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Steven Urbach

President

 

Chardan Capital Markets, LLC

17 State Street

Suite 1600

New York, NY 10004

Tel: 646 465 9028

Fax: 646 465 9091

 

 

June 9, 2015

MassRoots, Inc.
2247 Federal Blvd.,

Denver, CO 80202

  

Attention: Mr. Isaac Dietrich

 

Dear Isaac:

 

This letter will confirm our understanding that the company known to us as
MassRoots, Inc. (the “Company”) has engaged Chardan Capital Markets, LLC
(“Chardan”, “Advisor” or “Placement Agent”) to act as the Company’s
non-exclusive placement agent and financial advisor. The Company and Chardan are
each a “Party” and collectively, the “Parties”.

 

Section 1. Scope of Engagement and Services. In connection with this engagement,
Chardan shall provide the following services (“Services”), as appropriate:

 

(a)familiarize itself to the extent appropriate and feasible with the business,
operations, properties, financial condition and prospects of the Company in
order to, among other things, analyze the potential contributions of such
business, operations and facilities to the Company’s future operating results,
it being understood that Advisor shall be entitled, in the course of such
familiarization, to rely upon publicly available information and such other
information as may be supplied by the Company, without independent
investigation;

(b)advise and assist the Company in negotiating the terms and conditions of any
transaction;

(c)advise the Company on an appropriate investor relations program;

(d)introduce the Company to potential investors and/or business partners who are
“accredited investors”, as that term is defined under Rule 501 of the Securities
Act of 1933, as amended (“Chardan Contacts”);

(e)at the Company’s request, assist the Company in preparing a memorandum, for
distribution to Chardan Contacts, lenders and/or other financial sources,
describing the Company and its business, operations, properties, financial
condition and prospects, it being specifically agreed that (i) any such
memorandum shall be based entirely upon information supplied by the Company,
which information the Company hereby warrants shall be accurate in all material
respects; (ii) the Company shall be solely responsible for the accuracy and
completeness of such memorandum; and (iii) other than as contemplated by this
paragraph, such memorandum shall not be used, reproduced, disseminated, quoted
or referred to at any time, in any manner or for any purpose, except with the
Company’s prior written consent. Chardan shall make offers and sales of the
Company’s securities in compliance with the provisions of Rule 506 of Regulation
D and/or Section 4(2) of the Securities Act of 1933;

   

 

(f)arrange non-deal road shows;

(g)advise and assist management in preparing for presentations to investors,
lenders and/or other financial sources, including the development of the best
strategy for demonstrating the experience of management and the scope of such
experience;

(h)perform such other financial advisory services as Chardan and the Company may
from time to time agree upon.

 

Chardan understands that the Company reserves the right to reject the
subscription of any investor, including the Chardan Contacts, in whole or in
part, in its sole and absolute discretion.

 

Section 2. Compensation.

 

(a)RESERVED

(b)In the event a financing is consummated during the Term with Chardan Contacts
participating (a “Transaction”), the Company will pay to Chardan an aggregate
placement agent fee (the “Placement Fee”) as stated below. All such fees shall
be immediately paid by the Company to Chardan at the closing of the Transaction,
however, if such Transaction occurs through multiple closings, then pro rata
portion of such fees shall be paid upon each closing:

i.For any capital raise, the Company shall pay to Chardan at the time of
closing, (1) an aggregate cash fee equal to eight percent (8.0%) of the
aggregate sales price of the securities sold in the Transaction to the Chardan
Contacts only (excluding the exercise price of any warrants issued in the
Transaction); and (2) an aggregate restricted stock fee equal to eight percent
(8.0%) of the aggregate number of shares of common stock sold in the Transaction
to the Chardan Contacts only (in the event a convertible security is issued then
the number of shares of common stock that should be issued to Chardan or The
Special Equities Group, as the case may be, shall be calculated based upon the
number of shares of common stock that the convertible security can be converted
into).

ii.For any capital raise where Chardan is not the introducing broker but just
the executing broker, the Company shall pay to Chardan or its designees, as the
case may be, at the time of closing, an aggregate restricted stock fee equal to
four percent (4.0%) of the aggregate number of shares of common stock sold in
the Transaction (in the event a convertible security is issued then the number
of shares of common stock that should be issued to Chardan or The Special
Equities Group, as the case may be, shall be calculated based upon the number of
shares of common stock that the convertible security can be converted into).

 

Section 3. Indemnification. The Company agrees to indemnify Chardanin accordance
with the provisions of Annex A hereto, which is incorporated by reference and
made a part hereof.

 

Section 4. Expenses; Initial Retainer. The Company shall reimburse Chardan for
all of its actual and reasonable out-of-pocket expenses, including but not
limited to reasonable and documented travel, legal fees and other expenses,
incurred in connection with the financing, whether or not the financing is
completed (subject to the limitations set forth in the next sentence), subject
to presentation of appropriate documentation evidencing such out-of-pocket
expenses. In the event the financing does not close for any reason, the Company
shall only be obligated to pay expenses of up to $2,500 in the aggregate to
Chardan, including road show expenses, subject to presentation of appropriate
documentation evidencing such out-of-pocket expenses. In the event that a
Transaction is consummated, the Company shall only be obligated to pay expenses
of up to $25,000 in the aggregate to Chardan. Chardan will not bear any of the
Company’s legal, accounting, printing or other expenses in connection with any
transaction considered or consummated hereby; provided, however, that Chardan
agrees to get written approval from the Company prior to incurring any such
fees; further, provided, however, that such expenses shall not exceed $5,000. It
also is understood that Chardan will not be responsible for any fees or
commissions payable to any finder or to any other financial or other advisor
utilized or retained by the Company, except that Chardan shall pay the fees and
commissions of members of Chardan’s selling group in the Transaction (it being
understood by the parties that Chardan, and not the Company, shall be
responsible for the payment of any fees, if any, due and owing to any advisor it
engages unless expressly agreed otherwise).

 

   

 

Section 5. Right of First Refusal. The Company will grant Chardan a twelve (12)
month right of first refusal to act as lead underwriter or placement agent on
any future capital raising transactions involving the Company’s securities in
which the Company elects to engage an investment banker or placement agent.

 

Section 6. Chardan’s and the Company’s Relationships with Others. The Parties
acknowledge and agree that Chardan is engaged on a non-exclusive basis and that
the Company is free to retain others to perform the same or similar services
that are being provided by Chardan. Similarly, the Company acknowledges that
Chardan and its affiliates are in the business of providing investment banking,
financial advisory and consulting services to others and agrees that the
provision of such services shall not constitute a breach hereof of any duty owed
to the Company by virtue of this Agreement. Nothing contained herein, other than
Chardan’s obligations relating to the Company’s Confidential Material as
provided in Section 7 below, shall be construed to limit or restrict Chardan or
its respective affiliates in conducting such businesses with respect to others
or in rendering such services to others. Chardan is duly registered with the
United States Securities and Exchange Commission (the “SEC”) under Section 15 of
the Securities Exchange Act of 1934, as amended, as a broker-dealer and is a
member in good standing of the Financial Industry Regulatory Authority (“FINRA”)
and is registered in those states in which it is required to be so registered in
order to perform its obligations under this Agreement. 

 

Section 7. Confidential Information. In connection with the rendering of
services hereunder, Chardan has been or will be furnished with certain
confidential information of the Company including, but not limited to, financial
statements and information, cost and expense data, scientific data, intellectual
property, trade secrets, business strategies, marketing and customer data, and
such other information not generally available from public or published
information sources. Such information shall be deemed “Confidential Material”,
shall be used solely in connection with the provision of services contemplated
hereby, and shall not be disclosed by Chardan without the prior written consent
of the Company. In the event Chardan is required by applicable law or legal
process to disclose any of the Confidential Material, Chardan will deliver to
the Company prompt notice of such requirement (by fax or overnight courier
promptly following Chardan’s knowledge or determination of such requirement)
prior to such disclosure so the Company may seek an appropriate protective order
and/or waive compliance of this provision. If, in the absence of a protective
order (because the Company elected to not seek such an order or it was denied by
a court of competent jurisdiction) or receipt of written waiver, Chardan is
nonetheless, in the written opinion of its counsel, compelled to disclose any
Confidential Material, Chardan may do so without liability hereunder.

 

Section 8. Limitation Upon the Use of Advice and Services.

 

(a)No person or entity, other than the Company (including its directors,
officers and employees), shall be entitled to make use of, or rely upon any
advice of Chardan to be given hereunder, and the Company shall not transmit such
advice to, or encourage or facilitate the use or reliance upon such advice by
others without the prior written consent of Chardan.

(b)The Company hereby acknowledges that Chardan, for services rendered as
contemplated by this Agreement, does not make any commitment whatsoever to make
a market in any of the Company’s securities on any stock exchange or in any
electronic marketplace. Any decision by Chardan to make a market in any of the
Company’s securities shall be based solely on the independent judgment of
Chardan’s management, employees, and agents.

(c)Use of Chardan’s name in annual reports or any other report of the Company or
releases by the Company requires the prior written approval of Chardan unless
the Company is required by law to include Chardan’s name in such annual reports,
other report or release of the Company, in which event the Company shall furnish
to Chardan copies of such annual reports or other reports or releases using
Chardan’s names in advance of publication by the Company.

 

   

 

Section 9. Information; Cooperation. The Company will cooperate with and will
furnish Chardan with all reasonable information and data concerning the Company
and the financing which Chardan deems appropriate and will provide Chardan with
reasonable access to the Company’s officers, directors, employees, independent
accountants and legal counsel (provided that Chardan shall not communicate
directly with any such parties without the prior written or email authorization
of the President, Chief Executive Officer, or Chief Financial Officer of the
Company). The Company represents that all information and any disclosure
materials made available to Chardan for distribution to investors will be
complete and correct in all material respects and will not contain any untrue
statement of material fact or omit to state a material fact necessary in order
to make the statements therein not misleading in light of the circumstances
under which such statements are made. The Company further represents and
warrants that to the extent any projections are furnished, such projections will
have been prepared in good faith and will be based upon assumptions, which, in
light of the circumstances under which they are made, are reasonable. Chardan
shall not deliver to any prospective investors any information concerning the
Company, unless the Company has previously consented to the distribution of such
information.

 

Section 10. Miscellaneous.

 

(a)Any notice or communication between the parties hereto shall be sufficiently
given if sent by certified or registered mail, postage prepaid, or faxed and
confirmed if to the Company, addressed to it at: 2247 Federal Blvd., Denver, CO
80202, or if to Chardan, addressed to them at: 150 East 58th Street, 28th Floor,
New York, NY 10155. Such notice or other communication shall be deemed to be
given on the date of receipt.

(b)This Agreement embodies the entire agreement and understanding between the
Company and Chardan and supersedes any and all negotiations, prior discussions
and preliminary and prior agreements and understandings, including, but not
limited to, that certain engagement letter between Chardan and the Company,
dated on or about March __, 2015, that Chardan may have had with the Company
related to the subject matter hereof, and may be modified only by a written
instrument duly executed by each party. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and personal
representatives of each of the parties hereto. This Agreement has been duly
authorized, executed and delivered by and on behalf of the Company and Chardan.

(c)This Agreement shall be deemed to have been made and delivered in New York
City and shall be governed as to validity, interpretation, construction, effect
and in all other respects by the internal laws of the State of New York without
regard to principles of conflicts of law thereof. Any and all disputes,
controversies or claims arising out of or relating to this Agreement, or the
breach, termination or invalidity thereof, shall be finally and exclusively
resolved by arbitration in accordance with the Rules of FINRA as at present in
force. The arbitration shall take place in New York City, the State of New York.
The parties hereby submit themselves to the exclusive jurisdiction of the
arbitration tribunal in the City of New York, the State of New York under the
auspices of FINRA. To the extent permitted by law, the award of the arbitrators
may include, without limitation, one or more of the following: a monetary award,
a declaration of rights, an order of specific performance, an injunction,
reformation of the contract. The decision of the arbitrators shall be final and
binding upon the parties hereto, and judgment on the award may be entered in any
court having jurisdiction over the subject matter thereof. Each party to the
arbitration shall bear its own expenses of the arbitration (including without
limitation reasonable fees and expenses of counsel, experts and consultants).

(d)This Agreement and the rights hereunder may not be assigned by either party
(except by operation of law) without the other party’s prior written consent.

(e)Any term or provision of this Agreement which is invalid or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only as broad as is
enforceable.

   

 

(f)In rendering the Services, the Parties hereby agree that Chardan shall act as
an independent contractor and that nothing contained in this Agreement shall be
construed to create any joint venture, partnership, employer-employee or any
other type of relationship between the Company and Chardan. It is further
understood and agreed that this Agreement does not create a fiduciary
relationship between Chardan and the Company or their respective Boards of
Directors. Chardan shall not be considered to be the agent of the Company for
any purpose whatsoever and Chardan is not granted any right or authority to
assume or create any obligation or liability, express or implied, on behalf of
the Company, or to bind the Company in any manner whatsoever.

Section 11. Termination. The term (the “Term”) of Chardan’s engagement hereunder
shall commence on the date hereof and end on December 31, 2015; provided however
that this Agreement can be terminated early by either party on five (5) days
after receipt of written notice of termination for any reason after the five (5)
month anniversary of the Agreement.

 

In addition, in the event this Agreement shall be terminated in accordance with
the provisions of this Section 11 or upon expiration of this Agreement, neither
party shall have any further rights or obligations hereunder, except that (i) no
termination of this Agreement shall affect any rights or obligations that shall
have accrued hereunder prior to the effective date of termination, and (ii) the
sections headed “Confidential Information,” “Indemnification,” “Miscellaneous,”
, and “Limitation of Liability” shall survive after any termination.

 

Section 12. Limitation of Liability. The liability of Chardan pursuant to this
Engagement Letter shall be limited to the Placement Fee received by Chardan
hereunder, which shall not include any liability for incidental, consequential
or punitive damages, except that no such limitations shall apply to (i) any
indemnification obligation under Annex A hereto, (ii) any breach by Chardan of
Section 7 hereof or the last sentence of Section 9 hereof, or (iii) damages
resulting from the bad faith, gross negligence, willful misconduct, or
intentional breach of this Agreement by Chardan.

 

Section 13. Provision for Alternative Outcomes. In the event that other services
are requested by the Company, the parties hereto shall negotiate in good faith
to determine a mutually acceptable level of compensation in such an eventuality.

   

 

We are delighted to accept this engagement and look forward to working with you
on this assignment. Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us one copy of this enclosed duplicate
of this agreement.

 

Very truly yours,

 

CHARDAN CAPITAL MARKETS, LLC

  

By: /s/ Steven Urbach ______________________________

Steven Urbach

President

  

Agreed to and Accepted this 9th day of June, 2015

 

MASSROOTS, INC.

  

By: /s/ Isaac Dietrich ______________________________

Isaac Dietrich

Chief Executive Officer

 

   

 

ANNEX A

 

INDEMNIFICATION

 

The Company agrees to indemnify and hold harmless Chardan and its affiliates and
their respective officers, directors, employees, agents (including selected
dealers) and controlling persons (Placement Agent and each such person being an
“Indemnified Party”), from and against any losses, claims, damages and
liabilities, joint or several, to which such Indemnified Party may become
subject under any applicable law, or otherwise, which relate to or arise in any
manner out of any transaction, financing, or any other matter (collectively, the
"Matters") contemplated by the engagement letter of which this Annex A forms a
part and the performance by Chardan of the services contemplated thereby, and
will promptly reimburse each Indemnified Party for all reasonable expenses
(including reasonable fees and expenses of legal counsel) as incurred in
connection with the investigation of, preparation for or defense of any pending
or threatened claim or any action or proceeding arising therefrom, whether or
not such Indemnified Party is a party and whether or not such claim, action or
proceeding is initiated or brought by or on behalf of the Company.
Notwithstanding the foregoing, the Company shall not be liable under the
foregoing to the extent that any loss, claim, damage, liability or expense is
found in a final judgment by a court (or arbitration panel) of competent
jurisdiction to have resulted primarily from Placement Agent’s bad faith, gross
negligence, willful misconduct, intentional breach of the engagement letter of
which this Annex A forms a part, or the provision of information to investors in
a Transaction that is not authorized by the Company (the “Excepted Matters”).

 

The Company also agrees that no Indemnified Party other than Chardan shall have
any liability (whether direct or indirect, in contract or tort or otherwise) to
the Company or its security holders or creditors related to, arising out of, or
in connection with, any Matters, the engagement of Placement Agent pursuant to,
or the performance by Placement Agent of the services contemplated by, the
engagement letter, except to the extent any loss, claim, damage or liability if
found in a final judgment by a court of competent jurisdiction to have resulted
solely from Placement Agents’ bad faith or gross negligence. This limitation of
liability set forth in this paragraph shall not apply to Chardan, and the
liability limits applicable to Chardan are set forth in Section 11 of the
engagement letter of which this Annex A forms a part.

 

If the indemnification of an Indemnified Party provided for this letter
agreement is for any reason held unenforceable, although otherwise applicable in
accordance with its terms, the Company agrees to contribute to the losses,
claims, damages and liabilities for which such indemnification is held
unenforceable (i) in such proportion as is appropriate to reflect the relative
benefits to the Company, on the one hand, and Placement Agents, on the other
hand, of any Matter (whether or not the Matter is consummated) or (ii) if (but
only if) the allocation provided for in clause (i) is for any reason held
unenforceable, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) but also the relative fault of the
Company, on the one hand, and Placement Agent, on the other hand, as well as any
other relevant equitable considerations. The Company agrees that for the
purposes of this paragraph the relative benefits to the Company and Placement
Agent of any contemplated Matter (whether or not such Matter is consummated)
shall be deemed to be in the same proportion that the total value paid or
received or to be paid or received by the Company as a result of or in
connection with any Matter, bears to the fees paid or to be paid to Placement
Agent under the engagement letter; provided, however, that, to the extent
permitted by applicable law, in no event shall the Indemnified Parties be
required to contribute an aggregate amount in excess of the aggregate fees
actually paid to Chardan under the engagement letter of which this Annex A is a
part.

 

   

 

Promptly after receipt by Placement Agent or any other Indemnified Party of any
notice of any proceeding, or the commencement of any legal action or proceeding
in respect of which indemnity may be sought against the Company, Chardan or such
other Indemnified Party shall notify the Company promptly in writing of the
receipt of any such notice or commencement of such an action or proceeding. In
the event the Company shall be obligated under this Indemnification Annex to
indemnify Chardan and/or such other Indemnified Party, the Company may assume
and control all aspects of the defense of such proceeding, including, inter
alia, selection of counsel (which counsel shall be reasonably acceptable to
Chardan) and, subject to the next paragraph, settlement; provided, however, that
the Indemnified Parties shall have the right to retain separate counsel, but the
fees and expenses of such counsel shall be at the expense of the Indemnified
Parties, unless (i) the employment of such counsel has been specifically
authorized in writing by the Company, (ii) the Company has failed to assume the
defense and employ reasonably acceptable counsel as required above, or (iii) the
named parties to any such action (including any impleaded parties) include both
(a) the Indemnified Parties and (b) the Company, and the Indemnified Parties
shall have reasonably determined that the defenses available to them are not
available to the Company and/or may not be consistent with the best interests of
the Company or the Indemnified Parties (in which case the Company shall not have
the right to assume the defense of such action on behalf of the Indemnified
Parties); it being understood, however, that the Company shall not, in
connection with any one such action or separate, substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys for the Indemnified Parties, which firm
shall be designated in writing by Chardan.

 

The Company agrees that it will not, without the prior written consent of
Chardan, settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding in respect of which
indemnification may be sought hereunder (whether or not Chardan or any other
Indemnified Party is an actual or potential party to such claim, action or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of such Placement Agent and each other Indemnified Party
hereunder from all liability arising out of such claim, action or proceeding.

 

If Chardan or any other Indemnified Party is requested or required to appear as
a witness in any action brought by or on behalf of or against the Company in
which such party is not named as a defendant, the Company will reimburse Chardan
for all reasonable actual out-of-pocket expenses incurred in connection with
such party’s appearing and preparing to appear as such a witness, including,
without limitation, the fees and disbursements of its legal counsel.

 

The provisions of this Annex A shall continue to apply and shall remain in full
force and effect regardless of any modification or termination of the engagement
or engagement letter of which this Annex A is a part or the completion of
Placement Agent’s services thereunder.