it shall not be necessary for any Other Holder to be joined as an additional party in any proceeding for such purpose.

 

[Signature page to follow.]

 

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Agreed to and Acknowledged:  
   
“Company”  
   
Transportation & Logistics Systems, Inc.  
     
By:    
  John Mercadante, Jr.  
  Chief Executive Officer  
     
“Holder”  
[Investor]  
     
By:    

 

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Schedule I

 

List of Restricted Securities

 

(In each case without regard to any limitations on conversion or exercise with respect thereto)

 

  I. [●] shares of Common Stock

 

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