Exhibit
3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
THE
SERIES H-6 CONVERTIBLE PREFERRED STOCK OF
DROPCAR, INC.
I,
Spencer Richardson, hereby certify that I am the Chief Executive
Officer of DropCar, Inc. (the “Company”), a corporation organized
and existing under the Delaware General Corporation Law (the
“DGCL”), and
further do hereby certify:
That
pursuant to the authority expressly conferred upon the Board or
Directors (the “Board”) by the Company’s
Certificate of Incorporation, as amended (the “Certificate of Incorporation”),
the Board on January 29, 2020 adopted the following resolutions
creating a series of 50,000 shares of Preferred Stock designated as
Series H-6 Convertible Preferred Stock, none of which shares have
been issued:
RESOLVED, that the
Board designates the Series H-6 Convertible Preferred Stock and the
number of shares constituting such series, and fixes the rights,
powers, preferences, privileges and restrictions relating to such
series in addition to any set forth in the Certificate of
Incorporation as follows:
TERMS OF SERIES H-6 CONVERTIBLE PREFERRED STOCK
1.
Designation
and Number of Shares. There shall hereby be created and established
a series of preferred stock of the Company designated as
“Series H-6 Convertible Preferred Stock” (the
“Preferred Shares
”). The authorized number of Preferred Shares shall be 50,000
shares. Each Preferred Share shall have a par value of $0.0001.
Capitalized terms not defined herein shall have the meaning as set
forth in Section 18 below.
2.
Ranking.
Except with respect to any current series of preferred stock of
senior rank to the Preferred Shares in respect of the preferences
as to dividends, distributions and payments upon the liquidation,
dissolution and winding up of the Company (collectively, the
“Senior Preferred
Stock ”) and any current or future series of preferred
stock of pari passu rank to the Preferred Shares in respect of the
preferences as to dividends, distributions and payments upon the
liquidation, dissolution and winding up of the Company, which, as
of the date hereof, consists of Series H Convertible Preferred
Stock, Series H-3 Convertible Preferred Stock, Series H-4
Convertible Preferred Stock and Series H-5 Convertible Preferred
Stock (collectively, the “Parity Stock”), all shares of
capital stock of the Company shall be junior in rank to all
Preferred Shares with respect to the preferences as to dividends,
distributions and payments upon the liquidation, dissolution and
winding up of the Company (collectively, the “Junior Stock”). The rights of all
such shares of capital stock of the Company shall be subject to the
rights, powers, preferences and privileges of the Preferred Shares.
In the event of the merger or consolidation of the Company with or
into another corporation, the Preferred Shares shall maintain their
relative rights, powers, designations, privileges and preferences
provided for herein and no such merger or consolidation shall
result inconsistent therewith. For the avoidance of doubt, in no
circumstance will a Preferred Share have any rights subordinate or
otherwise inferior to the rights of shares of Parity Stock or
Common Stock (as defined below).
3.
Conversion.
Each Preferred Share shall be convertible into validly issued,
fully paid and non-assessable shares of Common Stock on the terms
and conditions set forth in this Section 3.
(a)
Holder’s
Conversion Right. Subject to the provisions of Section 3(e)), at
any time or times on or after the Initial Issuance Date, each
holder of a Preferred Share (each, a “Holder ” and collectively, the
“Holders”) shall
be entitled to convert any whole number of Preferred Shares into
validly issued, fully paid and non-assessable shares of Common
Stock in accordance with Section 3(c) at the Conversion Rate (as
defined below).
(b)
Conversion
Rate. The number of validly issued, fully paid and non-assessable
shares of Common Stock issuable upon conversion of each Preferred
Share pursuant to Section 3(a) shall be determined according to the
following formula (the “Conversion Rate ”):
Conversion Amount
Conversion
Price
No
fractional shares of Common Stock are to be issued upon the
conversion of any Preferred Shares. If the issuance would result in
the issuance of a fraction of a share of Common Stock, the Company
shall round such fraction of a share of Common Stock up to the
nearest whole share.
(c)
Mechanics
of Conversion. The conversion of each Preferred Share shall be
conducted in the following manner:
(i)
Holder’s
Conversion. To convert a Preferred Share into validly issued, fully
paid and non-assessable shares of Common Stock on any date (a
“Conversion Date
”), a Holder shall deliver (whether via electronic mail,
facsimile or otherwise), for receipt on or prior to 11:59 p.m., New
York time, on such date, a copy of an executed notice of conversion
of the share(s) of Preferred Shares subject to such conversion in
the form attached hereto as Exhibit
I (the “Conversion
Notice”) to the Company. If required by Section
3(c)(vi), within five (5) Trading Days following a conversion of
any such Preferred Shares as aforesaid, such Holder shall surrender
to a nationally recognized overnight delivery service for delivery
to the Company the original certificates representing the share(s)
of Preferred Shares (the “Preferred Share Certificates”) so
converted as aforesaid.
(ii)
Company’s
Response. On or before the first (1st ) Trading Day
following the date of receipt of a Conversion Notice, the Company
shall transmit by electronic mail or facsimile an acknowledgment of
confirmation, in the form attached hereto as Exhibit II, of receipt of such
Conversion Notice to such Holder and the Company’s transfer
agent (the “Transfer
Agent”), which confirmation shall constitute an
instruction to the Transfer Agent to process such Conversion Notice
in accordance with the terms herein. On or before the second
(2nd)
Trading Day following the date of receipt by the Company of such
Conversion Notice, the Company shall (1) provided that (x) the
Transfer Agent is participating in the Depository Trust Company
(“DTC”) Fast
Automated Securities Transfer Program and (y) Common Stock shares
to be so issued are otherwise eligible for resale pursuant to Rule
144 promulgated under the Securities Act of 1933, as amended,
credit such aggregate number of shares of Common Stock to which
such Holder shall be entitled to such Holder’s or its
designee’s balance account with DTC through its
Deposit/Withdrawal at Custodian system, or (2) if either of the
immediately preceding clauses (x) or (y) are not satisfied, issue
and deliver (via reputable overnight courier) to the address as
specified in such Conversion Notice, a certificate, registered in
the name of such Holder or its designee, for the number of shares
of Common Stock to which such Holder shall be entitled. If the
number of Preferred Shares represented by the Preferred Share
Certificate(s) submitted for conversion pursuant to Section
3(c)(vi) is greater than the number of Preferred Shares being
converted, then the Company shall if requested by such Holder, as
soon as practicable and in no event later than three (3) Trading
Days after receipt of the Preferred Share Certificate(s) and at its
own expense, issue and deliver to such Holder (or its designee) a
new Preferred Share Certificate representing the number of
Preferred Shares not converted.
(iii)
Record
Holder. The Person or Persons entitled to receive the shares of
Common Stock issuable upon a conversion of Preferred Shares shall
be treated for all purposes as the record holder or holders of such
shares of Common Stock on the Conversion Date.
(iv)
Company’s
Failure to Timely Convert. If the Company shall fail, for any
reason or for no reason, to issue to a Holder within three (3)
Trading Days after the Company’s receipt of a Conversion
Notice (whether via electronic mail, facsimile or otherwise) (the
“Share Delivery
Deadline ”), a certificate for the number of shares of
Common Stock to which such Holder is entitled and register such
shares of Common Stock on the Company’s share register or to
credit such Holder’s or its designee’s balance account
with DTC for such number of shares of Common Stock to which such
Holder is entitled upon such Holder’s conversion of any
Preferred Shares (as the case may be) (a “Conversion Failure”), then, in
addition to all other remedies available to such Holder, such
Holder, upon written notice to the Company, may void its Conversion
Notice with respect to, and retain or have returned (as the case
may be) any Preferred Shares that have not been converted pursuant
to such Holder’s Conversion Notice, provided that the voiding
of a Conversion Notice shall not affect the Company’s
obligations to make any payments which have accrued prior to the
date of such notice pursuant to the terms of this Certificate of
Designations or otherwise. In addition to the foregoing, if within
three (3) Trading Days after the Company’s receipt of a
Conversion Notice (whether via electronic mail, facsimile or
otherwise), the Company shall fail to issue and deliver a
certificate to such Holder and register such shares of Common Stock
on the Company’s share register or credit such Holder’s
or its designee’s balance account with DTC for the number of
shares of Common Stock to which such Holder is entitled upon such
Holder’s conversion hereunder (as the case may be), and if on
or after such third (3rd) Trading Day such
Holder (or any other Person in respect, or on behalf, of such
Holder) purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by such
Holder of all or any portion of the number of shares of Common
Stock, or a sale of a number of shares of Common Stock equal to all
or any portion of the number of shares of Common Stock, issuable
upon such conversion that such Holder so anticipated receiving from
the Company, then, in addition to all other remedies available to
such Holder, the Company shall, within three (3) Business Days
after such Holder’s request, which request shall include
reasonable documentation of all broker fees, costs and expenses and
in such Holder’s discretion, either (i) pay cash to such
Holder in an amount equal to such Holder’s total purchase
price (including brokerage commissions and other reasonable out of
pocket expenses related to the Buy-In, if any) for the shares of
Common Stock so purchased (including, without limitation, by any
other Person in respect, or on behalf, of such Holder) (the
“Buy-In Price”),
at which point the Company’s obligation to so issue and
deliver such certificate or credit such Holder’s balance
account with DTC for the number of shares of Common Stock to which
such Holder is entitled upon such Holder’s conversion
hereunder (as the case may be) (and to issue such shares of Common
Stock) shall terminate, or (ii) promptly honor its obligation to so
issue and deliver to such Holder a certificate or certificates
representing such shares of Common Stock or credit such
Holder’s balance account with DTC for the number of shares of
Common Stock to which such Holder is entitled upon such
Holder’s conversion hereunder (as the case may be) and pay
cash to such Holder in an amount equal to the excess (if any) of
the Buy-In Price over the product of (A) such number of shares of
Common Stock multiplied by (B) the sale price of the Common Stock
at which the sell order giving rise to such purchase obligation was
executed.
(v)
Pro
Rata Conversion; Disputes. In the event the Company receives a
Conversion Notice from more than one Holder for the same Conversion
Date and the Company can convert some, but not all, of such
Preferred Shares submitted for conversion, the Company shall
convert from each Holder electing to have Preferred Shares
converted on such date a pro rata amount of such Holder’s
Preferred Shares submitted for conversion on such date based on the
number of Preferred Shares submitted for conversion on such date by
such Holder relative to the aggregate number of Preferred Shares
submitted for conversion on such date. In the event of a dispute as
to the number of shares of Common Stock issuable to a Holder in
connection with a conversion of Preferred Shares, the Company shall
issue to such Holder the number of shares of Common Stock not in
dispute and resolve such dispute in accordance with Section 6 of
the Exchange Agreement.
(vi)
Book-Entry.
Notwithstanding anything to the contrary set forth in this Section
3, upon conversion of any Preferred Shares in accordance with the
terms hereof, no Holder thereof shall be required to physically
surrender the certificate representing the Preferred Shares to the
Company following conversion thereof unless (A) the full or
remaining number of Preferred Shares represented by the certificate
are being converted (in which event such certificate(s) shall be
delivered to the Company as contemplated by this Section 3(c)(vi)
or (B) such Holder has provided the Company with prior written
notice (which notice may be included in a Conversion Notice)
requesting reissuance of Preferred Shares upon physical surrender
of any Preferred Shares. Each Holder and the Company shall maintain
records showing the number of Preferred Shares so converted by such
Holder and the dates of such conversions or shall use such other
method, reasonably satisfactory to such Holder and the Company, so
as not to require physical surrender of the certificate
representing the Preferred Shares upon each such conversion. In the
event of any dispute or discrepancy, such records of such Holder
establishing the number of Preferred Shares to which the record
holder is entitled shall be controlling and determinative in the
absence of manifest error. A Holder and any transferee or assignee,
by acceptance of a certificate, acknowledge and agree that, by
reason of the provisions of this paragraph, following conversion of
any Preferred Shares, the number of Preferred Shares represented by
such certificate may be less than the number of Preferred Shares
stated on the face thereof. Each certificate for Preferred Shares
shall bear the following legend:
ANY
TRANSFEREE OR ASSIGNEE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW
THE TERMS OF THE CORPORATION’S CERTIFICATE OF DESIGNATIONS
RELATING TO THE SHARES OF SERIES H-6 PREFERRED STOCK REPRESENTED BY
THIS CERTIFICATE, INCLUDING SECTION 3(c)(vi) THEREOF. THE NUMBER OF
SHARES OF SERIES H-6 PREFERRED STOCK REPRESENTED BY THIS
CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES H-6
PREFERRED STOCK STATED ON THE FACE HEREOF PURSUANT TO SECTION
3(c)(vi) OF THE CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES
OF SERIES H-6 PREFERRED STOCK REPRESENTED BY THIS
CERTIFICATE.
(d)
Taxes.
The Company shall pay any and all documentary, stamp, transfer (but
only in respect of the registered holder thereof), issuance and
other similar taxes that may be payable with respect to the
issuance and delivery of shares of Common Stock upon the conversion
of Preferred Shares.
(e)
Limitation
on Beneficial Ownership.
(i)
Notwithstanding
anything to the contrary contained in this Certificate of
Designations, the Preferred Shares held by a Holder shall not be
convertible by such Holder, and the Company shall not effect any
conversion of any Preferred Shares held by such Holder, to the
extent (but only to the extent) that such Holder or any of its
affiliates would beneficially own in excess of 9.99% (the
“Maximum Percentage
”) of the Common Stock. To the extent the above limitation
applies, the determination of whether the Preferred Shares held by
such Holder shall be convertible (vis-à-vis other convertible,
exercisable or exchangeable securities owned by such Holder or any
of its affiliates) and of which such securities shall be
convertible, exercisable or exchangeable (as among all such
securities owned by such Holder and its affiliates) shall, subject
to such Maximum Percentage limitation, be determined on the basis
of the first submission to the Company for conversion, exercise or
exchange (as the case may be). No prior inability of a Holder to
convert Preferred Shares, or of the Company to issue shares of
Common Stock to such Holder, pursuant to this Section 3(e) shall
have any effect on the applicability of the provisions of this
Section 3(e) with respect to any subsequent determination of
convertibility or issuance (as the case may be). For purposes of
this Section 3(e), beneficial ownership and all determinations and
calculations (including, without limitation, with respect to
calculations of percentage ownership) shall be determined in
accordance with Section 13(d) of the 1934 Act and the rules and
regulations promulgated thereunder. The provisions of this Section
3(e) shall be implemented in a manner otherwise than in strict
conformity with the terms of this Section 3(e) to correct this
Section 3(e) (or any portion hereof) which may be defective or
inconsistent with the intended Maximum Percentage beneficial
ownership limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such
Maximum Percentage limitation. The limitations contained in this
Section 3(e) shall apply to a successor holder of Preferred Shares.
The Company may not waive this Section 3(e) without the consent of
holders of a majority of its Common Stock. For any reason at any
time, upon the written or oral request of a Holder, the Company
shall within one (1) Business Day confirm orally and in writing to
such Holder the number of shares of Common Stock then outstanding,
including by virtue of any prior conversion or exercise of
convertible or exercisable securities into Common Stock, including,
without limitation, pursuant to this Certificate of Designations or
securities issued pursuant to the other Transaction Documents. By
written notice to the Company, any Holder may increase or decrease
the Maximum Percentage to any other percentage not in excess of
9.99% specified in such notice; provided that (i) any such increase
will not be effective until the 61st day after such notice is
delivered to the Company, and (ii) any such increase or decrease
will apply only to such Holder sending such notice and not to any
other Holder.
4.
Adjustment
of Conversion Price
(a)
Subdivision
or Combination of Common Stock. Without limiting any provision of
Section 9, if the Company at any time on or after the Initial
Issuance Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. Without limiting any
provision of Section 9, if the Company at any time on or after the
Initial Issuance Date combines (by combination, reverse stock split
or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price
in effect immediately prior to such combination will be
proportionately increased. Any adjustment pursuant to this Section
4 shall become effective immediately after the effective date of
such subdivision or combination. If any event requiring an
adjustment under this Section 4 occurs during the period that a
Conversion Price is calculated hereunder, then the calculation of
such Conversion Price shall be adjusted appropriately to reflect
such event.
(b)
Certain
Anti-Dilution Adjustments. If the Company shall, at any time while
any of the Preferred Shares are outstanding, issue any shares of
its Common Stock, other than Exempt Issuances, without
consideration or for a consideration per share less than the
applicable Conversion Price, then with respect to any such
issuance, the applicable Conversion Price as in effect immediately
prior to each such issuance shall forthwith be lowered to a price
equal to the issuance, conversion, exchange or exercise price, as
applicable, of any such securities so issued. Common Stock issued
or issuable by the Company for no consideration or for
consideration that cannot be determined at the time of issue will
be deemed issuable or to have been issued for the Reduced
Conversion Floor Price. For purposes of the issuance and
adjustments described in this paragraph, in the event of the
issuance of any Common Stock Equivalent, the Company shall be
deemed to have issued Common Stock at the lowest price issuable
pursuant to such Common Stock Equivalent and shall result in a
reduction of the Conversion Price pursuant to this Section 4(b)
upon each of: (i) the issuance of such Common Stock Equivalent; and
(ii) upon any subsequent issuances of shares of Common Stock upon
exercise of such Common Stock Equivalent if such issuance is at a
price lower than the Conversion Price in effect upon such issuance.
Notwithstanding the foregoing, no reduction of the Conversion Price
shall be less than twenty percent (20%) of the original Conversion
Price on the Closing Date (subject to appropriate adjustments for
stock splits, stock dividends, recapitalizations, reorganizations,
reclassifications, combinations, reverse stock splits or other
similar transactions after the Issuance Date) (the
“Reduced Conversion Floor
Price ”). Notwithstanding anything herein to the
contrary, this Section 4(b) shall not apply until receipt of the
Shareholder Approval.
(a)
Reservation.
The Company shall initially reserve out of its authorized and
unissued Common Stock a number of shares of Common Stock equal to
100% of the Conversion Rate with respect to the Conversion Amount
of each Preferred Share as of the Initial Issuance Date (assuming
for purposes hereof, that all the Preferred Shares issuable
pursuant to the Exchange Agreement have been issued, such Preferred
Shares are convertible at the Conversion Price and without taking
into account any limitations on the conversion of such Preferred
Shares set forth in herein). So long as any of the Preferred Shares
are outstanding, the Company shall take all action necessary to
reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, as of any given date, 100% of
the number of shares of Common Stock as shall from time to time be
necessary to effect the conversion of all of the Preferred Shares
issued or issuable pursuant to the Exchange Agreement, assuming for
purposes hereof, that all the Preferred Shares issuable pursuant to
the Exchange Agreement have been issued and without taking into
account any limitations on the issuance of securities set forth
herein), provided that at no time shall the number of shares of
Common Stock so available be less than the number of shares
required to be reserved by the previous sentence (without regard to
any limitations on conversions contained in this Certificate of
Designations) (the “Required
Amount ”). The initial number of shares of Common
Stock reserved for conversions of the Preferred Shares and each
increase in the number of shares so reserved shall be allocated pro
rata among the Holders based on the number of Preferred Shares held
by each Holder on the Initial Issuance Date or increase in the
number of reserved shares (as the case may be) (the
“Authorized Share
Allocation”). In the event a Holder shall sell or
otherwise transfer any of such Holder’s Preferred Shares,
each transferee shall be allocated a pro rata portion of such
Holder’s Authorized Share Allocation. Any shares of Common
Stock reserved and allocated to any Person which ceases to hold any
Preferred Shares shall be allocated to the remaining Holders of
Preferred Shares, pro rata based on the number of Preferred Shares
then held by such Holders.
(b)
Insufficient
Authorized Shares. If, notwithstanding Section 5(a) and not in
limitation thereof, at any time while any of the Preferred Shares
remain outstanding the Company does not have a sufficient number of
authorized and unissued shares of Common Stock to satisfy its
obligation to have available for issuance upon conversion of the
Preferred Shares at least a number of shares of Common Stock equal
to the Required Amount (an “Authorized Share Failure ”), then
the Company shall promptly take all reasonable action (within its
control) to increase the Company’s authorized shares of
Common Stock to an amount sufficient to allow the Company to
reserve and have available the Required Amount for all of the
Preferred Shares then outstanding. Without limiting the generality
of the foregoing sentence, as soon as practicable after the date of
the occurrence of an Authorized Share Failure, but in no event
later than ninety (90) days after the occurrence of such Authorized
Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares
of Common Stock. In connection with such meeting, the Company shall
provide each stockholder with a proxy statement and shall use its
best efforts to solicit its stockholders’ approval of such
increase in authorized shares of Common Stock.
6.
Voting
Rights. Subject to the following
paragraph, on any matter presented to the stockholders of the
Company for their action or consideration at any meeting of
stockholders of the Company (or by written consent of stockholders
in lieu of a meeting), each Holder, in its capacity as such, shall
be entitled to cast the number of votes equal to the number of
whole shares of Common Stock into which the Preferred Shares
beneficially owned by such Holder are convertible as of the record
date for determining stockholders entitled to vote on or consent to
such matter (taking into account all Preferred Shares beneficially
owned by such Holder). Notwithstanding the foregoing, in no event
shall a Holder be permitted to exercise a greater number of votes
than such Holder would have been entitled to cast if the Preferred
Shares had immediately been converted into shares of Common Stock
at a conversion price equal to $0.78 (subject to adjustment for
stock splits, stock dividends, recapitalizations, reorganizations,
reclassifications, combinations, reverse stock splits or other
similar events). Except as otherwise required by law or by the
other provisions of the Certificate of Incorporation, the Holders,
in their capacity as such, shall vote together with the holders of
Common Stock and any other class or series of stock entitled to
vote thereon as a single class. Notwithstanding
anything to the contrary contained in this Certificate of
Designations, no Holder shall be permitted to vote the Preferred
Shares beneficially owned by such Holder in excess of the Maximum
Percentage. To the extent the above limitation applies to a Holder,
the total votes entitled to be cast by such Holder, in its capacity
as such, shall be proportionately decreased among the Preferred
Shares beneficially owned by such Holder. No prior inability of a
Holder to vote Preferred Shares pursuant to this Section 6 shall
have any effect on the applicability of the provisions of this
Section 6 with respect to any subsequent determination of voting.
For purposes of this Section 6, beneficial ownership and all
determinations and calculations (including, without limitation,
with respect to calculations of percentage ownership) shall be
determined in accordance with Section 13(d) of the 1934 Act and the
rules and regulations promulgated thereunder. The limitations
contained in this Section 6 shall apply to a successor holder of
Preferred Shares. For any reason at any time, upon the written or
oral request of a Holder, the Company shall within one (1) Business
Day confirm orally and in writing to such Holder the number of
shares of Common Stock then outstanding, including by virtue of any
prior conversion or exercise of convertible or exercisable
securities into Common Stock, including, without limitation,
pursuant to this Certificate of Designations or securities issued
pursuant to the other Transaction Documents.
8.
Liquidation,
Dissolution, Winding-Up. In the event of a Liquidation Event, the
Holders shall be entitled to receive in cash out of the assets of
the Company, whether from capital or from earnings available for
distribution to its stockholders (the “Liquidation Funds ”), before any
amount shall be paid to the holders of any of shares of Junior
Stock, an amount per Preferred Share equal to the amount per share
such Holder would receive if such Holder converted such Preferred
Shares into Common Stock immediately prior to the date of such
payment, provided that if the Liquidation Funds are insufficient to
pay the full amount due to the Holders and holders of shares of
Parity Stock, then each Holder and each holder of Parity Stock
shall receive a percentage of the Liquidation Funds equal to the
full amount of Liquidation Funds payable to such Holder and such
holder of Parity Stock as a liquidation preference, in accordance
with their respective certificate of designations (or equivalent),
as a percentage of the full amount of Liquidation Funds payable to
all holders of Preferred Shares and all holders of shares of Parity
Stock. To the extent necessary, the Company shall cause such
actions to be taken by each of its Subsidiaries so as to enable, to
the maximum extent permitted by law, the proceeds of a Liquidation
Event to be distributed to the Holders in accordance with this
Section 8. All the preferential amounts to be paid to the Holders
under this Section 8 shall be paid or set apart for payment before
the payment or setting apart for payment of any amount for, or the
distribution of any Liquidation Funds of the Company to the holders
of shares of Junior Stock in connection with a Liquidation Event as
to which this Section 8 applies.
9.
Participation.
In addition to any adjustments pursuant to Section 4, the Holders
shall, as holders of Preferred Shares, be entitled to receive such
dividends paid and distributions made to the holders of shares of
Common Stock to the same extent as if such Holders had converted
each Preferred Share held by each of them into shares of Common
Stock (without regard to any limitations on conversion herein or
elsewhere) and had held such shares of Common Stock on the record
date for such dividends and distributions. Payments under the
preceding sentence shall be made concurrently with the dividend or
distribution to the holders of shares of Common Stock (provided,
however, to the extent that a Holder’s right to participate
in any such dividend or distribution would result in such Holder
exceeding the Maximum Percentage, then such Holder shall not be
entitled to participate in such dividend or distribution to such
extent (or the beneficial ownership of any such shares of Common
Stock as a result of such dividend or distribution to such extent)
and such dividend or distribution to such extent shall be held in
abeyance for the benefit of such Holder until such time, if ever,
as its right thereto would not result in such Holder exceeding the
Maximum Percentage).
10.
Vote to
Change the Terms of or Issue Preferred Shares. In addition to any
other rights provided by law, except where the vote or written
consent of the holders of a greater number of shares is required by
law or by another provision of the Certificate of Incorporation,
without first obtaining the affirmative vote at a meeting duly
called for such purpose or the written consent without a meeting of
the Required Holders, voting together as a single class, the
Company shall not: (a) amend or repeal any provision of, or add any
provision to, its Certificate of Incorporation or bylaws, or file
any certificate of designations or certificate of amendment, 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 Preferred Shares, regardless of whether any
such action shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise; provided,
however, the Company shall be entitled, without the consent of the
Required Holders unless such consent is otherwise required by the
DGCL, to amend the Certificate of Incorporation to effectuate one
or more reverse stock splits of its issued and outstanding Common
Stock for purposes of maintaining compliance with the rules and
regulations of the Principal Market; or (b) without limiting any
provision of Section 13, whether or not prohibited by the terms of
the Preferred Shares, circumvent a right of the Preferred
Shares.
11.
Lost or
Stolen Certificates. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any certificates representing
Preferred Shares (as to which a written certification and the
indemnification contemplated below shall suffice as such evidence),
and, in the case of loss, theft or destruction, of an
indemnification undertaking by the applicable Holder to the Company
in customary and reasonable form and, in the case of mutilation,
upon surrender and cancellation of the certificate(s), the Company
shall execute and deliver new certificate(s) of like tenor and
date.
12.
Remedies,
Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Certificate of Designations
shall be cumulative and in addition to all other remedies available
under this Certificate of Designations and any of the other
Transaction Documents, at law or in equity (including a decree of
specific performance and/or other injunctive relief), and no remedy
contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy. Nothing herein shall limit
any Holder’s right to pursue actual and consequential damages
for any failure by the Company to comply with the terms of this
Certificate of Designations.. Amounts set forth or provided for
herein with respect to payments, conversion and the like (and the
computation thereof) shall be the amounts to be received by a
Holder and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders
and that the remedy at law for any such breach may be inadequate.
The Company therefore agrees that, in the event of any such breach
or threatened breach, each Holder shall be entitled, in addition to
all other available remedies, to an injunction restraining any such
breach or any such threatened breach, without the necessity of
showing economic loss and without any bond or other security being
required, to the extent permitted by applicable law. The Company
shall provide all information and documentation to a Holder that is
requested by such Holder to enable such Holder to confirm the
Company’s compliance with the terms and conditions of this
Certificate of Designations.
13.
Noncircumvention.
The Company hereby covenants and agrees that the Company will not,
by amendment of its Certificate of Incorporation, bylaws or through
any reorganization, transfer of assets, consolidation, merger,
scheme of arrangement, dissolution, issue or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Certificate of
Designations, and will at all times in good faith carry out all the
provisions of this Certificate of Designations and take all action
as may be required to protect the rights of the Holders. Without
limiting the generality of the foregoing or any other provision of
this Certificate of Designations, the Company (i) shall not
increase the par value of any shares of Common Stock receivable
upon the conversion of any Preferred Shares above the Conversion
Price then in effect without the consent or vote of the Required
Holders, (ii) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of Common Stock upon the
conversion of Preferred Shares and (iii) shall, so long as any
Preferred Shares are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, the maximum number of shares of
Common Stock as shall from time to time be necessary to effect the
conversion of the Preferred Shares then outstanding (without regard
to any limitations on conversion contained herein).
14.
Failure
or Indulgence Not Waiver. No failure or delay on the part of a
Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege.
No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party. This Certificate
of Designations shall be deemed to be jointly drafted by the
Company and all Holders and shall not be construed against any
Person as the drafter hereof.
15.
Notices.
The Company shall provide each Holder of Preferred Shares with
prompt written notice of all actions taken pursuant to the terms of
this Certificate of Designations, including in reasonable detail a
description of such action and the reason therefor. Whenever notice
is required to be given under this Certificate of Designations,
unless otherwise provided herein, such notice must be in writing
and shall be given in accordance with Section 8(c) of the Exchange
Agreement. Without limiting the generality of the foregoing, the
Company shall give written notice to each Holder (i) promptly
following any adjustment of the Conversion Price, setting forth in
reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least fifteen (15) days prior to the date on
which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the Common Stock, (B)
with respect to any grant, issuances, or sales of any Options,
Convertible Securities or rights to purchase stock, warrants,
securities or other property to all holders of shares of Common
Stock as a class or (C) for determining rights to vote with respect
to any dissolution or liquidation, provided, in each case, that
such information shall be made known to the public prior to, or
simultaneously with, such notice being provided to any
Holder.
16.
Preferred
Shares Register. The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as
it may designate by notice to the Holders), a register for the
Preferred Shares, in which the Company shall record the name,
address, E-mail address and facsimile number of the Persons in
whose name the Preferred Shares have been issued, as well as the
name and address of each transferee. The Company may treat the
Person in whose name any Preferred Shares is registered on the
register as the owner and holder thereof for all purposes,
notwithstanding any notice to the contrary, but in all events
recognizing any properly made transfers.
17.
Stockholder
Matters; Amendment.
(a)
Stockholder
Matters. Any stockholder action, approval or consent required,
desired or otherwise sought by the Company pursuant to the DGCL,
the Certificate of Incorporation, this Certificate of Designations
or otherwise with respect to the issuance of Preferred Shares may
be effected by written consent of the Company’s stockholders
or at a duly called meeting of the Company’s stockholders,
all in accordance with the applicable rules and regulations of the
DGCL.
(b)
Amendment.
This Certificate of Designations or any provision hereof may be
amended by obtaining the affirmative vote at a meeting duly called
for such purpose, or written consent without a meeting in
accordance with the DGCL, of the Required Holders, voting separate
as a single class, and with such other stockholder approval, if
any, as may then be required pursuant to the DGCL and the
Certificate of Incorporation.
18.
Certain
Defined Terms. For purposes of this Certificate of Designations,
the following terms shall have the following meanings:
(a)
“1934
Act ” means the Securities Exchange Act of 1934, as
amended.
(b)
“Bloomberg
” means Bloomberg, L.P.
(c)
“Business
Day ” means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
(d)
“Closing
Bid Price ” and “Closing Sale Price” means, for any
security as of any date, the last closing bid price and last
closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price (as the
case may be) then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if the Principal Market is not
the principal securities exchange or trading market for such
security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing
bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask
prices, respectively, of any market makers for such security as
reported in the “pink sheets” by OTC Markets Group Inc.
(formerly Pink Sheets LLC). If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date
on any of the foregoing bases, the Closing Bid Price or the Closing
Sale Price (as the case may be) of such security on such date shall
be the fair market value as mutually determined by the Company and
the applicable Holder. If the Company and such Holder are unable to
agree upon the fair market value of such security, then such
dispute shall be resolved in accordance with the procedures in the
Exchange Agreement. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or
other similar transaction during such period.
(e)
“Common
Stock ” means (i) the Company’s shares of common
stock, $0.0001 par value per share, and (ii) any capital stock into
which such common stock shall have been changed or any share
capital resulting from a reclassification of such common
stock.
(f)
“Common
Stock Equivalents ” means any securities of the
Company or its Subsidiaries which would entitle the holder thereof
to acquire at any time Common Stock, including, without limitation,
any debt, preferred stock, right, option, warrant or other
instrument that is at any time convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.
(g)
“Conversion
Amount ” means, with respect to each Preferred Share,
as of the applicable date of determination, the Stated Value
thereof.
(h)
“Conversion
Price ” means, with respect to each Preferred Share,
as of any Conversion Date or other applicable date of
determination, $0.72, subject to adjustment as provided
herein.
(i)
“Convertible
Securities ” means any stock or other security (other
than Options) that is at any time and under any circumstances,
directly or indirectly, convertible into, exercisable or
exchangeable for, or which otherwise entitles the holder thereof to
acquire, any shares of Common Stock.
(j)
“Eligible
Market ” means The New York Stock Exchange, the NYSE
American, the Nasdaq Global Select Market, the Nasdaq Global Market
or the Principal Market.
(k)
“Exchange
Agreement” means that
certain Exchange Agreement, dated as of February 5, 2020, by and
among the Company and the investors signatory thereto.
(l)
“Exempt
Issuance ” means the
issuance of (a) shares of Common Stock and options to officers,
employees, directors or consultants of the Company issued pursuant
to plans approved by a majority of the independent members of a
committee of the Board, (b) securities upon the exercise or
exchange of or conversion of any securities issued under the
Exchange Agreement (subject to adjustment for forward and reverse
stock splits and the like that occur after the date hereof) and/or
other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the date of
the Exchange Agreement; provided, except as set forth in clause (e)
below, that such securities and any term thereof have not been
amended since the date of the Exchange Agreement to increase the
number of such securities or to decrease the issue price, exercise
price, exchange price or conversion price of such securities, (c)
securities in connection with strategic license agreements and
other partnering arrangements so long as such issuances are not
primarily for the purpose of raising capital, (d) securities as
payment for investment banking services provided to the Company, or
(e) securities issued by the Company in exchange for or to modify
the terms of existing warrants issued by the
Company.
(m)
“Initial
Issuance Date ” means February 5, 2020.
(n)
“Liquidation
Event ” means, whether in a single transaction or
series of transactions, the voluntary or involuntary liquidation,
dissolution or winding up of the Company or such Subsidiaries the
assets of which constitute all or substantially all of the assets
of the business of the Company and its Subsidiaries, taken as a
whole.
(o)
“Options
” means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible
Securities.
(p)
“Person
” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity or a government or
any department or agency thereof.
(q)
“Principal
Market ” means the Nasdaq Capital Market.
(r)
“Required
Holders ” means the holders of at least 2/3rds of the
outstanding Preferred Shares.
(s)
“Securities
” means, collectively, the Preferred Shares and the shares of
Common Stock issuable upon conversion of the Preferred
Shares.
(t)
“Shareholder
Approval ” means such approval as may be required by
the applicable rules and regulations of the Nasdaq Stock Market (or
any successor entity) from the shareholders of the Company with
respect to the transactions contemplated by the Transaction
Documents, including the inclusion of Section 4(b).
(u)
“Stated
Value ” shall mean $72.00 per share, subject to
adjustment for stock splits, stock dividends, recapitalizations,
reorganizations, reclassifications, combinations, subdivisions or
other similar events occurring after the Initial Issuance Date with
respect to the Preferred Shares.
(v)
“Subsidiary
” means any Person in which the Company, directly or
indirectly, (i) owns a majority of the outstanding capital stock or
holds a majority of equity or similar interest of such Person or
(ii) controls or operates all or any part of the business,
operations or administration of such Person.
(w)
“Trading
Day ” means any day on which the Common Stock is
traded on the Principal Market, or, if the Principal Market is not
the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the
Common Stock is then traded, provided that “Trading
Day” shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading
during the final hour of trading on such exchange or market (or if
such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time) unless such day is otherwise
designated as a Trading Day in writing by the Required
Holders.
(x)
“Transaction
Documents ” means this Certificate of Designations,
the Exchange Agreement and each of the other agreements and
instruments entered into or delivered by the Company or any of the
Holders in connection with the transactions contemplated thereby,
all as may be amended from time to time in accordance with the
terms hereof or thereof.
19.
Disclosure.
Upon receipt or delivery by the Company of any notice in accordance
with the terms of this Certificate of Designations, unless the
Company has in good faith determined that the matters relating to
such notice do not constitute material, non-public information
relating to the Company or any of its Subsidiaries, the Company
shall simultaneously with any such receipt or delivery publicly
disclose such material, non-public information on a Current Report
on Form 8-K or otherwise. In the event that the Company believes
that a notice contains material, non-public information relating to
the Company or any of its Subsidiaries, the Company so shall
indicate to each Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, each Holder
shall be allowed to presume that all matters relating to such
notice do not constitute material, non-public information relating
to the Company or its Subsidiaries.
[signature
page follows]
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations of Series H-6 Convertible Preferred Stock of DropCar,
Inc. to be signed by its Chief Executive Officer on this 5th day of
February, 2020.
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DROPCAR, INC.
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By:
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/s/
Spencer Richardson
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Name:
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Spencer
Richardson
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Title:
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Chief
Executive Officer
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[Signature
Page to Certificate of Designations of Series H-6 Convertible
Preferred Stock]
EXHIBIT I
DROPCAR INC.
CONVERSION NOTICE
Reference is made
to the Certificate of Designations, Preferences and Rights of the
Series H-6 Convertible Preferred Stock of DropCar, Inc. (the
“Certificate of
Designations”). In accordance with and pursuant to the
Certificate of Designations, the undersigned hereby elects to
convert the number of shares of Series H-6 Convertible Preferred
Stock, $0.0001 par value per share (the “Preferred Shares”), of DropCar,
Inc., a Delaware corporation (the “Company”), indicated below into
shares of common stock, $0.0001 value per share (the
“Common Stock”),
of the Company, as of the date specified below.
Date of
Conversion:
Number
of Preferred Shares to be converted:
Share
certificate no(s). of Preferred Shares to be
converted:
Tax ID
Number (If applicable):
Conversion
Price:
Number
of shares of Common Stock to be issued:
Please
issue the shares of Common Stock into which the Preferred Shares
are being converted in the following name and to the following
address:
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Account
Number (if electronic book entry transfer):
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Transaction
Code Number (if electronic book entry transfer):
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EXHIBIT II
ACKNOWLEDGMENT
The
Company hereby acknowledges this Conversion Notice and hereby
directs [ ] to issue the above indicated number of shares of Common
Stock in accordance with the Irrevocable Transfer Agent
Instructions dated __________, 20____ from the Company and
acknowledged and agreed to by [ ].
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DROPCAR, INC.
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By:
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Name:
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Title:
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