Exhibit 10.2

 

WARRANT

 

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 (THE “COMMISSION” OR THE “SEC”) 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.

 

MassRoots, Inc.

 

WARRANT NO. JULY 2019 1-__

 

Issuance Date: July __, 2019

 

MassRoots, Inc., a corporation organized under the laws of the State of Delaware
(the “Company”), hereby certifies that, for value received, ____________ or its
assigns (the “Holder”), is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter, to purchase from the
Company up to a total of twenty five thousand (25,000) shares of the common
stock, $0.001 par value per share (the “Common Stock”), of the Company (the
“Warrant Shares”), at an exercise price equal to seven and one-half cents
($0.075) per share (the “Exercise Price”). Capitalized terms used and not
otherwise defined herein shall have the meanings set forth in that certain
Certificate of Designation for Series B Preferred Stock filed on July ___, 2019
(the “COD”).This warrant (“Warrant”) may be exercised any time after the
Issuance Date through and including the third (3rd) anniversary of the Issuance
Date (the “Expiration Date”), subject to the following terms and conditions:

 

1. Registration of Warrant. The Company shall, from time to time and whenever
requested by the Holder, register this Warrant in conformity with records to be
maintained by the Company for such purpose (the “Warrant Register”) in the name
of the Holder. The Company shall treat the registered Holder of this Warrant as
the absolute owner hereof for any and all purposes, including the exercise
hereof or any distribution to the Holder, and the Company shall not be affected
by notice to the contrary.

 

2. Registration of Transfers and Exchanges.

 

(a) The Company or the transfer agent shall enter or record the transfer of all
or any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant to the Company at the office specified herein or pursuant to Section 11
hereof. Upon any such registration or transfer, a new warrant to purchase Common
Stock, in substantially the form of this Warrant (any such new warrant
hereinafter referred to as a “New Warrant”), evidencing the portion of this
Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the Holder. The acceptance of the New Warrant by the
transferee thereof shall be deemed the acceptance of such transferee of all of
the rights and obligations of a holder of a Warrant.

 

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(b) This Warrant is exchangeable, upon the surrender hereof by the Holder to the
office of the Company specified herein or pursuant to Section 3(b) hereof for
one or more New Warrants, evidencing in the aggregate the right to purchase the
number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant shall be dated as of the Issuance Date.

 

(c) This Warrant may be offered for sale, sold, transferred or assigned without
the consent of the Company in accordance with an exemption from registration
under the Securities Act of 1933 (the “Securities Act”) including what is
referred to as Section 4(a)(1½) and/or 4(a)(7) and applicable state securities
laws.

 

3. Duration and Exercise of Warrants.

 

(a) This Warrant shall be exercisable by the registered Holder on any business
day before 5:00 P.M., Eastern time, at any time and from time to time on or
after the Issuance Date to and including the Expiration Date. At 4:59 P.M.,
Eastern time on the Expiration Date, the portion of this Warrant not exercised
prior thereto shall be automatically exercised on a cashless basis under Section
8(b) and become void and of no value. Prior to the Expiration Date, the Company
may not call or otherwise redeem this Warrant without the prior written consent
of the Holder, which consent shall be given or withheld at the sole and absolute
discretion of the Holder.

 

(b) Subject to Section 2(b), Section 5 and Section 9 hereof, upon: (x) providing
the Form of Election to Purchase, attached hereto as Exhibit A (the “Notice of
Election”), duly completed and signed, to the Company at its address for notice
set forth in Section 10 hereof; and (y) payment of the Exercise Price multiplied
by the number of Warrant Shares that the Holder intends to purchase hereunder,
in the manner provided hereunder, all as specified by the Holder in the Form of
Election to Purchase, the Company shall promptly (but in no event later than two
business days after the Date of Exercise (as defined below)) issue or cause to
be issued and cause to be delivered to the Holder in such name(s) as the Holder
may designate, a certificate for the Warrant Shares issuable upon such exercise
and free of restrictive legends unless (i) a registration statement covering the
resale of the Warrant Shares and naming the Holder as a selling stockholder
thereunder is not then effective or the Warrant Shares are not freely
transferable pursuant to Rule 144 (including without volume restrictions
pursuant to Rule 144) promulgated under the Securities Act, then the Warrant
Shares will bear a Securities Act restrictive legend, or (ii) this Warrant shall
have been issued pursuant to a written agreement between the original Holder and
the Company, as required by such agreement. Any person so designated by the
Holder to receive Warrant Shares shall be deemed to have become holder of record
of such Warrant Shares as of the Date of Exercise of this Warrant. A “Date of
Exercise” means the date on which the Company shall have received (I) if
exercised in full, this Warrant (or any New Warrant, as applicable), together
with the Form of Election to Purchase attached hereto (or attached to such New
Warrant) appropriately completed and duly signed; and (II) payment of the
Exercise Price for the number of Warrant Shares so indicated by the holder
hereof to be purchased. Notwithstanding anything herein to the contrary
(although the Holder may surrender the Warrant to, and receive a replacement
Warrant from, the Company), the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has purchased all of the
Warrant Shares available hereunder and the Warrant has been exercised in full,
in which case, the Holder shall surrender this Warrant to the Company for
cancellation within two business days of the date the Form of Election is
delivered to the Company. Partial exercises of this Warrant resulting in
purchases of a portion of the total number of Warrant Shares available hereunder
shall have the effect of lowering the outstanding number of Warrant Shares
purchasable hereunder in an amount equal to the applicable number of Warrant
Shares purchased. The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.

 

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(c) This Warrant shall be exercisable in its entirety or, from time to time, for
a portion of the number of Warrant Shares. In the event the Common Stock
representing the Warrant Shares is not delivered per the written instructions of
the Holder within two business days after the Notice of Election and Warrant is
received by the Company (the “Delivery Date”), then the Company shall pay to
Holder in cash 2.0% of the dollar value of the Warrant Shares to be issued for
the first day after the Delivery Date that the Warrant Shares are not delivered,
and an additional 2.0% of the dollar value of the Warrant Shares to be issued
after the Delivery Date for every 30 days thereafter that the Warrant Shares are
not delivered. If any period is less than 30 days, the payment shall be
pro-rated. The Company acknowledges that its failure to deliver the Warrant
Shares by the Delivery Date will cause the Holder to suffer damages in an amount
that will be difficult to ascertain. Accordingly, the parties hereto agree that
it is appropriate to include in this Warrant this provision for liquidated
damages. The parties hereto acknowledge and agree that the liquidated damages
provision set forth in this section represents the parties’ good faith effort to
quantify such damages and therefore agree that the form and amount of such
liquidated damages are reasonable and will not constitute a penalty.
Notwithstanding the foregoing, the payment of liquidated damages shall not
relieve the Company from its obligations to deliver the Warrant Shares pursuant
to the terms of this Warrant. The Company shall make any payments incurred under
this Section 3 in immediately available funds within five business days from the
date the Warrant Shares should have been delivered and each 30 day period
thereafter. Nothing herein shall limit Holder’s right to pursue actual damages
or cancel the Notice of Election for the Company’s failure to issue and deliver
Warrant Shares. For the purposes of this Section 3(c), the “dollar value” of the
Warrant Shares shall be the closing price of the Company’s common stock on the
Delivery Date.

 

4. Payment of Taxes. Upon the exercise of this Warrant, the Company will pay all
documentary stamp taxes attributable to the issuance of Warrant Shares;
provided, however, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.

 

5. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and indemnity, if
requested, satisfactory to it. Applicants for a New Warrant under such
circumstances shall comply with such other reasonable regulations and procedures
and pay such other reasonable charges as the Company may prescribe. The Holder
shall not be required to post a bond or other security.

 

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6. Reservation of Warrant Shares.

 

(a) The Company covenants that it will reserve from its authorized and unissued
Common Stock, solely for the purpose of the exercise of this Warrant, no less
than 100% of such aggregate maximum number of Warrant Shares then issuable upon
the exercise of this Warrant (the “Required Reserve Amount”). The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of issuing the necessary
Warrant Shares upon the exercise of the purchase rights under this Warrant. The
Company will take all such reasonable action as may be necessary to assure that
such Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading Market upon
which the Common Stock may be listed. The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant and payment for such Warrant Shares in accordance herewith, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).

 

(b) If, at any time while this Warrant remains outstanding, the Company does not
have a sufficient number of authorized and unreserved shares of Common Stock to
satisfy its obligation to reserve the Required Reserve Amount (an “Authorized
Share Failure”), then the Company shall immediately take all action necessary to
increase the Company’s authorized shares of Common Stock to an amount sufficient
to allow the Company to reserve the Required Reserve Amount for all the Warrants
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 75 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 and
to cause its board of directors to recommend to the stockholders that they
approve such proposal. In lieu of holding a meeting of stockholders, the Company
may take such action by consent of its stockholders by the above date in
compliance with Section 14(c) of the Securities Exchange Act of 1934 (the
“Exchange Act”). After the 75 day cure period provided for in this Section 6(b),
upon the occurance of an Authorized Share Failure, the liquidated damages
provided for in Section 3(c) shall apply with payments due each 30 days.

 

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(c) Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, 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 Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company will (i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (ii) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant and (iii) use best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof, as may be, necessary to enable the
Company to perform its obligations under this Warrant.

 

(d) Before taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.

 

7. Certain Adjustments.

 

(a) Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company upon
exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, (iii) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares
or (iv) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event, and the number of shares
issuable upon exercise of this Warrant shall be proportionately adjusted such
that the total consideration required to exercise this Warrant shall remain
unchanged. Any adjustment made pursuant to this Section 7(a) shall become
effective immediately upon the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become effective
immediately upon the effective date in the case of a subdivision, combination or
re-classification.

 

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(b) Subsequent Equity Sales. For a period of two years from the Issuance Date,
in the event that the Company shall, at any time, issue or sell any additional
shares of Common Stock or Common Stock Equivalents (hereafter defined)
(“Additional Shares of Common Stock”), in a transaction other than an Exempt
Issuance, at a price per share less than the Exercise Price then in effect or
without consideration (a “Dilutive Issuance” based on a “Dilutive Issuance
Price”), then the Exercise Price upon each such issuance shall be reduced to the
Dilutive Issuance Price, and the number of Warrant Shares (excluding Warrant
Shares previously exercised) shall be increased on a full ratchet basis to the
number of shares of Common Stock determined by multiplying the Exercise Price
then in effect immediately prior to such adjustment by the number of Warrant
Shares (excluding Warrant Shares previously exercised) acquirable upon exercise
of this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment. By way of example,
if E is the total number of Warrant Shares in effect immediately prior to such
Dilutive Issuance, F is the Exercise Price in effect immediately prior to such
Dilutive Issuance, and G is the Dilutive Issuance Price, the adjustment to the
number of Warrant Shares can be expressed in the following formula: Total number
of Warrant Shares after such Dilutive Issuance = the quotient obtained from
dividing [E x F] by G. “Exempt Issuance” means the issuance of Common Stock
pursuant to an exercise of this Warrant. “Common Stock Equivalents” means any
securities of the Company which would entitle the holder thereof to acquire at
any time Common Stock, including, without limitation, any debt, preferred stock,
rights, options, warrants 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.

 

If the price per share for which Additional Shares of Common Stock are sold, or
may be issuable pursuant to any such Common Stock Equivalent, is less than the
applicable Exercise Price then in effect, or if, after any such issuance of
Common Stock Equivalents, the price per share for which Additional Shares of
Common Stock may be issuable thereafter is amended or adjusted, and such price
as so amended shall be less than the applicable Exercise Price in effect at the
time of such amendment or adjustment, then the applicable Exercise Price and
number of Warrant Shares shall be adjusted upon each such issuance or amendment
as provided in this Section 7(b). In case any Common Stock Equivalent is issued
in connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction, (x) the Common Stock Equivalents
will be deemed to have been issued for the Option Value of such Common Stock
Equivalents and (y) the other securities issued or sold in such integrated
transaction shall be deemed to have been issued or sold for the difference of
(I) the aggregate consideration received by the Company less any consideration
paid or payable by the Company pursuant to the terms of such other securities of
the Company, less (II) the Option Value. If any shares of Common Stock or Common
Stock Equivalents are issued or sold or deemed to have been issued or sold for
cash, the amount of such consideration received by the Company will be deemed to
be the net amount received by the Company therefor. If any shares of Common
Stock or Common Stock Equivalents are issued or sold for a consideration other
than cash, the amount of such consideration received by the Company will be the
fair value of such consideration, except where such consideration consists of
publicly traded securities, in which case the amount of consideration received
by the Company will be the VWAP of such public traded securities on the date of
receipt. If any shares of Common Stock or Common Stock Equivalents are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefor will
be deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such shares of Common Stock or
Common Stock Equivalents, as the case may be.

 

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“Option Value” means the value of a Common Stock Equivalent based on the Black
Scholes Option Pricing model obtained from the “OV” function on Bloomberg L.P.
determined as of (A) the Trading Day prior to the public announcement of the
issuance of the applicable Common Stock Equivalent, if the issuance of such
Common Stock Equivalent is publicly announced or (B) the Trading Day immediately
following the issuance of the applicable Common Stock Equivalent if the issuance
of such Common Stock Equivalent is not publicly announced, for pricing purposes
and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury
rate for a period equal to the remaining term of the applicable Common Stock
Equivalent as of the applicable date of determination, (ii) an expected
volatility equal to the greater of 100% and the 100 day volatility obtained from
the HVT function on Bloomberg L.P. as of (A) the Trading Day immediately
following the public announcement of the applicable Common Stock Equivalent if
the issuance of such Common Stock Equivalent is publicly announced or (B) the
Trading Day immediately following the issuance of the applicable Common Stock
Equivalent if the issuance of such Common Stock Equivalent is not publicly
announced, (iii) the underlying price per share used in such calculation shall
be the highest VWAP of the Common Stock during the period beginning on the
Trading Day prior to the execution of definitive documentation relating to the
issuance of the applicable Common Stock Equivalent and ending on (A) the Trading
Day immediately following the public announcement of such issuance, if the
issuance of such Common Stock Equivalent is publicly announced or (B) the
Trading Day immediately following the issuance of the applicable Common Stock
Equivalent if the issuance of such Common Stock Equivalent is not publicly
announced, (iv) a zero cost of borrow and (v) a 360 day annualization factor.

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or
quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then
reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported, or (d) in all
other cases, the fair market value of a share of Common Stock as determined by
an independent appraiser selected in good faith by the Holders of a majority in
interest of the Warrants then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the Company.

 

The provisions of this Section 7(b) shall apply each time the Company, at any
time after the Issuance Date and prior to the date that is two years from
Original Issuance Date, shall issue any securities with a Dilutive Issuance
Price.  

 

(c) Voluntary Adjustment By Company. The Company may at any time during the term
of this Warrant, reduce the then current Exercise Price to any amount and for
any period of time deemed appropriate by the board of directors of the Company.

 

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(d) Notice; Variable Rate Transactions. The Company shall notify the Holder, in
writing, no later than the business day following the issuance or deemed
issuance of any Common Stock or Common Stock Equivalents subject to Section
7(b), indicating therein the applicable issuance price, or applicable reset
price, exchange price, conversion price and other pricing terms. If the Company
enters into a Variable Rate Transaction, the Company shall be deemed to have
issued Common Stock or Common Stock Equivalents at the lowest possible
conversion or exercise price at which such securities may be converted or
exercised and the Exercise Price shall be adjusted for the Dilutive Issuance.
Variable Rate Transaction means: a transaction in which the Company (i) issues
or sells any Common Stock Equivalents either (A) at a conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading
prices of or quotations for the shares of Common Stock at any time after the
initial issuance of such securities, or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the
initial issuance of such securities or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the Company
or the market for the Common Stock, or (ii) enters into any agreement
(including, but not limited to, an equity line of credit) whereby the Company
may sell securities at a future determined price (other than customary
“pre-emptive” or “participation” rights).

 

(e) Pro Rata Distributions. During such time as this Warrant is outstanding, if
the Company shall declare or make any dividend or other distribution of its
assets (or rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”), at any time after
the issuance of this Warrant, then, in each such case, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant (without regard
to any limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of which a record
is taken for such Distribution, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be determined for the
participation in such Distribution (provided, however, to the extent that the
Holder’s right to participate in any such Distribution would result in the
Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not
be entitled to participate in such Distribution to such extent (or in the
beneficial ownership of any shares of Common Stock as a result of such
Distribution to such extent) and the portion of such Distribution shall be held
in abeyance for the benefit of the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation).

 

(f) Calculations. All calculations under this Section 7 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 7, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any, issued and outstanding.

 

(g) Notice to Holder.

 

(i) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 7, the Company shall promptly mail to
the Holder a notice setting forth the Exercise Price after such adjustment and
any resulting adjustment to the number of Warrant Shares and setting forth a
brief statement of the facts requiring such adjustment.

 

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(ii) Notice to Allow Exercise by Holder. If (A) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to
all holders of the Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of
any stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
mailed to the Holder at its last address as it shall appear upon the Warrant
Register of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of
the corporate action required to be specified in such notice. To the extent that
any notice provided hereunder constitutes, or contains, material, non-public
information regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K. The Holder shall remain entitled to exercise this Warrant during
the period commencing on the date of such notice to the effective date of the
event triggering such notice except as may otherwise be expressly set forth
herein. In addition to any other remedies provided by this Agreement or other
transaction documents, if the Company provides any material, non-public
information to the Holder without its prior written consent, and it fails to
immediately (no later than that business day) file a Form 8-K disclosing this
material, non-public information, it shall pay the Holder as partial liquidated
damages and not as a penalty a sum equal to $1,000 per business day for each
$50,000 of the Holder’s subscription amount for which this Warrant was issued
beginning with the day the information is disclosed to the Holder and ending and
including the day the Form 8-K disclosing this information is filed.

 

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(h) Fundamental Transaction. If, at any time while this Warrant is outstanding,
(i) the Company, directly or indirectly, in one or more related transactions
effects any merger or consolidation of the Company with or into another Person,
(ii) the Company, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct
or indirect, purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders of 50% or more
of the outstanding Common Stock, (iv) the Company, directly or indirectly, in
one or more related transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property, or (v) the Company, directly or indirectly, in one
or more related transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person or
group of Persons whereby such other Person or group acquires more than 50% of
the outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the Holder
shall have the right to receive, for each Warrant Share that would have been
issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction (without regard to any limitation on the exercise of
this Warrant), at the option of the Holder the number of shares of Common Stock
of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and any additional consideration (the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by a
holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction (without regard to
any limitation on the exercise of this Warrant). For purposes of any such
exercise, the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Company shall apportion the Exercise Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any exercise of this
Warrant following such Fundamental Transaction. Notwithstanding anything to the
contrary, in the event of a Fundamental Transaction, the Company or any
Successor Entity (as defined below) shall, at the Holder’s option, exercisable
at any time concurrently with, or within 30 days after, the consummation of the
Fundamental Transaction, purchase this Warrant from the Holder by paying to the
Holder an amount of cash equal to the Black Scholes Value of the remaining
unexercised portion of this Warrant on the date of the consummation of such
Fundamental Transaction or (ii) the positive difference between the cash per
share paid in such Fundamental Transaction minus the then in effect Exercise
Price. “Black Scholes Value” means the value of the unexercised portion of this
Warrant based on the Black and Scholes Option Pricing Model obtained from the
“OV” function on Bloomberg L.P. determined as of the day of consummation of the
applicable Fundamental Transaction for pricing purposes and reflecting (A) a
risk-free interest rate corresponding to the U.S. Treasury rate for a period
equal to the time between the date of the public announcement of the applicable
Fundamental Transaction and the Expiration Date, (B) an expected volatility
equal to the greater of 100% and the 100 day volatility obtained from the HVT
function on Bloomberg L.P. as of the Trading Day immediately following the
public announcement of the applicable Fundamental Transaction, (C) the
underlying price per share used in such calculation shall be the sum of the
price per share being offered in cash, if any, plus the value of any non-cash
consideration, if any, being offered in such Fundamental Transaction and (D) a
remaining option time equal to the time between the date of the public
announcement of the applicable Fundamental Transaction and the Expiration Date.
The Company shall cause any successor entity in a Fundamental Transaction in
which the Company is not the survivor (the “Successor Entity”) to assume in
writing all of the obligations of the Company under this Warrant in accordance
with the provisions of this Section 7(h) pursuant to written agreements in form
and substance reasonably satisfactory to the Holder and approved by the Holder
(without unreasonable delay) prior to such Fundamental Transaction and shall, at
the option of the Holder, deliver to the Holder in exchange for this Warrant a
security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant which is exercisable for a
corresponding number of shares of capital stock of such Successor Entity (or its
parent entity) equivalent to the shares of Common Stock acquirable and
receivable upon exercise of this Warrant prior to such Fundamental Transaction
(without regard to any limitation on the exercise of this Warrant), and with an
exercise price which applies the exercise price hereunder to such shares of
capital stock (but taking into account the relative value of the shares of
Common Stock pursuant to such Fundamental Transaction and the value of such
shares of capital stock, such number of shares of capital stock and such
exercise price being for the purpose of protecting the economic value of this
Warrant immediately prior to the consummation of such Fundamental Transaction),
and which is reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Warrant referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Warrant with the same effect as if such Successor Entity had
been named as the Company herein.

 

-10-

 

 

8. Payment of Exercise Price. The Holder, at its sole election, may pay the
Exercise Price in one of the following manners:

 

(a) Cash Exercise. The Holder shall deliver immediately available funds; or

 

(b) Cashless Exercise. If at any time after the six month anniversary of the
Issuance Date, there is no effective Registration Statement registering, or no
current prospectus available for, the resale of the Warrant Shares issuable
hereunder by the Holder, this Warrant may be exercised by means of a cashless
exercise unless an effective registration statement covers the Warrant Shares
and a current prospectus has been filed on www.sec.gov. In such event, the
Holder shall surrender this Warrant to the Company, together with a notice of
cashless exercise, and the Company shall issue to the Holder the number of
Warrant Shares determined as follows:

 

[(A x B) - (A x C)] divided by (B), where:

 

A = the number of Warrant Shares with respect to which this Warrant is being
exercised.

 

B = the average closing bid price of the Common Stock for the five trading days
immediately prior to the Date of Exercise.

 

C = the Exercise Price.

 

For purposes of Section 4(a)(1) of, and Rule 144 under, the Securities Act, it
is intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the Issuance Date.

 

-11-

 

 

(c) Holder’s Exercise Limitations. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any portion of
this Warrant to the extent that after giving effect to such issuance after
exercise as set forth on the applicable Notice of Election, the Holder (together
with the Holder’s Affiliates, and any other Persons acting as a group together
with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution
Parties”)), would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below).  For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by the Holder and its
Affiliates and Attribution Parties shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of its
Affiliates or Attribution Parties and (ii) exercise or conversion of the
unexercised or non-converted portion of any other securities of the Company
(including, without limitation, any other Common Stock equivalents) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its Affiliates or Attribution
Parties.  Except as set forth in the preceding sentence, for purposes of this
Section 8(c), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for any schedules
required to be filed in accordance therewith. To the extent that the limitation
contained in this Section 8(c) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which portion of
this Warrant is exercisable shall be in the sole discretion of the Holder, and
the submission of a Notice of Election shall be deemed to be the Holder’s
determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates and Attribution
Parties) and of which portion of this Warrant is exercisable, in each case
subject to the Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 8(c), in
determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with the Securities and
Exchange Commission, as the case may be, (B) a more recent public announcement
by the Company or (C) a more recent written notice by the Company or the
transfer agent setting forth the number of shares of Common Stock outstanding. 
Upon the written or oral request of a Holder, the Company shall within three
trading days confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding.  In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Warrant, by the Holder or
its Affiliates or Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported.

 

-12-

 

 

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 exercise of this Warrant. The limitations
contained in this paragraph shall apply to a successor holder of this Warrant.
The Holder, upon not less than 61 days’ prior notice to the Company, may
increase the Beneficial Ownership Limitation provisions of this Section 8(c)
solely with respect to the Holder’s Warrant, provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of shares of Common
Stock outstanding immediately after giving effect to the issuance of shares of
Common Stock upon exercise of this Warrant held by the Holder and the provisions
of this Section 8(c) shall continue to apply. Any such increase will not be
effective until the 61st day after such notice is delivered to the Company. The
Holder may also decrease the Beneficial Ownership Limitation provisions of this
Section 8(c) solely with respect to the Holder’s Warrant at any time, which
decrease shall be effectively immediately upon delivery of notice to the
Company.

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 405 under the
Securities Act.

 

“Person” means an 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.

 

9. Fractional Shares. The Company shall not be required to issue or cause to be
issued fractional Warrant Shares upon the exercise of this Warrant. The number
of full Warrant Shares which shall be issuable upon the exercise of this Warrant
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of this Warrant so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 9, be issuable on
the exercise of this Warrant, the Company shall pay an amount in cash equal to
the Exercise Price multiplied by such fraction.

 

10. Notices. Any and all notices or other communications or deliveries hereunder
(except payment) shall be in writing and shall be sufficiently given if
delivered to the addressees in person, by FedEx or similar receipted next
business day delivery or by email (followed by next business day delivery), as
follows:

 

If to the Company:

 

MassRoots, Inc.

7083 Hollywood Blvd., Office 4084

Office 4084

Los Angeles, CA 90028

 

If to the Holder:

 

__________________________

__________________________

__________________________

 

Or to such other address as any of them, by notice to the other may designate
from time to time. Time shall be counted to, or from, as the case may be, the
date of delivery.

 

-13-

 

 

11. Warrant Agent. The Company shall serve as warrant agent under this Warrant.
Upon 30 days notice to the Holder, the Company may appoint a new warrant agent.
Any corporation into which the Company or any new warrant agent may be merged or
any corporation resulting from any consolidation to which the Company or any new
warrant agent shall be a party or any corporation to which the Company or any
new warrant agent transfers substantially all of its corporate trust or
shareholders services business shall be a successor warrant agent under this
Warrant without any further action. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder’s last address as shown
on the Warrant Register.

 

12. Miscellaneous.

 

(a) This Warrant shall be binding on and inure to the benefit of the parties
hereto. This Warrant may be amended only in writing signed by the Company and
the Holder.

 

(b) Nothing in this Warrant shall be construed to give to any person or
corporation other than the Company and the Holder any legal or equitable right,
remedy or cause under this Warrant. This Warrant shall inure to the sole and
exclusive benefit of the Company and the Holder.

 

(c) The headings herein are for convenience only, do not constitute a part of
this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

 

(d) In case any one or more of the provisions of this Warrant shall be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

 

(e) The Company hereby represent and warrants to the Holder that: (i) it is
voluntarily issuing this Warrant of its own freewill, (ii) it is not issuing
this Warrant under economic duress, (iii) the terms of this Warrant are
reasonable and fair to the Company, and (iv) the Company has had independent
legal counsel of its own choosing review this Warrant, advise the Company with
respect to this Warrant, and represent the Company in connection with its
issuance of this Warrant.

 

-14-

 

 

(f) Any capitalized term used but not defined in this Warrant shall have the
meaning ascribed to it in the Subscription Agreement, of even date herewith, by
and between the Company and the Holder.

 

(g) This Warrant may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Warrant. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

 

(h) This Warrant and the obligations of the Company hereunder shall not be
assignable by the Company.

 

(i) Notwithstanding anything in this Warrant to the contrary, the parties hereto
hereby acknowledge and agree to the following: (i) the Holder makes no
representations or covenants that it will not engage in trading in the
securities of the Company; (ii) the Company shall, by the second business day
following the date hereof, file a Current Report on Form 8-K disclosing the
material terms of the transactions contemplated hereby and in the other Offering
Materials; (iii) the Company has not and shall not provide material non-public
information to the Holder unless prior thereto the Holder Party shall have
executed a written agreement regarding the confidentiality and use of such
information; and (iv) the Company understands and confirms that the Holder will
be relying on the acknowledgements set forth in clauses (i) through (iii) above
if the Holder effects any transactions in the securities of the Company.

 

(j) This Warrant does not entitle the Holder to any voting rights, dividends or
other rights as a stockholder of the Company prior to the exercise hereof.

 

-15-

 

 

(k) The remedies provided in this Warrant shall be cumulative and in addition to
all other remedies available under this Warrant and the other transaction
documents, at law or in equity (including a decree of specific performance
and/or other injunctive relief or ensuring performance of any obligation herein
or preventing a breach of any obligation herein), and nothing herein shall limit
the right of the Holder to pursue actual and consequential damages for any
failure by the Company to comply with the terms of this Warrant. The Company
covenants to the Holder that there shall be no characterization concerning this
instrument other than as expressly provided herein. Amounts set forth or
provided for herein with respect to payments, exercises and the like (and the
computation thereof) shall be the amounts to be received by the Holder and shall
not, except as expressly provided herein, be subject to any other obligation of
the Company (or the performance thereof). The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Holder and
that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holder of this Warrant shall be entitled, in addition to all other available
remedies, to specific performance and an injunction restraining any breach,
without the necessity of showing economic loss and without any bond or other
security being required. The Company shall provide all information and
documentation to the Holder that is requested by the Holder to enable the Holder
to confirm the Company’s compliance with the terms and conditions of this
Warrant. The issuance of shares and certificates for shares as contemplated
hereby upon the exercise of this Warrant shall be made without charge to the
Holder or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the Holder or its agent on its behalf. If (a)
this Warrant is placed in the hands of an attorney for collection or enforcement
or is collected or enforced through any legal proceeding or the Holder otherwise
takes action to collect amounts due under this Warrant or to enforce the
provisions of this Warrant or (b) there occurs any bankruptcy, reorganization,
receivership of the company or other proceedings affecting company creditors’
rights and involving a claim under this Warrant, then the Company shall pay the
reasonable costs incurred by the Holder for such collection, enforcement or
action or in connection with such bankruptcy, reorganization, receivership or
other proceeding, including, without limitation, attorneys’ fees and
disbursements.

 

(l) Subject to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be binding upon
the successors and permitted assigns of the Company and the successors and
permitted assigns of Holder. The provisions of this Warrant are intended to be
for the benefit of any Holder from time to time of this Warrant and shall be
enforceable by the Holder or holder of Warrant Shares. 

 

13. Disputes Under This Agreement. All disputes arising under this Warrant shall
be governed by and interpreted in accordance with the laws of the State of
Delaware, without regard to principles of conflict of laws, as provided for
under the Subscription Agreement for which this Warrant was issued.

 

[Signature on Following Page]

 

-16-

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its authorized officer as of the date first indicated above.

 

  MassRoots, Inc.         By:     Name:  Isaac Dietrich   Title: CEO

 

-17-

 

 

EXHIBIT A

 

FORM OF ELECTION TO PURCHASE

 

MassRoots, Inc.

 

Re:Intention to Exercise Right to Purchase Shares of Common Stock Under the
Warrant

 

Gentlemen:

 

In accordance with the Warrant enclosed with this Form of Election to Purchase,
the undersigned hereby irrevocably elects to purchase _________________shares of
Common Stock, $0.001 par value per share, of MassRoots, Inc. and, if such Holder
is not utilizing the cashless exercise provisions set forth in the Warrant,
encloses herewith $________ in cash, certified or official bank check(s), which
sum represents the aggregate Exercise Price for the number of shares of Warrant
Shares to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant. Any
capitalized terms used but not defined in this Form of Election to Purchase
shall have the meaning ascribed to them in the accompanying Warrant.

 

The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of:

 

  (Please insert SS# or FEIN #)   (Please print name and address)

 

If the number of shares of Common Stock issuable upon this exercise shall not be
all of the shares of Common Stock which the undersigned is entitled to purchase
in accordance with the enclosed Warrant, the undersigned requests that a New
Warrant evidencing the right to purchase the shares of Common Stock not issuable
pursuant to the exercise evidenced hereby be issued in the name of and delivered
to:

 

  (Please print name and address)    

 

Dated: _____________, _____ Name of Holder:    

 

  Signed:_______________________________   Print
Name:____________________________   Title:_________________________________

 

(Signature must conform in all respects to name of Holder as specified on the
face of the Warrant)

 

 

-18-