Securities Registration: Business Combination (s-4)

Explanatory Note Regarding the Merger Agreement

The following summary of the Merger Agreement, and the copy of the Merger Agreement attached as Annex A to this joint proxy and consent solicitation statement/prospectus, are intended only to provide information regarding the terms of the Merger Agreement. They are not intended to provide any factual information about AYRO, DropCar, DropCar’s subsidiaries or DC Partners or to modify or supplement any factual disclosures about DropCar in its public reports filed with the SEC. The Merger Agreement and the related summary are not intended to be a source of factual, business or operational information about AYRO, DropCar, DropCar’s subsidiaries or DC Partners, and the following summary of the Merger Agreement and the copy thereof included as Annex A are not intended to modify or supplement any factual disclosure about DropCar in any documents DropCar has or will publicly file with the SEC. The Merger Agreement contains representations and warranties by, and covenants of, AYRO, DropCar, DC Partners and certain subsidiaries of DropCar that were made only for purposes of the Merger Agreement and as of specified dates. The representations, warranties and covenants in the Merger Agreement were made solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to contractual standards of materiality or material adverse effect applicable to the contracting parties that generally differ from those applicable to investors. In addition, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in DropCar’s public disclosures.

The Merger Agreement (see page 182 and Annex A)

On December 19, 2019, DropCar, Merger Sub and AYRO entered into the Merger Agreement. The Merger Agreement is the legal document governing the merger and is included in this joint proxy and consent solicitation statement/prospectus as Annex A. All descriptions in this Summary and elsewhere in this joint proxy and consent solicitation statement/prospectus of the terms and conditions of the merger are qualified in their entirety by reference to the full text of the Merger Agreement. Please read the Merger Agreement carefully for a more complete understanding of the merger.

The Merger (see page 143)

At the effective time of the merger, Merger Sub, a wholly owned subsidiary of DropCar, will merge with and into AYRO, with AYRO continuing as the surviving corporation and a wholly owned subsidiary of DropCar. Immediately prior to the merger, AYRO will change its name to “AYRO Operating Company, Inc.” and DropCar will change its name to “AYRO, Inc.”

Effects of Merger; Merger Consideration (see page 182)

Upon the terms and subject to the conditions set forth in the Merger Agreement, upon the effectiveness of the merger, each share of AYRO common stock issued and outstanding immediately prior to the effective time of the merger (excluding those certain shares owned by AYRO as treasury stock or otherwise and any dissenting shares exercising appraisal rights under Section 262 of the DGCL) will convert into and become exchangeable for the number of pre-reverse stock split shares of DropCar common stock equal to the number of shares of AYRO common stock multiplied by the Exchange Ratio as described below. Additionally, the Pre-funded Warrants to purchase 1,750,000 shares of AYRO common stock, Outstanding Warrants to purchase 12,794,180 shares of AYRO common stock and AYRO Options to purchase 4,455,000 shares of AYRO common stock will automatically convert into the right to purchase pre-reverse stock split shares of DropCar common stock equal to the number of shares of AYRO common stock underlying such outstanding AYRO pre-funded warrants, warrants and options multiplied by the Exchange Ratio, with the exercise price of such converted pre-funded warrants, warrants and options determined by dividing the exercise price of the AYRO pre-funded warrants, warrants and options by the Exchange Ratio. As a result of the issuance of the merger consideration and the merger, AYRO stockholders will receive an aggregate of approximately 41,927,211 pre-reverse stock split shares of DropCar common stock, including 25,974,049 shares of DropCar common stock to be issued in respect of the AYRO equity securities outstanding as of the date of this joint proxy and consent solicitation statement/prospectus, 4,098,318 shares of DropCar common stock to be issued in respect of shares of AYRO to be issued upon conversion of the bridge loans made to AYRO in the Bridge Financing immediately prior to the merger, 9,104,317 shares of DropCar common stock to be issued in respect of shares of AYRO to be issued upon closing of the AYRO Private Placements immediately prior to the merger and 550,110 and 2,200,417 shares of DropCar common stock to be issued in respect of AYRO common stock to be issued to a financial advisor of AYRO and a consultant of AYRO, respectively, prior to the closing of the merger.

Immediately prior to the effective time of the merger, all outstanding shares of AYRO preferred stock will be converted into shares of AYRO common stock.

All shares of AYRO capital stock held by AYRO as treasury stock or otherwise will be cancelled and no payment will be made with respect to such shares.

Pursuant to the Merger Agreement, all outstanding AYRO Options will be assumed by DropCar. Each option to purchase shares of AYRO common stock will be converted into an option to purchase a number of shares of DropCar common stock representing the number of AYRO shares of common stock for which the exchanged option was exercisable multiplied by the Exchange Ratio with an exercise price equal to the exercise price of such options divided by the Exchange Ratio.

In addition, in respect of the warrants issued by AYRO that are outstanding upon consummation of the merger, including the warrants issued by AYRO in connection with the Bridge Financing, the AYRO Private Placements and the Nominal Stock Subscription, upon consummation of the merger, the Pre-funded Warrants issued in the Nominal Stock Subscription will convert into the right to purchase 2,081,275 shares of DropCar common stock at an exercise price of $0.000084 per share; the Outstanding Warrants will convert into the right to purchase an aggregate of 15,216,119 shares of DropCar common stock, with the warrants to be issued in the Bridge Financing being exercisable to purchase 4,098,318 shares of DropCar common stock at an exercise price of $0.2806 per share, the warrants to be issued in the $850,000 AYRO Private Placement being exercisable to purchase 5,237,045 shares of DropCar common stock at an exercise price of $0.1867 per share, the warrants to be issued in the $1,150,000 AYRO Private Placement being exercisable to purchase 3,867,272 shares of DropCar common stock at an exercise price of $0.3420 per share, and the other warrants will convert into the right to purchase 2,013,484 shares of DropCar common stock at an exercise price of 1.68 per share.

Based on the number of shares of DropCar common stock outstanding as of [●], 2020, the total number of shares of DropCar common stock outstanding after the closing of the merger and all related transactions will be approximately 55,010,981 assuming the exercise in full of the Pre-funded Warrants and the conversion of outstanding shares of DropCar preferred stock, prior to giving effect to the proposed reverse stock split contemplated by the Reverse Stock Split Proposal, and (i) AYRO equity holders (including the investors in the Bridge Financing, the AYRO Private Placements, and the Nominal Stock Subscription and a consultant to AYRO) will own approximately 79% of the outstanding equity of DropCar; (ii) current DropCar stockholders (including holders of Series H-4 Preferred Stock and Series H-6 Preferred Stock) will own approximately 18% of the outstanding equity of DropCar; and (iii) the financial advisor to DropCar and AYRO will own approximately 3% of the outstanding equity of DropCar.

DropCar will not issue any fractional shares of DropCar common stock in the merger. AYRO stockholders who would otherwise be entitled to a fraction of a share of DropCar common stock upon the completion of the merger (after aggregating all fractional shares of DropCar common stock to be received by such holder) will instead receive from DropCar one full share of DropCar common stock (i.e., rounded up to the nearest whole share).

Each share of Merger Sub common stock issued and outstanding immediately prior to the effective time of the merger will convert into and become one (1) share of common stock of post-merger AYRO, which will represent all of the issued and outstanding shares of common stock of post-merger AYRO immediately following the effective time of the merger.

After the merger is completed, AYRO equity holders will have only the right to receive the merger consideration and one full share in lieu of any fractional shares of DropCar common stock, or, in the case of AYRO stockholders that properly exercise and perfect appraisal rights, the right to receive the fair market value for such shares, and will no longer have any rights as AYRO stockholders, including voting or other rights.

For a full description of the merger consideration, see the sections titled “THE MERGER” beginning on page 143 and “THE MERGER AGREEMENT — Effects of Merger; Merger Consideration” beginning on page 182 of this joint proxy and consent solicitation statement/prospectus.

AYRO Private Placements (see page 179)

Pursuant to the Merger Agreement, on December 19, 2019, AYRO entered into two securities purchase agreements (collectively the “AYRO Private Placement SPAs”) with accredited investors whereby AYRO agreed to sell to the investors for an aggregate of $2.0 million a number of shares of AYRO common stock for an aggregate of 16.55% of the combined company’s outstanding common stock immediately following the merger, as well as warrants to purchase an equivalent number of shares of common stock of the combined company, which are referred to herein as the AYRO Private Placements.

For a full description of the AYRO Private Placements, see the section titled “THE MERGER — AYRO Private Placements.” beginning on page 179 of this joint proxy and consent solicitation statement/prospectus.

DropCar’s Reasons for the Merger (see page 150)

In evaluating strategic alternatives, the DropCar Board of Directors consulted with DropCar’s management and legal and financial advisors, reviewed a significant amount of information, and considered a number of factors, including, among others, the following factors regarding the combined company that the DropCar Board of Directors viewed as supportive of its decision to approve the merger with AYRO, as being in the best interests of DropCar’s stockholders:

Each of the DropCar Board of Directors and the AYRO board of directors also considered other reasons for the merger, as described herein. For example, the DropCar Board of Directors considered, among other things:

The DropCar Board of Directors also reviewed the terms and conditions of the proposed Merger Agreement and associated transactions, as well as the safeguards and protective provisions included therein to mitigate risks, including:

The DropCar Board of Directors believes that, overall, the potential benefits to DropCar stockholders of the Merger Agreement and the transactions contemplated thereby outweigh the risks and uncertainties.

Although this discussion of the information and factors considered by the DropCar Board of Directors is believed to include the material factors it considered, it is not intended to be exhaustive and may not include all of the factors considered by the DropCar board of directors. The DropCar Board of Directors did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination that the merger agreement and the transactions contemplated thereby are fair to, advisable, and in the best interests of DropCar and its stockholders. The DropCar Board of Directors based its determination on the totality of the information presented to and factors considered by it. In addition, individual members of the DropCar Board of Directors may have given differing weights to different factors.

For a more complete discussion of DropCar’s reasons for the merger, see the section titled “THE MERGER — DropCar’s Reasons for the Merger.” beginning on page 150 of this joint proxy and consent solicitation statement/prospectus.

AYRO’s Reasons for the Merger (see page 153)

AYRO’s board of directors considered many factors in making its decision to approve and adopt the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement, and to recommend that its stockholders approve the AYRO Merger Proposal. In arriving at its decision, AYRO’s board of directors consulted with AYRO’s senior management and legal advisors, reviewed a significant amount of information, and conducted an overall analysis of a number of factors, including the following material facts (not in any relative order of importance):

For a more complete discussion of AYRO’s reasons for the merger, see the section titled “THE MERGER — AYRO’s Reasons for the Merger” beginning on page 153 of this joint proxy and consent solicitation statement/prospectus.

Risk Factors (see page 65)

In evaluating the Merger Agreement and the merger and related transactions contemplated by the Merger Agreement, you should carefully consider all of the information in this joint proxy and consent solicitation statement/prospectus. In particular, you are urged to read and consider all of the factors discussed in the section titled “RISK FACTORS” beginning on page 65.

Recommendation of the DropCar Board of Directors (see page 114)

The DropCar Board of Directors has determined that the Merger Agreement and the transactions contemplated thereby, including the merger and the issuance of shares of DropCar common stock pursuant to the terms of the Merger Agreement, are advisable and in the best interests of DropCar and its stockholders and has approved and adopted the Merger Agreement, the merger and the other transactions contemplated therein. In addition, the DropCar Board of Directors has determined that the Asset Purchase Agreement and the transactions contemplated thereby, including the sale of all or substantially all of the assets related to the existing DropCar business, are advisable and in the best interests of DropCar and its stockholders and has approved and adopted the Asset Purchase Agreement and the other transactions contemplated therein. The DropCar Board of Directors believes that each of the DropCar Share Issuance Proposal, the Reverse Stock Split Proposal, the Asset Sale Proposal, the DropCar Preferred Conversion Proposal, the A&R Charter Proposal, the Incentive Plan Proposal, the DropCar Golden Parachute Compensation Proposal and the Adjournment Proposal to be presented at the special meeting is in the best interests of DropCar and its stockholders, and recommends that its stockholders vote “FOR” each of the proposals. For the factors considered by the DropCar Board of Directors in reaching its decision to approve the merger and Merger Agreement, see the section titled “THE MERGER — DropCar’s Reasons for the Merger” beginning on page 150 of this joint proxy and consent solicitation statement/prospectus.

Recommendation of AYRO’s Board of Directors (see page 142)

AYRO’s board of directors has determined that the Merger Agreement and the transactions contemplated thereby, including the merger, are just, equitable and fair to AYRO and its stockholders and that it is advisable and in the best interests of AYRO and its stockholders that AYRO consummate the merger and has unanimously approved and adopted the Merger Agreement and the transactions contemplated thereby, including the merger and the AYRO Preferred Stock Conversion. AYRO’s board of directors unanimously recommends that AYRO stockholders consent to the adoption and approval of the Merger Agreement and the other transactions contemplated by the Merger Agreement, including the merger, and that AYRO’s preferred stockholders consent to the AYRO Preferred Stock Conversion. For the factors considered by AYRO’s board of directors in reaching its decision to approve the merger and Merger Agreement, see the section titled “THE MERGER — AYRO’s Reasons for the Merger” beginning on page 153 of this joint proxy and consent solicitation statement/prospectus.

The DropCar Special Meeting (see page 114)

The DropCar special meeting will be held on [●], 2020, at [●] a.m., Eastern Time, at the offices of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., 666 Third Avenue, New York, New York 10017. At the special meeting, DropCar stockholders will be asked to consider and vote on the following:

(1) The DropCar Share Issuance Proposal — to approve, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of DropCar common stock to AYRO equity holders in connection with the merger of Merger Sub with and into AYRO, pursuant to the terms and conditions of the Merger Agreement and the transactions contemplated thereby;

(2) The Reverse Stock Split Proposal — to approve an amendment to DropCar’s amended and restated certificate of incorporation (the “DropCar Charter”) to effect a reverse stock split with a ratio between 1-for-[●] and 1-for-[●] with respect to the issued and outstanding common stock of the combined company immediately following the merger. The reverse stock split will increase DropCar’s stock price to at least $5.00 per share;

(3) The Asset Sale Proposal — to approve the sale of substantially all of the assets of DropCar (the “Asset Sale Transaction”) pursuant to the terms and conditions of the Asset Purchase Agreement by and among DropCar, DropCar Operating, DC Partners, Spencer Richardson and David Newman;

(4) The DropCar Preferred Conversion Proposal — to approve an amendment to DropCar’s certificate of incorporation to provide for the reduction of the conversion price of the Series H-4 Convertible Preferred Stock to $0.50 per share and the automatic conversion of such shares into DropCar common stock and to authorize, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of DropCar common stock in connection therewith;

(5) The A&R Charter Proposal — to approve the amendment and restatement of the DropCar Charter in its entirety;

(6) The Incentive Plan Proposal — to approve the 2020 Long-Term Equity Incentive Plan;

(7) The DropCar Golden Parachute Compensation Proposal — to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to DropCar’s named executive officers in connection with the merger (the “DropCar Golden Parachute Compensation Proposal”); and

(8) The Adjournment Proposal — to consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit the solicitation of additional proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve one or more proposals presented to stockholders for vote.

Only the holders of record of shares of DropCar capital stock at the close of business on [●], 2020, the DropCar record date, will be entitled to vote at the special meeting. Each share of DropCar common stock is entitled to one vote on each proposal to be considered at the DropCar special meeting. 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. As of the DropCar record date, there were [●] shares of DropCar capital stock outstanding entitled to vote at the DropCar special meeting.

Consummation of the merger is subject to certain closing conditions, including, among other things, approval by the stockholders of DropCar and AYRO, the continued listing of DropCar’s common stock on The Nasdaq Stock Market after the merger and satisfaction of minimum net cash thresholds by DropCar and AYRO. In accordance with the terms of the Merger Agreement, (i) certain executive officers, directors and stockholders of AYRO (solely in their respective capacities as AYRO stockholders) holding approximately 57% of the outstanding AYRO capital stock have entered into the AYRO Voting Agreements with DropCar to vote all of their shares of AYRO capital stock in favor of adoption of the Merger Agreement and (ii) certain executive officers, directors and stockholders of DropCar (solely in their respective capacities as DropCar stockholders) holding approximately 10% of the outstanding DropCar common stock have entered into the DropCar Voting Agreements with AYRO to vote all of their shares of DropCar common stock in favor of approval of the Merger Agreement. The Voting Agreements include covenants with respect to the voting of such shares in favor of approving the transactions contemplated by the Merger Agreement and against any competing acquisition proposals. As of the close of business on the DropCar record date, the directors and executive officers of DropCar and their affiliates collectively beneficially owned and were entitled to vote [●] shares of DropCar capital stock, which represent, in the aggregate, approximately [●]% of DropCar capital stock outstanding on that date. DropCar currently expects that DropCar’s directors and executive officers will vote their shares in favor of the DropCar Share Issuance Proposal, the Reverse Stock Split Proposal, the Asset Sale Proposal, the DropCar Preferred Conversion Proposal, the A&R Charter Proposal, the Incentive Plan Proposal, the DropCar Golden Parachute Compensation Proposal and the Adjournment Proposal.

Assuming the presence of a quorum, approval of the DropCar Share Issuance Proposal requires the affirmative vote of a majority of the votes cast, the approval of the Incentive Plan Proposal, the DropCar Golden Parachute Compensation Proposal and the Adjournment Proposal require the affirmative vote of a majority of the votes present and entitled to vote thereon, and the approval of the Reverse Stock Split Proposal, the Asset Sale Proposal, the DropCar Preferred Conversion Proposal and the A&R Charter Proposal require the affirmative vote of holders of at least a majority of the shares of DropCar capital stock outstanding and entitled to vote. DropCar will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, an abstention will have no effect on any of the DropCar Share Issuance Proposal, but will have the effect of a vote against the Reverse Stock Split Proposal, the Asset Sale Proposal, the DropCar Preferred Conversion Proposal, the A&R Charter Proposal, the Incentive Plan Proposal, the DropCar Golden Parachute Compensation Proposal and the Adjournment Proposal. In addition, if a holder fails to submit a proxy or vote in person at the DropCar special meeting or fails to instruct such holder’s bank or broker how to vote with respect to any of the proposals, it will have no effect on the DropCar Share Issuance Proposal, the Incentive Plan Proposal, the DropCar Golden Parachute Compensation Proposal or the Adjournment Proposal, but will have the same effect as a vote against the Reverse Stock Split Proposal, the Asset Sale Proposal, the DropCar Preferred Conversion Proposal and the A&R Charter Proposal.

AYRO Solicitation of Written Consent (see page 140)

AYRO stockholders are being asked to adopt the Merger Agreement and thereby approve the AYRO Merger Proposal and the AYRO Preferred Stock Conversion by written consent.

Only the holders of record of shares of AYRO capital stock at the close of business on [●], 2020, the AYRO record date, will be entitled to approve the AYRO Merger Proposal by written consent. As of the AYRO record date, there were [●] shares of AYRO common stock, [●] shares of Series Seed-1 Preferred Stock, [●] shares of Series Seed-2 Preferred Stock and [●] shares of Series Seed-3 Preferred Stock issued and outstanding.

In accordance with the terms of the Merger Agreement, (i) certain executive officers, directors and stockholders of AYRO (solely in their respective capacities as AYRO stockholders) holding approximately 57% of the outstanding AYRO capital stock have entered into the AYRO Voting Agreements with DropCar to vote all of their shares of AYRO capital stock in favor of adoption of the Merger Agreement, and (ii) certain executive officers, directors and stockholders of DropCar (solely in their respective capacities as DropCar stockholders) holding approximately 10% of the outstanding DropCar common stock have entered into the DropCar Voting Agreements with AYRO to vote all of their shares of DropCar common stock in favor of approval of the Merger Agreement. The Voting Agreements include covenants with respect to the voting of such shares in favor of approving the transactions contemplated by the Merger Agreement and against any competing acquisition proposals.

As of the close of business on the AYRO record date, the directors and executive officers of AYRO and their affiliates collectively beneficially owned [●] shares of AYRO common stock and [●] shares of AYRO preferred stock, which represent, in the aggregate, approximately [●]% of AYRO voting stock outstanding and entitled to vote on that date on an as-converted-to-common stock basis. AYRO currently expects that AYRO’s directors and executive officers will provide written consent to the AYRO Merger Proposal.

The adoption and approval of the AYRO Merger Proposal requires the affirmative vote or written consent of the holders of at least a majority of the issued and outstanding shares of AYRO common stock and preferred stock, voting together as a single class on an as-converted-to-common stock basis. The adoption and approval of the AYRO Preferred Stock Conversion requires the approval of the holders of a majority of the outstanding shares of AYRO preferred stock voting together as a single class and on an as-converted-to-common stock basis.

Interests of DropCar’s Directors and Executive Officers in the Merger (see page 161)

In considering the recommendation of the DropCar Board of Directors that DropCar stockholders vote to approve all of the presented proposals, DropCar stockholders should be aware that some of DropCar’s directors and officers have interests in the merger and have arrangements that are different from, or in addition to, those of DropCar stockholders generally. These interests and arrangements may create potential conflicts of interest. The DropCar Board of Directors was aware of these interests and considered these interests, among other matters, in adopting and approving the Merger Agreement, the Asset Sale Agreement and the transactions contemplated thereby, including the merger, and in recommending that DropCar stockholders approve the DropCar Share Issuance Proposal, the Reverse Stock Split Proposal, the Asset Sale Proposal, the DropCar Preferred Conversion Proposal, the A&R Charter Proposal, the Incentive Plan Proposal, the DropCar Golden Parachute Compensation Proposal and the Adjournment Proposal.

When you consider the recommendation of the DropCar Board of Directors in favor of approval of the DropCar Share Issuance Proposal, the Reverse Stock Split Proposal, the Asset Sale Proposal, the DropCar Preferred Conversion Proposal, the A&R Charter Proposal, the Incentive Plan Proposal, the DropCar Golden Parachute Compensation Proposal and the Adjournment Proposal, you should keep in mind that DropCar’s directors and officers have interests in the merger that are different from, or in addition to, your interests as a stockholder. These interests include, among other things:

For a more complete description of these interests, see “THE MERGER — Interests of DropCar’s Directors and Executive Officers in the Merger” beginning on page 161 of this joint proxy and consent solicitation statement/prospectus.

Interests of AYRO’s Directors and Executive Officers in the Merger (see page 163)

In considering the recommendation of AYRO’s board of directors that AYRO stockholders consent to approve the Merger Agreement and the merger, AYRO stockholders should be aware that some of AYRO’s directors and officers have interests in the merger and have arrangements that are different from, or in addition to, those of AYRO stockholders generally. These interests and arrangements may create potential conflicts of interest. AYRO’s board of directors was aware of these interests and considered these interests, among other matters, in adopting and approving the Merger Agreement and the transactions contemplated thereby, including the merger, and in recommending that AYRO stockholders approve the AYRO Merger Proposal.

When AYRO’s stockholders consider the recommendation of AYRO’s board of directors in favor of approval of the AYRO Merger Proposal, AYRO’s stockholders should keep in mind that AYRO’s directors and officers have interests in the merger that are different from, or in addition to, the interests of its stockholders. These interests include, among other things:

For a more complete description of these interests, see “THE MERGER — Interests of AYRO’s Directors and Executive Officers in the Merger” beginning on page 163 of this joint proxy and consent solicitation statement/prospectus.

Assumption of AYRO Stock Options (see page 183)

At the effective time of the merger, all of AYRO’s rights and obligations under all stock options granted pursuant to the AYRO Equity Plan that are outstanding immediately prior to the effective time of the merger will be assumed by DropCar. Each outstanding stock option to purchase shares of AYRO common stock will be converted into an option to purchase a number of shares of DropCar common stock representing the number of shares of AYRO common stock for which the exchanged option was exercisable multiplied by the Exchange Ratio with an exercise price equal to the exercise price of such options divided by the Exchange Ratio. As a general matter, except as set forth in the Merger Agreement, all other material terms and conditions governing stock options granted pursuant to the AYRO Equity Plan in effect immediately prior to the merger will remain in effect following the merger.

For more information on the assumption of outstanding stock options of AYRO, see the section titled “THE MERGER AGREEMENT — Assumption of AYRO Stock Options” beginning on page 183 of this joint proxy and consent solicitation statement/prospectus.

Board Composition and Management of DropCar After the Merger (see page 160)

Pursuant to the Merger Agreement, immediately after the effective time of the merger, the combined company’s board of directors will be fixed at seven members, three of whom will be directors designated by the DropCar board and will include Joshua Silverman, DropCar’s current director and chairman of the board of directors, as chairman of the board of directors of the combined company. One of the seven will be a director designated by Alpha Capital Anstalt, the lead investor in the AYRO Private Placement, and the three remaining will be the current directors of AYRO. Following the merger, it is expected that certain stockholders of the combined company who were beneficial owners of [  ]% of the AYRO common stock issued and outstanding as of the effective time of the merger will be entitled to nominate additional members of the board upon achievement of certain business milestones by the combined company. Designees to the board of directors are expected to satisfy the requisite independence requirements for the combined company’s board of directors, as well as the sophistication and independence requirements for committee members pursuant to Nasdaq listing requirements.

The following table lists the names and positions of the individuals who are expected to serve as executive officers and directors of the combined company upon the completion of the merger:

Following the merger, the management team of the combined company is expected to be composed of the current management team of AYRO, listed as follows:

Appraisal Rights (see page 173 and Annex E)

If the merger is completed, AYRO stockholders are entitled to appraisal rights under Section 262 of the DGCL. In view of the complexity of Section 262 of the DGCL, AYRO stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors. An AYRO stockholder of record who wishes to exercise appraisal rights, or preserve the ability to do so, must not deliver a signed written consent adopting the Merger Agreement or deliver a signed consent without indicating a decision on the AYRO Merger Proposal. Any signed written consent returned without indicating a decision on the AYRO Merger Proposal will be counted as approving the AYRO Merger Proposal. The obligations of DropCar to effect the merger are subject to the condition that less than 5% of the shares of AYRO capital stock (on an as converted to AYRO common stock basis) shall have exercised statutory appraisal rights pursuant to Section 262 of the DGCL. For a more complete discussion of the appraisal rights, see the provisions of Section 262 of the DGCL, referred to as Section 262, and attached to this joint proxy and consent solicitation statement/prospectus as Annex E, and the section titled “THE MERGER — Appraisal Rights” beginning on page 173 of this joint proxy and consent solicitation statement/prospectus.

DropCar stockholders do not have any dissenters’ or appraisal rights under the DGCL in connection with the merger or with respect to any of the matters to be voted on at the DropCar special meeting.

No Solicitation (see page 189)

The Merger Agreement contains provisions that make it more difficult for each of AYRO and DropCar to solicit, initiate, knowingly encourage, induce or knowingly facilitate the communication, making, submission or announcement of, any “acquisition proposal” or “acquisition inquiry,” as defined in the Merger Agreement, or take any action that could reasonably be expected to lead to an acquisition proposal or acquisition inquiry, including the following:

Conditions to Completion of the Merger (see page 186)

Currently, DropCar and AYRO expect to complete the merger during [●]. As more fully described in this joint proxy and consent solicitation statement/prospectus and in the Merger Agreement, each party’s obligation to complete the merger depends on a number of conditions being satisfied or, where legally permissible, waived, including the following:

The obligation of DropCar to complete the merger is subject to the satisfaction or waiver of the following additional conditions:

The obligation of AYRO to complete the merger is subject to the satisfaction or waiver of the following additional conditions:

Neither DropCar nor AYRO can be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed. See “THE MERGER AGREEMENT — Conditions to Completion of the Merger” on page 186 of this joint proxy and consent solicitation statement/prospectus for a more complete summary of the conditions that must be satisfied prior to closing.

Listing of DropCar Common Stock (see page 159)

DropCar common stock is currently listed on The Nasdaq Capital Market under the symbol “DCAR.” Pursuant to the Merger Agreement, DropCar has agreed to obtain approval for listing on The Nasdaq Capital Market the shares of DropCar common stock to be issued to AYRO equity holders in the merger. In addition, under the Merger Agreement, each party’s obligation to complete the merger is subject to the satisfaction or waiver by each of the parties, at or prior to the merger, of various conditions, including that DropCar must have caused such shares of DropCar common stock to be approved for listing on The Nasdaq Capital Market, subject only to official notice of issuance as of the closing of the merger.

In connection with and immediately prior to the merger, AYRO will change its name to “AYRO Operating Company, Inc.”, and DropCar will change its name to “AYRO, Inc.” and seek to change its trading symbol on The Nasdaq Capital Market to “AYRO.”

Ancillary Agreements (see page 197)

Transaction Documents

On or prior to December 19, 2019, AYRO entered into the following transactions, the completion of which are conditions to closing the merger: (i) the AYRO Private Placements; (ii) the conversion of $565,000 principal amount of certain outstanding promissory notes of AYRO into 605,130 shares of AYRO’s preferred stock, (iii) the holders of $637,729.03 principal amount of certain outstanding promissory notes of AYRO agreed to extend the maturity date of $500,000.00 in principal amount of such notes until April 30, 2021 and $137,729.03 in principal amount of such notes until May 31, 2021, (iv) the Bridge Financing; and (v) the Nominal Stock Subscription.

Pursuant to the AYRO Private Placements, prior to closing the Merger Agreement, AYRO shall issue (i) to the investors in the $1,150,000 AYRO Private Placement an aggregate of 3,251,721 shares of AYRO common stock and warrants to purchase an aggregate of 3,251,721 shares of AYRO common stock at an exercise price of $0.4067 per share and (ii) to the investors in the $850,000 AYRO Private Placement an aggregate of 4,403,468 shares of AYRO common stock and warrants to purchase an aggregate of 4,403,468 shares of AYRO common stock at an exercise price of $0.2220 per share. The AYRO Private Placement SPAs include registration rights agreements by and between DropCar and the investors in the AYRO Private Placements.

Pursuant to the Bridge Financing, immediately prior to closing the Merger Agreement, the bridge loans shall convert into an aggregate of 3,445,991 shares of AYRO common stock, and AYRO shall issue to the bridge loan investors warrants to purchase an aggregate of 3,445,991 shares of AYRO common stock at an exercise price of $0.3337 per share.

Pursuant to the Nominal Stock Subscription, immediately prior to closing the Merger Agreement, AYRO shall issue to the investor Pre-funded Warrants to purchase an aggregate of 1,750,000 shares of AYRO common stock at an exercise price of $0.0001 per share.

The shares of common stock issued as a result of the foregoing transactions will be exchanged for merger consideration at the effective time of the merger, and the warrants issued in the foregoing transactions will automatically convert into the right to purchase shares of DropCar common stock equal to the number of shares of AYRO common stock issuable upon exercise of such warrants multiplied by the Exchange Ratio, with an exercise price equal to the exercise price of such warrants divided by the Exchange Ratio. For additional information, see “ANCILLARY AGREEMENTS — Transaction Documents” on page 197 of this joint proxy and consent solicitation statement/prospectus. Copies of the complete text of the AYRO Private Placement SPAs, the Bridge Financing and the Nominal Stock Subscription Agreement are included in this joint proxy and consent solicitation statement/prospectus as Annexes K, L and M, respectively.

Palladium Placement Agent and Merger Advisory Agreement

On December 19, 2019, AYRO entered into an engagement agreement (the “Palladium Advisory Agreement”) with Palladium Capital Advisors, LLC (“Palladium”), whereby Palladium agreed to (i) act as the non-exclusive placement agent in a private placement of, or similar unregistered transaction involving, equity or equity-linked securities of AYRO to a limited number of institutional, accredited individual or strategic investors, and (ii) serve as AYRO’s non-exclusive advisor in connection with a merger. Palladium served as the non-exclusive placement agent in the Bridge Financing and the AYRO Private Placements.

Pursuant to the Palladium Advisory Agreement, among other things, in connection with the Bridge Financing and the AYRO Private Placement, AYRO is to (a) pay Palladium a cash fee equal to 8% of the aggregate gross proceeds raised in each transaction, payable in cash at the time of such closing, provided that, any cash fees in excess of $40,000 shall not be payable until the consummation of the merger, (b) issue Palladium five-year warrants to purchase a number of shares of common stock of AYRO equal to 7% of the aggregate number of shares sold in the Bridge Financing and the AYRO Private Placements, at an exercise price equal to 115% of the offering price per share in each closing.

Pursuant to the Palladium Advisory Agreement, for Palladium’s advisory services in connection with the merger, upon consummation of the merger, Palladium will receive the number of shares of common stock of the post-merger entity immediately following the merger that represents 1% equity ownership in such entity based on the total number of shares outstanding.

In addition, AYRO agrees to reimburse Palladium periodically for its reasonable and customary out-of-pocket and incidental expenses incurred during the term of Palladium’s engagement, including the fees and expenses of its legal counsel and those of any other advisor retained by Palladium.

DropCar Placement Agent and Merger Advisory Agreement with Palladium

On December 5, 2019, DropCar entered into a Placement Agent and Merger Advisory Agreement with Palladium (the “DropCar Palladium Agreement”), whereby Palladium agreed to (i) act as the non-exclusive placement agent in a private placement of, or similar unregistered transaction involving, equity or equity-linked securities of DropCar to a limited number of institutional, accredited individual or strategic investors, and (ii) serve as DropCar’s exclusive financial advisor and investment banker to provide general financial advisory and investment banking services in connection with a possible business combination of DropCar with an unaffiliated third party.

The engagement and retention of Palladium will expire on the earlier of December 5, 2020, or the consummation of a business combination of DropCar with an unaffiliated third party.

Pursuant to the DropCar Palladium Agreement, for Palladium’s advisory services in connection with the merger, upon consummation of the merger, Palladium will receive 1,100,220 shares of common stock of the combined company immediately following the merger that represents 2% equity ownership in the combined company based on the total shares outstanding.

In addition, DropCar agreed to reimburse Palladium periodically for its reasonable and customary out-of-pocket and incidental expenses incurred during the term of Palladium’s engagement, including the fees and expenses of its legal counsel and those of any other advisor retained by Palladium.

The DropCar Palladium Agreement contains indemnification provisions and representations and warranties customary to such agreements.

ALS Letter Agreement

On December 19, 2019, AYRO entered into a letter agreement (the “ALS Letter Agreement”) with ALS Investment, LLC (“ALS”), which provides that if the merger is consummated by June 19, 2020, upon consummation of the merger, AYRO shall issue ALS 2,200,417 shares of common stock of the combined company, which is equal to 4.5% of the outstanding shares of common stock of the combined company giving effect to the merger.

Termination of Merger Agreement (see page 196)

The Merger Agreement may be terminated at any time prior to the effective time of the merger, whether before or after the required stockholder approvals to complete the merger and related matters have been obtained, as set forth below:

Termination Fees (see page 196)

DropCar must pay AYRO a termination fee of $1,000,000 if the Merger Agreement was terminated (i) by AYRO because the DropCar Board of Directors has withdrawn or modified its recommendation to DropCar stockholders to vote for the merger, the sale of substantially all assets of DropCar pursuant to the Asset Purchase Agreement, the A&R Charter Proposal and the Reverse Stock Split Proposal by the DropCar stockholders for a superior offer; or (ii) by DropCar in connection with DropCar entering into a definitive agreement to effect an unsolicited superior.

AYRO must pay DropCar a termination fee of $1,000,000 if the Merger Agreement was terminated by DropCar because AYRO’s stockholder approval was not obtained within five (5) business days following the date the S-4 Registration Statement is declared effective, subject to certain exceptions.

If either DropCar or AYRO terminates the Merger Agreement because (i) DropCar’s stockholder meeting was held and the stockholder approval contemplated by the Merger Agreement was not obtained thereat; (ii) prior to DropCar’s stockholder meeting, an acquisition proposal with respect to DropCar shall have been publicly announced, disclosed or otherwise communicated to DropCar board of directors; or (iii) within 12 months after the date of such termination, DropCar enters into a definitive agreement with respect to an acquisition transaction for more than 50% of DropCar or any liquidation or dissolution of DropCar or consummates such acquisition transaction, then DropCar shall pay AYRO, upon such entry into a definitive agreement and/or consummation of such acquisition transaction, a termination fee of $1,000,000.

Comparison of the Rights of DropCar Stockholders and AYRO Stockholders (see page 311)

Each of DropCar and AYRO is incorporated under the laws of the State of Delaware and, accordingly, the rights of the stockholders of each company are currently, and will continue to be, governed by the DGCL. If the merger is completed, AYRO stockholders will become stockholders of DropCar, and their rights will be governed by the DGCL, as well as the DropCar Charter and DropCar Bylaws. The rights of DropCar stockholders contained in the DropCar Charter and the DropCar Bylaws, as amended and restated, differ from the rights of AYRO stockholders under AYRO’s amended and restated certificate of incorporation (the “AYRO Charter”) and AYRO’s amended and restated bylaws (the “AYRO Bylaws”), as more fully described under the section titled “COMPARISON OF RIGHTS OF DROPCAR STOCKHOLDERS AND AYRO STOCKHOLDERS” on page 311 of this joint proxy and consent solicitation statement/prospectus.

Accounting Treatment (see page 172)

Although DropCar is the legal acquirer and will issue shares of its common stock to effect the merger with AYRO, the business combination will be accounted for as an acquisition of DropCar by AYRO under GAAP. Under the “acquisition” method of accounting, the assets and liabilities of DropCar will be recorded, as of the completion of the merger, at their respective fair values in the financial statements of AYRO. The financial statements of AYRO issued after the completion of the merger will reflect these values, but will not be restated retroactively to reflect the historical financial position or results of operations of DropCar.

For a more complete discussion of the accounting treatment of the merger, see the section titled “The Merger — Accounting Treatment” on page 172 of this joint proxy and consent solicitation statement/prospectus.

U.S. Federal Income Tax Considerations (see page 172)

The merger should qualify as a “reorganization” within the meaning of Section 368(a) of the Code and Treasury Regulations promulgated thereunder. As a result of the “reorganization,” AYRO stockholders and warrant holders generally should not recognize gain or loss for U.S. federal income tax purposes upon the exchange of their shares of AYRO stock for shares of DropCar common stock and in the conversion of AYRO warrants into DropCar warrants in connection with the merger, subject to the uncertainty concerning the tax treatment of fractional shares. DropCar stockholders generally will not recognize gain or loss for U.S. federal income tax purposes as a result of the merger.

Tax matters are very complicated, and the tax consequences of the merger to a particular DropCar or AYRO stockholder or AYRO warrant holder will depend in part on such holder’s circumstances. Accordingly, DropCar and AYRO urge you to consult your own tax advisor for a full understanding of the tax consequences of the merger to you, including the applicability and effect of federal, state, local and foreign income and other tax laws. For a more complete discussion of the material U.S. federal income tax consequences of the merger, see the section titled “CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER” on page 241 of this joint proxy and consent solicitation statement/prospectus.

Regulatory Approvals (see page 171)

DropCar and AYRO believe that the merger does not raise substantial antitrust or other significant regulatory concerns and that both parties will be able to obtain all requisite regulatory approvals prior to the anticipated closing. DropCar must also comply with the applicable federal and state securities laws and the rules and regulations of The Nasdaq Stock Market LLC for the approval of the listing application to be submitted in connection with the issuance of shares of DropCar common stock in the merger and the filing with the SEC of the registration statement of which this joint proxy and consent solicitation statement/prospectus forms a part. For a more complete discussion of the regulatory approvals required in connection with the merger, see the section titled “THE MERGER — Regulatory Approvals Required for the Merger” on page 171 of this joint proxy and consent solicitation statement/prospectus.

Opinion of DropCar’s Financial Advisor (see page 154 and Annex F)

On December 18, 2019, Gemini rendered its oral opinion to the DropCar Board of Directors (which was confirmed in writing by delivery of Gemini’s written opinion, dated December 18, 2019), as of December 18, 2019, as to the fairness, from a financial point of view, to DropCar of the Exchange Ratio in the merger, after giving effect to the ancillary transactions, pursuant to the Merger Agreement. In the sections of this joint proxy and consent solicitation statement/prospectus regarding Gemini’s analyses or opinion, references to the AYRO Private Placements, the AYRO Preferred Stock Conversion, the AYRO convertible note conversion and the DropCar private placement are referred to collectively as the “ancillary transactions” and, together with the merger and the bridge loan conversion, as the “transaction.”

The opinion was addressed to the DropCar Board of Directors for the use and benefit of the members of the DropCar Board of Directors (in their capacities as such) in connection with the DropCar Board of Directors’ evaluation of the merger. Gemini’s opinion only addressed whether, as of the date of the opinion, the Exchange Ratio in the merger, after giving effect to the ancillary transactions pursuant to the Merger Agreement, was fair, from a financial point of view, to DropCar. It did not address any other terms, aspects, or implications of the transaction or the Merger Agreement. The summary of the opinion in this joint proxy and consent solicitation statement/prospectus is qualified in its entirety by reference to the full text of the written opinion, which is included as Annex F to this joint proxy and consent solicitation statement/prospectus and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Gemini in preparing its opinion. Neither the opinion nor the summary of the opinion and related analyses set forth in this joint proxy and consent solicitation statement/prospectus is intended to and they do not constitute advice or a recommendation to any of the stockholders of DropCar or any other security holders as to how such holder should vote or act with respect to any matter relating to the transaction or otherwise.

For further information, see the section titled “THE MERGER — Opinion of DropCar’s Financial Advisor” beginning on page 154 and the full text of the opinion attached as Annex F to this joint proxy and consent solicitation statement/prospectus.

ASSET PURCHASE AGREEMENT

This section describes the material terms of the Asset Purchase Agreement. Please note that the summary of the Asset Purchase Agreement below and elsewhere in this joint proxy and consent solicitation statement/prospectus may not contain all of the information that is important to you. The summary of the Asset Purchase Agreement below and elsewhere in this joint proxy and consent solicitation statement/prospectus does not purport to be complete and is subject to, and qualified in its entirety by, reference to the full text of the Asset Purchase Agreement, a copy of which is attached to this joint proxy and consent solicitation statement/prospectus as Annex G. We encourage you to read the Asset Purchase Agreement carefully in its entirety for a more complete understanding of the Asset Sale Transaction, the terms of the Asset Purchase Agreement and other information that may be important to you.

Explanatory Note Regarding the Asset Purchase Agreement

The following summary of the Asset Purchase Agreement, and the copy of the Asset Purchase Agreement attached as Annex G to this joint proxy and consent solicitation statement/prospectus, are intended only to provide information regarding the terms of the Asset Purchase Agreement. They are not intended to provide any factual information about DropCar, its subsidiaries or DC Partners or to modify or supplement any factual disclosures about DropCar in its public reports filed with the SEC. The Asset Purchase Agreement and the related summary are not intended to be a source of factual, business or operational information about DropCar, its subsidiaries or DC Partners, and the following summary of the Asset Purchase Agreement and the copy thereof included as Annex G are not intended to modify or supplement any factual disclosure about DropCar in any documents DropCar has or will publicly file with the SEC. The Asset Purchase Agreement contains representations and warranties by, and covenants of, DropCar, DC Partners and certain subsidiaries of DropCar that were made only for purposes of the Asset Purchase Agreement and as of specified dates. The representations, warranties and covenants in the Asset Purchase Agreement were made solely for the benefit of the parties to the Asset Purchase Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Asset Purchase Agreement instead of establishing these matters as facts, and may be subject to contractual standards of materiality or material adverse effect applicable to the contracting parties that generally differ from those applicable to investors. In addition, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Asset Purchase Agreement, which subsequent information may or may not be fully reflected in DropCar’s public disclosures.

Additional information about DropCar may be found elsewhere in this joint proxy and consent solicitation statement/prospectus and in DropCar’s other public filings. See the section titled “Additional Information” beginning on page 9 of this joint proxy and consent solicitation statement/prospectus.

The Asset Sale Transaction

On December 19, 2019, DropCar and DropCar Operating entered into the Asset Purchase Agreement with DC Partners, Spencer Richardson and David Newman. The Asset Purchase Agreement provides that DC Partners will purchase from DropCar Operating substantially all of the assets and certain specified liabilities of the DropCar business prior to the merger, for a purchase price consisting of (i) the cancellation of any liabilities pursuant to those certain employment agreements (the “Employment Agreements”) by and between DropCar Operating and each of Mr. Richardson and Mr. Newman, respectively (except as otherwise set forth in (x) a Termination and Release Agreement to be entered into between DropCar and each of Mr. Richardson and Mr. Newman and/or (y) Section 3(h) of the Employment Agreements, which relates to indemnification with respect to services as a director of DropCar) and (ii) the assumption of all liabilities or obligations of DropCar (x) relating to or arising out of workers’ compensation claims of any employee which relate to events occurring prior to the closing of the Asset Sale Transaction and (y) arising under or relating to the assigned contracts pursuant to the Asset Purchase Agreement.

Completion of the Asset Sale Transaction

Unless the parties to the Asset Purchase Agreement agree to an earlier date, the Asset Sale Transaction will close on the date that is the second business day after all of the conditions to completion of the sale contained in the Asset Purchase Agreement, which are described in the section titled “Asset Purchase Agreement — Conditions to Closing” of this joint proxy and consent solicitation statement/prospectus, are satisfied or waived, including the receipt of stockholder approval from DropCar stockholders and the consummation of a change of control of DropCar, which will occur as a result of the merger (the “closing” and such date, the “closing date”). At the closing, DropCar, DropCar Operating and DC Partners will exchange various closing deliverables, including but not limited to a bill of sale, an assignment and assumption agreement, termination and release agreements and certain other customary closing deliverables.

Purchase Price

DropCar will not receive cash proceeds in connection with the Asset Sale Transaction. The purchase price in connection with the Asset Sale Transaction consists of the cancellation of certain employment liabilities and the assumption by DC Partners of other liabilities relating to workers’ compensation claims and other claims arising out of certain assigned contracts.

Representations and Warranties

The Asset Purchase Agreement contains customary representations and warranties made by DropCar Operating regarding its organization and good standing, authority to enter into the Asset Sale Transaction and solvency, as well as other facts pertinent to the Asset Sale Transaction. The Asset Purchase Agreement also includes similar customary representations and warranties of DC Partners. The assertions in the representations and warranties may be subject to important qualifications and limitations agreed to by DropCar Operating and DC Partners in connection with the negotiated terms of the Asset Purchase Agreement, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Asset Purchase Agreement instead of establishing these matters as facts. Moreover, some of the representations and warranties may have only been true as of a certain date, may be subject to a contractual standard of materiality or may have been used for purposes of allocating risk between DropCar Operating and DC Partners rather than establishing matters of fact. DropCar’s stockholders are not third-party beneficiaries under the Asset Purchase Agreement.

DropCar Operating made a number of representations and warranties to DC Partners in the Asset Purchase Agreement, including representations and warranties regarding DropCar Operating relating to the following:

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DC Partners made a number of representations and warranties to DropCar Operating in the Asset Purchase Agreement, including representations and warranties regarding DC Partners as a company relating to the following:

Some of the representations and warranties in the Asset Purchase Agreement are qualified by materiality qualifications or a “material adverse effect” qualification.

For purposes of this summary of the Asset Purchase Agreement, a “material adverse effect” means any event, occurrence, fact, condition or change that is materially adverse to (a) the business, results of operations, financial condition or assets of the DropCar business, taken as a whole, or (b) the ability of DropCar Operating to consummate the transactions contemplated thereby; provided, however, that “Material Adverse Effect” does not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions; (ii) conditions generally affecting the industries in which the DropCar business operates; (iii) any changes in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security or any market index or any change in prevailing interest rates; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (v) any action required or permitted by the Asset Purchase Agreement or any action taken (or omitted to be taken) with the written consent of or at the written request of DC Partners; (vi) any matter of which DC Partners is aware on the date of entry into the Asset Purchase Agreement; (vii) any changes in applicable laws or accounting rules (including GAAP) or the enforcement, implementation or interpretation thereof; (viii) the announcement, pendency or completion of the transactions contemplated by the Asset Purchase Agreement, including losses or threatened losses of employees, customers, suppliers, distributors or others having relationships with DropCar Operating, DC Partners and the DropCar business; (ix) any natural or man-made disaster or acts of God; or (x) any failure by the DropCar business to meet any internal or published projections, forecasts or revenue or earnings predictions (provided that the underlying causes of such failures (subject to the other provisions of this definition) are not excluded).

Conduct of Business

DropCar Operating agreed in the Asset Purchase Agreement to (a) conduct the DropCar business in the ordinary course of business, including the continuation of the cash management practices in place between DropCar and DropCar Operating, provided, however, that in no event shall DropCar Operating have access to amounts in excess of $240,000 in the aggregate at any one time and (b) use commercially reasonable efforts to maintain and preserve intact DropCar Operating’s current business organization, operations and franchise and to preserve the rights, franchises, goodwill and relationships of its employees, customers, lenders, suppliers, regulators and others having relationships with the DropCar business.

Recommendation

The DropCar Board of Directors recommends that you vote for the Asset Sale Proposal.

Additional Covenants

The Asset Purchase Agreement contains additional agreements between DropCar Operating and DC Partners relating to, among other things:

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Conditions to Closing

The Asset Sale Transaction is subject to the satisfaction or waiver of certain closing conditions including, among others:

Termination

The Asset Purchase Agreement may be terminated:

Specific Performance

The parties are entitled to specific performance of the terms of the Asset Purchase Agreement in addition to any other remedy to which they would be entitled at law or in equity.

Amendments and Waivers

The Asset Purchase Agreement may only be amended by a written agreement executed by the parties thereto.

Expenses

Each party will bear its respective expenses incurred in connection with the preparation, execution, and performance of the Asset Purchase Agreement and the related transaction agreements, and the contemplated transactions, including all fees and expenses of representatives, except that DropCar Operating agreed to pay DC Partners’ legal fees not to exceed $25,000. All expenses incurred by DropCar Operating shall be paid by DropCar Operating.

Governing Law

The Purchase Agreement is governed by the laws of the State of New York.

Ancillary Agreements

Termination and Release Agreements

Contemporaneously with the execution of the Asset Purchase Agreement, DropCar Operating agreed with each of Spencer Richardson and David Newman to a form of termination and release agreement to be entered into at closing by and between DropCar and each of Mr. Richardson and Mr. Newman. Pursuant to the terms of the termination and release agreements, each of Mr. Richardson and Mr. Newman will agree to resign their employment with DropCar Operating without good reason. The termination and release agreements also provide for the mutual release of claims by DropCar and each of Mr. Richardson and Mr. Newman.