Document:

Legend Oil and Gas, Ltd. - 8-K

Exhibit 10.1

 

 

SECURITIES PURCHASE AGREEMENT

This Securities
Purchase Agreement (this “Agreement”) is dated as of September 30, 2016, between Legend Oil and Gas, Ltd., a
Colorado corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).

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 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: (a) capitalized
terms that are not otherwise defined herein have the meanings given to such terms in the Debentures (as defined herein), and (b)
the following terms have the meanings set forth in this Section 1.1:

“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.6.

“Action”
shall have the meaning ascribed to such term in Section 3.1(j).

“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.

“Board
of Directors” means the board of directors of the Company.

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

“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

“Closing
Date” means the Trading Day on which all of the 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, in each case, have been satisfied or waived.

 

    	 

    	 

    

 

“Closing
Statement” means the Closing Statement in the form on Annex A attached hereto.

“Commission”
means the United States Securities and Exchange Commission.

“Common
Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.

“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant 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.

“Company
Counsel” means Greenberg Traurig, LLP, with offices located at 3333 Piedmont Road NE, Suite 2500, Atlanta, Georgia 30305.

“Debentures”
means the Senior Secured Debentures due, subject to the terms therein, September 30, 2019, issued by the Company to the Purchasers
hereunder, in the form of Exhibit A attached hereto.

“Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(r).

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

 

“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company
pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors
or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise
or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended
since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or
conversion price of such securities, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a
majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person (or to the equityholders
of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic
with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in securities.

 

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“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.

“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).

“Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(aa).

“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).

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

“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(m).

“Maximum
Rate” shall have the meaning ascribed to such term in Section 5.17.

“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.

“Preferred
Stock” means the preferred stock of the Company, par value $0.001 per share1,
and any other class of securities into which such securities may hereafter be reclassified or changed.

“Prior
Purchasers” means the Purchasers as defined in that certain securities purchase agreement dated January 21, 2015, April
2, 2015, April 28, 2015, June 30, 2015, July 2015, October 21, 2015, January 29, 2016, March 25, 2016, April 7, 2016, May 26, 2016,
July 5, 2016, July 27, 2016 and August 21, 2016

“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.

“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.9.

“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

1
Note to Draft: Parties to discuss terms of Preferred Stock.

 

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“Required
Minimum” means, as of any date, the maximum aggregate number of shares of (a) Preferred Stock equal to the sum of (i)
the then issued, or potentially issuable in the future pursuant to the Transaction Documents, shares of Preferred Stock, including
any Underlying Shares issuable upon the increase of the Subscription Amount pursuant to Section 4.17, ignoring any conversion or
exercise limits set forth therein and (ii) the then issued, or potentially issuable in the future upon the exercise or conversion
of any other securities of the Company exercisable or exchangeable for or convertible into shares of Preferred Stock that are outstanding,
shares of Preferred Stock and (b) Common Stock into which the shares of Preferred Stock described in clause (a) is convertible.

“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.

“Rule
424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.

 

“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).

“Securities”
means the Debentures and the Underlying Shares.

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

“Share
Reservation” shall have the meaning ascribed to such term in Section 4.10(a).

“Share
Reservation Date” shall have the meaning ascribed to such term in Section 4.10(a).

“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 the Debentures 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, as may be increased pursuant to Section 4.17.

“Subsidiary”
means any subsidiary of the Company as set forth in the SEC Reports and shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the date hereof.

 

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“Thompson
Hine” means Thompson Hine LLP, with offices located at 3900 Key Center, 127 Public Square, Cleveland, Ohio 44144.

“Trading
Day” means a day on which the principal Trading Market is open for trading.

“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

“Transaction
Documents” means this Agreement, the Debentures, all exhibits and schedules thereto and hereto and any other documents
or agreements executed in connection with the transactions contemplated hereunder.

“Transfer
Agent” means VStock Transfer, LLC, the current transfer agent of the Company, with a mailing address of 18 Lafayette
Place, Woodmere, NY 11598 and a facsimile number of 646-536-3179, and any successor transfer agent of the Company.

“Underlying
Shares” means the shares of Preferred Stock issuable upon the increase of the Subscription Amount pursuant to Section
4.17 and the Common Stock issuable upon the conversion of such Preferred Stock.

“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.12.

ARTICLE II. 

PURCHASE AND SALE

2.1             
Closing. On the Closing Date, 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, up to an aggregate of $1,150,000 in principal amount of
the Debentures corresponding to an aggregate Subscription Amount of $1,150,000, subject to increase pursuant to Section 4.17. Each
Purchaser shall deliver to the Company immediately available funds, via wire transfer or a certified check, equal to such Purchaser’s
Subscription Amount as set forth on the signature page hereto executed by such Purchaser, and the Company shall deliver to each
Purchaser its respective Debenture, 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 offices of Thompson Hine, or such other location as the parties shall mutually
agree.

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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 duly executed by the Company;

(ii)             
a legal opinion of Company Counsel, substantially in the form of Exhibit B attached
hereto; 

(iii)           
a Debenture with a principal amount equal to such Purchaser’s Subscription Amount, registered
in the name of such Purchaser; and

(iv)            
titles to each of the vehicles listed on Exhibit C.

(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 duly executed by such Purchaser; and

(ii)             
such Purchaser’s Subscription Amount by wire transfer to the account specified in writing
by 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 (unless as of a specific date therein in which case they shall be accurate as of such date);

(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)                
the accuracy in all material respects when made and on the Closing Date of the representations
and warranties of the Company contained herein (unless as of a specific date therein);

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

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

 

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 (iv)            
there shall have been no Material Adverse Effect with respect to the Company since the date
hereof; and

(v)              
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 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 such Purchaser, makes it impracticable or inadvisable
to purchase the Securities at the Closing.

ARTICLE III. 

REPRESENTATIONS AND WARRANTIES

3.1             
Representations and Warranties of the Company. 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 SEC Reports. The Company owns, directly or indirectly, all of 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. If the Company
has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

(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, 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 nor 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.

 

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(c)              
Authorization; Enforcement. The Company has the requisite corporate power and authority
to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other
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, the Board of Directors
or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This
Agreement and each other Transaction Document to which it is a party 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.

(d)              
No Conflicts. The execution, delivery and performance by the Company of this Agreement
and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it
of the 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, (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.

 

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(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) the filings required pursuant to Section 4.6 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 Underlying 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. 

(g)              
Capitalization. The capitalization of the Company is as set forth in the SEC Reports.
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 and/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 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 duly authorized, 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 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.

 

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(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 Company has never been an issuer subject to Rule 144(i) under the Securities Act.
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, immaterial, year-end audit adjustments.

(i)                
Material Changes; Undisclosed Events, Liabilities or Developments.  Since the
date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in a subsequent
SEC Report 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, or (C) any other liabilities, specifically liabilities relating to asset back loans with respect
to the Company’s vehicles, that have been approved by the Company’s Board, (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. 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, no event, liability, fact, circumstance, occurrence or development has occurred
or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses,
properties, operations, assets 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 1 Trading Day prior to
the date that this representation is made.

 

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(j)                
Litigation. 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 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 labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company, which 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. To the knowledge
of the Company, no executive officer of the Company or any Subsidiary, 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 judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation
of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal,
state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and
employment and labor matters, 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. Except as set forth in the SEC Reports or any widely disseminated
press release of the Company or as set forth on Schedule 3.1(n) attached hereto, 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 (i) 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 (ii) Liens for the payment of federal, state or other taxes,
for which appropriate reserves have been made therefor in accordance with GAAP and, 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.

 

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(o)              
Intellectual Property. 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 as described in the SEC Reports as necessary or required for
use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively,
the “Intellectual Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice
(written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected
to expire or terminate or be abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary
has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a
claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except
as could not have or reasonably be expected to not have a Material Adverse Effect. 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, including, but not limited to, directors and officers insurance coverage at least equal to the
aggregate Subscription Amount. 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.

(q)              
Transactions With Affiliates and Employees. Except as set forth in the SEC Reports,
none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees
of the Company or any Subsidiary 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 providing for the borrowing of money from or lending of
money to, 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,
stockholder, member or partner, in each case in excess of $120,000 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.

 

    	 	13	 

    	 

    

 

(r)               
Sarbanes-Oxley; Internal Accounting Controls. The Company and the Subsidiaries are
in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof,
and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof
and as of the Closing Date. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide
reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization,
and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls
and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules
and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of
the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange
Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under
the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over
financial reporting (as such term is defined in the Exchange Act) of the Company and its Subsidiaries that have materially affected,
or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.

(s)               
Certain Fees. No brokerage or finder’s fees or commissions are or will be payable
by the Company or any Subsidiaries 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. The Purchasers shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in
this Section that may be due in connection with the transactions contemplated by the Transaction Documents. 

(t)                
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.

(u)              
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 an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

    	 	14	 

    	 

    

 

(v)              
Registration Rights. No Person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company or any Subsidiaries.

(w)            
Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section
12(b) or 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.
The Common Stock is currently eligible for electronic transfer through the Depository Trust Company or another established clearing
corporation and the Company is current in payment of the fees to the Depository Trust Company (or such other established clearing
corporation) in connection with such electronic transfer.

(x)              
Application of Takeover Protections. The Company and the Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate
of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to
the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’
ownership of the Securities.

(y)              
Disclosure. All of the disclosure furnished by or on behalf of the Company to the Purchasers
regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby 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.

 

    	 	15	 

    	 

    

 

(z)              
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.

(aa)           
Solvency. Based on the consolidated financial condition of the Company as of the Closing
Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder: (i) the fair
saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do
not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and
projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with
the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses
of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid.
The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing
and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which
lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date. The SEC Reports set forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than
trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations
in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance
sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions
in the ordinary course of business; and (z) the present value of any lease payments
in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary
is in default with respect to any Indebtedness.

 

    	 	16	 

    	 

    

 

(bb)          
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 its Subsidiaries each (i) has made or filed
all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required
by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company or of any Subsidiary know of no basis for any such claim.

(cc)           
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.

(dd)          
Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge
of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, 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 any Subsidiary (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 FCPA.

(ee)           
Accountants. The Company’s accounting firm is Marcum 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 for the
fiscal year ending December 31, 2016.

(ff)             
Seniority. As of the Closing Date, no Indebtedness or other claim against the Company
is senior to the Debentures in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise,
other than indebtedness secured by security interests (which is senior only as to underlying assets covered thereby) and capital
lease obligations (which is senior only as to the property covered thereby).

 

    	 	17	 

    	 

    

 

(gg)          
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 and the Company is current with respect to any fees owed to its accountants and lawyers which
could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.

(hh)          
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.

(ii)             
Acknowledgment Regarding
Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for
Sections 3.2(f) and 4.14 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has 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) past or future open market or other transactions by any Purchaser, 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) any Purchaser, and counter-parties
in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, may presently have a “short”
position in the Common Stock and (iv) 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 (y) one or more Purchasers may engage in hedging activities at various times during the period
that the Securities are outstanding, and (z) 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.

(jj)             
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, other than, in the case of clauses (ii) and (iii), compensation
paid to the Company’s placement agent in connection with the placement of the Securities.

 

    	 	18	 

    	 

    

 

(kk)          
Stock Option Plans. Each stock option granted by the Company under the Company’s
stock option plan was granted (i) in accordance with the terms of the Company’s stock option plan and (ii) with an exercise
price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under
GAAP and applicable law. No stock option granted under the Company’s stock option plan has been backdated. The Company has
not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or
otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information
regarding the Company or its Subsidiaries or their financial results or prospects.

(ll)             
Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the
Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject
to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

(mm)     
 U.S. Real Property Holding Corporation. The Company is not and has never been a U.S.
real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company
shall so certify upon Purchaser’s request.

(nn)          
Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates
is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of
Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries
or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting
securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation
by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the
management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

(oo)          
Money Laundering. The operations of the Company and its Subsidiaries are and have been
conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder
(collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is
pending or, to the knowledge of the Company or any Subsidiary, threatened.

 

    	 	19	 

    	 

    

 

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 (unless
as of a specific date therein):

(a)              
Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated
or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full
right, corporate, partnership, limited liability company or similar 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, partnership, limited liability company or similar action, as applicable,
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 (this representation and warranty not limiting such Purchaser’s right to sell the Securities
pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws). 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
as of the date hereof it is, an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8)
under the Securities Act.

 

    	 	20	 

    	 

    

 

(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)               
Certain Transactions and Confidentiality. Other than consummating the transactions
contemplated hereunder, such Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Purchaser, executed any purchases or sales, including Short Sales, of the securities of the Company
during the period commencing as of 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 and ending
immediately prior to the execution hereof. 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 direct 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). Notwithstanding
the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any
actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect
Short Sales or similar transactions in the future.

The Company acknowledges and agrees that the
representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.

 

    	 	21	 

    	 

    

 

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), 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 and obligations 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:

THIS SECURITY 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.

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, including, if
the Securities are subject to registration, the preparation and filing of any required prospectus supplement under Rule 424(b)(3)
under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholder
table thereunder.

 

    	 	22	 

    	 

    

 

(c)              
Certificates evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 4.1(b) hereof): (i) while a registration statement covering the resale of such security is effective
under the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144, (iii) if such Underlying Shares
are eligible for sale under Rule 144 or (iv) 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 shall cause its counsel
to issue a legal opinion to the Transfer Agent promptly if required by the Transfer Agent to effect the removal of the legend hereunder.
If all or any portion of a Debenture is converted at a time when there is an effective registration statement to cover the resale
of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144 or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the
Commission) then such Underlying Shares shall be issued free of all legends. The Company agrees that following such time as such
legend is no longer required under this Section 4.1(c), it will, no later than three Trading Days following the delivery by a Purchaser
to the Company or the Transfer Agent of a certificate representing Underlying Shares, issued with a restrictive legend (such third
Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing
such shares that is free from all restrictive and other legends. In addition, the Company shall deliver such Purchaser a copy of
such legal opinion, the instruction letter to the Transfer Agent, the resolution of the Board of Directors authorizing the Transaction
Documents and any additional supporting documentation requested by the Purchaser as may be requested by the Purchaser in order
to deposit Underlying Shares in accounts with its prime broker (or other brokerage account). 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 4.
Certificates for Underlying Shares 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.

 

(d)              
In addition to such Purchaser’s other available remedies, the Company shall pay to a
Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares delivered for removal
of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading
Days after such damages have begun to accrue) for each Trading Day after the second Trading Day following the Legend Removal Date
until the later of (i) such Trading Day that such certificate is delivered without a legend and (ii) the Trading Day on which the
Company shall have delivered a copy of the opinion of its counsel and other supporting documentation requested by the Purchaser
(including, without limitation, any instruction letter to the Company’s transfer agent) as may be requested by the Purchaser
in order to deposit Underlying Shares in accounts with its prime broker (or other brokerage account). Nothing herein shall limit
such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any
Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

    	 	23	 

    	 

    

 

(e)              
Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company
that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including
any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a Registration
Statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of
the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s
reliance upon this understanding.

4.2             
Acknowledgment of Dilution. The Company acknowledges that the issuance of shares of
Preferred Stock may result in dilution of the outstanding shares of Preferred Stock and Common Stock, which dilution may be substantial
under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents are unconditional
and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the
ownership of the other stockholders of the Company.

4.3             
Furnishing of Information. If the Common Stock is not registered under Section 12(b)
or 12(g) of the Exchange Act on the date hereof, the Company agrees to cause the Common Stock to be registered under Section 12(g)
of the Exchange Act on or before the 60th calendar day following the date hereof. Until the earliest of the time that
no Purchaser owns Securities, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g)
of the Exchange Act and to timely file (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 even if the Company is not then
subject to the reporting requirements of the Exchange Act. 

4.4             
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
or that would be integrated with the offer or sale of the Securities 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.

 

    	 	24	 

    	 

    

 

4.5             
Securities Laws Disclosure; Publicity. The Company shall file a Current Report on Form
8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the Exchange Act.
From and after the filing of such Current Report on Form 8-K, the Company represents to the Purchasers that it shall have publicly
disclosed all material, non-public information delivered 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. The Company and each Purchaser shall consult with each other in issuing any press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any press release nor otherwise make any such public
statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent
of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed,
except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market,
without the prior written consent of such Purchaser, except to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause.

4.6             
Shareholder Rights Plan. No claim will be made or enforced by the Company or, with
the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition,
business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement
in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company
and the Purchasers.

4.7             
Non-Public Information. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, 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 entered into a written agreement with the Company
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.

4.8             
Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities
hereunder only (a) to repay any existing financing indebtedness related to the Company’s acquisition of the vehicles indicated
on Exhibit C, (b) to purchase additional vehicles indicated on Exhibit C or as otherwise approved by the Purchaser
and (c) for working capital purposes and shall not use such proceeds: (i) for the redemption of any Common Stock or Common Stock
Equivalents, (ii) for the settlement of any outstanding litigation or iii) in violation of FCPA or OFAC regulations.

 

    	 	25	 

    	 

    

 

4.9             
Indemnification of Purchasers. Subject to the provisions of this Section 4.10, 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 the Purchaser Parties 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 Party, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser Party’s
representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party
may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct
by such Purchaser Party 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 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 (y) for any settlement
by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed;
or (z) 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. The indemnification required by this Section 4.10 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements
contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others
and any liabilities the Company may be subject to pursuant to law.

    	 	26	 

    	 

    

 

4.10         
Reservation of Securities.

(a)              
On or prior to the date of the issuance of shares of Series B Preferred Stock pursuant to
Section 4.17, if any, the Company agrees to establish and maintain a reserve of shares of Common Stock and of Preferred Stock from
its duly authorized shares of Common Stock and of Preferred Stock that is equal to the Required Minimum for the issuance of shares
of Preferred Stock pursuant to Section 4.17, or the conversion of such shares of Preferred Stock into shares of Common Stock (such
reservation, the “Share Reservation” and the date of the Share Reservation, the “Share Reservation
Date”).

(b)              
If, on any date after the Share Reservation Date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock or of Preferred Stock is less than the Required Minimum on such date, then the Board
of Directors shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to
increase the number of authorized but unissued shares of Common Stock or of Preferred Stock, as applicable, to at least the Required
Minimum at such time, as soon as possible and in any event not later than the 75th day after such date.

4.11         
Intercreditor Agreement. If the Prior Purchasers and the Purchasers enter into an agreement
with regard to the priority of security, priority of payment and other matters customarily addressed in an intercreditor agreement,
the Company agrees to execute and deliver such agreement and perform its obligations thereunder, provided that such obligations
do not grant either the Prior Purchasers or the Purchasers a security interest in collateral to which they would not have a security
interest in the absence of such agreement.

4.12         
Variable Rate Transactions. From the date hereof until such time as no Purchaser holds
any of the Debentures, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the
Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents (or a combination of units thereof) involving a
Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or
sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive,
additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based
upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance
of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future
date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly
or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into any agreement, including,
but not limited to, an equity line of credit, whereby the Company may issue securities at a future determined price. Any Purchaser
shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition
to any right to collect damages.

 

    	 	27	 

    	 

    

 

4.13         
Equal Treatment of Purchasers. No consideration (including any modification of any
Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of
this Agreement unless the same consideration is also offered to all of the parties to this Agreement. Further, the Company shall
not make any payment of principal or interest on the Debentures in amounts which are disproportionate to the respective principal
amounts outstanding on the Debentures at any applicable time. For clarification purposes, this provision constitutes a separate
right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect
to the purchase, disposition or voting of Securities or otherwise.

4.14         
Certain Transactions and Confidentiality. 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 purchases or sales, including Short Sales, of any of the Company’s securities during the period commencing
with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly
announced pursuant to the Current Report on Form 8-K as described in Section 4.6.  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 pursuant to the Current Report on Form 8-K as described in Section 4.6, such Purchaser will maintain the confidentiality
of the existence and terms of this transaction and the information included in the Transaction Documents. Notwithstanding the foregoing,
and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i)
no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities
of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the
Current Report on Form 8-K as described in Section 4.6, (ii) no Purchaser shall be restricted or prohibited from effecting any
transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the Current Report on Form 8-K as described in Section
4.6 and (iii) no Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the filing of the Current
Report on Form 8-K as described in Section 4.6.  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 direct 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.

4.15         
Form D; Blue Sky Filings. The Company agrees to timely file 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.

 

    	 	28	 

    	 

    

 

4.16         
Capital Changes. Until the one year anniversary of the Closing Date, the Company shall
not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of the
Purchasers holding a majority in principal amount outstanding of the Debentures.

4.17         
Increase of Subscription Amount. 

(a)              
At any time prior to the date that is 180 days after the Closing, and upon mutual agreement
of the Company and the Purchaser, the Purchaser may purchase up to an additional $850,000 in principal amount of the Debentures
(it being agreed that the amount of additional Debentures to be purchased would be equal to 90% of the purchase price of the assets
being acquired by the Company in connection with such additional purchase) up to a maximum of $2,000,000 in aggregate hereunder. 
Subject to Section 4.17(b), such additional Debenture (i) shall bear interest at the same rate and payable on the same dates as
the initial Debenture, (ii) shall have a first priority security interest in the assets being acquired in connection with such
additional purchase, and (iii) shall have principal amortization in the same manner and on the same dates as principal is amortized
under the initial Debenture, and shall otherwise be in substantially the form of the initial Debenture.

(b)              
In the event the parties increase the Subscription Amount pursuant to Section 4.17(a), the
Company shall, in addition to all other obligations contained in this Agreement, issue to the Purchaser a number of shares of Series
B Preferred Stock equal to five percent (5%) of the dollar amount of such increase divided by the then-current Stated Value (as
defined in the Company’s Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred
Stock adopted by the Company’s Board of Directors on October 21, 2015), and shall amend its Certificate of Designation of
Preferences , Rights and Limitations of Series B Convertible Preferred Stock to provide for an adequate number of such shares of
Series B Preferred Stock to permit such issuance (without amending the terms of the Series B Convertible Preferred Stock).  For
illustrative purposes only, if the Subscription Amount is to the maximum of $2,000,000 on the first anniversary of the issuance
of any Series B Preferred Stock, the Company would issue to the Purchaser 39.36 shares of Series B Preferred Stock (($850,000 in
increased Subscription Amount) x (5%) / ($1,000 initial Stated Value + $80 accrued and unpaid dividends)).   

ARTICLE V. 

MISCELLANEOUS

5.1             
Termination.  This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by
written notice to the other parties, if the Closing has not been consummated on or before October 15, 2016; provided, however,
that such termination will not affect the right of any party to sue for any breach by any other party (or parties).

 

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5.2             
Fees and Expenses. At the Closing, the Company has agreed to pay to the Purchasers
a non-accountable sum of (a) $50,000 and (b) all fees and expenses of legal counsel to the Purchasers incurred in connection with
the negotiation and preparation of the Transaction Documents and the transactions contemplated thereby. Except as expressly set
forth in the preceding sentence or in any Transaction Document to the contrary, 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 pay all Transfer Agent fees (including, without
limitation, any fees required for same-day processing of any instruction letter delivered by the Company), stamp taxes and other
taxes and duties levied in connection with the delivery of any Securities to the Purchasers. The Purchasers may withhold from disbursement
all fees and expenses to be paid by the Company pursuant to this Section 5.2.

5.3             
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 thereof 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.

5.4             
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 at the facsimile number or e-mail at the e-mail address set forth on
the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after
the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or e-mail at the e-mail
address set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City
time) on any Trading Day, (c) the second (2nd) Trading 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.

5.5             
Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding at least
67% in interest of the Securities then outstanding 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.

5.6             
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.

 

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5.7             
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its
rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee
agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that
apply to the “Purchasers.”

5.8             
No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and 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 4.9.

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, partners, members,
employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. 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. If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents,
then, in addition to the obligations of the Company under Section 4.9, the prevailing party in such action, suit or proceeding
shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

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

 

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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 each other party, it being understood that the 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         
Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained
in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a
right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations
within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions
and rights.

5.14         
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.

5.15         
Remedies. In addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason
of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for
specific performance of any such obligation the defense that a remedy at law would be adequate. 

 

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5.16         
Payment Set Aside. To the extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law,
common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.

5.17         
Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist
upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage
of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that
may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision
to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company
under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest
or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated
to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed
by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction
Documents from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced
by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness
or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election.

5.18         
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 hereto or
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 its review and negotiation of the Transaction Documents. 

 

    	 	33	 

    	 

    

 

5.19         
Liquidated Damages. The Company’s obligations to pay any partial liquidated damages
or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until
all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

5.20         
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken
or such right may be exercised on the next succeeding Business Day.

5.21         
Construction. The parties agree that each of them and/or their respective counsel have
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 thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction
Document shall be 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 date of this Agreement.

5.22         
WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT
BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE
LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY. 

 

(Signature
Pages Follow)

 

    	 	34	 

    	 

    

 

(Signature Pages
Follow)

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.

	
        legend oil and gas, ltd.

         

         
	Address for Notice:
	
        By:  __________________________________________

        

        

        
	
        Fax:

	Name:	E-Mail Address:
	Title:	 
	 	 
	With a copy to (which shall not constitute notice):	 
	
         

         

         
	 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

    	 	35	 

    	 

    

 

[PURCHASER
SIGNATURE PAGES TO 

LOGL
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: Lorton Finance Company

Signature of Authorized Signatory of
Purchaser: __________________________________

Name of Authorized Signatory: Heidi Bowman

Title of Authorized Signatory: President

Email Address of Authorized Signatory:
heidib@hillaircapital.com

Facsimile Number of Authorized Signatory: 650-570-7984

Address for Notice to Purchaser: 345 Lorton Ave., #303, Burlingame,
CA 94010

 

 

 

 

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

 

 

 

 

Subscription Amount in Cash: $1,150,000

 

Principal Amount: $1,150,000

 

EIN Number: 81-3968135

 

 

 

[SIGNATURE PAGES CONTINUE]

 

 

    	 	36	 

    	 

    

 

Annex A 

 

CLOSING STATEMENT

 

Pursuant to the attached Securities Purchase
Agreement, dated on or about the date hereto, the purchasers shall purchase Debentures from Legend Oil and Gas, Ltd., a Colorado
corporation (the “Company”). All funds payable to the Company will be wired into an account maintained by the
Company. All funds will be disbursed in accordance with this Closing Statement.

 

Disbursement
Date: ;September 30, 2016

 

 

 

	
        I.  PURCHASE PRICE

        
	 
	 	 	 
	 	Gross Proceeds to be Received 	$1,150,000
	 	 
	
        II.  DISBURSEMENTS

        
	 
	 	 	 
	 	State Bank & Trust Company	$274,954.56
	 	 	 
	 	Legend Oil & Gas Ltd.	$787,500
	 	 	 
	 	Lorton Finance Company (fees/expenses)	$87,545.44 (not to be disbursed)
	 	 	 
	 	 	 
	 	 
	Total Amount Disbursed:	$1,062,454.60
	 	 
	 	 
	 	 
	
        WIRE INSTRUCTIONS:

         

        See attached
	 
	 	 
	 	 	 

[Signature Page Follows]

 

    	 	37	 

    	 

    

 

 

 

	
         

        Acknowledged and agreed to

        this 30th day of September 2016

         

        LEGEND OIL AND GAS, LTD.

         

         

        

        

        

         
	 
	By:  __________________________________________	 
	Name:	 
	Title:	 

 

 

    	 	38Legend Oil and Gas, Ltd. 8-K

 

Exhibit
10.2

SECURITY
AGREEMENT

This
SECURITY AGREEMENT, dated as of September 30, 2016 (this “Agreement”), is by and among Legend Oil and Gas,
Ltd., a Colorado corporation (the “Company”), all of the Subsidiaries of the Company
(such subsidiaries, the “Guarantors” and
together with the Company, the “Debtors”) and the holders of the Company’s Senior Secured Debentures
due on the Maturity Date (as defined in the Debentures), in the original aggregate principal amount of $1,150,000 (collectively,
the “Debentures”) issued pursuant to that certain securities purchase agreement (the “Purchase Agreement”)
dated on or about the date hereof among the Company and certain Secured Parties signatory hereto, their endorsees, transferees
and assigns (collectively, the “Secured Parties”).

W
I T N E S S E T H:

WHEREAS,
pursuant to the Purchase Agreement, the Secured Parties have severally agreed to extend the loans to the Company evidenced by
the Debentures;

WHEREAS,
pursuant to a certain Subsidiary Guarantee, dated as of the date hereof (the “Guarantee”), the
Guarantors have
jointly and severally agreed to guarantee and act as surety for payment of such Debentures; and

WHEREAS,
in order to induce the Secured Parties to extend the loans evidenced by the Debentures, each Debtor has agreed to execute and
deliver to the Secured Parties this Agreement and to grant the Secured Parties, pari passu with each other Secured Party
and through the Agent (as defined in Section 18 hereof), a security interest in certain property of such Debtor to secure the
prompt payment, performance and discharge in full of all of the Company’s obligations under the Debentures and the Guarantors’
obligations under the Guarantee.

NOW,
THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1.

Certain
Definitions. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1. Terms used
but not otherwise defined in this Agreement that are defined in Article 9 of the UCC (such as “account”, “chattel
paper”, “commercial tort claim”, “deposit account”, “document”, “equipment”,
“fixtures”, “general intangibles”, “goods”, “instruments”, “inventory”,
“investment property”, “letter-of-credit rights”, “proceeds” and “supporting obligations”)
shall have the respective meanings given such terms in Article 9 of the UCC.

(a)

“Collateral”
means all vehicles set forth on Exhibit C of the Purchase Agreement and any other vehicles purchased by any Debtor using any proceeds
from any Debenture, as approved by the Secured Parties.

    	1 

    	 

    

 

Notwithstanding
the foregoing, nothing herein shall be deemed to constitute an assignment of any asset which, in the event of an assignment, becomes
void by operation of applicable law or the assignment of which is otherwise prohibited by applicable law (in each case to the
extent that such applicable law is not overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC or other similar applicable
law); provided, however, that to the extent permitted by applicable law, this Agreement shall create a valid security
interest in such asset and, to the extent permitted by applicable law, this Agreement shall create a valid security interest in
the proceeds of such asset.

(b)

[Reserved].

(c)

“Majority
in Interest” means, at any time of determination, 50.1% in interest (based on then-outstanding principal amounts of
Debentures at the time of such determination) of the Secured Parties.

(d)

“Necessary
Endorsement” means undated stock powers endorsed in blank or other proper instruments of assignment duly executed and
such other instruments or documents as the Agent (as that term is defined below) may reasonably request.

(e)

“Obligations”
means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become
due, or that are now or may be hereafter contracted or acquired, or owing to, of any Debtor to the Secured Parties, including,
without limitation, all obligations under this Agreement, the Debentures, the Guarantee and any other instruments, agreements
or other documents executed and/or delivered in connection herewith or therewith, in each case, whether now or hereafter existing,
voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all
or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from any of the Secured Parties as a preference, fraudulent transfer or otherwise as such obligations may
be amended, supplemented, converted, extended or modified from time to time. Without limiting the generality of the foregoing,
the term “Obligations” shall include, without limitation: (i) principal of, and interest on the Debentures and the
loans extended pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations and liabilities of the Debtors from
time to time under or in connection with this Agreement, the Debentures, the Guarantee and any other instruments, agreements or
other documents executed and/or delivered in connection herewith or therewith; and (iii) all amounts (including but not limited
to post-petition interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such
amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving
any Debtor.

    	2 

    	 

    

 

(f)

“Organizational
Documents” means with respect to any Debtor, the documents by which such Debtor was organized (such as a certificate
of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates
of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Debtor
(such as bylaws, a partnership agreement or an operating, limited liability or members agreement).

(g)

[Reserved].

(h)

[Reserved].

(i)

“UCC”
means the Uniform Commercial Code of the State of New York and or any other applicable law of any state or states which has jurisdiction
with respect to all, or any portion of, the Collateral or this Agreement, from time to time. It is the intent of the parties that
defined terms in the UCC should be construed in their broadest sense so that the term “Collateral” will be construed
in its broadest sense. Accordingly if there are, from time to time, changes to defined terms in the UCC that broaden the definitions,
they are incorporated herein and if existing definitions in the UCC are broader than the amended definitions, the existing ones
shall be controlling.

2.

Grant
of Security Interest in Collateral. As an inducement for the Secured Parties to extend the loans as evidenced by the Debentures
and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations,
each Debtor hereby unconditionally and irrevocably pledges, grants and hypothecates to the Secured Parties a security interest
in and to, a lien upon and a right of set-off against all of their respective right, title and interest of whatsoever kind and
nature in and to, the Collateral (a “Security Interest” and, collectively, the “Security Interests”).

3.

Delivery
of Certain Collateral. Contemporaneously or prior to the execution of this Agreement, each Debtor shall deliver or cause to
be delivered to the Agent any and all certificates of title for all of the vehicles listed on Schedule C to the Purchase Agreement
and other instruments or documents representing any of the other Collateral, in each case, together with all Necessary Endorsements.

4.

Representations,
Warranties, Covenants and Agreements of the Debtors. Except as set forth under the corresponding section of the disclosure
schedules delivered to the Secured Parties concurrently herewith (the “Disclosure Schedules”), which Disclosure
Schedules shall be deemed a part hereof, each Debtor represents and warrants to, and covenants and agrees with, the Secured Parties
as follows:

(a)

Each
Debtor has the requisite corporate, partnership, limited liability company or other power and authority to enter into this Agreement
and otherwise to carry out its obligations hereunder. The execution, delivery and performance by each Debtor of this Agreement
and the filings contemplated therein have been duly authorized by all necessary action on the part of such Debtor and no further
action is required by such Debtor. This Agreement has been duly executed by each Debtor. This Agreement constitutes the legal,
valid and binding obligation of each Debtor, enforceable against each Debtor in accordance with its terms except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting
the rights and remedies of creditors and by general principles of equity.

    	3 

    	 

    

 

(b)

The
Debtors have no place of business or offices where their respective books of account and records are kept (other than temporarily
at the offices of its attorneys or accountants) or places where Collateral is stored or located, except as set forth on Schedule
A attached hereto. Except as specifically set forth on Schedule A, each Debtor is the record owner of the real property
where such Collateral is located, and there exist no mortgages or other liens on any such real property except for Permitted Liens
(as defined in the Debentures). Except as disclosed on Schedule A, none of such Collateral is in the possession of any
consignee, bailee, warehouseman, agent or processor.

(c)

Except
for Permitted Liens (as defined in the Debentures) and except as set forth on Schedule B attached hereto, the Debtors are
the sole owner of the Collateral (except for non-exclusive licenses granted by any Debtor in the ordinary course of business),
free and clear of any liens, security interests, encumbrances, rights or claims, and are fully authorized to grant the Security
Interests. Except as set forth on Schedule C attached hereto, there is not on file in any governmental or regulatory authority,
agency or recording office an effective financing statement, security agreement, license or transfer or any notice of any of the
foregoing (other than those that will be filed in favor of the Secured Parties pursuant to this Agreement) covering or affecting
any of the Collateral. Except as set forth on Schedule C attached hereto and except pursuant to this Agreement, as long
as this Agreement shall be in effect, the Debtors shall not execute and shall not knowingly permit to be on file in any such office
or agency any other financing statement or other document or instrument (except to the extent filed or recorded in favor of the
Secured Parties pursuant to the terms of this Agreement).

(d)

No
written claim has been received that any Collateral or any Debtor’s use of any Collateral violates the rights of any third
party. There has been no adverse decision to any Debtor’s claim of ownership rights in or exclusive rights to use the Collateral
in any jurisdiction or to any Debtor’s right to keep and maintain such Collateral in full force and effect, and there is
no proceeding involving said rights pending or, to the best knowledge of any Debtor, threatened before any court, judicial body,
administrative or regulatory agency, arbitrator or other governmental authority.

(e)

[Reserved]

    	4 

    	 

    

 

(f)

This
Agreement creates in favor of the Secured Parties a valid security interest in the Collateral, subject only to Permitted Liens
(as defined in the Debentures) securing the payment and performance of the Obligations. Upon making the filings described in the
immediately following paragraph, all security interests created hereunder in any Collateral which may be perfected by filing Uniform
Commercial Code financing statements shall have been duly perfected. Except for the filing of the Uniform Commercial Code financing
statements referred to in the immediately following paragraph,
the delivery of the certificates and other instruments provided in Section 3, and the notation of the Security Interest on the
vehicle titles, no action is necessary to create, perfect or protect the
security interests created hereunder. Without limiting the generality of the foregoing, except as provided in the immediately
following paragraph no consent of any third parties and no authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required for (i) the execution, delivery and performance of this Agreement,
(ii) the creation or perfection of the Security Interests created hereunder in the Collateral or (iii) the enforcement of the
rights of the Agent and the Secured Parties hereunder.

(g)

Each
Debtor hereby authorizes the Agent to file one or more financing statements under the UCC with the proper filing and recording
agencies in any jurisdiction deemed proper by Agent, and to cause the any governmental authority to record or note the Security
Interests on vehicle titles.

(h)

The
execution, delivery and performance of this Agreement by the Debtors does not (i) violate any of the provisions of any Organizational
Documents of any Debtor or any judgment, decree, order or award of any court, governmental body or arbitrator or any applicable
law, rule or regulation applicable to any Debtor 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, 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
any Debtor’s debt or otherwise) or other understanding to which any Debtor is a party or by which any property or asset
of any Debtor is bound or affected. If any, all required consents (including, without limitation, from stockholders or creditors
of any Debtor) necessary for any Debtor to enter into and perform its obligations hereunder have been obtained.

(i)

[Reserved].

(j)

[Reserved].

(k)

Except
for Permitted Liens (as defined in the Debentures), each Debtor shall at all times maintain the liens and Security Interests provided
for hereunder as valid and perfected first priority liens and security interests in the Collateral in favor of the Secured Parties
until this Agreement and the Security Interest hereunder shall be terminated pursuant to Section 14 hereof. Each Debtor hereby
agrees to defend the same against the claims of any and all persons and entities. Each Debtor shall safeguard and protect all
Collateral for the account of the Secured Parties. At the request of the Agent, each Debtor will sign and deliver to the Agent
on behalf of the Secured Parties at any time or from time to time one or more financing statements pursuant to the UCC in form
reasonably satisfactory to the Agent, and take such actions as Agent may request to cause the Security Interest to be noted or
recorded on vehicle titles, and will pay the cost of filing the same in all public offices wherever filing is, or is deemed by
the Agent to be, necessary or desirable to effect the rights and obligations provided for herein. Without limiting the generality
of the foregoing, each Debtor shall pay all fees, taxes and other amounts necessary to maintain the Collateral and the Security
Interests hereunder, and each Debtor shall obtain and furnish to the Agent from time to time, upon demand, such releases and/or
subordinations of claims and liens which may be required to maintain the priority of the Security Interests hereunder.

    	5 

    	 

    

 

(l)

No
Debtor will transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral (except for non-exclusive
licenses granted by a Debtor in its ordinary course of business and sales of inventory by a Debtor in its ordinary course of business)
without the prior written consent of a Majority
in Interest.

(m)

Each
Debtor shall keep and preserve the Collateral in good condition, repair and order and shall not operate or locate any such Collateral
(or cause to be operated or located) in any area excluded from insurance coverage.

(n)

Each
Debtor shall maintain with financially sound and reputable insurers, insurance with respect to the Collateral, including Collateral
hereafter acquired, against loss or damage of the kinds and in the amounts customarily insured against by entities of established
reputation having similar properties similarly situated and in such amounts as are customarily carried under similar circumstances
by other such entities and otherwise as is prudent for entities engaged in similar businesses but in any event sufficient to cover
the full replacement cost thereof. Each Debtor shall cause each insurance policy issued in connection herewith to provide, and
the insurer issuing such policy to certify to the Agent, that (a) the Agent will be named as lender loss payee and additional
insured under each such insurance policy; (b) if such insurance be proposed to be cancelled or materially changed for any reason
whatsoever, such insurer will promptly notify the Agent and such cancellation or change shall not be effective as to the Agent
for at least thirty (30) days after receipt by the Agent of such notice, unless the effect of such change is to extend or increase
coverage under the policy; and (c) the Agent will have the right (but no obligation) at its election to remedy any default in
the payment of premiums within thirty (30) days of notice from the insurer of such default. If no Event of Default (as defined
in the Debentures) exists and if the proceeds arising out of any claim or series of related claims do not exceed $100,000, loss
payments in each instance will be applied by the applicable Debtor to the repair and/or replacement of property with respect to
which the loss was incurred to the extent reasonably feasible, and any loss payments or the balance thereof remaining, to the
extent not so applied, shall be payable to the applicable Debtor; provided, however, that payments received by any
Debtor after an Event of Default occurs and is continuing or in excess of $100,000 for any occurrence or series of related occurrences
shall be paid to the Agent on behalf of the Secured Parties and, if received by such Debtor, shall be held in trust for the Secured
Parties and immediately paid over to the Agent unless otherwise directed in writing by the Agent. Copies of such policies or the
related certificates, in each case, naming the Agent as lender loss payee and additional insured shall be delivered to the Agent
at least annually and at the time any new policy of insurance is issued.

(o)

Each
Debtor shall, within ten (10) Business Days of obtaining knowledge thereof, advise the Secured Parties promptly, in sufficient
detail, of any material adverse change in the Collateral, and of the occurrence of any event which would have a material adverse
effect on the value of the Collateral or on the Secured Parties’ security interest, through the Agent, therein.

    	6 

    	 

    

 

(p)

[Reserved].

(q)

Each
Debtor shall permit the Agent and its representatives and agents to inspect the Collateral during normal business hours and upon
reasonable prior notice, and to make copies of records pertaining to the Collateral as may be reasonably requested by the Agent
from time to time.

(r)

Each
Debtor shall take all steps reasonably necessary to diligently pursue and seek to preserve, enforce and collect any rights, claims,
causes of action and accounts receivable in respect of the Collateral.

(s)

Each
Debtor shall promptly notify the Secured Parties in sufficient detail upon becoming aware of any attachment, garnishment, execution
or other legal process levied against any Collateral and of any other information received by such Debtor that may materially
affect the value of the Collateral, the Security Interest or the rights and remedies of the Secured Parties hereunder.

(t)

All
information heretofore, herein or hereafter supplied to the Secured Parties by or on behalf of any Debtor with respect to the
Collateral is accurate and complete in all material respects as of the date furnished.

(u)

The
Debtors shall at all times preserve and keep in full force and effect their respective valid existence and good standing and any
rights and franchises material to its business.

(v)

[Reserved].

(w)

[Reserved.]

(x)

[Reserved].

(y)

Each
Debtor was organized and remains organized solely under the laws of the state set forth next to such Debtor’s name in Schedule
D attached hereto, which Schedule D sets forth each Debtor’s organizational identification number or, if any
Debtor does not have one, states that one does not exist.

(z)

(i)
The actual name of each Debtor is the name set forth in Schedule D attached hereto; (ii) no Debtor has any trade names
except as set forth on Schedule E attached hereto; (iii) no Debtor has used any name other than that stated in the preamble
hereto or as set forth on Schedule E for the preceding five years; and (iv) no entity has merged into any Debtor or been
acquired by any Debtor within the past five years except as set forth on Schedule E.

    	7 

    	 

    

 

(aa)

At
any time and from time to time that any Collateral consists of instruments, certificated securities or other items that require
or permit possession by the secured party to perfect the security interest created hereby, the applicable Debtor shall deliver
such Collateral to the Agent.

(bb)

[Reserved].

(cc)

[Reserved].

(dd)

[Reserved].

(ee)

[Reserved].

(ff)

To
the extent that any Collateral is in the possession of any third party, the applicable Debtor shall join with the Agent in notifying
such third party of the Secured Parties’ security interest in such Collateral and shall use its reasonable best efforts
to obtain an acknowledgement and agreement from such third party with respect to the Collateral, in form and substance reasonably
satisfactory to the Agent.

(gg)

[Reserved].

(hh)

[Reserved]

(ii)

Each
Debtor shall cause each subsidiary
of such Debtor, to immediately become a party hereto (an “Additional Debtor”), by
executing and delivering an Additional Debtor Joinder in substantially the form of Annex A attached hereto and comply with
the provisions hereof applicable to the Debtors. Concurrent therewith, the Additional Debtor shall deliver replacement schedules
for, or supplements to all other Schedules to (or referred to in) this Agreement, as applicable, which replacement schedules shall
supersede, or supplements shall modify, the Schedules then in effect. The Additional Debtor shall also deliver such opinions of
counsel, authorizing resolutions, good standing certificates, incumbency certificates, organizational documents, financing statements
and other information and documentation as the Agent may reasonably request. Upon delivery of the foregoing to the Agent, the
Additional Debtor shall be and become a party to this Agreement with the same rights and obligations as the Debtors, for all purposes
hereof as fully and to the same extent as if it were an original signatory hereto and shall be deemed to have made the representations,
warranties and covenants set forth herein as of the date of execution and delivery of such Additional Debtor Joinder, and all
references herein to the “Debtors” shall be deemed to include each Additional Debtor.

(jj)

[Reserved].

(kk)

[Reserved].

(ll)

[Reserved].

    	8 

    	 

    

(mm)

[Reserved].

(nn)

Each
Debtor will from time to time, at the joint and several expense of the Debtors, promptly execute and deliver all such further
instruments and documents, and take all such further action as may be necessary or desirable, or as the Agent may reasonably request,
in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Secured Parties
to exercise and enforce their rights and remedies hereunder and with respect to any Collateral or to otherwise carry out the purposes
of this Agreement.

(oo)

[Reserved].

(pp)

Except
as set forth on Schedule F attached hereto, none of the account debtors or other persons or entities obligated on any of
the Collateral is a governmental authority covered by the Federal Assignment of Claims Act or any similar federal, state or local
statute or rule in respect of such Collateral.

(qq)

Until
the Obligations shall have been paid and performed in full, the Company covenants that it shall promptly direct any direct or
indirect subsidiary of the Company formed or acquired after the date hereof to enter into a Subsidiary Guarantee in favor of the
Secured Party, in the form of Exhibit A hereto.

5.

[Reserved].

6.

Defaults.
The following events shall be “Events of Default”:

(a)

The
occurrence of an Event of Default (as defined in the Debentures) under the Debentures;

(b)

Any
representation or warranty of any Debtor in this Agreement or the Purchase Agreement shall prove to have been incorrect in any
material respect when made;

(c)

The
failure by any Debtor to observe or perform any of its obligations hereunder for five (5) Business Days after delivery to such
Debtor of notice of such failure by or on behalf of a Secured Party unless such default is capable of cure but cannot be cured
within such time frame and such Debtor is using best efforts to cure same in a timely fashion; or

(d)

If
any provision of this Agreement shall at any time for any reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Debtor, or a proceeding shall be commenced by any Debtor, or by any governmental authority having
jurisdiction over any Debtor, seeking to establish the invalidity or unenforceability thereof, or any Debtor shall deny that any
Debtor has any liability or obligation purported to be created under this Agreement.

    	9 

    	 

    

 

7.

Duty
To Hold In Trust.

(a)

Upon
the occurrence of any Event of Default and at any time during the continuance of such Event of Default, each Debtor shall, upon
receipt of any revenue, income, dividend,
interest or other sums subject to the Security Interests, whether payable
pursuant to the Debentures or otherwise, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation
to pay any such sum, hold the same in trust for the Secured Parties and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Secured Parties, pro-rata in proportion to their respective then-currently outstanding principal
amount of Debentures for application to the satisfaction of the Obligations (and if any Debenture is not outstanding, pro-rata
in proportion to the initial purchases of the remaining Debentures).

(b)

[Reserved].

8.

Rights
and Remedies Upon Default.

(a)

Upon
the occurrence of any Event of Default and at any time during the continuance of such Event of Default, the Secured Parties, acting
through the Agent, shall have the right to exercise all of the remedies conferred hereunder and under the Debentures, and the
Secured Parties shall have all the rights and remedies of a secured party under the UCC. Without limitation, the Agent, for the
benefit of the Secured Parties, shall have the following rights and powers:

(i)

The
Agent shall have the right to take possession of the Collateral and, for that purpose, enter, with the aid and assistance of any
person, any premises where the Collateral, or any part thereof, is or may be placed and remove the same, and each Debtor shall
assemble the Collateral and make it available to the Agent at places which the Agent shall reasonably select, whether at such
Debtor’s premises or elsewhere, and make available to the Agent, without rent, all of such Debtor’s respective premises
and facilities for the purpose of the Agent taking possession of, removing or putting the Collateral in saleable or disposable
form.

(ii)

[Reserved].

(iii)

The
Agent shall have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the Collateral, at public
or private sale or otherwise, either with or without special conditions or stipulations, for cash or on credit or for future delivery,
in such parcel or parcels and at such time or times and at such place or places, and upon such terms and conditions as the Agent
may deem commercially reasonable, all without (except as shall be required by applicable statute and cannot be waived) advertisement
or demand upon or notice to any Debtor or right of redemption of a Debtor, which are hereby expressly waived. Upon each such sale,
lease, assignment or other transfer of Collateral, the Agent, for the benefit of the Secured Parties, may, unless prohibited by
applicable law which cannot be waived, purchase all or any part of the Collateral being sold, free from and discharged of all
trusts, claims, right of redemption and equities of any Debtor, which are hereby waived and released.

    	10 

    	 

    

 

(iv)

[Reserved].

(v)

[Reserved].

(vi)

[Reserved].

(b)

The
Agent shall comply with any applicable law in connection with a disposition of Collateral and such compliance will not be considered
adversely to affect the commercial reasonableness of any sale of the Collateral. The Agent may sell the Collateral without giving
any warranties and may specifically disclaim such warranties. If the Agent sells any of the Collateral on credit, the Debtors
will only be credited with payments actually made by the purchaser. In addition, each Debtor waives any and all rights that it
may have to a judicial hearing in advance of the enforcement of any of the Agent’s rights and remedies hereunder, including,
without limitation, its right following an Event of Default to take immediate possession of the Collateral and to exercise its
rights and remedies with respect thereto.

(c)

[Reserved].

9.

Applications
of Proceeds. The proceeds of any such sale, lease or other disposition of the Collateral hereunder or from payments made on
account of any insurance policy insuring any portion of the Collateral shall be applied first, to the expenses of retaking, holding,
storing, processing and preparing for sale, selling, and the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable attorneys’ fees and expenses incurred by the Agent
in enforcing the Secured Parties’ rights hereunder and in connection with collecting, storing and disposing of the Collateral,
and then to satisfaction of the Obligations pro rata among the Secured Parties (based on then-outstanding principal amounts of
Debentures at the time of any such determination), and to the payment of any other amounts required by applicable law, after which
the Secured Parties shall pay to the applicable Debtor any surplus proceeds. If, upon the sale, license or other disposition of
the Collateral, the proceeds thereof are insufficient to pay all amounts to which the Secured Parties are legally entitled, the
Debtors will be liable for the deficiency, together with interest thereon, at the rate of 18% per annum or the lesser amount permitted
by applicable law (the “Default Rate”), and the reasonable fees of any attorneys employed by the Secured Parties
to collect such deficiency. To the extent permitted by applicable law, each Debtor waives all claims, damages and demands against
the Secured Parties arising out of the repossession, removal, retention or sale of the Collateral, unless due solely to the gross
negligence or willful misconduct of the Secured Parties as determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.

10.

[Reserved].

    	11 

    	 

    

 

11.

Costs
and Expenses. Each Debtor agrees to pay all reasonable out-of-pocket fees, costs and expenses incurred in connection with
any filing required hereunder, including without limitation, any financing statements pursuant to the UCC, continuation statements,
partial releases and/or termination statements related thereto or any expenses of any searches reasonably required by the Agent.
The Debtors shall also pay all other claims and charges which in the reasonable opinion of the Agent is reasonably likely to prejudice,
imperil or otherwise affect the Collateral or the Security Interests therein. The Debtors will also, upon demand, pay to the Agent
the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and
agents, which the Agent, for the benefit of the Secured Parties, may incur in connection with the creation, perfection, protection,
satisfaction, foreclosure, collection or enforcement of the Security Interest and the preparation, administration, continuance,
amendment or enforcement of this Agreement and pay to the Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the Agent, for the benefit of the Secured Parties, and the
Secured Parties may incur in connection with (i) the enforcement of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Collateral, or (iii) the exercise or enforcement of any of the
rights of the Secured Parties under the Debentures. Until so paid, any fees payable hereunder shall be added to the principal
amount of the Debentures and shall bear interest at the Default Rate.

12.

Responsibility
for Collateral. The Debtors assume all liabilities and responsibility in connection with all Collateral, and the Obligations
shall in no way be affected or diminished by reason of the loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason. Without limiting the generality of the foregoing, (a) neither the Agent nor any Secured Party (i)
has any duty (either before or after an Event of Default) to collect any amounts in respect of the Collateral or to preserve any
rights relating to the Collateral, or (ii) has any obligation to clean-up or otherwise prepare the Collateral for sale, and (b)
each Debtor shall remain obligated and liable under each contract or agreement included in the Collateral to be observed or performed
by such Debtor thereunder. Neither the Agent nor any Secured Party shall have any obligation or liability under any such contract
or agreement by reason of or arising out of this Agreement or the receipt by the Agent or any Secured Party of any payment relating
to any of the Collateral, nor shall the Agent or any Secured Party be obligated in any manner to perform any of the obligations
of any Debtor under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Agent or any Secured Party in respect of the Collateral or as to the sufficiency of any performance by any party
under any such contract or agreement, to present or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to the Agent or to which the Agent or any Secured Party may be entitled
at any time or times.

    	12 

    	 

    

 

13.

Security
Interests Absolute. All rights of the Secured Parties and all obligations of the Debtors hereunder, shall be absolute and
unconditional, irrespective of: (a) any lack of validity or enforceability of this Agreement, the Debentures or any agreement
entered into in connection with the foregoing, or any portion hereof or thereof; (b) any change in the time, manner or place of
payment or performance of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any
consent to any departure from the Debentures or any other agreement entered into in connection with the foregoing; (c) any exchange,
release or nonperfection of any of the Collateral, or any release or amendment or waiver of or consent to departure from any other
collateral for, or any guarantee, or any other security, for all or any of the Obligations; (d) any action by the Secured Parties
to obtain, adjust, settle and cancel in its sole discretion any insurance claims or matters made or arising in connection with
the Collateral; or (e) any other circumstance which might otherwise constitute any legal or equitable defense available to a Debtor,
or a discharge of all or any part of the Security Interests granted hereby. Until the Obligations shall have been paid and performed
in full, the rights of the Secured Parties shall continue even if the Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or bankruptcy. Each Debtor expressly waives presentment, protest, notice
of protest, demand, notice of nonpayment and demand for performance. In the event that at any time any transfer of any Collateral
or any payment received by the Secured Parties hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or insolvency laws of the United States, or shall
be deemed to be otherwise due to any party other than the Secured Parties, then, in any such event, each Debtor’s obligations
hereunder shall survive cancellation of this Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or cancellation of this Agreement, but shall remain a valid and binding obligation enforceable in accordance with the terms
and provisions hereof. Each Debtor waives all right to require the Secured Parties to proceed against any other person or entity
or to apply any Collateral which the Secured Parties may hold at any
time, or to marshal assets, or to pursue any other remedy. Each Debtor waives any defense arising by reason of the application
of the statute of limitations to any obligation secured hereby.

14.

Term
of Agreement. This Agreement and the Security Interests shall terminate on the date on which all payments under the Debentures
have been indefeasibly paid in full and all other Obligations have been paid or discharged; provided, however, that all indemnities
of the Debtors contained in this Agreement (including, without limitation, Annex B hereto) shall survive and remain operative
and in full force and effect regardless of the termination of this Agreement.

15.

Power
of Attorney; Further Assurances.

(a)

Each
Debtor authorizes the Agent, and does hereby make, constitute and appoint the Agent and its officers, agents, successors or assigns
with full power of substitution, as such Debtor’s true and lawful attorney-in-fact, with power, in the name of the Agent
or such Debtor, to, after the occurrence and during the continuance of an Event of Default, (i) endorse any note, checks, drafts,
money orders or other instruments of payment (including payments payable under or in respect of any policy of insurance) in respect
of the Collateral that may come into possession of the Agent; (ii) to sign and endorse any financing statement pursuant to the
UCC or any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other documents relating to the Collateral; (iii) to pay or discharge
taxes, liens, security interests or other encumbrances at any time levied or placed on or threatened against the Collateral; (iv)
to demand, collect, receipt for, compromise, settle and sue for monies due in respect of the Collateral; and (v) generally, at
the option of the Agent, and at the expense of the Debtors, at any time, or from time to time, to execute and deliver any and
all documents and instruments and to do all acts and things which the Agent deems necessary to protect, preserve and realize upon
the Collateral and the Security Interests granted therein in order to effect the intent of this Agreement and the Debentures all
as fully and effectually as the Debtors might or could do; and each Debtor hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof. This power of attorney is coupled with an interest and shall be irrevocable for the term
of this Agreement and thereafter as long as any of the Obligations shall be outstanding. The
designation set forth herein shall be deemed to amend and supersede any inconsistent provision in the Organizational Documents
or other documents or agreements to which any Debtor is subject or to which any Debtor is a party. 

    	13 

    	 

    

 

(b)

On
a continuing basis, each Debtor will make, execute, acknowledge, deliver, file and record, as the case may be, with the proper
filing and recording agencies in any jurisdiction, including, without limitation, the jurisdictions indicated on Schedule C
attached hereto, all such instruments, and take all such action as may reasonably be deemed necessary or advisable, or as
reasonably requested by the Agent, to perfect the Security Interests granted hereunder and otherwise to carry out the intent and
purposes of this Agreement, or for assuring and confirming to the Agent the grant or perfection of a perfected security interest
in all the Collateral under the UCC.

(c)

Each
Debtor hereby irrevocably appoints the Agent as such Debtor’s attorney-in-fact, with full authority in the place and instead
of such Debtor and in the name of such Debtor, from time to time in the Agent’s discretion, to take any action and to execute
any instrument which the Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including the filing,
in its sole discretion, of one or more financing or continuation statements and amendments thereto, relative to any of the Collateral
without the signature of such Debtor where permitted by law, and ratifies all such actions taken by the Agent. This power of attorney
is coupled with an interest and shall be irrevocable for the term of this Agreement and thereafter as long as any of the Obligations
shall be outstanding.

16.

Notices.
All notices, requests, demands and other communications hereunder shall be subject to the notice provision of the Purchase Agreement.

17.

Other
Security. To the extent that the Obligations are now or hereafter secured by property other than the Collateral or by the
guarantee, endorsement or property of any other person, firm, corporation or other entity, then the Agent shall have the right,
in its sole discretion, to pursue, relinquish, subordinate, modify or take any other action with respect thereto, without in any
way modifying or affecting any of the Secured Parties’ rights and remedies hereunder.

18.

Appointment
of Agent. The Secured Parties hereby
appoint Lorton Finance Company to act as their agent (“Lorton” or “Agent”) for purposes
of exercising any and all rights and remedies of the Secured Parties hereunder. Such appointment shall continue until revoked
in writing by a Majority in Interest, at which time a Majority in Interest
shall appoint a new Agent, provided that Lorton may not be removed as Agent unless funds managed by
Lorton shall then hold less than $50,000 in principal amount of Debentures;
provided, further, that such removal may occur only if each of the other Secured Parties shall then hold not less
than an aggregate of $250,000 in principal amount of Debentures.  The
Agent shall have the rights, responsibilities and immunities set forth in Annex
B hereto.

    	14 

    	 

    

 

19.

Miscellaneous.

(a)

No
course of dealing between the Debtors and the Secured Parties, nor any failure to exercise, nor any delay in exercising, on the
part of the Secured Parties, any right, power or privilege hereunder or under the Debentures shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.

(b)

All
of the rights and remedies of the Secured Parties with respect to the Collateral, whether established hereby or by the Debentures
or by any other agreements, instruments or documents or by law shall be cumulative and may be exercised singly or concurrently.

(c)

This
Agreement, together with the exhibits and schedules hereto, 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 this Agreement and the exhibits and schedules hereto. No provision of this Agreement
may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Debtors
and the Secured Parties holding 50.1% or more of the principal amount of Debentures then outstanding, or, in the case of a waiver,
by the party against whom enforcement of any such waived provision is sought.

(d)

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.

(e)

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.

    	15 

    	 

    

(f)

This
Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company
and the Guarantors may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each
Secured Party (other than by merger). Any Secured Party may assign any or all of its rights under this Agreement to any Person
(as defined in the Purchase Agreement) to whom such Secured Party assigns or transfers any Obligations, provided such transferee
agrees in writing to be bound, with respect to the transferred Obligations, by the provisions of this Agreement that apply to
the “Secured Parties.”

(g)

Each
party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order
to carry out the provisions and purposes of this Agreement.

(h)

Except
to the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, all questions concerning the
construction, validity, enforcement and interpretation of this Agreement 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. Except to the extent
mandatorily governed by the jurisdiction or situs where the Collateral is located, each Debtor agrees that all proceedings concerning
the interpretations, enforcement and defense of the transactions contemplated by this Agreement and the Debentures (whether brought
against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan. Except to
the extent mandatorily governed by the jurisdiction or situs where the Collateral is located, each Debtor 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, and hereby
irrevocably waives, and agrees not to assert in any proceeding, any claim that it is not personally subject to the jurisdiction
of any such court, that such proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such 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 manner permitted by law. Each party hereto hereby irrevocably waives,
to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.

(i)

This
Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and,
all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature
is executed) the same with the same force and effect as if such facsimile signature were the original thereof.

    	16 

    	 

    

 

(j)

All
Debtors shall jointly and severally be liable for the obligations of each Debtor to the Secured Parties hereunder.

(k)

Each
Debtor shall indemnify, reimburse and hold harmless the Agent and the Secured Parties and their respective partners, members,
shareholders, officers, directors, employees and agents (and any other persons with other titles that have similar functions)
(collectively, “Indemnitees”) from and against any and all losses, claims, liabilities, damages, penalties,
suits, costs and expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the
foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise
from this Agreement or the Collateral, except any such losses, claims, liabilities, damages, penalties, suits, costs and expenses
which result from the gross negligence or willful misconduct of the Indemnitee as determined by a final, nonappealable decision
of a court of competent jurisdiction. This indemnification provision is in addition to, and not in limitation of, any other indemnification
provision in the Debentures, the Purchase Agreement, or any other agreement, instrument or other document executed or delivered
in connection herewith or therewith.

(l)

Nothing
in this Agreement shall be construed to subject Agent or any Secured Party to liability as a partner in any Debtor or any if its
direct or indirect subsidiaries that is a partnership or as a member in any Debtor or any of its direct or indirect subsidiaries
that is a limited liability company, nor shall Agent or any Secured Party be deemed to have assumed any obligations under any
partnership agreement or limited liability company agreement, as applicable, of any such Debtor or any of its direct or indirect
subsidiaries or otherwise, unless and until any such Secured Party exercises its right to be substituted for such Debtor as a
partner or member, as applicable, pursuant hereto.

(m)

To
the extent that the grant of the security interest in the Collateral and the enforcement of the terms hereof require the consent,
approval or action of any partner or member, as applicable, of any Debtor or any direct or indirect subsidiary of any Debtor or
compliance with any provisions of any of the Organizational Documents, the Debtors hereby grant such consent and approval and
waive any such noncompliance with the terms of said documents.

[SIGNATURE
PAGES FOLLOW]

    	17 

    	 

    

 

IN
WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed on the day and year first above written.

	Legend
    Oil and Gas, Ltd.
	 	 
	By:  	 
	 	Name:

        Title:

	 	 
	Black
    Diamond Energy LLC
	 
	By:	 
	 	Name:

        Title:

	 	 
	Black
    Diamond Energy Holdings LLC
	 
	By:	 
	 	Name:

        Title:

	 	 
	BDE
    Tractor Leasing I, LLC
	 	 
	By:	 
	 	Name:

        Title:

 

[SIGNATURE
PAGE OF HOLDERS FOLLOWS]

    	18 

    	 

    

 

[SIGNATURE
PAGE OF HOLDERS TO LEGEND OIL AND GAS, LTD.]

Name
of Investing Entity: Lorton Finance Company

Signature
of Authorized Signatory of Investing entity: _________________________

Name
of Authorized Signatory: Heidi Bowman

Title
of Authorized Signatory: President

 

    	19 

    	 

    

 

SCHEDULE
A

Location
of Collateral

    	20 

    	 

    

 

SCHEDULE
B

Title
to Property

    	21 

    	 

    

 

SCHEDULE
C

Financing
Statements

    	22 

    	 

    

 

SCHEDULE
D

Legal
Names and Organizational Identification Numbers

    	23 

    	 

    

 

SCHEDULE
E

Names;
Mergers and Acquisitions

    	24 

    	 

    

 

SCHEDULE
F

Account
Debtors

    	25 

    	 

    

 

ANNEX
A

to

SECURITY

AGREEMENT

FORM
OF ADDITIONAL DEBTOR JOINDER

Security
Agreement dated as of September [__] made by

Legend
Oil and Gas, Ltd.

and
its subsidiaries party thereto from time to time, as Debtors

to
and in favor of

the
Secured Parties identified therein (the “Security Agreement”)

Reference
is made to the Security Agreement as defined above; capitalized terms used herein and not otherwise defined herein shall have
the meanings given to such terms in, or by reference in, the Security Agreement.

The
undersigned hereby agrees that upon delivery of this Additional Debtor Joinder to the Secured Parties referred to above, the undersigned
shall (a) be an Additional Debtor under the Security Agreement, (b) have all the rights and obligations of the Debtors under the
Security Agreement as fully and to the same extent as if the undersigned was an original signatory thereto and (c) be deemed to
have made the representations and warranties set forth therein as of the date of execution and delivery of this Additional Debtor
Joinder. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY
INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY
TRIAL PROVISIONS SET FORTH THEREIN.

Attached
hereto are supplemental and/or replacement Schedules to the Security Agreement, as applicable.

An
executed copy of this Joinder shall be delivered to the Secured Parties, and the Secured Parties may rely on the matters set forth
herein on or after the date hereof. This Joinder shall not be modified, amended or terminated without the prior written consent
of the Secured Parties.

    	 

    	 

    

IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be executed in the name and on behalf of the undersigned.

	 	[Name of Additional Debtor]
	 	 
	 	By:
	 	 
	 	Name:
	 	Title:
	 	 
	 	Address:

 

Dated:

    	 

    	 

    

 

ANNEX
B

to

SECURITY

AGREEMENT

THE
AGENT

1.
Appointment. The Secured Parties (all capitalized terms used herein and not otherwise defined shall have the respective
meanings provided in the Security Agreement to which this Annex B is attached (the “Agreement”)), by their
acceptance of the benefits of the Agreement, hereby designate Lorton Finance Company (“Lorton” or “Agent”)
as the Agent to act as specified herein and in the Agreement. Each Secured Party shall be deemed irrevocably to authorize the
Agent to take such action on its behalf under the provisions of the Agreement and any other Transaction Document (as such term
is defined in the Purchase Agreement) and to exercise such powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto.
The Agent may perform any of its duties hereunder by or through its agents or employees.

2.
Nature of Duties. The Agent shall have no duties or responsibilities except those expressly set forth in the Agreement.
Neither the Agent nor any of its partners, members, shareholders, officers, directors, employees or agents shall be liable for
any action taken or omitted by it as such under the Agreement or hereunder or in connection herewith or therewith, be responsible
for the consequence of any oversight or error of judgment or answerable for any loss, unless caused solely by its or their gross
negligence or willful misconduct as determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction.
The duties of the Agent shall be mechanical and administrative in nature; the Agent shall not have by reason of the Agreement
or any other Transaction Document a fiduciary relationship in respect of any Debtor or any Secured Party; and nothing in the Agreement
or any other Transaction Document, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any
obligations in respect of the Agreement or any other Transaction Document except as expressly set forth herein and therein.

    	 

    	 

    

 

3.
Lack of Reliance on the Agent. Independently and without reliance upon the Agent, each Secured Party, to the extent it
deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs
of the Company and its subsidiaries in connection with such Secured Party’s investment in the Debtors, the creation and
continuance of the Obligations, the transactions contemplated by the Transaction Documents, and the taking or not taking of any
action in connection therewith, and (ii) its own appraisal of the creditworthiness of the Company and its subsidiaries, and of
the value of the Collateral from time to time, and the Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Secured Party with any credit, market or other information with respect thereto, whether coming into its
possession before any Obligations are incurred or at any time or times thereafter. The Agent shall not be responsible to the Debtors
or any Secured Party for any recitals, statements, information, representations or warranties herein or in any document, certificate
or other writing delivered in connection herewith, or for the execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, priority or sufficiency of the Agreement or any other Transaction Document, or for the financial condition
of the Debtors or the value of any of the Collateral, or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of the Agreement or any other Transaction Document, or the financial
condition of the Debtors, or the value of any of the Collateral, or the existence or possible existence of any default or Event
of Default under the Agreement, the Debentures or any of the other Transaction Documents.

4.
Certain Rights of the Agent. The Agent shall have the right to take any action with respect to the Collateral, on behalf
of all of the Secured Parties. To the extent practical, the Agent shall request instructions from the Secured Parties with respect
to any material act or action (including failure to act) in connection with the Agreement or any other Transaction Document, and
shall be entitled to act or refrain from acting in accordance with the instructions of a Majority in Interest; if such instructions
are not provided despite the Agent’s request therefor, the Agent shall be entitled to refrain from such act or taking such
action, and if such action is taken, shall be entitled to appropriate indemnification from the Secured Parties in respect of actions
to be taken by the Agent; and the Agent shall not incur liability to any person or entity by reason of so refraining. Without
limiting the foregoing, (a) no Secured Party shall have any right of action whatsoever against the Agent as a result of the Agent
acting or refraining from acting hereunder in accordance with the terms of the Agreement or any other Transaction Document, and
the Debtors shall have no right to question or challenge the authority of, or the instructions given to, the Agent pursuant to
the foregoing and (b) the Agent shall not be required to take any action which the Agent believes (i) could reasonably be expected
to expose it to personal liability or (ii) is contrary to this Agreement, the Transaction Documents or applicable law.

5.
Reliance. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by the proper person or entity, and, with respect to all legal matters pertaining to the Agreement and the
other Transaction Documents and its duties thereunder, upon advice of counsel selected by it and upon all other matters pertaining
to this Agreement and the other Transaction Documents and its duties thereunder, upon advice of other experts selected by it.
Anything to the contrary notwithstanding, the Agent shall have no obligation whatsoever to any Secured Party to assure that the
Collateral exists or is owned by the Debtors or is cared for, protected or insured or that the liens granted pursuant to the Agreement
have been properly or sufficiently or lawfully created, perfected, or enforced or are entitled to any particular priority.

    	 

    	 

    

 

6.
Indemnification. To the extent that the Agent is not reimbursed and indemnified by the Debtors, the Secured Parties
will jointly and severally reimburse and indemnify the Agent, in proportion to their initially purchased respective principal
amounts of Debentures, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against
the Agent in performing its duties hereunder or under the Agreement or any other Transaction Document, or in any way relating
to or arising out of the Agreement or any other Transaction Document except for those determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction to have resulted solely from the Agent’s own gross negligence or
willful misconduct. Prior to taking any action hereunder as Agent, the Agent may require each Secured Party to deposit with it
sufficient sums as it determines in good faith is necessary to protect the Agent for costs and expenses associated with taking
such action.

7.
Resignation by the Agent.

(a)
The Agent may resign from the performance of all its functions and duties under the Agreement and the other Transaction Documents
at any time by giving 30 days’ prior written notice (as provided in the Agreement) to the Debtors and the Secured Parties.
Such resignation shall take effect upon the appointment of a successor Agent pursuant to clauses (b) and (c) below.

(b)
Upon any such notice of resignation, the Secured Parties, acting by a Majority
in Interest, shall appoint a successor Agent hereunder.

(c)
If a successor Agent shall not have been so appointed within said 30-day period, the Agent shall then appoint a successor Agent
who shall serve as Agent until such time, if any, as the Secured Parties appoint a successor Agent as provided above. If a successor
Agent has not been appointed within such 30-day period, the Agent may petition any court of competent jurisdiction or may interplead
the Debtors and the Secured Parties in a proceeding for the appointment of a successor Agent, and all fees, including, but not
limited to, extraordinary fees associated with the filing of interpleader and expenses associated therewith, shall be payable
by the Debtors on demand.

8.
Rights with respect to Collateral. Each Secured Party agrees with all other Secured Parties and the Agent (i) that
it shall not, and shall not attempt to, exercise any rights with respect to its security interest in the Collateral, whether pursuant
to any other agreement or otherwise (other than pursuant to this Agreement), or take or institute any action against the Agent
or any of the other Secured Parties in respect of the Collateral or its rights hereunder (other than any such action arising from
the breach of this Agreement) and (ii) that such Secured Party has no other rights with respect to the Collateral other than as
set forth in this Agreement and the other Transaction Documents. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations under the Agreement. 
After any retiring Agent’s resignation or removal hereunder as Agent, the provisions of the Agreement including this Annex
B shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent.

    	 

    	 

    

 

EXHIBIT
A

FORM
OF SUBSIDIARY GUARANTEE

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