Document:

dcar_ex4-8

  Exhibit 4.8

 

DESCRIPTION OF SECURITIES

 

The following is a summary of material characteristics of the
capital stock of DropCar, Inc. (“we,” “us,”
“our,” “DropCar,” or the
“Company”) as set forth in DropCar’s amended and
restated certificate of incorporation, as amended (the
“DropCar Charter”) and amended and restated bylaws, as
amended (the “DropCar Bylaws”), its outstanding
warrants, and applicable provisions of the General Corporation Law
of the State of Delaware (the “DGCL”). The following
description does not purport to be complete and is subject to and
qualified in its entirety by, and should be read in conjuncture
with, the DropCar Charter and DropCar Bylaws, each of which are
filed as exhibits to the Annual Report on Form 10-K to which this
description is an exhibit, and to applicable provisions of the
DGCL. Unless otherwise noted, all disclosure included in this
“Description of Securities” section reflects the
1-for-6 reverse stock split of DropCar’s common stock that
was effected on March 8, 2019.

 

General

 

The following description of DropCar’s capital stock and
provisions of the DropCar Charter and DropCar Bylaws are summaries
and are qualified by reference to the DropCar Charter and the
DropCar Bylaws that are on file with the Securities and Exchange
Commission (the “SEC”).

 

DropCar is authorized to issue up to 100,000,000 shares of common
stock and up to 5,000,000 shares of preferred stock with the
rights, preferences and privileges determined by its board of
directors (the “DropCar Board of Directors”) from time
to time. Based on DropCar’s capitalization as of March 25,
2020, DropCar had issued and outstanding:

 

●

4,551,882 shares of
DropCar common stock held by 33 stockholders of
record;

 

●

37,047 shares of
DropCar convertible preferred stock held by 6 stockholders of
record; and

 

●

8,001,225 shares of
DropCar common stock reserved for future issuance as
follows:

 

o

380,396 shares for
issuance upon exercise of stock options granted under the DropCar,
Inc. Amended and Restated 2014 Equity Incentive Plan, at a weighted
average exercise price of $14.42 per share, all of which are
issuable upon exercise of currently outstanding options, subject to
vesting;

 

o

3,320,269 shares
for issuance upon conversion of the outstanding shares of
DropCar’s convertible preferred stock; and

 

o

4,300,560 shares
for issuance upon exercise of DropCar’s outstanding
warrants.

 

Common Stock

 

Holders of DropCar common stock are entitled to one vote for each
share held on all matters submitted to a vote of stockholders and
do not have cumulative voting rights. Holders of Series H-6
Convertible Preferred Stock are entitled to vote together with the
holders of DropCar common stock those shares of Series H-6
Convertible Preferred Stock owned on the record date, on an as-if
converted to DropCar common stock basis, subject to certain
beneficial ownership blockers. Each election of directors by
DropCar’s stockholders will be determined by a plurality of
the votes cast by the stockholders entitled to vote on the
election. Holders of common stock are entitled to receive
proportionately any dividends as may be declared by the DropCar
Board of Directors, subject to any preferential dividend rights of
outstanding preferred stock.

 

In the event of DropCar’s liquidation or dissolution, the
holders of DropCar common stock are entitled to receive
proportionately all assets available for distribution to
stockholders after the payment of all debts and other liabilities
and subject to the prior rights of any of DropCar’s
outstanding preferred stock. Holders of DropCar common stock have
no preemptive, subscription, redemption or conversion rights. The
rights, preferences and privileges of holders of DropCar common
stock are subject to and may be adversely affected by the rights of
the holders of shares of any series of DropCar preferred stock that
it may designate and issue in the future.

 

 

 

 

Preferred Stock

 

Under the terms of the DropCar Charter, the DropCar Board of
Directors is authorized to issue shares of preferred stock in one
or more series without stockholder approval. The DropCar Board of
Directors has the discretion to determine the rights, preferences,
privileges and restrictions, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation
preferences, of each series of preferred stock.

 

The purpose of authorizing the DropCar Board of Directors to issue
preferred stock and determine its rights and preferences is to
eliminate delays associated with a stockholder vote on specific
issuances. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions, future
financings and other corporate purposes, could have the effect of
making it more difficult for a third-party to acquire, or could
discourage a third-party from seeking to acquire, a majority of
DropCar’s outstanding voting stock.

 

Series H Convertible Preferred Stock

 

On June 30, 2015, DropCar entered into Amendment, Waiver and
Exchange Agreements with certain of its promissory note holders,
who held $1,299,000 in principal amount of unsecured promissory
notes of DropCar. Pursuant to the terms of the exchange agreements,
the holders of such notes agreed to exchange all the existing
indebtedness for, and DropCar agreed to issue to the holders, an
aggregate of 8,435 shares of Series H Convertible Preferred Stock,
par value $0.0001 per share (“Series H Stock”). On June
30, 2015, DropCar filed with the Secretary of State of the State of
Delaware a Certificate of Designations, Preferences and Rights of
the Series H Convertible Preferred Stock (the “Series H
Certificate of Designation”). Under the terms of the Series H
Certificate of Designation, each share of Series H Stock has a
stated value of  $154 and is convertible into shares of
DropCar’s common stock, equal to the stated value divided by
the conversion price of $36.96 per share (subject to adjustment in
the event of stock splits or dividends). DropCar is prohibited from
effecting the conversion of the Series H Stock to the extent that,
as a result of such conversion, the holder would beneficially own
more than 9.99%, in the aggregate, of the issued and outstanding
shares of DropCar’s common stock calculated immediately after
giving effect to the issuance of shares of DropCar’s common
stock upon such conversion.

 

As of March 25, 2020, there were 8 shares of Series H Stock issued
and outstanding.

 

Series H-3 Convertible Preferred Stock

 

On March 30, 2017, DropCar entered into a Securities Purchase
Agreement with five investors pursuant to which DropCar issued to
the investors an aggregate of 7,017 shares of Series H-3 Preferred
Convertible Stock, par value $0.0001 per share (the “Series
H-3 Stock”), and warrants to purchase 1,101,751 shares of
common stock, with an exercise price of $1.38 per share (the
“Series H-3 Warrants”). The purchase price for each
share of Series H-3 Stock was $138 and the purchase price for each
Series H-3 Warrant was $0.1250, for aggregate gross proceeds of
$1,100,000.

 

On March 30, 2017, DropCar filed with the Secretary of State of the
State of Delaware a Certificate of Designations, Preferences and
Rights of the Series H-3 Stock (the “Series H-3 Certificate
of Designation”). Under the terms of the Series H-3
Certificate of Designation, each share of the Series H-3 Stock has
a stated value of $138 and is convertible into shares of common
stock, equal to the stated value divided by the conversion price of
$33.12 per share (subject to adjustment in the event of stock
splits and dividends). DropCar is prohibited from effecting the
conversion of the Series H-3 Stock to the extent that, as a result
of such conversion, the holder or any of its affiliates would
beneficially own more than 9.99%, in the aggregate, of the issued
and outstanding shares of common stock calculated immediately after
giving effect to the issuance of shares of common stock upon the
conversion of the Series H-3 Stock.

 

As of March 25, 2020, there were 2,189 shares of Series H-3 Stock
issued and outstanding.

 

 

 

 

Series H-4 Convertible Preferred Stock

 

On March 8, 2018, DropCar entered into a
Securities Purchase Agreement with certain institutional and
accredited investors, pursuant to which DropCar issued to the investors
an aggregate of 26,843 shares (the “Series H-4 Shares”)
of its Series H-4 Convertible Preferred Stock, par value $0.0001
per share (the “Series H-4 Stock”), and warrants to
purchase 2,684,300 shares of its common stock, with an exercise
price of $15.60 per share, subject to adjustments (the
“Series H-4 Warrants”). The purchase price per Series
H-4 Share was $235.50, equal to (i) the closing price
of DropCar’s common stock on
The Nasdaq Capital Market
(“Nasdaq”) on March 7, 2018, plus $0.125 multiplied by
(ii) 100. The aggregate purchase price for the Series H-4 Shares
and Series H-4 Warrants was approximately $6.0 million. The Series
H-4 Shares were originally convertible into 2,684,300 shares
of DropCar’s common stock. On
November 15, 2018, the DropCar stockholders approved the reduction
in the conversion price of the Series H-4 Shares to $3.60 per
share.

 

On September 5, 2018, DropCar received a request from Nasdaq to
amend its Certificate of Designations, Preferences and Rights of
the Series H-4 Convertible Preferred Stock, originally filed with
the Secretary of State of the State of Delaware on March 8, 2018
(the “Series H-4 Certificate of Designations”) to
provide that the Series H-4 Stock may not be converted into shares
of common stock until DropCar obtained stockholder approval of the
issuance of the common stock underlying the Series H-4 Stock
pursuant to the applicable rules and regulations of Nasdaq. On
September 10,2018, DropCar filed a Certificate of Amendment to the
Series H-4 Certificate of Designations to provide for stockholder
approval as described above prior to the conversion of the Series
H-4 Stock. The required stockholder approval was obtained on
November 15, 2018.

 

As of March 25, 2020, there were 5,028 shares of Series H-4 Stock
issued and outstanding, which were convertible into 419,000 shares
of DropCar’s common stock.

 

Series H-5 Convertible Preferred Stock

 

On December 6, 2019, DropCar entered into a Securities Purchase
Agreement with certain institutional and accredited investors,
pursuant to which DropCar issued to the investors an aggregate of
34,722 shares of its newly designated Series H-5 Convertible
Preferred Stock, par value $0.0001 per share (the “Series H-5
Shares”), and warrants to purchase 3,472,200 shares of common
stock, with an exercise price of $0.792 per share, subject to
adjustments (the “Series H-5 Warrants”). The purchase
price per Series H-5 Share was $72.00, equal to (i) the closing
price of DropCar’s common stock on Nasdaq on December 5,
2019, plus $0.125 multiplied by (ii) 100. The aggregate purchase
price for the Series H-5 Shares and Series H-5 Warrants was
approximately $2.5 million. Subject to certain ownership
limitations, the Series H-5 Warrants will be exercisable beginning
six (6) months from the issuance date and will be exercisable for a
period of five (5) years from the initial exercise
date.

 

On December 6, 2019, DropCar filed the Certificate of Designations,
Preferences and Rights of the Series H-5 Convertible Preferred
Stock (the “Series H-5 Certificate of Designation”)
with the Secretary of State of the State of Delaware, establishing
and designating the rights, powers and preferences of the Series
H-5 Convertible Preferred Stock (the “Series H-5
Stock”). DropCar designated up to 50,000 shares of Series H-5
Stock and each share has a stated value of $72.00 (the
“Stated Value”). Each share of Series H-5 Stock is
convertible at any time at the option of the holder thereof, into a
number of shares of common stock determined by dividing the Stated
Value by the initial conversion price of $0.72 per share, subject
to a 9.99% blocker provision. The Series H-5 Stock have the same
dividend rights as DropCar common stock, and no voting rights
except as provided for in the Series H-5 Certificate of Designation
or as otherwise required by law. In the event of any liquidation or
dissolution of DropCar, the Series H-5 Stock ranks senior to
DropCar common stock in the distribution of assets, to the extent
legally available for distribution.

 

As of March 25, 2020, there were 0 shares of Series H-5 Stock
issued and outstanding as a result of the Share Exchange (as
described below).

 

 

 

 

Series H-6 Convertible Preferred Stock

 

On February 5, 2020, DropCar entered into separate Exchange
Agreements (the “Share Exchange Agreements”) with the
holders of the Series H-5 Shares to exchange an equivalent number
of shares of DropCar’s Series H-6 Convertible Preferred Stock
(the “Series H-6 Shares”), par value $0.0001 per share
(the “Share Exchange”). The Share Exchange closed on
February 5, 2020.

 

On February 5, 2020, DropCar filed the Certificate of Designations,
Preferences and Rights of the Series H-6 Shares with the Secretary
of State of the State of Delaware, establishing and designating the
rights, powers and preferences of the Series H-6 Shares. DropCar
designated up to 50,000 shares of Series H-6 Shares and each share
has a stated value of $72.00. Each Series H-6 Share is convertible
at any time at the option of the holder thereof, into a number of
shares of DropCar common stock determined by dividing the stated
value by the initial conversion price of $0.72 per share, subject
to a 9.99% blocker provision. The Series H-6 Shares have the same
dividend rights as the DropCar common stock, except as provided for
in the Certificate of Designations, Preferences and Rights of the
Series H-6 Shares or as otherwise required by law. The Series H-6
shares also have the same voting rights as the DropCar common
stock, except that in no event shall a holder of Series H-6 Shares
be permitted to exercise a greater number of votes than such holder
would have been entitled to cast if the Series H-6 Shares had
immediately been converted into shares of DropCar 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). In addition, a holder (together with its
affiliates) may not be permitted to vote Series H-6 Shares held by
such holder to the extent that such holder would beneficially own
more than 9.99% of DropCar common stock. In the event of any
liquidation or dissolution of DropCar, the Series H-6 Stock ranks
senior to the DropCar common stock in the distribution of assets,
to the extent legally available for distribution.

 

As of March 25, 2020, there were 29,822 Series H-6 Shares
outstanding.

 

Options

 

As of March 25, 2020, DropCar had outstanding options to purchase
380,396 shares of its common stock, at a weighted average exercise
price of $14.43 per share.

 

Restricted Stock Units

 

As of March 25, 2020, DropCar had zero outstanding restricted stock
units.

 

Warrants

 

As of March 25, 2020, DropCar had outstanding warrants to purchase
an aggregate of 4,300,560 shares of its common stock with exercise
prices ranging from $0.792 to $33.12, with an approximate weighted
average exercise price of $1.77 per share. The classes of warrants
are described below.

 

2018 Merger Warrants

 

On April 19, 2018, DropCar entered into separate Warrant Exchange
Agreements with the holders of existing merger warrants (the
“2018 Merger Warrants”) to purchase shares of its
common stock, pursuant to which the 2018 Merger Warrant holders
exchanged each 2018 Merger Warrant for one-third of a share of
DropCar common stock (collectively, the “New Shares”)
and one-half of a warrant to purchase a share of DropCar common
stock (collectively, the “Series I Warrants”). In
connection with the exchange agreements, DropCar issued an
aggregate of (i) 292,714 New Shares and (ii) Series I Warrants to
purchase an aggregate of 439,070 shares of DropCar common stock.
The closing took place on May 16, 2018.

 

 

 

 

The Series I Warrants have an exercise price of $13.80 per share
(reflecting 110% of the market value of DropCar common stock on The
Nasdaq Capital Market as of the close of trading on April 18, 2018,
prior to the entry into the warrant exchange agreements), and do
not contain any price-based anti-dilution protections. In addition,
the Series I Warrants are exercisable for three years from the date
of issuance and contain a mandatory exercise feature if (i) the
volume weighted average price of DropCar common stock equals or
exceeds a certain value (subject to appropriate adjustments for
stock splits, stock dividends, recapitalizations, reorganizations,
reclassifications, combinations, reverse stock splits or other
similar transactions after the issuance date) for not less than ten
(10) consecutive trading days (the “Mandatory Exercise
Measuring Period”); (ii) the daily average number of shares
of DropCar common stock traded during the Mandatory Exercise
Measuring Period equals or exceeds a certain value (subject to
appropriate adjustments for stock splits, stock dividends,
recapitalizations, reorganizations, reclassifications,
combinations, reverse stock splits or other similar transactions
after the issuance date); and (iii) no Equity Conditions Failure
(as defined in the form of Series I Warrant) has occurred (unless
the holder has waived such Equity Conditions Failure).

 

The 2018 Merger Warrants were originally issued in connection with
the merger of DC Acquisition Corporation, a wholly-owned subsidiary
of WPCS International Incorporated (“WPCS”), with and
into DropCar, Inc. (“Private DropCar”), with Private
DropCar surviving as a wholly owned subsidiary of WPCS, which
merger was completed on January 30, 2018. The 2018 Merger Warrants,
which are exercisable to purchase up to 878,146 shares of DropCar
common stock, were issued in exchange for previously outstanding
Private DropCar warrants and have terms identical to the terms of
the Private DropCar warrants for which they were exchanged, except
that the number of shares covered by the 2018 Merger Warrants and
the exercise price per share were adjusted for an exchange ratio
of 0.3273.

 

As of March 25, 2020, there were zero 2018 Merger Warrants issued
and outstanding and 73,178 Series I Warrants issued and
outstanding.

 

Series H-1 Warrants

 

During July 2015, DropCar issued warrants to
purchase 1,279,759 shares
of its common stock, with a weighted average exercise price equal
to $29.04 per share, subject to adjustments (the “Series H-1
Warrants”). Subject to certain ownership limitations, the
Series H-1 Warrants are immediately exercisable from the issuance
date and will be exercisable for a period of five (5) years from
the issuance date.

 

As of March 25, 2020, there were 50,744 Series H-1 Warrants issued
and outstanding.

 

Series H-3 Warrants

 

As described above under “Preferred Stock,” in
connection with the issuance of the Series H-3 Shares, on March 30,
2017, DropCar issued warrants to
purchase 1,101,751 shares of its common stock, with an exercise
price of $33.12 per share, subject to adjustments (the
“Series H-3 Warrants”). Subject to certain ownership
limitations, the Series H-3 Warrants are immediately exercisable
from the issuance date and will be exercisable for a period of five
(5) years from the issuance date.

 

As of March 25, 2020, there were 14,001 Series H-3 Warrants issued
and outstanding.

 

Series H-4 Warrants

 

As described above under “Preferred Stock,” in
connection with the issuance of the Series H-4 Shares, on March 8,
2018, DropCar issued warrants to purchase
2,684,300 shares of its
common stock, with an original
exercise price of $15.60 per share, subject to adjustments (the
“Series H-4 Warrants”). Subject to certain ownership
limitations, the Series H-4 Warrants are immediately exercisable
from the issuance date and will be exercisable for a period of five
(5) years from the issuance date.

 

On September 5, 2018, in connection with the repricing described
below, DropCar received a request from Nasdaq to amend its Series
H-4 Warrants to provide that the Series H-4 Warrants may not be
exercised until DropCar obtained stockholder approval of the
issuance of its common stock underlying the Series H-4 Warrants
pursuant to the applicable rules and regulations of Nasdaq. On
September 10, 2018, DropCar entered into an amendment with the
holders of its Series H-4 Warrants to provide for stockholder
approval as described above prior to the exercise of the Series H-4
Warrants. The required stockholder approval was obtained on
November 15, 2018.

 

On November 15, 2018, the Company obtained shareholder approval to
reduce the exercise price from $15.60 per share to $3.60 per share.
The Series H-4 Warrants contain anti-dilution price protection that
was triggered on December 6, 2019 upon the issuance of the Series
H-5 Warrants (as defined below), causing the exercise price to
decrease from $3.60 per share to $3.12 per share.

 

 

 

 

As of March 25, 2020, there were 187,267 Series H-4 Warrants issued
and outstanding.

 

Series J Warrants

 

On August 31, 2018, DropCar offered to the holders of its Series
H-4 Warrants the opportunity to exercise such Series H-4 Warrants
for cash at a reduced exercise price of $3.60 per share provided
such Series H-4 Warrants were exercised for cash on or before 5:00
P.M. Eastern Daylight Time on September 4, 2018. In addition,
DropCar issued a “reload” warrant (the “Series J
Warrants”) to each H-4 Holder who exercised their Series H-4
Warrants prior to September 4, 2018 covering one share for each
Series H-4 Warrant exercised during that period. The terms of the
Series J Warrants are substantially identical to the terms of the
Series H-4 Warrants except that (i) the exercise price is equal to
$6.00, (ii) the Series J Warrants may be exercised at all times
beginning on the 6-month anniversary of the issuance date on a cash
basis and also on a cashless basis as described in Section 2(d) of
the Series J Warrant, (iii) the Series J Warrants do not contain
any provisions for anti-dilution adjustment and (iv) DropCar has
the right to require the holders to exercise all or any portion of
the Series J Warrants still unexercised for a cash exercise if the
VWAP (as defined in the Series J Warrant) for its common stock
equals or exceeds $9.00 for not less than ten consecutive trading
days.

 

On September 4, 2018, DropCar received executed repricing offer
letters from a majority of the holders, which resulted in the
issuance of Series J Warrants to purchase up to 1,560,696 shares of
its common stock. DropCar received gross proceeds of approximately
$937,000 from the exercise of the Series H-4 Warrants pursuant to
the terms of the repricing offer letter.

 

As of March 25, 2020, there were 260,116 Series J Warrants issued
and outstanding.

 

Prefunded Series K Warrants

 

On November 14, 2018, DropCar entered into a Securities Purchase
Agreement with an existing investor, pursuant to which DropCar
agreed to issue and sell, in a registered direct offering,
Pre-Funded Series K Warrants (the “Pre-Funded Series K
Warrants”) to purchase 1,666,666 shares of DropCar’s
common stock in lieu of shares of DropCar’s common stock
because the purchase of DropCar’s common stock would have
caused the beneficial ownership of the purchaser, together with its
affiliates and certain related parties, to exceed 9.99% of
DropCar’s outstanding common stock. The price to the
purchaser for each Pre-Funded Series K Warrant was $0.59 and the
Pre-Funded Series K Warrants are immediately exercisable at a price
of $0.06 per share of DropCar common stock. DropCar received
approximately $0.983 million in gross proceeds from the offering
before the deduction of fees and offering expenses.

 

As of March 25, 2020, there were zero Pre-Funded Series K Warrants
issued and outstanding.

 

Series H-5 Warrants

 

As described above under “Preferred Stock,” in
connection with the issuance of the Series H-5 Shares, on December
6, 2019, DropCar issued warrants to
purchase 3,472,200 shares of its common stock, with an exercise
price of $0.792 per share, subject to adjustments (the
“Series H-5 Warrants”). Subject to certain ownership
limitations, the Series H-5 Warrants will be exercisable beginning
six (6) months from the issuance date and will be exercisable for a
period of five (5) years from the initial exercise
date.

 

As of March 25, 2020, there were 3,715,254 Series H-5 Warrants
issued and outstanding.

 

 

 

 

Anti-Takeover Effects of Certain Provisions of Delaware Law, the
DropCar Charter and DropCar Bylaws

 

Delaware Law

 

DropCar is subject to Section 203 of the DGCL, which prohibits a
publicly-held Delaware corporation from engaging in a business
combination with an interested stockholder, generally a person
which together with its affiliates owns, or within the last three
years has owned, 15% of DropCar’s voting stock, for a period
of three (3) years after the date of the transaction in which the
person became an interested stockholder, unless the business
combination is approved in a prescribed manner. Subject to certain
exceptions, Section 203 prevents a publicly held Delaware
corporation from engaging in a “business combination”
with any “interested stockholder” for three years
following the date that the person became an interested
stockholder, unless either the interested stockholder attained such
status with the approval of the DropCar Board of Directors, the
business combination is approved by the DropCar Board of Directors
and stockholders in a prescribed manner or the interested
stockholder acquired at least 85% of DropCar’s outstanding
voting stock in the transaction in which it became an interested
stockholder. A “business combination” includes, among
other things, a merger or consolidation involving DropCar and the
“interested stockholder” and the sale of more than 10%
of DropCar’s assets. In general, an “interested
stockholder” is any entity or person beneficially owning 15%
or more of DropCar’s outstanding voting stock and any entity
or person affiliated with or controlling or controlled by such
entity or person. The restrictions contained in Section 203 are not
applicable to any of DropCar’s existing stockholders that
owned 15% or more of DropCar’s outstanding voting stock upon
the closing of DropCar’s initial public
offering.

 

Potential Effects of Authorized but Unissued Stock

 

DropCar has shares of common stock and preferred stock available
for future issuance without stockholder approval. DropCar may
utilize these additional shares for a variety of corporate
purposes, including future public offerings to raise additional
capital, to facilitate corporate acquisitions or payment as a
dividend on the capital stock.

 

The existence of unissued and unreserved common stock and preferred
stock may enable the DropCar Board of Directors to issue shares to
persons friendly to current management or to issue preferred stock
with terms that could render more difficult or discourage a
third-party attempt to obtain control of DropCar by means of a
merger, tender offer, proxy contest or otherwise, thereby
protecting the continuity of DropCar’s management. In
addition, the DropCar Board of Directors has the discretion to
determine designations, rights, preferences, privileges and
restrictions, including voting rights, dividend rights, conversion
rights, redemption privileges and liquidation preferences of each
series of preferred stock, all to the fullest extent permissible
under the DGCL and subject to any limitations set forth in the
DropCar Charter. The purpose of authorizing the DropCar Board of
Directors to issue preferred stock and to determine the rights and
preferences applicable to such preferred stock is to eliminate
delays associated with a stockholder vote on specific issuances.
The issuance of preferred stock, while providing desirable
flexibility in connection with possible financings, acquisitions
and other corporate purposes, could have the effect of making it
more difficult for a third-party to acquire, or could discourage a
third-party from acquiring, a majority of DropCar’s
outstanding voting stock.

 

Limitations of Director Liability and Indemnification of Directors,
Officers and Employees

 

Section 145 of the DGCL, permits indemnification of directors,
officers, agents and controlling persons of a corporation under
certain conditions and subject to certain limitations. Section 145
empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding whether civil,
criminal, administrative or investigative, by reason of the fact
that he or she is or was a director, officer or agent of the
corporation or another enterprise if serving at the request of
DropCar. Depending on the character of the proceeding, a
corporation may indemnify against expenses (including
attorneys’ fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such
action, suit or proceeding if the person indemnified acted in good
faith and in a manner he or she reasonably believed to be in or not
opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification
may be made with respect to any claim, issue or matter as to which
such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought
shall determine that despite the adjudication of liability such
person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper. Section 145 further
provides that to the extent a present or former director or officer
of a corporation has been successful in the defense of any action,
suit or proceeding referred to above or in the defense of any
claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys’ fees) actually and
reasonably incurred by such person in connection
therewith.dcar_ex10-21

DropCar,
Inc.

[ ],
2020

 

 

 

[Name]

[Address]

[Address]

 

Re:            

Merger,
Consolidation or Change of Control Payment

 

Dear
[Name]:

 

This
letter agreement (this “Agreement”) sets forth
the terms and conditions of the merger, consolidation or Change in
Control payment arrangement between yourself and DropCar, Inc. (the
“Company”). All
capitalized terms used in this Agreement without definition or
reference have the meanings set forth in the Company’s
Amended and Restated 2014 Equity Inventive Plan (the
“Plan”).

 

1.            

Payment.
Upon (i) a merger or consolidation with another entity where the
Company retains more than 50% of the outstanding voting securities
of the Company or (ii) the consummation of a Change in Control
prior to November 14, 2020 (each, a “Triggering Event”), you
shall receive a transaction payment equal to $[ ]1, less any applicable
taxes to be withheld by the Company (the “Transaction Payment”);
provided, however, that in order to be eligible for, and earn, the
Transaction Payment, you must be providing services to the Company
as an employee or director in good standing on the date of
consummation of the Triggering Event. The Transaction Payment shall
be payable, in the discretion of the Company, either in (i) cash,
or (ii) shares of Common Stock (or the common stock of a successor
company following a Change of Control) calculated by dividing (a)
the Transaction Payment amount by (b) the Fair Market Value of a
share of Common Stock on the date of the Triggering Event.
Notwithstanding the foregoing, shares of Common Stock (or the
common stock of a successor corporation) will only be issued if, at
the time of issuance, such shares may be issued by the Company
without unreasonable expense or effort pursuant to either (i) the
Plan (or a successor equity plan), or (ii) an available exemption
from registration under the Securities Act of 1933, and any
applicable state securities “blue sky”
laws.

 

2.            

Timing of
Payment. The Company shall pay the Transaction Payment to
you no later than thirty (30) days following the effective date of
the Triggering Event.

 

3. 

Miscellaneous.

 

(a)           No
Additional Rights. This
Agreement does not confer any rights to provide services as a
director or under any employment or consulting agreement or
otherwise, nor does it create
or convey any equity or ownership interest in the Company nor any
rights commonly associated with any such interest, including, but
not limited to, the right to vote on any matters put before the
Company’s equity holders.

 

(b)           Taxes.
You acknowledge that the ultimate liability for all taxes legally
due by you is and remains your responsibility and the Company makes
no representations or undertakings regarding the treatment of any
taxes in connection with any aspect of this Agreement.

 

(c)           Entire
Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter
hereof.

 

1 $60,000 for Mr. Silverman; $25,000 to Mr. Schiffman;
$50,000 to all other non-employee directors.

 

 

 

 

(d)           General
Creditor. Any payments due under this Agreement shall be
paid from the general assets of the Company and no separate fund
shall be established to secure payment of these amounts. Any
amounts payable under this Agreement shall be entries in the
Company’s books and records only, and shall remain available
to and subject to the claims of the Company’s creditors until
actually paid to you.

 

(e)           Successor.
This Agreement shall bind and inure to the benefit of the Company,
its successors and assigns, and you.

 

(f)           Amendment.
This Agreement may be amended or modified by the Company at any
time prior to the date of the Triggering Event in its sole
discretion; provided that notice is provided to you.

 

(g)           Governing
Law. This Agreement shall be construed under and be governed
in all respects by the laws of the State of Delaware without giving
effect to any conflict of laws principles.

 

	
 

	
 

DROPCAR,
INC.

 

 

By:                                                                       

 

Name:
Joshua
Silverman

 

Its:
Chairman of the Board of
Directors

 

 

Acknowledged and Agreed:

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