Exhibit 10.2

 

Secured Convertible Promissory Note Purchase Agreement

 

This Secured Convertible Promissory Note Purchase Agreement (the “Agreement”)
dated as of July 20, 2018 is made and entered into by and among EVO
Transportation & Energy Services, Inc., a Delaware corporation (the “Company”),
each purchaser listed on Schedule I hereto (each, an “Investor”).

 

Recitals

 

The Company is seeking to raise financing for its operations. The Investors
desire to lend funds to the Company on the terms and conditions set forth in
this Agreement.

 

Terms and Conditions

 

Accordingly, in consideration of the foregoing, the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Securities.

 

(a) Promissory Note. Subject to the terms and conditions hereof, the Company
hereby agrees to issue and sell to each Investor, and each Investor, severally
and not jointly, hereby agrees to purchase from the Company, a secured
convertible promissory note (each, a “Note”) in the principal amount set forth
beside the Investor’s name on Schedule I (the “Loan Amount”), in substantially
the form attached as Exhibit A.

 

(b) Warrant. As additional consideration for the loan, the Company will issue to
each Investor, concurrently with the delivery of the Note, a warrant in
substantially the form attached hereto as Exhibit B (each, a “Warrant”) to
purchase the number of shares of the Company’s common stock set forth beside the
Investor’s name on Schedule I.

 

(c) Tax Matters. The Company and the Investors, as a result of arm’s length
bargaining, agree that:

 

(i) neither the Investors nor any entity affiliated with the Investors has
rendered any services to the Company in connection with this Agreement;

 

(ii) the Warrants are not being issued as compensation;

 

(iii) the aggregate fair market value of the Notes, if issued apart from the
Warrants, is $2,999,000 and the aggregate fair market value of the Warrants, if
issued apart from the Notes, is $1,000; and

 

(iv) all tax returns and other informational returns of each party relative to
this Agreement and the Notes and Warrants shall consistently reflect the matters
referred to in this Section 1(c).

 

2. Closings.

 

(a) Initial Closing. The initial closing of the sale and purchase of the Notes
and Warrants (the “Closing”) will be held on the date hereof or at such other
time as the Company and the Investors shall agree.

 

(b) Additional Closings. Each of the Investors acknowledges and agrees that the
Company may issue and sell additional Notes (together with related Warrants),
such that the aggregate principal amount of Notes issued pursuant to this
Agreement will not exceed $5,000,000. The issuance and sale of the additional
Notes and Warrants will be on the same terms as the sale of Notes and Warrants
at the initial closing; provided, that all subsequent sales are consummated
prior to 90 days after the initial closing. At each additional closing, each
Investor purchasing Notes (together with related Warrants) at that closing will
become a party to this Agreement upon execution of a Notice of Adoption of this
Agreement in the form of Exhibit D by such purchaser who will thereupon become
bound by the conditions of and entitled to the benefits of this Agreement as an
“Investor” and Schedule I shall be updated accordingly.

 

(c) Delivery. At each closing under this Agreement, (i) each Investor purchasing
a Note under this Agreement will deliver to the Company a check or wire transfer
of funds in the amount of the Investor’s Loan Amount and (ii) the Company will
issue and deliver to the Investor (A) a Note in favor of the Investor in the
principal amount of the Investor’s Loan Amount, (B) a corresponding Warrant, and
(C) a Security Agreement executed by the Company in favor of the Investors in
the form of Exhibit C attached hereto (the “Security Agreement” and, together
with the Notes and the Warrants, collectively the “Transaction Documents”).

 

 

 

 

3. Representations, Warranties, and Covenants of the Company. To induce the
Investors to enter into this Agreement and to purchase the Notes and Warrants,
the Company hereby represents and warrants to the Investors as follows.

 

(a) Organization, Good Standing, Corporate Power and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as presently conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
Material Adverse Effect. “Material Adverse Effect” means a material adverse
effect on the business, assets (including intangible assets), liabilities,
financial condition, property, prospects or results of operations of the
Company.

 

(b) Authorization. All corporate action required to be taken by the Company’s
board of directors and stockholders in order to authorize the Company to enter
into this Agreement and the other Transaction Documents, and to perform its
obligations under this Agreement and the other Transaction Documents, including
the issuance and delivery of the Notes and Warrants and the reservation of the
equity securities issuable upon conversion of the Notes and exercise of the
Warrants has been taken or will be taken prior to the issuance of those equity
securities. All action on the part of the officers of the Company necessary for
the execution and delivery of this Agreement and the other Transaction
Documents, the performance of all obligations of the Company under this
Agreement and the other Transaction Documents to be performed as of the closing,
and the issuance and delivery of the Notes and Warrants has been taken or will
be taken prior to the issuance of these securities. This Agreement, the Notes,
the Warrants and the other Transaction Documents, when executed and delivered by
the Company, shall constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, or other laws of general
application relating to or affecting the enforcement of creditors’ rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.

 

(c) Valid Issuance of Securities. The Notes and Warrants, when issued, sold and
delivered in accordance with the terms and for the consideration set forth in
this Agreement, will be validly issued, fully paid and nonassessable and free of
restrictions on transfer other than restrictions on transfer under this
Agreement or the applicable securities, applicable state and federal securities
laws and liens or encumbrances created by or imposed by an Investor. Assuming
the accuracy of the representations of the Investors in this Agreement and
subject to the filings described in Section 3(d), the Notes, the shares issuable
upon conversion of the Notes (the “Note Shares”), the Warrants and the Warrant
Shares (collectively, the “Securities”) will be issued in compliance with all
applicable federal and state securities laws. The capital stock of the Company
issuable upon conversion of the Notes and exercise of the Warrants, when issued
in compliance with the provisions of this Agreement, the Notes or the Warrants
and the Company’s certificate of incorporation, will be validly issued, fully
paid and nonassessable and free of restrictions on transfer other than
restrictions on transfer under this Agreement or the applicable securities,
applicable federal and state securities laws and liens or encumbrances created
by or imposed by an Investor. Other than the Company SEC Documents, the Company
has not distributed and will not distribute prior to the Closing date any
offering material in connection with the offering and sale of the Securities.
The Company has not taken any action to sell, offer for sale or solicit offers
to buy any securities of the Company which would bring the offer, issuance or
sale of the Securities within the provisions of Section 5 of the Securities Act
of 1933 (the “Securities Act”), unless such offer, issuance or sale was or shall
be within the exemptions of Section 4 of the Securities Act.

 

(d) Government Consents and Filings. Assuming the accuracy of the
representations made by the Investors in this Agreement, no consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state or local governmental authority
is required on the part of the Company in connection with the consummation of
the transactions contemplated by this Agreement and the other Transaction
Documents, except for filings pursuant to Regulation D of the Securities Act of
1933, other applicable securities laws, and applicable state securities laws,
which have been made or will be made in a timely manner.

 

Purchase AgreementPage 2

 

 

(e) Compliance with Other Instruments and Laws. The Company is not in violation
or default, the violation of which would have a Material Adverse Effect, (i) of
any provisions of its certificate of incorporation or bylaws (or any similar
organization documents), (ii) of any instrument, judgment, order, writ or
decree, (iii) except as disclosed in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2017, under any note, indenture or mortgage or
(iv) except as disclosed in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2017, under any lease, agreement, contract or purchase
order to which it is a party or by which it is bound, or, to its knowledge, of
any provision of federal or state statute, rule or regulation applicable to the
Company. The execution, delivery and performance of this Agreements and the
other Transaction Documents and the consummation of the transactions
contemplated by this Agreement will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either (i) a default under any such provision, instrument, judgment,
order, writ, decree, contract or agreement or (ii) an event which results in the
creation of any lien, charge or encumbrance upon any assets of the Company or
the suspension, revocation, forfeiture, or nonrenewal of any material permit or
license applicable to the Company.

 

(f) No Finder’s Fees. Other than certain fees to be paid to Northland
Securities, Inc. or one or more of its affiliates, the Company represents that
it neither is nor will be obligated for any finder’s fee or commission in
connection with this transaction. The Company agrees to indemnify and hold
harmless each Investor from any liability for any commission or compensation in
the nature of a finder’s or broker’s fee arising out of this transaction (and
the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.

 

(g) Bad Actor Disqualification.

 

(i) No Disqualification Events. With respect to Securities (as hereinafter
defined) to be offered and sold hereunder in reliance on Rule 506 under the
Securities Act of 1933 (“Regulation D Securities”), none of the Company, any of
its predecessors, any affiliated issuer, any director, executive officer, other
officer of the Company participating in the transactions contemplated hereby,
any beneficial owner of 20% or more of the Company's outstanding voting equity
securities (calculated on the basis of voting power), nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected with the Company
in any capacity at the time of such sale (each, an “Issuer Covered Person” and,
together, “Issuer Covered Persons”) is subject to any of the “Bad Actor”
disqualifications described in Rule 506(d)(1)(i)–(viii) under the Securities Act
of 1933 (a “Disqualification Event”), except for a Disqualification Event
covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care
to determine whether any Issuer Covered Person is subject to a Disqualification
Event. The Company has complied, to the extent applicable, with its disclosure
obligations under Rule 506(e), and has furnished to the Investors a copy of any
disclosures provided thereunder.

 

(ii) Other Covered Persons. Other than as set forth in Section 3(f), the Company
is not aware of any person (other than any Issuer Covered Person) that has been
or will be paid (directly or indirectly) remuneration for solicitation of
purchasers in connection with the sale of any Regulation D Securities.

 

(iii) Notice of Disqualification Events. The Company will notify the Investors
in writing, prior to any closing hereunder of (i) any Disqualification Event
relating to any Issuer Covered Person and (ii) any event that would, with the
passage of time, become a Disqualification Event relating to any Issuer Covered
Person.

 

(h) Certificate of Incorporation; Bylaws. The Company has made available to the
Investors true, correct and complete copies of the certificate of incorporation
and bylaws of the Company, as in effect on the date hereof.

 

(i) SEC Filings. The consolidated financial statements contained in each report,
registration statement and definitive proxy statement filed by the Company with
the Securities and Exchange Commission on or after November 29, 2016 (the “SEC,”
and the documents, the “Company SEC Documents”): (i) complied as to form in all
material respects with the published rules and regulations of the SEC applicable
thereto and were timely filed; (ii) the information contained therein as of the
respective dates thereof did not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances under which they were
made not misleading; (iii) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered, except as may be indicated in the notes to such financial statements
and (in the case of unaudited statements) as permitted by Form 10-Q of the SEC,
and except that unaudited financial statements may not contain footnotes and are
subject to year-end audit adjustments; and (iv) fairly present the consolidated
financial position of the Company and its subsidiaries as of the respective
dates thereof and the consolidated results of operations cash flows and the
changes in shareholders’ equity of the Company and its subsidiaries for the
periods covered thereby. Except as set forth in the financial statements
included in the Company SEC Documents, neither the Company nor its subsidiaries
has any liabilities, contingent or otherwise, other than liabilities incurred in
the ordinary course of business subsequent to March 31, 2018, and liabilities of
the type not required under generally accepted accounting principles to be
reflected in such financial statements. Except for liabilities incurred in
connection with that certain Equity Purchase Agreement dated June 1, 2018
between the Company and Billy (Trey) Peck Jr., such liabilities incurred
subsequent to March 31, 2018, are not, in the aggregate, material to the
financial condition or operating results of the Company and its subsidiaries,
taken as a whole.

 

Purchase AgreementPage 3

 

 

(j) Capitalization. The authorized capital stock of the Company consists of (i)
100,000,000 shares of common stock, of which (A) 2,571,068 shares were issued
and outstanding as of the date of this Agreement, and (B) 15,987,287 shares were
reserved for issuance upon the exercise or conversion, as the case may be, of
outstanding options, warrants or other convertible securities as of the date of
this Agreement; and (ii) 10,000,000 shares of preferred stock, of which 100,000
shares designated as Series A Preferred Stock were issued and outstanding as of
the date of this Agreement. All issued and outstanding shares of common stock
have been duly authorized and validly issued, are fully paid and nonassessable,
have been issued and sold in compliance with the registration requirements of
federal and state securities laws or the applicable statutes of limitation have
expired, and were not issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. Except as set forth herein or
the Company SEC Documents, there are no (i) outstanding rights (including,
without limitation, preemptive rights), warrants or options to acquire, or
instruments convertible into or exchangeable for, any unissued shares of capital
stock or other equity interest in the Company, or any contract, commitment,
agreement, understanding or arrangement of any kind to which the Company or any
subsidiary is a party and relating to the issuance or sale of any capital stock
or convertible or exchangeable security of the Company or any subsidiary; or
(ii) obligations of the Company to purchase redeem or otherwise acquire any of
its outstanding capital stock or any interest therein or to pay any dividend or
make any other distribution in respect thereof. Except as disclosed in the
Company SEC Documents, there are no anti-dilution or price adjustment
provisions, co-sale rights, registration rights, rights of first refusal or
other similar rights contained in the terms governing any outstanding security
of the Company that will be triggered by the issuance of the Securities.

 

(k) Subsidiaries. Except as set forth in the Company SEC Documents, the Company
does not presently own or control, directly or indirectly, and has no stock or
other interest as owner or principal in, any other corporation or partnership,
joint venture, association or other business venture or entity (each a
“subsidiary”). Each subsidiary is duly incorporated or organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization and has all requisite power and authority to carry
on its business as now conducted. Each subsidiary is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect on its business or properties. All
of the outstanding capital stock or other securities of each subsidiary is owned
by the Company, directly or indirectly, free and clear of any liens claims, or
encumbrances except for Permitted Liens (as defined in the Security Agreement).

 

(l) Valid Issuance of Securities. The Securities are duly authorized and, when
issued, sold and delivered in accordance with the terms hereof or the Notes or
Warrants, as the case may be, will be duly and validly authorized and issued,
fully paid and nonassessable, free from all taxes, liens, claims, encumbrances
and charges with respect to the issue thereof; provided, however, that the
Securities may be subject to restrictions on transfer under state and/or federal
securities laws or as otherwise set forth herein. The issuance, sale and
delivery of the Securities in accordance with the terms hereof or the Note or
Warrant, as the case may be, will not be subject to preemptive rights of
stockholders of the Company. The Warrant Shares and Note Shares have been duly
reserved for issuance upon exercise of the Warrants and Notes.

 

(m) Litigation. Except as set forth in the Company SEC Documents, there is no
action, suit, proceeding nor investigation pending or, to the Company’s
knowledge, currently threatened against the Company or any of its subsidiaries
that (a) if adversely determined would reasonably be expected to adversely
effect the business, condition, prospects, capitalization, assets, liabilities,
operations or financial performance of the Company or its subsidiaries or (b)
would be required to be disclosed in the Company’s Annual Report on Form 10-K
under the requirements of Item 103 of Regulation S-K. The foregoing includes,
without limitation, any action, suit, proceeding or investigation, pending or
threatened, that questions the validity of this Agreement or the right of the
Company to enter into such Agreement and perform its obligations hereunder.
Neither the Company nor any subsidiary is subject to any injunction, judgment,
decree or order of any court, regulatory body, arbitral panel, administrative
agency or other government body.

 

Purchase AgreementPage 4

 

 

(n) No Brokers. Except for any fees payable to Northland Securities, Inc., no
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the transactions contemplated by this
Agreement based on arrangements made by the Company.

 

(o) Compliance. Except as would not be reasonably likely to have a Material
Adverse Effect, the Company is not in violation of its certificate of
incorporation or bylaws. Neither the Company nor the subsidiaries have been
advised or have reason to believe, that it is not conducting its business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and regulations; except
where failure to be so in compliance would not have a Material Adverse Effect.
Each of the Company and the subsidiaries has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local
government or governmental agency, department or body that are currently
necessary for the operation of the business of the Company and they subsidiaries
as currently conducted, except where the failure to currently possess such
franchises, licenses, certificates and other authorizations would not reasonably
be expected to have a Material Adverse Effect.

 

(p) No Material Changes. Except as disclosed in the Company SEC Documents, since
March 31, 2018, there has been no material adverse change in the assets,
liabilities, business, properties, operations, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole. Since March
31, 2018, the Company has not declared or paid any dividend or distribution or
its capital stock.

 

(q) Contracts. Except for matters which are not reasonably likely to have a
Material Adverse Effect and those contracts that are substantially or fully
performed or expired by their terms, the contracts listed as exhibits to or
described in the Company SEC Documents that are material to the Company or any
of its subsidiaries and all amendments thereto, are in full force and effect on
the date hereof, and neither the Company nor, to the Company’ knowledge, any
other party to such contracts is in breach of or default under any of such
contracts. The Company has no contracts or agreements that would constitute a
material contract as such term is defined in Item 601(b) of Regulation S-K,
except for such contracts or agreements that are filed as exhibits to or
described in the Company SEC Documents.

 

(r) Intellectual Property.

 

i. The Company has ownership or license or legal right to use all patent,
copyright, trade secret, know-how trademark, trade name customer lists, designs,
manufacturing or other processes, computer software, systems, data compilation,
research results or other proprietary rights used in the business of the Company
(collectively “Intellectual Property”). All of such patents, registered
trademarks and registered copyrights have been duly registered in, filed in or
issued by the United States Patent and Trademark Office, the United States
Register of Copyrights or the corresponding offices of other jurisdictions and
have been maintained and renewed in accordance with all applicable provisions of
law and administrative regulations in the United States and all such
jurisdictions.

 

ii. The Company believes it has taken all reasonable steps required in
accordance with sound business practice and business judgment to establish and
preserve its and its subsidiaries ownership of all material Intellectual
Property with respect to their products and technology.

 

iii. To the knowledge of the Company, the present business, activities and
products of the Company and its subsidiaries do not infringe any intellectual
property of any other person, except where such infringement would not have a
Material Adverse Effect. No proceeding charging the Company with infringement of
any adversely held Intellectual Property has been filed.

 

iv. No proceedings have been instituted or pending or, to the knowledge of the
Company, threatened, which challenge the rights of the Company to the use of the
Intellectual Property. The Company has the right to use, free and clear of
material claims or rights of other persons, all of its customer lists, designs,
computer software, systems, data compilations, and other information that are
required for its products or its business as presently conducted. Neither the
Company nor any subsidiary is making unauthorized use of any confidential
information or trade secrets of any person. The activities of any of the
employees on behalf of the Company or of any subsidiary do not violate any
agreements or arrangements between such employees and third parties are related
to confidential information or trade secrets of third parties or that restrict
any such employee’s engagement in business activity of any nature.

 

Purchase AgreementPage 5

 

 

v. All licenses or other agreements under which (i) the Company or any
subsidiary employs rights in Intellectual Property, or (ii) the Company or any
subsidiary has granted rights to others in Intellectual Property owned or
licensed by the Company or any subsidiary are in full force and effect, and
there is no default (and there exists no condition which, with the passage of
time or otherwise, would constitute a default by the Company or such subsidiary)
by the Company or any subsidiary with respect thereto.

 

(s) Exchange Compliance. The Company’s common stock is registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) and
trades on the OTC Pink Market (the “Principal Market”), and the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the common stock under the Exchange Act or delisting the common
stock (including the Note Shares and Warrant Shares) from the Principal Market.
The Company is in compliance with all of the presently applicable requirements
for continued listing of the common stock on the Principal Market. The issuance
of the Securities does not require shareholder approval including, without
limitation, pursuant to the rules and regulations of the Principal Market.

 

(t) [Intentionally Omitted].

 

(u) Accountants. EKS&H LLP, who expressed its opinion with respect to the
consolidated financial statements contained in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2017, to be incorporated by reference
into the Registration Statement (as hereinafter defined) and the prospectus
which forms a part thereof (the “Prospectus”), have advised the Company that it
is, and to the knowledge of the Company it is, an independent accountant as
required by the Securities Act and the rules and regulations promulgated
thereunder. The Company covenants to file its Form 10-K containing audited
consolidated financial statements for the year ended December 31, 2018 within
the time period required by applicable securities laws and further represents
and warrants that it has no reason to believe that the auditors will not be able
to express an unqualified opinion with respect to such financial statements,
assuming the Closing occurs as contemplated herein.

 

(v) Taxes. The Company has filed all necessary federal, state, local and foreign
income and franchise tax returns and has paid or accrued all taxes shown as due
thereon, and the Company has no knowledge of a tax deficiency which has been or
might be asserted or threatened against it by any taxing jurisdiction.

 

(w) Insurance. The Company maintains and will continue to maintain insurance of
the types and in the amounts that the Company reasonably believes is adequate
for its business, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against
by similarly situated companies, all of which insurance is in full force and
effect.

 

(x) Transfer Taxes. On the Closing date, all stock transfer or other taxes
(other than income taxes) that are required to be paid in connection with the
sale and transfer of the Securities hereunder will be, or will have been, fully
paid or provided for by the Company and the Company will have complied with all
laws imposing such taxes.

 

(y) Investment Company. The Company (including its subsidiaries) is not an
“investment company” or an “affiliated person” of, or “promoter” or “principal
underwriter” for an investment company, within the meaning of the Investment
Company Act of 1940 and will not be deemed an “investment company” as a result
of the transactions contemplated by this Agreement.

 

(z) Related Party Transactions. To the knowledge of the Company, no transaction
has occurred between or among the Company or any of its affiliates (including,
without limitation, any of its subsidiaries), officers or directors or any
affiliate or affiliates of any such affiliate officer or director that with the
passage of time will be required to be disclosed pursuant to Section 13, 14 or
15(d) of the Exchange Act other than those transactions that have already been
so disclosed.

 

(aa) Books and Records. The books, records and accounts of the Company and its
subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in, and dispositions of, the assets of, and the operations of, the
Company and its subsidiaries.

 

Purchase AgreementPage 6

 

 

(bb) Disclosure Controls and Internal Controls.

 

i. The Company has established and maintains disclosure controls and procedures
(as such term is defined in Rule 13a-15 under the Exchange Act), which (i) are
designed to ensure that material information relating to the Company is made
known to their Company’s principal executive officer and its principal financial
officer by others within those entities particularly during the periods in which
the periodic reports required under the Exchange Act are being prepared; and
(ii) provide for the periodic evaluation of the effectiveness of such disclosure
controls and procedures as of the end of the period covered by the Company’s
most recent annual or quarterly report filed with the SEC.

 

ii. The Company maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. Except
as described in the Company SEC Documents, the Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-14 under the
Exchange Act) that are effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed in to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the Company’s
management, including its principal executive officer or officers and its
principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. Except as described in the Company SEC
Documents, the Company is not aware of (i) any significant deficiency in the
design or operation of internal controls which could adversely affect the
Company’s or any of its subsidiary’s ability to record, process, summarize and
report financial data or any material weaknesses in internal controls; or (ii)
any fraud, whether or not material, that involves management or other employees
who have a significant role in the Company’s or any of its subsidiary’s internal
controls.

 

iii. Since the date of the most recent evaluation of such disclosure controls
and procedures, there have been no changes that have materially affected, or are
reasonably likely to materially affect, the Company’s or any of its subsidiary’s
internal control over financial reporting, including any corrective actions with
regard to significant deficiencies and material weaknesses.

 

iv. Except as described in the Company SEC Documents, there are no material
off-balance sheet arrangements (as defined in Item 303 of Regulation S-K), or
any other relationships with unconsolidated entities (in which the Company or
its control persons have an equity interest) that may have a material current or
future effect on the Company’s or any of its/subsidiary’s financial condition,
revenues or expenses, changes in financial condition, results of operations,
liquidity, capital expenditures or capital resources.

 

v. To the knowledge of the Company, neither the board of directors nor the audit
committee has been informed, nor is any director of the Company aware, of (1)
except as described in the Company SEC Documents, any significant deficiencies
in the design or operation of the Company’s internal controls which could
adversely affect the Company’s or any subsidiary’s ability to record, process,
summarize and report financial data or any material weakness in the Company’s or
any subsidiary’s internal controls; or (2) any fraud, whether or not material,
that involves management or other employees of the Company or any of its
subsidiaries who have a significant role in the Company’s or any subsidiary’s
internal controls.

 

(cc) No General Solicitation. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D
promulgated under the Securities Act) in connection with the offer or sale of
the Securities.

 

(dd) Application of Takeover Protections; Rights Agreement. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the certificate of incorporation or the laws of
the jurisdiction of its formation which is or could become applicable to any
Purchaser as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the Securities and any
Purchaser’s ownership of the Securities. The Company has not adopted a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of common stock or a change in control of the Company.

 

Purchase AgreementPage 7

 

 

(ee) Foreign Corrupt Practices. Neither the Company nor any director, officer,
agent, employee or other person acting on behalf of the Company has, in the
course of its actions for, or on behalf of, the Company (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.

 

(ff) Sarbanes-Oxley Act. The Company is in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof, except where
such noncompliance would not have, individually or in the aggregate, a Material
Adverse Effect.

 

(gg) Employee Relations. The Company is not a party to any collective bargaining
agreement or employs any member of a union. The Company believes that its
relations with its employees are good. No executive officer of the Company (as
defined in Rule 501(f) of the Securities Act) has notified the Company that such
officer intends to leave the Company or otherwise terminate such officer's
employment with the Company. No executive officer of the Company, to the
knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company to any liability
with respect to any of the foregoing matters.

 

The Company is in compliance with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.

 

(hh) Environmental Laws. The Company (i) is in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) has received all permits,
licenses or other approvals required of it under applicable Environmental Laws
to conduct its business and (iii) is in compliance with all terms and conditions
of any such permit, license or approval where, in each of the foregoing clauses
(i), (ii) and (iii), the failure to so comply could be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect. The term
“Environmental Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

 

(ii) Indebtedness. Schedule II attached hereto sets forth (a) all indebtedness
of the Company and its subsidiaries for borrowed money or for the deferred
purchase price of assets or services or which is evidenced by a note, debenture
or similar instrument, to the extent it would appear as a liability upon a
balance sheet of the Company prepared in accordance with GAAP; (b) all direct or
contingent obligations of the Company and its subsidiaries arising under letters
of credit (including standby and commercial), bankers’ acceptances, bank
guaranties, surety bonds and similar instruments; (c) net obligations of the
Company and its subsidiaries under any swap contract; (d) indebtedness described
in clauses (a) through (c) of this definition (excluding prepaid interest
thereon) secured by a lien on property owned or being purchased by the Company
or any of its subsidiaries (including indebtedness arising under conditional
sales or other title retention agreements), whether or not such indebtedness
shall have been assumed by the Company or a subsidiary or is limited in
recourse; and (e) all guarantees of the Company and its subsidiaries in respect
of any of the foregoing.

 

(jj) No Manipulation; Disclosure of Information. The Company has not taken and
will not take any action designed to or that might reasonably be expected to
cause or result in an unlawful manipulation of the price of the common stock to
facilitate the sale or resale of the Securities. The Company confirms that, to
its knowledge, with the exception of the proposed sale of Securities as
contemplated herein (as to which the Company makes not representation), neither
it nor any other person acting on its behalf has provided any of the Purchasers
or their agents or counsel with any information that constitutes or might
constitute material, non-public information. The Company understands and
confirms that the Purchasers shall be relying on the foregoing representations
in effecting transactions in securities of the Company. All disclosures provided
to the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the exhibits to this Agreement, furnished by the
Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.

 

Purchase AgreementPage 8

 

 

(kk) Forward-Looking Information. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) made by the Company or any of its officers or directors contained in the
Company SEC Documents, or made available to the public generally since March 31,
2018, has been made or reaffirmed without a reasonable basis or has been
disclosed other than in good faith.

 

(ll) No Additional Agreements. Other than with respect to closing mechanics, the
Company has no other agreements or understandings (including, without
limitation, side letters) with any Purchaser or other person to purchase
Securities on terms more favorable to such person than as set forth herein.

 

4. Representations of the Investors. To induce the Company to enter into this
Agreement and to sell the Notes and Warrants, each Investor, severally and not
jointly, hereby represents and warrants to the Company as follows:

 

(a) Authorization. The Investor has full power and authority to enter into this
Agreement. This Agreement, when executed and delivered by the Investor, will
constitute a valid and legally binding obligation of the Investor, enforceable
in accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of creditors’ rights
generally, and as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.

 

(b) Purchase for Own Account. This Agreement is made with the Investor in
reliance upon the Investor’s representation to the Company, which by the
Investor’s execution of this Agreement, the Investor hereby confirms, that the
Securities to be acquired by the Investor will be acquired for investment for
the Investor’s own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that the Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the Securities. By executing this Agreement, the Investor further
represents that the Investor does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. The Investor has not been formed for the specific purpose of
acquiring the Securities.

 

(c) Disclosure of Information; Sophistication. The Investor has had an
opportunity to discuss the Company’s business, management, financial affairs and
the terms and conditions of the offering of the Securities with the Company’s
management and has had an opportunity to review the Company’s facilities. The
Investor has received all information it has requested from the Company that it
considers necessary or appropriate for deciding whether to acquire the
Securities. The Investor represents and warrants that it has the knowledge and
experience in financial and business matters such that it is capable of
evaluating the merits and risks of this investment. The Investor acknowledges
that investment in the Securities involves a high degree of risk and represents
that it is able, without materially impairing its financial condition, to hold
the Securities for an indefinite period of time and to suffer a complete loss of
its investment. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 3 of this Agreement or
the right of the Investors to rely thereon.

 

(d) Restricted Securities. The Investor understands that the Securities have not
been, and will not be, registered under the Securities Act of 1933, by reason of
a specific exemption from the registration provisions of the Securities Act of
1933 which depends upon, among other things, the bona fide nature of the
investment intent and the accuracy of the Investor’s representations as
expressed herein. The Investor understands that the Securities are “restricted
securities” under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Investor must hold the Securities indefinitely
unless they are registered with the Securities and Exchange Commission and
qualified by state authorities, or an exemption from such registration and
qualification requirements is available. The Investor acknowledges that the
Company has no obligation to register or qualify the Securities for resale. The
Investor further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Securities, and on requirements relating to the Company which are
outside of the Investor’s control, and which the Company is under no obligation
and may not be able to satisfy.

 

Purchase AgreementPage 9

 

 

(e) Legends. The Investor understands that the Securities and any securities
issued in respect of or exchange for the Securities, may bear one or all of the
following legends (in substantially the form set forth below):

 

(i) “THE SECURITIES REPRESENTED HEREBY and the SECURITIES ISSUABLE UPON
CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933.”

 

(ii) Any legend required by the securities laws of any state to the extent such
laws are applicable to the Securities represented by the certificate so
legended.

 

(f) No Public Market. The Investor understands that no public market now exists
for the Securities, and that the Company has made no assurances that a public
market will ever exist for the Securities.

 

(g) Accredited Investor. The Investor is an accredited investor as defined in
Rule 501(a) of Regulation D promulgated under the Securities Act of 1933. The
Investor satisfies the criteria indicated on the signature page hereto.

 

(h) Foreign Investors. If the Investor is not a United States person (as defined
by Section 7701(a)(30) of the Internal Revenue Code of 1986), the Investor
hereby represents that it has satisfied itself as to the full observance of the
laws of its jurisdiction in connection with any invitation to subscribe for the
Securities or any use of this Agreement, including (i) the legal requirements
within its jurisdiction for the purchase of the Securities, (ii) any foreign
exchange restrictions applicable to such purchase, (iii) any governmental or
other consents that may need to be obtained, and (iv) the income tax and other
tax consequences, if any, that may be relevant to the purchase, holding,
redemption, sale, or transfer of the Securities. The Investor’s subscription and
payment for and continued beneficial ownership of the Securities will not
violate any applicable securities or other laws of the Investor’s jurisdiction.

 

(i) No General Solicitation. Neither the Investor, nor any of its officers,
directors, employees, agents, stockholders or partners has either directly or
indirectly, including through a broker or finder (i) engaged in any general
solicitation, or (ii) published any advertisement in connection with the offer
and sale of the Securities.

 

(j) Exculpation Among Investors. The Investor acknowledges that it is not
relying upon any person, other than the Company and its officers and directors,
in making its investment or decision to invest in the Company. The Investor
agrees that neither any Investor nor the respective controlling persons,
officers, directors, partners, agents, or employees of any Investor shall be
liable to any other Investor for any action heretofore taken or omitted to be
taken by any of them in connection with the purchase of the Securities.

 

(k) Residence, Investment Decision. The Investor’s residence or principal place
of business, and the location where the Investor made the decision to purchase
the Notes and Warrants, is in the state set forth in the Investor’s address on
the signature page hereto.

 

(l) No Finder’s Fees. Each Investor represents that it neither is nor will be
obligated for any finder’s fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder’s or broker’s fee arising out of this transaction (and the costs and
expenses of defending against such liability or asserted liability) for which
each Investor or any of its officers, employees, or representatives is
responsible.

 

(m) Further Assurances. Each Investor agrees and covenants that at any time and
from time to time it will promptly execute and deliver to the Company such
further instruments and documents and take such further action as the Company
may reasonably require in order to carry out the full intent and purpose of this
Agreement and to comply with federal or state securities laws or other
regulatory approvals.

 

Purchase AgreementPage 10

 

 

5. Further Agreements.

 

(a) Use of Proceeds. In accordance with the directions of the Company’s board of
directors, the Company will use the proceeds from the sale of the Notes and
Warrants for product development and other general corporate purposes. Except
for approximately $1 million of proceeds that the Company shall use to repay
principal, interest, fees, and expenses related to the senior bridge notes of
the Company held by Red Ocean Consulting, LLC and the Richard H. Enrico
Revocable Trust Dated June 9, 1998, the proceeds from the sale of the Notes and
Warrants shall not be used for the redemption or repurchase of debt or
securities (other than the repurchase of securities from employees and directors
pursuant to the Company’s omnibus stock plan), dividends or payments to officers
other than regular salaries, relocation expenses and reimbursements for costs
incurred on behalf of the Company in the ordinary course of business.

 

(b) Reporting Status. With a view to making available to the Investors the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Note Shares and Warrant Shares to the public without registration, the
Company agrees to use its reasonable efforts to file with the SEC, in a timely
manner all reports and other documents required of the Company under the
Exchange Act. The Company will otherwise take such further action as an Investor
may reasonably request, all to the extent required from time to time to enable
such Investor to sell the Note Shares and Warrant Shares without registration
under the Securities Act or any successor rule or regulation adopted by the SEC.

 

(c) Adjustments in Share Numbers. In the event of any stock split, subdivision,
dividend or distribution payable in shares of common stock (or other securities
or rights convertible into, or entitling the holder thereof to receive directly
or indirectly shares of common stock), combination or other similar
recapitalization or event occurring after the date hereof, each reference in
this Agreement or the Note or the Warrants to a number of shares or price per
share shall be amended appropriately to account for such event.

 

6. Registration Rights.

 

(a) Registration Procedures and Expenses.

 

i. The Company shall prepare and file with the SEC, as promptly as reasonably
practicable following the Closing but in no event later than 45 days following
Closing, a registration statement on Form S-1 (or any successor to Form S-1),
covering the resale of the Registrable Securities (the “Registration Statement”)
and as soon as reasonably practicable thereafter but in no event later than 180
days following the filing of the Registration Statement (210 days in the event
of a full review of the Registration Statement by the SEC), to effect such
registration and any related qualification or compliance with respect to all
Registrable Securities held by the Investors. For purposes of this Agreement,
the term “Registrable Securities” shall mean (i) the Note Shares; (ii) the
Warrant Shares; and (iii) any common stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, any Note Shares or Warrant Shares. If the Registration
Statement has not been declared effective by the SEC on or before the date that
is 180 days after the filing date of the Registration Statement, or 210 days
after the filing of the Registration Statement in the event of a full review of
the Registration Statement by the SEC (the “Required Effective Date”), the
Company shall, on the business day immediately following the Required Effective
Date and each 30th day thereafter, make a payment to the Purchasers as partial
liquidated damages for such delay (together, the “Late Registration Payments”)
equal to 1% of the Purchase Price paid for the Securities then owned by the
Purchasers until the Registration Statement is declared effective by the SEC.
Late Registration Payments will be prorated on a daily basis during each 30 day
period and will be paid to the Purchasers by wire transfer or check within five
business days after the earlier of (i) the end of each 30 day period following
the Required Effective Date or (ii) the effective date of the Registration
Statement. If the Company fails to pay any liquidated damages pursuant to this
section in full within seven days after the date payable, the Company will pay
interest thereon at a rate of 12% per annum (or such lesser maximum amount that
is permitted to be paid by applicable law) to the Purchasers, accruing daily
from the date such liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. “Business day” means any day except
Saturday, Sunday and any day that is a federal legal holiday in the United
States.

 

Purchase AgreementPage 11

 

 

ii. The Company shall use its best efforts to:

 

A. prepare and file with the SEC such amendments and supplements to the
Registration Statement and the Prospectus used in connection therewith as may be
necessary or advisable to keep the Registration Statement current and effective
for the Registrable Securities (collectively, “Common Shares”) held by a
Purchaser for a period ending on the earlier of (i) the second anniversary of
the Closing date, (ii) the date on which all Common Shares may be sold pursuant
to Rule 144 under the Securities Act or any successor rule (“Rule 144”) or (iii)
such time as all Common Shares have been sold pursuant to a registration
statement or Rule 144. At such time the Company is no longer required to keep
the Registration Statement current and effective for the Common Shares held by a
Purchaser (the “Registration Statement Termination Date”), that Purchaser will
no longer accrue any additional liquidated damages payments pursuant to Sections
6(a)(i) or 6(b)(iii); however, the Company shall still be obligated to make all
payments under Sections 6(a)(i) or 6(b)(ii) that were not made prior to the
Registration Statement Termination Date for that Purchaser. The Company shall
notify each Purchaser promptly upon the Registration Statement and each
post-effective amendment thereto, being declared effective by the SEC and advise
each Purchaser that the form of Prospectus contained in the Registration
Statement or post-effective amendment thereto, as the case may be, at the time
of effectiveness meets the requirements of Section 10(a) of the Securities Act
or that it intends to file a Prospectus pursuant to Rule 424(b) under the
Securities Act that meets the requirements of Section 10(a) of the Securities
Act;

 

B. furnish to the Purchaser with respect to the Common Shares registered under
the Registration Statement such number of copies of the Registration Statement
and the Prospectus (including supplemental prospectuses) filed with the SEC in
conformance with the requirements of the Securities Act and other such documents
as the Purchaser may reasonably request, in order to facilitate the public sale
or other disposition of all or any of the Common Shares by the Purchaser;

 

C. make any necessary blue sky filings;

 

● pay the expenses incurred by the Company and the Purchasers in complying with
Section 6, including, all registration and filing fees, FINRA fees, exchange
listing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding attorneys’ fees
of any Purchaser and any and all underwriting discounts and selling commissions
applicable to the sale of Registrable Securities by the Purchasers);

 

● advise the Purchasers, promptly after it shall receive notice or obtain
knowledge of the issuance of any stop order by the SEC delaying or suspending
the effectiveness of the Registration Statement or of the initiation of any
proceeding for that purpose; and it will promptly use its commercially
reasonable best efforts to prevent the issuance of any stop order or to obtain
its withdrawal at the earliest possible moment if such stop order should be
issued; and

 

● with a view to making available to the Purchaser the benefits of Rule 144 and
any other rule or regulation of the SEC that may at any time permit the
Purchaser to sell Common Shares to the public without registration, the Company
covenants and agrees to use its commercially reasonable best efforts to: (i)
make and keep public information available, as those terms are understood and
defined in Rule 144, until the earlier of (A) such date as all of the Common
Shares qualify to be resold immediately pursuant to Rule 144 or any other rule
of similar effect or (B) such date as all of the Common Shares shall have been
resold pursuant to Rule 144 (and may be further resold without restriction);
(ii) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and under the Exchange Act; and
(iii) furnish to the Purchaser upon request, as long as the Purchaser owns any
Common Shares, (A) a written statement by the Company as to whether it has
complied with the reporting requirements of the Securities Act and the Exchange
Act, (B) a copy of the Company’s most recent Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, and (C) such other information as may be
reasonably requested in order to avail the Purchaser of any rule or regulation
of the SEC that permits the selling of any such Common Shares without
registration.

 

The Company understands that the Purchasers disclaim being an underwriter, but
acknowledges that a determination by the SEC that a Purchaser is deemed an
underwriter shall not relieve the Company of any obligations it has hereunder.

 

Purchase AgreementPage 12

 

 

(b) Transfer of Shares After Registration; Suspension.

 

(i) Except in the event that Section 6(b)(ii) applies, the Company shall: (i) if
deemed necessary or advisable by the Company, prepare and file from time to time
with the SEC a post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that such Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and so that, as
thereafter delivered to purchasers of the Common Shares being sold thereunder,
such Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (ii) provide the Purchasers copies of any documents filed
pursuant to Section 6.2(a)(i); and (iii) upon request, inform each Purchaser who
so requests that the Company has complied with its obligations in Section
6.2(b)(i) (or that, if the Company has filed a post-effective amendment to the
Registration Statement which has not yet been declared effective, the Company
will notify the Purchaser to that effect, will use its commercially reasonable
best efforts to secure the effectiveness of such post-effective amendment as
promptly as possible and will promptly notify the Purchaser pursuant to Section
6.2(b)(i) when the amendment has become effective).

 

(ii) Subject to Section 6(b)(iii), in the event: (i) of any request by the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related Prospectus or for additional information; (ii)
of the issuance by the SEC or any other federal or state governmental authority
of any stop order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose; (iii) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Common Shares for sale in any
jurisdiction or the initiation of any proceeding for such purpose; or (iv) of
any event or circumstance which necessitates the making of any changes in the
Registration Statement or Prospectus, or any document incorporated or deemed to
be incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the Prospectus, it
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; then the Company shall promptly deliver a certificate in writing to
the Purchasers (the “Suspension Notice”) to the effect of the foregoing and,
upon receipt of such Suspension Notice, the Purchasers will refrain from selling
any Common Shares pursuant to the Registration Statement (a “Suspension”) until
the Purchasers are advised in writing by the Company that the current Prospectus
may be used, and have received copies from the Company of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such Prospectus. In the event of any Suspension, the Company will use its
reasonable best efforts to cause the use of the Prospectus so suspended to be
resumed as soon as reasonably practicable after delivery of a Suspension Notice
to the Purchasers. In addition to and without limiting any other remedies
(including, without limitation, at law or at equity) available to the Company
and the Purchaser, the Company and the Purchasers shall be entitled to specific
performance in the event that the other party fails to comply with the
provisions of this Section 6(b)(ii).

 

(iii) Notwithstanding the foregoing paragraphs of this Section 6(b), the Company
shall use its commercially reasonable best efforts to ensure that (i) a
Suspension shall not exceed 30 days individually, (ii) Suspensions covering no
more than 45 days, in the aggregate, shall occur during any twelve month period
and (iii) each Suspension shall be separated by a period of at least 30 days
from a prior Suspension (each Suspension that satisfies the foregoing criteria
being referred to herein as a “Qualifying Suspension”). In the event that there
occurs a Suspension (or part thereof) that does not constitute a Qualifying
Suspension, the Company shall pay to the Purchaser, on the 30th day following
the first day of such Suspension (or the first day of such part), and on each
30th day thereafter, an amount equal to 1% of the Purchase Price paid for the
Securities purchased by the Purchaser and not previously sold by the Purchaser
with such payments to be prorated on a daily basis during each 30 day period and
will be paid to the Purchaser by wire transfer or check within five business
days after the end of each 30 day period following.

 

(iv) If a Suspension is not then in effect, the Purchasers may sell Common
Shares under the Registration Statement, provided that they comply with any
applicable prospectus delivery requirements. Upon receipt of a request therefor,
the Company will provide an adequate number of current Prospectuses to a
Purchaser and to any other parties reasonably requiring such Prospectuses.

 

(v) The Company agrees that it shall, immediately prior to the Registration
Statement being declared effective, deliver to its transfer agent an opinion
letter of counsel, opining that at any time the Registration Statement is
effective, the transfer agent may issue, in connection with the sale of the
Common Shares, certificates representing such Common Shares without restrictive
legend, provided the Common Shares are to be sold pursuant to the Prospectus
contained in the Registration Statement. Upon receipt of such opinion, the
Company shall cause the transfer agent to confirm, for the benefit of the
Purchasers, that no further opinion of counsel is required at the time of
transfer in order to issue such Common Shares without restrictive legend.

 

Purchase AgreementPage 13

 

 

The Company shall cause its transfer agent to issue a certificate without any
restrictive legend to a purchaser of any Common Shares from the Purchasers, if
no Suspension is in effect at the time of sale, and (a) the sale of such Common
Shares is registered under the Registration Statement (including registration
pursuant to Rule 415 under the Securities Act); (b) the holder has provided the
Company with an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public sale
or transfer of such Common Shares may be made without registration under the
Securities Act; or (c) such Common Shares are sold in compliance with Rule 144
under the Securities Act. In addition, the Company shall remove the restrictive
legend from any Common Shares held by the Purchasers following the expiration of
the holding period required by Rule 144 under the Securities Act (or any
successor rule).

 

(c) Indemnification. For the purpose of this Section 6(c):

 

● the term “Selling Shareholder” shall mean a Purchaser, its executive officers
and directors and each person, if any, who controls that Purchaser within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act;

 

● the term “Registration Statement” shall include any final Prospectus, exhibit,
supplement or amendment included in or relating to, and any document
incorporated by reference in, the Registration Statement (or deemed to be a part
thereof) referred to in Section 6.1; and

 

● the term “untrue statement” shall mean any untrue statement or alleged untrue
statement of a material fact, or any omission or alleged omission to state in
the Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

 

i. The Company agrees to indemnify and hold harmless each Selling Shareholder
from and against any losses, claims, damages or liabilities to which such
Selling Shareholder may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon (i) any untrue
statement of a material fact contained in the Registration Statement, (ii) any
inaccuracy in the representations and warranties of the Company contained in
this Agreement or the failure of the Company to perform its obligations
hereunder or (iii) any failure by the Company to fulfill any undertaking
included in the Registration Statement, and the Company will reimburse such
Selling Shareholder for any reasonable legal expense or other actual accountable
out of pocket expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim; provided, however,
that the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of, or is based upon, an untrue
statement made in such Registration Statement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
Selling Shareholder specifically for use in preparation of the Registration
Statement or the failure of such Selling Shareholder to comply with its
covenants and agreements contained herein or any statement or omission in any
Prospectus that is corrected in any subsequent Prospectus that was delivered to
the Selling Shareholder prior to the pertinent sale or sales by the Selling
Shareholder.

 

ii. Each Purchaser severally (as to itself), and not jointly, agrees to
indemnify and hold harmless the Company (and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act, each officer
of the Company who signs the Registration Statement and each director of the
Company) from and against any losses, claims, damages or liabilities to which
the Company (or any such officer, director or controlling person) may become
subject (under the Securities Act or otherwise), insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, (i) any failure by that Purchaser to comply with the
covenants and agreements contained herein or (ii) any untrue statement of a
material fact contained in the Registration Statement if, and only if, such
untrue statement was made in reliance upon and in conformity with written
information furnished by or on behalf of that Purchaser specifically for use in
preparation of the Registration Statement, and that Purchaser will reimburse the
Company (or such officer, director or controlling person, as the case may be),
for any reasonable legal expense or other reasonable actual accountable
out-of-pocket expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim. The obligation to
indemnify shall be limited to the net amount of the proceeds received by the
Purchaser from the sale of the Common Shares pursuant to the Registration
Statement.

 

Purchase AgreementPage 14

 

 

iii. Promptly after receipt by any indemnified person of a notice of a claim or
the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 6(c), such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, but the omission to so notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party under this Section 6(c) (except to the extent that such
omission materially and adversely affects the indemnifying party’s ability to
defend such action) or from any liability otherwise than under this Section
6(c). Subject to the provisions hereinafter stated, in case any such action
shall be brought against an indemnified person, the indemnifying person shall be
entitled to participate therein, and, to the extent that it shall elect by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, shall be entitled to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
person. After notice from the indemnifying person to such indemnified person of
its election to assume the defense thereof (unless it has failed to assume the
defense thereof and appoint counsel reasonably satisfactory to the indemnified
party), such indemnifying person shall not be liable to such indemnified person
for any legal expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided, however, that if there exists or
shall exist a conflict of interest that would make it inappropriate, in the
reasonable opinion of counsel to the indemnified person, for the same counsel to
represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel (who shall not be the same as the opining counsel) at the
expense of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel (together with appropriate local counsel) for all indemnified parties.
In no event shall any indemnifying person be liable in respect of any amounts
paid in settlement of any action unless the indemnifying person shall have
approved the terms of such settlement; provided that such consent shall not be
unreasonably withheld. No indemnifying person shall, without the prior written
consent of the indemnified person, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified person is or could
reasonably have been a party and indemnification could have been sought
hereunder by such indemnified person, unless such settlement includes an
unconditional release of such indemnified person from all liability on claims
that are the subject matter of such proceeding.

 

iv. If the indemnification provided for in this Section 6(c) is unavailable to
or insufficient to hold harmless an indemnified party under subsection (i) or
(iii) above in respect of any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and the liable Purchaser on the other in
connection with the statements or omissions or other matters which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, in the case of an untrue
statement, whether the untrue statement relates to information supplied by the
Company on the one hand or the liable Purchaser on the other and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement. The Company and the Purchasers agree that it
would not be just and equitable if contribution pursuant to this subsection (iv)
were determined by pro rata allocation (even if the Purchasers were treated as
one entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to above in this
subsection (iv). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (iv) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (iv), no Purchasers shall be required to
contribute any amount in excess of the amount by which the net amount received
by that Purchaser from the sale of the Common Shares to which such loss relates
exceeds the amount of any damages which that Purchaser has otherwise been
required to pay to the Company by reason of such untrue statement. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Purchasers’ obligations in
this subsection to contribute are several in proportion to their sales of Common
Shares to which such loss relates and not joint.

 

Purchase AgreementPage 15

 

 

v. The parties to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations
regarding the provisions hereof including, without limitation, the provisions of
this Section 6(c), and are fully informed regarding said provisions. They
further acknowledge that the provisions of this Section 6(c) fairly allocate the
risks in light of the ability of the parties to investigate the Company and its
business in order to assure that adequate disclosure is made in the Registration
Statement as required by the Securities Act and the Exchange Act.

 

vi. The obligations of the Company and of the Purchasers under this Section 6(c)
shall survive completion of any offering of Registrable Securities in such
Registration Statement for a period of two years from the effective date of the
Registration Statement. No indemnifying party, in the defense of any such claim
or litigation, shall, except with the consent of each indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.

 

(d) Termination of Conditions and Obligations. The conditions precedent imposed
by this Section 6 upon the transferability of the Common Shares shall cease and
terminate as to any particular number of the Common Shares when such Common
Shares shall have been effectively registered under the Securities Act and sold
or otherwise disposed of in accordance with the intended method of disposition
set forth in the Registration Statement covering such Common Shares or at such
time as an opinion of counsel satisfactory to the Company shall have been
rendered to the effect that such conditions are not necessary in order to comply
with the Securities Act. The Company shall request an opinion of counsel
promptly upon receipt of a request therefor from Purchaser.

 

(e) Information Available. So long as the Registration Statement is effective
covering the resale of Common Shares owned by a Purchaser, the Company will
furnish (or, to the extent such information is available electronically through
the Company’s filings with the SEC, the Company will make available via the
SEC’s EDGAR system or any successor thereto) to each Purchaser:

 

● as soon as practicable after it is available, one copy of (i) its Annual
Report to Shareholders (which Annual Report shall contain financial statements
audited in accordance with generally accepted accounting principles by a
national firm of certified public accountants) and (ii) if not included in
substance in the Annual Report to Shareholders, its Annual Report on Form 10-K
(the foregoing, in each case, excluding exhibits);

 

● upon the request of the Purchaser, all exhibits excluded by the parenthetical
to subparagraph (a)(ii) of this Section 6(e) as filed with the SEC and all other
information that is made available to shareholders; and

 

● upon the reasonable request of the Purchaser, an adequate number of copies of
the Prospectuses to supply to any other party requiring such Prospectuses; and
the Company, upon the reasonable request of a Purchaser, will meet with each
Purchaser or a representative thereof at the Company’s headquarters during the
Company’s normal business hours to discuss all information relevant for
disclosure in the Registration Statement covering the Common Shares and will
otherwise reasonably cooperate with the Purchasers conducting an investigation
for the purpose of reducing or eliminating the Purchasers’ exposure to liability
under the Securities Act, including the reasonable production of information at
the Company’s headquarters; provided, that the Company shall not be required to
disclose any confidential information to or meet at its headquarters with a
Purchaser until and unless that Purchaser shall have entered into a
confidentiality agreement in form and substance reasonably satisfactory to the
Company with the Company with respect thereto.

 

(f) Public Statements; Limitation on Information. The Company agrees to disclose
on a Current Report on Form 8-K the existence of the offering and the material
terms thereof, including pricing, within one business day after it specifies the
Closing date. Such Current Report on Form 8-K shall include a form of this
Agreement (and all exhibits and schedules thereto) as an exhibit thereto. The
Company will not issue any public statement, press release or any other public
disclosure listing a Purchaser as one of the purchasers of the Common Shares
without that Purchaser’s prior written consent, except as may be required by
applicable law or rules of any exchange on which the Company’s securities are
listed. The Company shall not provide, and shall cause each of its subsidiaries
and the respective officers, directors, employees and agents of the Company and
each of its subsidiaries not to provide, the Purchasers with any material
nonpublic information regarding the Company or any subsidiary from and after the
date the Company files, or is required by this Section to file, the Current
Report on Form 8-K with the SEC without the prior express written consent of the
Purchaser.

 

Purchase AgreementPage 16

 

 

(g) Limits on Additional Issuances. The Company will not, for a period of six
months following the Closing date offer for sale or sell any securities without
the prior consent of the holders of at least a majority of the then-outstanding
principal amount of the Notes. Except as disclosed in the Company SEC Documents
and for the issuance of stock options under the Company’s stock option plans,
the issuance of common stock upon exercise of outstanding options and warrants,
the issuance of common stock purchase warrants, and the offering contemplated
hereby, the Company has not engaged in any offering of equity securities during
the six months prior to the date of this Agreement. The foregoing provisions
shall not prevent the Company from filing a “shelf” registration statement
pursuant to Rule 415 under the Securities Act, but the foregoing provisions
shall apply to any sale of securities thereunder.

 

(h) Form D and State Securities Filings. The Company will file with the SEC a
Notice of Sale of Securities on Form D with respect to the Securities, as
required under Regulation D under the Securities Act, no later than 15 days
after the Closing date. The Company will promptly and timely file all documents
and pay all filing fees required by any states’ securities laws in connection
with the sale of Securities.

 

(i) Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 6 may be assigned by a
Purchaser to a party that acquires, other than pursuant to the Registration
Statement or Rule 144, any of the Note Shares and Warrant Shares originally
issued or issuable to such Purchaser pursuant to this Agreement and Note and the
Warrants (or any common stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
any such Note Shares or Warrant Shares), or to any affiliate of a Purchaser that
acquires any Registrable Securities. Any such permitted assignee shall have all
the rights of such Purchaser under this Section 6 with respect to the
Registrable Securities transferred.

 

7. Miscellaneous.

 

(a) Survival of Warranties. Unless otherwise set forth in this Agreement, the
representations and warranties of the Company and the Investors contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the closings under this Agreement and shall in no way be affected
by any investigation or knowledge of the subject matter thereof made by or on
behalf of the Investors or the Company.

 

(b) Successors and Assigns. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

 

(c) Governing Law. This Agreement and any controversy arising out of or relating
to this Agreement shall be governed by and construed in accordance with the
General Corporation Law of the State of Delaware as to matters within the scope
thereof, and as to all other matters shall be governed by and construed in
accordance with the internal laws of State of Arizona, without regard to
conflict of law principles that would result in the application of any law other
than the law of the State of Arizona.

 

(d) Counterparts; Facsimile. This Agreement may be executed and delivered by
facsimile or electronic signature and in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

 

(e) Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

 

(f) Notices. All notices and other communications given or made pursuant to this
Agreement shall be in writing and shall be deemed effectively given upon the
earlier of actual receipt or: (a) personal delivery to the party to be notified,
(b) when sent, if sent by electronic mail or facsimile during normal business
hours of the recipient, and if not sent during normal business hours, then on
the recipient’s next business day, (c) five days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (d)
one business day after deposit with a nationally recognized overnight courier,
freight prepaid, specifying next business day delivery, with written
verification of receipt. All communications shall be sent to the respective
parties at their address as set forth on the signature page, or to such e-mail
address, facsimile number or address as subsequently modified by written notice
given in accordance with this Section. If notice is given to the Company, a copy
shall also be sent to Frank B. Bennett, Fredrikson & Byron, P.A., 200 South
Sixth Street, Suite 4000, Minneapolis, MN 55402, and if notice is given to the
Investors, a copy shall also be given to [Investor Counsel Name and Address].

 

Purchase AgreementPage 17

 

 

(g) Attorneys’ Fees. If any action at law or in equity (including arbitration)
is necessary to enforce or interpret the terms of any of this Agreement, the
Notes or the Warrants, the prevailing party shall be entitled to reasonable
attorneys’ fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.

 

(h) Amendments and Waivers. Any term of this Agreement may be amended,
terminated or waived only with the written consent of (i) the Company, (ii) (A)
the holders of at least a majority of the then-outstanding principal amount of
the Notes or (B) for an amendment, termination or waiver effected prior to the
initial closing, Investors obligated to purchase a majority of the principal
amount of the Notes to be issued at the initial closing and (iii) the holders of
at least a majority of the then-outstanding Warrants. Any amendment or waiver
effected in accordance with this Section shall be binding upon the Investors and
each transferee of the Securities, each future holder of all such securities,
and the Company.

 

(i) Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.

 

(j) Delays or Omissions. No delay or omission to exercise any right, power or
remedy accruing to any party under this Agreement, upon any breach or default of
any other party under this Agreement, shall impair any such right, power or
remedy of such non-breaching or non-defaulting party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or
default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.

 

(k) Entire Agreement. This Agreement (including the exhibits hereto), the Notes
and the Warrants constitute the full and entire understanding and agreement
between the parties with respect to the subject matter hereof, and any other
written or oral agreement relating to the subject matter hereof existing between
the parties are expressly canceled.

 

(l) No Commitment for Additional Financing. The Company acknowledges and agrees
that no Investor has made any representation, undertaking, commitment or
agreement to provide or assist the Company in obtaining any financing,
investment or other assistance, other than the purchase of the Notes and
Warrants as set forth herein and subject to the conditions set forth herein. In
addition, the Company acknowledges and agrees that (i) no statements, whether
written or oral, made by any Investor or its representatives on or after the
date of this Agreement shall create an obligation, commitment or agreement to
provide or assist the Company in obtaining any financing or investment, (ii) the
Company shall not rely on any such statement by any Investor or its
representatives and (iii) an obligation, commitment or agreement to provide or
assist the Company in obtaining any financing or investment may only be created
by a written agreement, signed by such Investor and the Company, setting forth
the terms and conditions of such financing or investment and stating that the
parties intend for such writing to be a binding obligation or agreement. Each
Investor shall have the right, in its sole and absolute discretion, to refuse or
decline to participate in any other financing of or investment in the Company,
and shall have no obligation to assist or cooperate with the Company in
obtaining any financing, investment or other assistance.

 

(m) Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT
OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY
SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF
ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION
BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.

 

[Remainder of page intentionally left blank—signature page follows]

 

Purchase AgreementPage 18

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date first written above.

 

Investor:   EVO TRANSPORTATION & ENERGY SERVICES, INC.       Entity Name: DAN
THOMPSON II LLC                 By: /s/ Dan Thompson   By: /s/ John P. Yeros
Name: Dan Thompson   Name: John P. Yeros Title: President   Title: Chief
Executive Officer            TIN/SSN:                   Address:                
            E-mail:        

Facsimile: 

       

 

Mark all that are applicable:

 

____ Investor is an individual with a net worth, or a joint net worth together
with his or her spouse, in excess of $1,000,000.     ____ Investor is an
individual that had an individual income in excess of $200,000 in each of the
prior two years and reasonably expects an income in excess of $200,000 in the
current year or an individual that had with his/her spouse joint income in
excess of $300,000 in each of the prior two years and reasonably expects joint
income in excess of $300,000 in the current year.     ____ Investor is an entity
all of whose members are either (a) individuals with a net worth, or a joint net
worth together with the individual’s spouse, in excess of $1,000,000, (b)
individuals that had an individual income in excess of $200,000 in each of the
prior two years and reasonably expect an income in excess of $200,000 in the
current year or (c) individuals that had with the individual’s spouse joint
income in excess of $300,000 in each of the prior two years and reasonably
expect joint income in excess of $300,000 in the current year.     ____ Investor
is a private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940, an investment company registered under the
Investment Company Act of 1940, a business development company as defined in
Section 2(a)(48) of the Investment Company Act of 1940 or a Small Business
Investment Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958.     ____
Investor has total assets in excess of $5,000,000, was not formed for the
specific purpose of acquiring the securities and is one or more of the following
(check one or more, as appropriate):

 

  ____ an organization described in Section 501(c)(3) of the Internal Revenue
Code;

  

  ____ a corporation; ____ a Massachusetts or similar business trust; or

 

  ____ a partnership.

 

____ Investor is a trust with total assets exceeding $5,000,000 that was not
formed for the specific purpose of acquiring securities and whose purchase is
directed by a person who has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
investment in the securities.     ____ Investor is a director or executive
officer of the Company.

 

 

 

 

Schedule I

 

Schedule of Investors

  

Investor   Loan Amount   Date of Note Issue   Warrant Shares Dan Thompson II LLC
Attention:  ______________
_______________________
______________, __ _____
Tel: (___) ___-____
Fax: (___) ___-____
Email: _____@___________.___   $3,000,000.00   July 20, 2018   1,200,000        
     

_______________________

 

Attention: ______________
_______________________
______________, __ _____
Tel: (___) ___-____
Fax: (___) ___-____
Email: _____@___________.___

 

  $__________   _________ __, 20__    

Purchase AgreementSchedule I

 

 

Schedule II

 

Indebtedness

 

1.Loan Agreement, dated as of December 31, 2014, by and between Titan El Toro,
LLC and FirstCNG LLC and Tradition Capital Bank

2.Secured Bridge Note, dated February 29, 2016, by Titan CNG LLC in favor of Red
Ocean Consulting, LLC

3.Secured Bridge Note, dated February 29, 2016, by Titan CNG LLC in favor of
David M. Leavenworth

4.Secured Bridge Note, dated September 26, 2016, by Titan CNG LLC in favor of
Red Ocean Consulting, LLC

5.Convertible Promissory Note, dated November 22, 2016, by Minn Shares Inc. in
favor of Joseph H. Whitney

6.Convertible Promissory Note, dated November 22, 2016, by Minn Shares Inc. in
favor of The Globe Resources Group, LLC

7.Convertible Promissory Note, dated November 22, 2016, by Minn Shares Inc. in
favor of Richard E. Gilbert

8.Secured Bridge Note, dated January 31, 2017, by Titan CNG LLC in favor of the
Richard H. Enrico Revocable Trust dated June 9, 1998

9.Convertible Promissory Note, dated February 1, 2017, by Minn Shares Inc. in
favor of Danny R. Cuzick

10.Convertible Promissory Note, dated February 1, 2017, by Minn Shares Inc. in
favor of Damon R. Cuzick

11.Convertible Promissory Note, dated February 1, 2017, by Minn Shares Inc. in
favor of Theril H. Lund

12.Convertible Promissory Note, dated February 1, 2017, by Minn Shares Inc. in
favor of Thomas J. Kiley

13.Senior Promissory Note, dated February 1, 2017, by Minn Shares Inc. in favor
of Danny R. Cuzick, as amended

14.Working Capital Note, dated February 1, 2017, by Minn Shares Inc. in favor of
Danny R. Cuzick

15.Working Capital Note, dated February 1, 2017, by Minn Shares Inc. in favor of
Damon R. Cuzick

16.Working Capital Note, dated February 1, 2017, by Minn Shares Inc. in favor of
Theril H. Lund

17.Working Capital Note, dated February 1, 2017, by Minn Shares Inc. in favor of
Thomas J. Kiley

18.Promissory Note, dated February 1, 2017, by Environmental Alternative Fuels,
LLC in favor of Danny R. Cuzick, (guaranteed by the Company)

19.Promissory Note dated June 1, 2018 between EVO Transportation & Energy
Services, Inc. and Billy (Trey) Peck Jr.

20.Equity Purchase Agreement dated June 1, 2018 between EVO Transportation &
Energy Services, Inc. and Billy (Trey) Peck Jr.

  

Purchase AgreementSchedule II

 

 

Exhibit A

 

Form of Convertible Note

 

 

 

 

 

 

Purchase AgreementExhibit A

 

 

Exhibit B

 

Form of Initial Warrant

 

 

 

 

 

 

 

 

 

Purchase AgreementExhibit B

 

 

Exhibit C

 

Form of Security Agreement

 

 

 

 

 

 

 

 

Purchase AgreementExhibit C

 

 

Exhibit D

 

Notice of Adoption

 

This Notice of Adoption (“Adoption Notice”) is executed by the undersigned (the
“Adopting Party”) pursuant to the terms of that certain Bridge Loan Agreement
dated as of _________ __, 20__, as may be amended from time to time (the
“Agreement”), by and among _____________, a __________ __________, and the other
parties thereto. Capitalized terms used but not defined herein will have the
respective meanings ascribed to such terms in the Agreement. By the execution
and delivery of this Adoption Notice, the Adopting Party agrees as follows:

 

1. Acknowledgment. Adopting Party acknowledges that Adopting Party is purchasing
the Notes and related Warrants set forth below.

 

2. Agreement. Adopting Party: (i) agrees that the Notes and Warrants acquired by
Adopting Party will be bound by and subject to the terms of the Agreement; and
(ii) hereby adopts the Agreement with the same force and effect as if Adopting
Party were originally an Investor, with its representations and warranties
effective as of the date hereof.

 

3. Notice. Any notice required or permitted by the Agreement will be given to
Adopting Party at the address or facsimile listed beside Adopting Party’s
signature below.

 

IN WITNESS WHEREOF, the Adopting Party has caused this Notice of Adoption to be
executed by its duly authorized representative as of the date first written
below.

 

Aggregate Principal Amount of Notes Purchased:                Printed Name of
Adopting Party

 

Date:                                   Signature           Address            
    Email:        

 

Facsimile: (___)     Printed Name and Title

 

Purchase AgreementExhibit D

 

 

Mark all that are applicable:

 

____ Investor is an individual with a net worth, or a joint net worth together
with his or her spouse, in excess of $1,000,000.     ____ Investor is an
individual that had an individual income in excess of $200,000 in each of the
prior two years and reasonably expects an income in excess of $200,000 in the
current year or an individual that had with his/her spouse joint income in
excess of $300,000 in each of the prior two years and reasonably expects joint
income in excess of $300,000 in the current year.     ____ Investor is an entity
all of whose members are either (a) individuals with a net worth, or a joint net
worth together with the individual’s spouse, in excess of $1,000,000, (b)
individuals that had an individual income in excess of $200,000 in each of the
prior two years and reasonably expect an income in excess of $200,000 in the
current year or (c) individuals that had with the individual’s spouse joint
income in excess of $300,000 in each of the prior two years and reasonably
expect joint income in excess of $300,000 in the current year.     ____ Investor
is a private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940, an investment company registered under the
Investment Company Act of 1940, a business development company as defined in
Section 2(a)(48) of the Investment Company Act of 1940 or a Small Business
Investment Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958.     ____
Investor has total assets in excess of $5,000,000, was not formed for the
specific purpose of acquiring the securities and is one or more of the following
(check one or more, as appropriate):

 

  ____ an organization described in Section 501(c)(3) of the Internal Revenue
Code;

 

  ____ a corporation; ____ a Massachusetts or similar business trust; or

 

  ____ a partnership.

 

____ Investor is a trust with total assets exceeding $5,000,000 that was not
formed for the specific purpose of acquiring securities and whose purchase is
directed by a person who has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
investment in the securities.     ____ Investor is a director or executive
officer of the Company.

 

 

Purchase AgreementExhibit D