SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is between Barfresh Food
Group Inc., a Delaware corporation (the “Company”) and each purchaser identified
on the signature pages hereto (each, including its successors and assigns, a
“Purchaser” and collectively the “Purchasers”) dated with respect to each
Purchaser as of the date set forth on each Purchaser’s signature page hereto.

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506(b) promulgated thereunder, the Company desires
to issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:

 

ARTICLE I.
DEFINITIONS

 

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms have the meanings set
forth in this Section 1.1: 

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 405 under the
Securities Act. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Purchaser will be deemed to be an Affiliate of such Purchaser.

 

“Business Day” means any day except Saturday, Sunday, any day that is a federal
legal holiday in the United States or any day on which banking institutions in
the State of California are authorized or required by law or other governmental
action to close.

 

“Closing” or “Closing Date” means the Business Day(s) when Transaction Documents
have been executed and delivered by the applicable parties thereto, and all
conditions precedent to: (i) the Purchasers’ obligations to pay the Subscription
Amount; and (ii) the Company’s obligations to deliver the Securities have been
satisfied or waived.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.000001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed into.

 

“Common Stock Equivalents” means any securities of the Company which would
entitle the holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

 

“Disclosure Schedules” means the Disclosure Schedules of the attached hereto as
Annex B and incorporated herein by reference.

 

 

 

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.

 

“Per Share Purchase Price” equals $0.50, subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the issuance thereof.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“Securities” means the Shares, the Warrants and the Warrant Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Shares” means the shares of Common Stock issued to each Purchaser pursuant to
this Agreement.

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Shares and Warrants purchased hereunder as specified below such
Purchaser’s name on the signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in immediately available
funds.

 

“Subsidiary” means any subsidiary of the Company as set forth on Schedule
3.1(a), and shall, where applicable, include any subsidiary of the Company
formed or acquired after the date hereof.

 

“Trading Day” means a day on which the New York Stock Exchange is open for
trading.

 

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: The New York
Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global
Market, the Nasdaq Capital Market or the OTCQB.

 

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“Transaction Documents” means this Agreement, the Registration Rights Agreement,
the Warrants and any other documents or agreements executed in connection with
the transactions contemplated hereunder.

 

“Transfer Agent” means Action Stock Transfer, with a mailing address of 2469 E.
Fort Union Blvd., Suite 214, Salt Lake City, UT 84121, and a facsimile number of
(801) 274-1099, or any successor transfer agent of the Company.

 

“Warrants” means, collectively, the series “F” Common Stock purchase warrants
delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which Warrants shall be exercisable immediately at a price of $0.60 per
Warrant Share and have a term of exercise equal to five (5) years from the
Initial Exercise Date, in the form of Exhibit A attached hereto.

 

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.

 

ARTICLE II.
PURCHASE AND SALE

 

2.1 Closing.

 

(a) On the Closing Date(s), upon the terms and subject to the conditions set
forth herein, substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and the Purchasers,
severally and not jointly, agree to purchase, in the aggregate, the Company’s
Shares at the Per Share Purchase Price of $0.50. One-half (1/2) of a five (5)
year Warrant to purchase Common Stock at an exercise price of $0.60 per Warrant
Share will be issued with each Share that is subscribed.

 

(b) The date and time of the Closing (the “Closing”) shall be 5:00 p.m., PST
time on such date as is mutually agreed to by the Company and each Purchaser
(the “Closing Date”). The aggregate purchase price for the Stock and Warrants to
be purchased by each such Purchaser at the Closing (the “Purchase Price”) shall
be the amount set forth opposite each Purchaser’s name in column (3) of the
Schedule of Purchasers attached hereto as Annex A; provided that the aggregate
purchase price of the Shares and Warrants sold hereunder must be at least $5
million (“Minimum Aggregate Purchase Price”) and may not exceed $7 million
(“Maximum Aggregate Purchase Price”). Officers, directors and employees of the
Company and its Affiliates may, but are not required to, participate in this
offering, and their subscriptions shall be considered in calculating the Minimum
Aggregate Purchase Price and Maximum Aggregate Purchase Price.

 

(c) Subscribed funds will be available for use by the Company immediately after
the Closing. Each Purchaser shall deliver to the Company, via wire transfer or a
certified check, immediately available funds equal to its Subscription Amount,
and the Company shall deliver to each Purchaser its respective Shares and a
Warrant as determined pursuant to Section 2.2(a), and the Company and each
Purchaser shall deliver the other items set forth in Section 2.2 deliverable at
the Closing. Upon satisfaction of the covenants and conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the Company’s executive office
or such other location as the parties shall mutually agree or take place via
facsimile or email at the facsimile number and email address provided herein.
Notwithstanding anything contained herein to the contrary, the Company may
reject any subscription, in whole or in part, in its sole discretion.

 

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2.2 Deliveries.

 

(a) On or prior to the Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser the following:

 

(i) this Agreement and the Registration Rights Agreement duly executed by the
Company;

 

(ii) the opinion of Libertas Law Group, Inc., the Company’s counsel, dated as of
the Closing Date, in the form acceptable to such Purchaser;

 

(iii) a certificate evidencing the formation and good standing of the Company
issued by the Secretary of State of Delaware as of a date within ten (10) days
of the Closing Date;

 

(iv) a certified copy of the Certificate of Incorporation as certified by the
Delaware Secretary of State within ten (10) days of the Closing Date;

 

(v) a letter from the Company’s transfer agent certifying the number of shares
of Common Stock outstanding on the Closing Date immediately prior to the
Closing;

 

(vi) a certificate, duly executed by the Chief Executive Officer of the Company,
dated as of the Closing Date, certifying that each and every representation and
warranty of the Company shall be true and correct as of the date when made and
as of the Closing Date as though originally made at that time (except for
representations and warranties that speak as of a specific date, which shall be
true and correct as of such specific date) and the Company shall have performed,
satisfied and complied in all respects with the covenants, agreements and
conditions required to be performed, satisfied or complied with by the Company
at or prior to the Closing Date;

 

(vii) a copy of the irrevocable instructions to the Transfer Agent, duly
executed by the Company, instructing the Transfer Agent to deliver, on an
expedited basis, a certificate evidencing a number of Shares equal to such
Purchaser’s Subscription Amount divided by the Per Share Purchase Price,
registered in the name of such Purchaser;

 

(viii) a letter on the letterhead of the Company, duly executed by the Chief
Executive Officer of the Company, setting forth the wire transfer instructions
of the Company; and

 

(ix) a Warrant, duly executed by the Company, registered in the name of such
Purchaser to purchase up to that number of shares of Common Stock equal to
one-half (1/2) of every Share issued to such Purchaser in accordance with this
Agreement, with an exercise price equal to $0.60, subject to adjustment therein.

 

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(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:

 

(i) this Agreement and the Registration Rights Agreement duly executed by such
Purchaser; and

 

(ii) such Purchaser’s Subscription Amount by wire transfer to the Company.

 

2.3 Closing Conditions.

 

(a) The obligations of the Company hereunder in connection with the Closing are
subject to the following conditions being met:

 

(i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers contained herein;

 

(ii) all obligations, covenants and agreements of each Purchaser required to be
performed at or prior to the Closing Date shall have been performed; and

 

(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b) of
this Agreement.

 

(b) The respective obligations of the Purchasers hereunder in connection with
the Closing are subject to the following conditions being met:

 

(i) each and every representation and warranty of the Company set forth herein
shall be true and correct as of the date when made and as of the Closing Date as
though originally made at that time (except for representations and warranties
that speak as of a specific date, which shall be true and correct as of such
specific date) and the Company shall have performed, satisfied and complied in
all respects with the covenants, agreements and conditions required to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date;

 

(ii) on or prior to the Closing Date, the Company shall receive (or shall have
received) at least $5 million (and no more than $7 million) in aggregate
purchase price for the Shares and Warrants to be purchased by the Purchasers
hereunder.

 

(iii) the Company shall have obtained all governmental, regulatory or third
party consents and approvals, if any, necessary for the sale of the Securities;

 

(iv) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;

 

(v) there shall have been no Material Adverse Effect (defined in Section 3.1(b)
below) with respect to the Company since the date hereof; and

 

(vi) from the date hereof to the Closing Date, trading in the Common Stock shall
not have been suspended by the Commission or the Company’s principal Trading
Market (except for any suspension of trading of limited duration agreed to by
the Company, which suspension shall be terminated prior to the Closing), and, at
any time prior to the Closing Date, trading in securities generally as reported
by Bloomberg L.P. shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Securities at the Closing.

 

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ARTICLE III.
REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company. Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof
and shall qualify any representation or otherwise made herein to the extent of
the disclosure contained in the corresponding section of the Disclosure
Schedules, the Company hereby makes the following representations and warranties
to each Purchaser:

 

(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are
set forth in the Company’s SEC Reports (hereinafter defined in Section 3.1(h)).
The Company owns, directly or indirectly, the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all of the issued
and outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.

 

(b) Organization and Qualification. The Company and each of the Subsidiaries is
an entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation or default of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in (i) a
material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”), and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

 

(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company, its board of directors or its stockholders in connection therewith
other than in connection with the Required Approvals. Each Transaction Document
has been (or upon delivery will have been) duly executed by the Company and,
when delivered in accordance with the terms hereof and thereof, will constitute
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

 

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(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company, the issuance and sale of the Securities and the
consummation by the Company of the other transactions contemplated hereby and
thereby do not and will not: (i) conflict with or violate any provision of the
Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents; or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected; or
(iii) subject to the Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not have or reasonably be expected to result in a Material Adverse
Effect.

 

(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) filings required pursuant to Section 4.4 of this Agreement; and (ii)
the filing of Form D with the Commission and such filings as are required to be
made under applicable state securities laws (collectively, the “Required
Approvals”).

 

(f) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents. The Warrant Shares, when issued in accordance
with the terms of the Transaction Documents, will be validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents. The Company
has reserved from its duly authorized capital stock the maximum number of shares
of Common Stock issuable pursuant to this Agreement and the Warrants.

 

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(g) Capitalization. Except as set forth on Schedule 3.1(g), the Company has not
issued any capital stock since its most recently filed periodic report under the
Exchange Act, other than pursuant to the exercise of employee stock options
under the Company’s stock option plans, the issuance of shares of Common Stock
to employees pursuant to the Company’s employee stock purchase plans and
pursuant to the conversion or exercise of Common Stock Equivalents outstanding
as of the date of the most recently filed periodic report under the Exchange
Act. No Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as set forth in the Company’s
SEC Reports and as a result of the purchase and sale of the Securities, there
are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under any of such securities. All of the outstanding shares of capital
stock of the Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. No further approval or
authorization of any stockholder, the board of directors of the Company or
others is required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.

 

(h) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC Reports”) on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal year-end audit adjustments.

 

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(i) Material Changes; Undisclosed Events, Liabilities or Developments. Except as
specifically disclosed in the Company’s SEC Reports filed prior to the date
hereof: (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect; (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or disclosed in
filings made with the Commission; (iii) the Company has not altered its method
of accounting; (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock; and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans or
pursuant to conversion of outstanding debt. The Company does not have pending
before the Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this Agreement or as
set forth on Schedule 3.1(i), no event, liability or development has occurred or
exists with respect to the Company or its Subsidiaries or their respective
business, properties, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least one (1) Trading Day prior to the date that this representation is made.

 

(j) Litigation. Except as set forth in the SEC Reports, there is no action,
suit, inquiry, notice of violation, Proceeding or investigation pending or, to
the knowledge of the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which:
(i) adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities; or (ii) could, if there were
an unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor to the knowledge of
the Company, any director or officer thereof, is or has been the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been, and
to the knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

(k) Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company
that could reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a member of a union that
relates to such employee’s relationship with the Company or such Subsidiary, and
neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. No executive officer, 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 or non-competition agreement, or any other
contract or agreement or any restrictive covenant in favor of any third party,
and the continued employment of each such executive officer does not subject the
Company or any of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in compliance with all
U.S. federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

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(l) Compliance. Neither the Company nor any Subsidiary: (i) is in default under
or in violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the Company
or any Subsidiary under), nor has the Company or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived); (ii) is in violation of any
order of any court, arbitrator or governmental body; or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business and all such laws that affect the environment, except
in each case as could not have or reasonably be expected to result in a Material
Adverse Effect.

 

(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not reasonably be expected to result in a Material
Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary
has received any notice of Proceedings relating to the revocation or
modification of any Material Permit.

 

(n) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable
title in all personal property owned by them that is material to the business of
the Company and the Subsidiaries, in each case free and clear of all Liens,
except for Liens as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are in
compliance.

 

(o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses as described in
the SEC Reports and which the failure to so have could have a Material Adverse
Effect (collectively, the “Intellectual Property Rights”). Neither the Company
nor any Subsidiary has received a notice (written or otherwise) that any of the
Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person. To the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

(p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.

 

10

 

 

(q) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports or as otherwise set forth on Schedule 3(q), none of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of the
amount permitted under Item 404 of Regulation S-K other than for: (i) payment of
salary or consulting fees for services rendered; (ii) reimbursement for expenses
incurred on behalf of the Company; and (iii) other employee benefits, including
stock option agreements under any stock option plan of the Company.

 

(r) Private Placement. Assuming the accuracy of the Purchasers representations
and warranties set forth in Section 3.2, no registration under the Securities
Act is required for the offer and sale of the Securities by the Company to the
Purchasers as contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Trading Market.

 

(s) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act of 1940,
as amended.

 

(t) Listing and Maintenance Requirements. The Company’s Common Stock is
registered pursuant to Section 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration. The Company has not, in the 12
months preceding the date hereof, received notice from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.

 

(u) Disclosure. Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company confirms
that 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 it believes
constitutes or might constitute material, non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that the Purchasers will rely on the foregoing representation in
effecting transactions in securities of the Company. All disclosure furnished by
or on behalf of the Company to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the Disclosure
Schedules to this Agreement, is true and correct and does 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. The press releases disseminated by the
Company during the twelve months preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3.2 hereof.

 

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(v) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of: (i) the Securities Act which would require the registration of
any such securities under the Securities Act; or (ii) any applicable shareholder
approval provisions of any Trading Market on which any of the securities of the
Company are listed or designated.

 

(w) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
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 asserted or threatened against the Company or any Subsidiary.

 

(x) No General Solicitation. Neither the Company nor any person acting on behalf
of the Company has offered or sold any of the Securities by any form of general
solicitation or general advertising. The Company has offered the Securities for
sale only to the Purchasers and certain other “accredited investors” within the
meaning of Rule 501 under the Securities Act.

 

(y) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has: (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds; (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law; or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.

 

(z) Accountants. The Company’s accounting firm is Eide Bailly LLP. To the
knowledge and belief of the Company, such accounting firm: (i) is a registered
public accounting firm as required by the Exchange Act; and (ii) shall express
its opinion with respect to the financial statements to be included in the
Company’s Annual Report on Form 10-K for the year ending March 31, 2015.

 

(aa) No Disagreements with Accountants and Lawyers. There are no disagreements
of any kind presently existing, or reasonably anticipated by the Company to
arise, between the Company and the accountants and lawyers formerly or presently
employed by the Company which could affect the Company’s ability to perform any
of its obligations under any of the Transaction Documents, and the Company is
current with respect to any fees owed to its accountants.

 

(bb) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges that
no Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities. The Company further represents to each
Purchaser that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.

 

12

 

 

(cc) Acknowledgement Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for
Sections 3.2(f) hereof), it is understood and acknowledged by the Company: (i)
that none of the Purchasers have been asked by the Company to agree, nor has any
Purchaser agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term; (ii) that past
or future open market or other transactions by any Purchaser, including Short
Sales, and specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this or future private
placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) that any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser is a party, directly or
indirectly, presently may have a “short” position in the Common Stock, provided,
however, any such short position shall not have been established by an such
Purchaser, or its Affiliates, during the Discussion Time ( as defined in Section
3.2(f)) and (iv) that each Purchaser shall not be deemed to have any affiliation
with or control over any arm’s length counter-party in any “derivative”
transaction. The Company further understands and acknowledges that (a) one or
more Purchasers may engage in hedging activities at various times during the
period that the Securities are outstanding and (b) such hedging activities (if
any) could reduce the value of the existing stockholders’ equity interests in
the Company at and after the time that the hedging activities are being
conducted. The Company acknowledges that such aforementioned hedging activities
do not constitute a breach of any of the Transaction Documents.

 

(dd) Regulation M Compliance. The Company has not, and to its knowledge no one
acting on its behalf has: (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities; (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities; or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company.

 

(ee) Certain Fees. Other than payments of certain fees and commissions pursuant
to the Company’s agreement with Wunderlich Securities, no brokerage or finder’s
fees or commissions are or will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment banker,
bank or other Person with respect to the transactions contemplated by the
Transaction Documents.

 

(ff) No Disqualification Events. With respect to Securities to be offered and
sold hereunder in reliance on Rule 506(b) under the Securities Act (“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 offering contemplated hereby, any beneficial owner of 20%
or more of the Company’s outstanding voting equity securities 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 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) to (viii) under the
Securities Act (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 Purchasers a copy of any
disclosures provided thereunder.

 

13

 

 

(gg) Other Covered Persons. The Company is not aware of any Person (other than
Wunderlich Securities) that has been or will be paid (directly or indirectly)
remuneration for solicitation of Purchasers or potential purchasers in
connection with the sale of any Regulation D Securities.

 

3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself
and for no other Purchaser, hereby represents and warrants as of the date hereof
and as of the Closing Date to the Company as follows:

 

(a) Organization; Authority. Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction Documents have
been duly authorized by all necessary corporate or similar action on the part of
such Purchaser. Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms, except:
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally; (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies; and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

 

(b) Own Account. Such Purchaser understands that the Securities are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Securities as principal for
its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
in violation of the Securities Act or any applicable state securities law. Such
Purchaser is acquiring the Securities hereunder in the ordinary course of its
business.

 

(c) Purchaser Status. At the time such Purchaser was offered the Securities, it
was, and at the date hereof it is, and on each date on which it exercises any
Warrants, it will be either: (i) an “accredited investor” as defined in Rule 501
under the Securities Act; or (ii) a “qualified institutional buyer” as defined
in Rule 144A(a) under the Securities Act. Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.

 

14

 

 

(d) Experience of Such Purchaser. Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

 

(e) General Solicitation. Such Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

 

(f) Short Sales and Confidentiality Prior To The Date Hereof. Other than
consummating the transactions contemplated hereunder, such Purchaser has not,
nor has any Person acting on behalf of or pursuant to any understanding with
such Purchaser, directly or indirectly executed any purchases or sales,
including Short Sales, of the securities of the Company during the period
commencing from the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated hereunder
until the date hereof (“Discussion Time”). Notwithstanding the foregoing, in the
case of a Purchaser that is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of such Purchaser’s assets and the
portfolio managers have no knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement. Other than to other Persons
party to this Agreement, such Purchaser has maintained the confidentiality of
all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction).

 

(g) Non-Reliance on Statements of Agents. Purchaser represents and warrants that
Purchaser has not relied on statements of any officer, director, employee or
agent of the Company not contained in this Agreement or the Company’s SEC
Filings in evaluating the merits of an investment in the Securities.

 

(h) Certain Fees. Purchaser has not entered into any agreement or arrangement
entitling any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person to brokerage or finder’s fees or
commissions with respect to the transactions contemplated by the Transaction
Documents. The Company shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of any Person other than Wunderlich
Securities for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by the Transaction Documents.

 

15

 

 

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

 

4.1 Transfer Restrictions.  

 

(a) The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the Company or
to an Affiliate of a Purchaser or in connection with a pledge as contemplated in
Section 4.1(b), except in a case of the transfer of Securities to the
Purchaser’s Limited Partners, the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement.

 

(b) The Purchasers agree to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following form:

 

THESE SECURITIES HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

(c) The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may
transfer pledged or secured Securities to the pledgees or secured parties. Such
a pledge or transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or pledgor shall be
required in connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser’s expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
Securities. Certificates evidencing the Shares and Warrant Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)): (i)
following any sale of such Shares or Warrant Shares pursuant to Rule 144; or
(ii) if such Shares or Warrant Shares are eligible for sale under Rule 144
(provided that a Purchaser provides the Company with an assurance letter, which
shall not include an opinion of Purchaser’s counsel, in the form reasonably
satisfactory to Company’s legal counsel, that such Shares or Warrant Shares are
eligible for sale, assignment or transfer under Rule 144); or (iii) if such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission). The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section, except in accordance with applicable law. Certificates
for Securities subject to legend removal hereunder shall be transmitted by the
Transfer Agent to the Purchaser by crediting the account of the Purchaser’s
prime broker with the Depository Trust Company System as directed by such
Purchaser. The Company shall, subject to applicable law, cause its counsel to
issue a legal opinion with respect to any resale of Securities pursuant to Rule
144 or a registration statement. Any fees (with respect to the Transfer Agent,
counsel to the Company or otherwise) associated with the issuance of such
opinion shall be borne by the Company.

 

16

 

 

(d) If the Company shall fail, for any reason or for no reason, to either (I) if
the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, to issue and deliver to a Purchaser (or its designee) a
certificate representing the Securities so delivered to the Company by such
Purchaser that is registered on the Company’s share register or, if the Transfer
Agent is participating in the DTC Fast Automated Securities Transfer Program, to
credit the balance account of such Purchaser or such Purchaser’s designee with
DTC for such number of Shares or Warrant Shares, as applicable, so delivered to
the Company or (II) if a Registration Statement covering the resale of such
number of Shares or Warrant Shares, as applicable, so delivered to the Company
(the “Unavailable Shares”) is not available for the resale of such Unavailable
Shares and the Company fails to promptly, but in no event later than as required
pursuant to the Registration Rights Agreement (x) so notify such Purchaser and
(y) deliver the Shares or Warrant Shares, as applicable, electronically by
crediting such aggregate number of Shares or Warrant Shares, as applicable, to
such Purchaser’s or its designee’s balance account with DTC through its
Deposit/Withdrawal At Custodian system (the event described in the immediately
foregoing clause (II) is hereinafter referred as a “Notice Failure” and together
with the event described in clause (I) above, a “Delivery Failure”), and if on
or after such Trading Day such Purchaser purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by such Purchaser of shares of Common Stock issuable upon such exercise
that such Purchaser anticipated receiving from the Company (a “Buy-In”), then
the Company shall, within three (3) Trading Days after such Purchaser’s request
and in such Purchaser’s discretion, either (i) pay cash to such Purchaser in an
amount equal to such Purchaser’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the shares of Common
Stock so purchased) (the “Buy-In Price”), at which point the Company’s
obligation to deliver such certificate or credit such Purchaser’s balance
account shall terminate and such shares shall be cancelled, or (ii) promptly
honor its obligation to so deliver to such Purchaser a certificate or
certificates or credit such Purchaser’s DTC account representing such number of
shares of Common Stock that would have been so delivered if the Company timely
complied with its obligations hereunder and pay cash to such Purchaser in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of shares of Shares or Warrant Shares (as the case may be) that the
Company was required to deliver to such Purchaser by the Required Delivery Date,
multiplied by (B) the lowest Closing Sale Price (as defined in the Warrants) of
the Common Stock on any Trading Day during the period commencing on the date of
the delivery by such Purchaser to the Company of the applicable Shares or
Warrant Shares (as the case may be) and ending on the date of such delivery and
payment under this clause (ii). Except insofar as the payments provided for
herein may be deemed to reflect the uncertainty of a Purchaser’s damages upon a
Delivery Failure and are intended to be a reasonable estimate of a Purchaser’s
damages in such case, nothing shall limit such Purchaser’s right to pursue any
other remedies available to it hereunder, at law or in equity, including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to the Company’s failure to timely deliver certificates
representing shares of Common Stock (or to electronically deliver such shares of
Common Stock) as required pursuant to the terms hereof.

 

4.2 Furnishing of Information. Until the earliest of the time that: (i) no
Purchaser owns Securities; or (ii) the Securities may be sold without
restriction, the Company covenants to file in a timely manner (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. As long as any Purchaser owns Securities, if the Company is
not required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144 such information as is required for the Purchasers to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144.

 

17

 

 

4.3 Integration. The Company shall not sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities to the Purchasers for purposes of the
rules and regulations of any Trading Market such that it would require
shareholder approval prior to the closing of such other transaction unless
shareholder approval is obtained before the closing of such subsequent
transaction.

 

4.4 Securities Laws Disclosure; Publicity. On or before 9:30 a.m., New York
time, on the first (1st) Business Day after the date of this Agreement, the
Company shall issue a press release and Current Report on Form 8-K disclosing
the material terms of the transactions contemplated hereby (the “8-K Filing”).
From and after the filing of the 8-K Filing, the Company shall have disclosed
all material, non-public information (if any) provided to any of the Purchasers
by the Company or any of its Subsidiaries or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents. Subject to the foregoing, neither the Company, its
Subsidiaries nor any Purchaser shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby;
provided, however, the Company shall be entitled, without the prior approval of
any Purchaser, to make the Press Release and any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with
the 8-K Filing and contemporaneously therewith and (ii) as is required by
applicable law and Trading Market regulations (provided that in the case of
clause (i) each Purchaser shall be consulted by the Company in connection with
any such press release or other public disclosure prior to its release). Without
the prior written consent of the applicable Purchaser (which may be granted or
withheld in such Purchaser’s sole discretion), the Company shall not (and shall
cause each of its Subsidiaries and affiliates to not) disclose the name of such
Purchaser in any filing, announcement, release or otherwise. Notwithstanding
anything contained in this Agreement to the contrary and without implication
that the contrary would otherwise be true, except with respect to the material
terms and conditions of the transactions contemplated by the Transaction
Documents, the Company expressly acknowledges and agrees that no Purchaser has
had, and no Purchaser shall have (unless expressly agreed to by a particular
Purchaser after the date hereof in a written definitive and binding agreement
executed by the Company and such particular Purchaser (it being understood and
agreed that no Purchaser may bind any other Purchaser with respect thereto)),
any duty of confidentiality with respect to, or a duty not to trade on the basis
of, any material, non-public information regarding the Company or any of its
Subsidiaries.

 

4.5 Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents
disclosed in the 8-K Filing or publicly disclosed on or prior to the Closing
Date, the Company covenants and agrees that neither it nor any other Person
acting on its behalf will provide any Purchaser or its agents or counsel with
any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company. To the extent
that the Company delivers any material, non-public information to a Purchaser
without such Purchaser’s consent, the Company hereby covenants and agrees that
such Purchaser shall not have any duty of confidentiality with respect to, or a
duty not to trade on the basis of, such material, non-public information.

 

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4.6 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and shall not use such
proceeds for: (a) the satisfaction of any portion of the Company’s debt (other
than payment of trade payables in the ordinary course of the Company’s business
and prior practices); (b) the redemption of any Common Stock or Common Stock
Equivalents; or (c) the settlement of any outstanding litigation.

 

4.7 Indemnification. Subject to the provisions of this Section 4.7, the Company
will indemnify and hold each Purchaser and its directors, officers,
shareholders, members, partners, employees and agents (and any other Persons
with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to: (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents; or (b) any action instituted against a
Purchaser in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Purchaser Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that: (i) the employment
thereof has been specifically authorized by the Company in writing; (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel; or (iii) in such action there is, in the reasonable opinion
of such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party, in which case
the Company shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel. The Company will not be liable to any Purchaser
Party under this Agreement: (i) for any settlement by a Purchaser Party effected
without the Company’s prior written consent, which shall not be unreasonably
withheld or delayed; or (ii) to the extent, but only to the extent that a loss,
claim, damage or liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction Documents.

 

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4.8 Indemnification of Company. Subject to the provisions of this Section 4.7,
each Purchaser (other than institutional investors) severally and not jointly
with the other Purchasers, will indemnify and hold the Company and its
directors, officers, shareholders, members, partners, employees and agents
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that the Company may suffer or incur as a result of or relating to
any breach of any of the representations, warranties, covenants or agreements
made by the Purchaser in this Agreement. If any action shall be brought against
the Company in respect of which indemnity may be sought pursuant to this
Agreement, the Company shall promptly notify such Purchaser in writing, and the
Purchaser shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Company. The Company shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Company except to the extent that: (i) the employment thereof
has been specifically authorized by the Purchaser in writing; (ii) the Purchaser
has failed after a reasonable period of time to assume such defense and to
employ counsel; or (iii) in such action there is, in the reasonable opinion of
such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser, in which case the
Purchaser shall be responsible for the reasonable fees and expenses of no more
than one such separate counsel. Such Purchaser will not be liable to the Company
under this Agreement: (i) for any settlement by the Company effected without the
Purchaser’s prior written consent, which shall not be unreasonably withheld or
delayed; (ii) to the extent, but only to the extent that a loss, claim, damage
or liability is attributable to any of the Company’s breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement; or (iii) in an amount in excess of such Purchaser’s gain upon such
Purchaser’s sale of the Common Stock and/or Warrant Shares acquired pursuant to
this Agreement.

 

4.9 Reservation of Common Stock. As of the date hereof, the Company has reserved
and the Company shall continue to reserve and keep available at all times, free
of preemptive rights, a sufficient number of shares of Common Stock for the
purpose of enabling the Company to issue Shares pursuant to this Agreement and
Warrant Shares pursuant to any exercise of the Warrants.

 

4.10 Listing of Common Stock. The Company hereby agrees to use best efforts to
maintain the listing or quotation of the Common Stock on a Trading Market. The
Company will take all action reasonably necessary to continue the listing or
quotation and trading of its Common Stock on a Trading Market and will comply in
all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of the Trading Market.

 

4.11 Short Sales and Confidentiality After The Date Hereof. Each Purchaser
severally and not jointly with the other Purchasers, covenants that neither it
nor any Affiliate acting on its behalf or pursuant to any understanding with it
will execute any Short Sales during the period commencing at the Discussion Time
and ending at the time that the transactions contemplated by this Agreement are
first publicly announced as described in Section 4.4. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the
information included in the Disclosure Schedules. Notwithstanding the foregoing,
no Purchaser makes any representation, warranty or covenant hereby that it will
not engage in Short Sales in the securities of the Company after the time that
the transactions contemplated by this Agreement are first publicly announced as
described in Section 4.4. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser’s assets, the covenant set
forth above shall only apply with respect to the portion of assets managed by
the portfolio manager that made the investment decision to purchase the
Securities covered by this Agreement.

 

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4.12 Delivery of Securities After Closing. The Company shall deliver, or cause
to be delivered, the respective Securities purchased by each Purchaser to such
Purchaser within three (3) Trading Days of the Closing Date.

 

4.13 Form D; Blue Sky Filings. The Company agrees to file in a timely manner a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof, promptly upon request of any Purchaser. The Company
shall take such action as the Company shall reasonably determine is necessary in
order to obtain an exemption for, or to qualify the Securities for, sale to the
Purchasers at the Closing under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of such actions promptly
upon request of any Purchaser.

 

4.14 Notice of Disqualification Events. The Company will notify the Purchasers
in writing, prior to the Closing Date 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.

 

ARTICLE V.
MISCELLANEOUS

 

5.1 Fees and Expenses. Except as provided below, each party shall pay the fees
and expenses of its advisers, counsel, accountants and other experts, if any,
and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall reimburse Kelley Drye & Warren LLP for all reasonable legal fees and
expenses of Kelley Drye & Warren LLP incurred in connection with the
structuring, documentation, negotiation and closing of the transactions
contemplated by the Transaction Documents and regulatory filings in connection
therewith) (the “Transaction Expenses”) which at the option of Kelley Drye &
Warren LLP, may be withheld by the lead Purchaser from its Purchase Price at the
Closing in an aggregate amount not to exceed $15,000. Other than for Persons
engaged by any Purchaser, the Company shall further be responsible for the
payment of any placement agent’s fees, financial advisory fees, transfer agent
fees, the fees and expenses of DTC (as defined below) fees or broker’s
commissions relating to or arising out of the transactions contemplated hereby
(including, without limitation, any fees payable to any placement agent of the
Company in connection with the transactions contemplated by this Agreement),
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection
with the delivery of any Securities to the Purchasers. The Company shall pay,
and hold each Purchaser harmless against, any liability, loss or expense
(including, without limitation, reasonable attorneys’ fees and out-of-pocket
expenses) arising in connection with any claim relating to any such payment.

 

5.2 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

 

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5.3 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of: (a) the date of transmission, if such
notice or communication is delivered via facsimile or email at the facsimile
number set forth on the signature pages attached hereto or the email address set
forth on the signature pages attached hereto prior to 5:30 p.m. (PST) on a
Business Day; (b) the next Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (PST) on any Business Day; (c) the 2nd Business Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service; or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as set forth on the signature pages attached hereto.

 

5.4 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and the Purchasers of more than fifty percent (50%) of the Shares still
held by the Purchasers or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right.

 

5.5 Headings. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.

 

5.6 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns.

 

5.7 Assignment. Each Purchaser acknowledges that it may not assign any of its
rights to or interest in or under this Agreement without the prior written
consent of the Company, and any attempted assignment without such consent shall
be void and without force or effect.

 

5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and each of their respective successors and permitted assigns
and is not for the benefit of, nor may any provision hereof be enforced by, any
other Person, except as otherwise set forth in Section 4.8.

 

5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in The
City of New York, Borough of Manhattan. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in The City
of New York, Borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any other manner permitted by law.

 

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5.10 Survival. The representations and warranties contained herein shall survive
the Closing and the delivery of the Shares and Warrant Shares.

 

5.11 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.

 

5.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

 

5.13 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs (including customary indemnity) associated with the
issuance of such replacement Securities.

 

5.14 Independent Nature of Purchasers’ Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. The Company’s counsel does not represent any of the Purchasers. The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.

 

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5.15 Construction. The parties agree that each of them and/or their respective
counsel has reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

BARFRESH FOOD GROUP inc.

 

Address for Notice:

            BARFRESH FOOD GROUP inc.       90 Madison Street       Suite 701    
  Denver, CO 80206 By: /s/ Riccardo Delle Coste   Facsimile: (303) 297-1903
Name: Riccardo Delle Coste   Attention: Riccardo Delle Coste,   Title: Chief
Executive Officer   Chief Executive Officer       Email:
riccardo@smoothieinc.com

 

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[PURCHASER SIGNATURE PAGE TO BARFRESH FOOD GROUP INC. SECURITIES PURCHASE
AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

Name of Purchaser:       Signature of Authorized Signatory of Purchaser:      
Name of Authorized Signatory:       Title of Authorized Signatory:       Date:  
    Email Address of Purchaser:       Telephone Number of Purchaser:       Fax
Number of Purchaser:  

  

Address for Notice of Purchaser:

 

Address for Delivery of Securities for Purchaser (if not same as address for
notice):

 

Subscription Amount: $                                              

 

Shares:
                                                                         

 

Warrant Shares:                                                           

 

EIN Number:                                                                 

 

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ANNEX B

DISCLOSURE SCHEDULES

 

26