CHARDAN

 

Steven Urbach

President

Chardan Capital Markets, LLC

17 State Street

Suite 1600

New York, NY 10004

Tel: 646 465 9023

Fax: 646 465 9091

 

March 3, 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
("Chardan Contacts") who are "accredited investors", as that term is defined
under Rule 501 of the Securities Act of 1933, as amended;

(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 theCompany,
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)The Company agrees to pay Chardan for its Services the following fees upon
the execution of this Agreement: 200,000 shares of the Company's restricted
common stock; such shares shall be deemed fully vested at the time of issuance
and shall be issued to Chardan or its designees (the "Agent Stock"). The Company
acknowledges and agrees that all Agent Stock is non-cancellable, nonrefundable,
and is deemed to be earned and issued as of the date this Agreement is signed by
the Company and Chardan. The Company shall deliver to Chardan, or its designees,
the restricted Agent Stock no later than fifteen (15) calendar days from
execution of this Agreement, along with a signed resolution of its Board of
Directors authorizing the execution of this Agreement, The Company understands
and agrees that Chardan has foregone significant opportunities to accept this
engagement, and that the Company derives substantial benefit from Chardan's
decision to enter into and sign this Agreement. The Agent Stock therefore,
constitutes payment only for Chardan's agreement to consult with the Company,
and are a nonrefundable, non-apportionable, and non-ratable retainer; such
shares of common stock are not a prepayment for future services. Chardan
acknowledges that the receipt of the shares involves a high degree of risk and
further acknowledges that is can bear the economic risk of receiving the shares,
which may include the total loss of its compensation. If the Company decides to
terminate this Agreement at any time after the effective date of this Agreement
for any reason whatsoever, it is agreed and understood that Chardan will not be
requested or demanded by the Company to return any of the Agent Stock. The
Company agrees to take any and all action(s) necessary to clear the restricted
securities of restriction upon presentation of any completed Rule 144(b)a
pplication by Chardan, it's designees, or its broker, including, but not limited
to: (1) Authorizing the Company's transfer agent to remove the restrictive
legend on the restricted securities; (2) Expediting either the acquisition of a
legal opinion from Company's counsel authorizing the removal of the restrictive
legend, or accepting a third party legal opinion acknowledging same; and (3)
Cooperating and communicating with Chardan and its broker in order to use
Company's best efforts to clear the subject securities of restriction as soon as
possible after presentation of a Rule 144(B) application by Chardan (or its
designees or broker) to either the Company and/or the Company's transfer agent.
Further, the Company agrees to not unreasonably withhold or delay approval of
any application filed by Chardan under Rule 144(b) of the Act to clear the
subject securities of restriction. Chardan and the Company therefore agree that
the Company shall have a period of five (5) business days from the date
Chardan's Rule 144(b) application is tendered to either the Company or its
transfer agent by either Chardan and/or its broker, to take any and all
necessary action to clear the subject securities of restriction. The Company and
Chardan agree that this five (5) day period is reasonable and consistent with
industry standards concerning the handling and processing of restricted
securities under Rule 144 by publicly traded companies. The Company also
acknowledges that Chardan's ability to clear the subject securities of
restriction, by virtue of the Company's best efforts, cooperation, covenants and
representations in this regard is a material part of this Agreement and is a
reasonable and material expectation of Chardan in entering into this Agreement.
Should events occur that require further expense of time beyond this five (5)
day time period, the Company and Chardan shall reasonably agree in a writing
signed by each to an extension for a specific amount of time. In no event shall
an extension be agreed to unless the Company comports with its "best efforts"
obligations, as set out above, and communicates with Chardan bona fide and
reasonable attempts at meeting Company's obligations to clear the subject
restricted securities, as described herein.

 

   

 

(b)In the event a financing is consummated during the Term in which investors
introduced by Chardan are 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 he 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 four percent (4.0%) of the aggregate
sales price of the securities sold in the Transaction (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 (in the event a convertible
security is issued then the number of shares of common stock that should be
issued to Chardan shall be calculated based upon the number of shares of common
stock that the convertible security can be converted into).

 

Section 3. Indemnification.

 

(a)Chardan' Indemnification of the Company. Chardan shall indemnify and hold
harmless the Company, its affiliates and their respective directors, officers,
employees, agents, shareholders, members, partners, managers, and controlling
persons (each a "Company Indemnified Person") from and against any and all
liabilities, claims, losses, costs, damages, liabilities, and expenses, joint or
several, including reasonable legal fees, costs, and the like to which any such
Company Indemnified Person may become subject, arising from, related to, or
otherwise connected with (i) any material breach by Chardan of any provision of
this Agreement, including any representation, warranty, covenant or agreement
set forth herein, (ii) any violation of any applicable law by Chardan, its
employees, representatives or (iii) Chardan's gross negligence, willful
malfeasance or reckless disregard of its obligations under this Agreement.

(b)Company's Indemnification of Chardan. The Company agrees to indemnify and
hold harmless Chardan, its affiliates and their respective directors, officers,
employees, agents, shareholders, members, partners, managers, and controlling
persons (each a "Chardan Indemnified Person") from and against any and all
liabilities, claims, losses, costs, damages, liabilities, and expenses, joint or
several, including reasonable legal fees, costs, and the like to which any such
Chardan Indemnified Person may become subject, arising from, related to, or
otherwise connected with (i) any material breach by the Company, its employees
or representatives of any provision of this Agreement, including any
representation, warranty, covenant or agreement set forth herein, (ii) any
violation of any applicable law by the Company, its employees, or
representatives or (iii) the Company's, its employees or representatives
negligence (gross or otherwise), willful malfeasance or reckless disregard of
its obligations under this Agreement

 

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. 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. In the event that the Transaction is
consummated, 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.

(h)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 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 for a period
of one (1) year after 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,

CLARDIN CAPITAL MARKETS, LLC 

 

By:[image_004.gif]    

Steven Urbach

  President

 

Agreed to and Accepted this 3rd day of March, 2015

 

MASSROOTS, INC.

 

By: /s/ Isaac Dietrich

Chief Executive Officer