[LETTERHEAD] July 22, 1994 To former DynEco International, Inc shareholders: Effective March 31, 1994, the shares of DynEco International, Inc. were exchanged for shares of DynEco Corporation. In this exchange, DynEco Corporation assumed certain outstanding Warrants of DynEco International, Inc. The Warrants assumed included a Warrant to all DynEco International, Inc. shareholders to purchase one (1) additional common share of DynEco International, Inc. share at $7.00 per share until December 31, 1995, subject to the terms and conditions of the Warrant, for each ten (10) shares held. Upon your exercise and return of the enclosed Warrant Purchase Agreement (no payment required), a DynEco Corporation Warrant certificate will promptly be forwarded to you. If you have any questions regarding the Warrant, please call me at 612-633-1501. Also enclosed for your information is a Research Report on DynEco Corporation issued by Mathews, Holmquist & Associates, Inc. Respectfully, /s/ Donald Hewitt Donald Hewitt Assistant Secretary Enclosures: WARRANT PURCHASE AGREEMENT DYNECO CORPORATION July 1, 1994 TOTAL Shares Dear Sir/Madam: On May 1, 1993, DynEco International, Inc. ("DII") issued you a Warrant to purchase up to 392,600 shares of common stock of DII for the purchase price of $7.00 per share (the "DII Warrant"). On March 31, 1994 (the "Effective Date"), the shareholders of DII exchanged all of their shares of DII common stock for the common stock of DynEco Corporation (the "Exchange") pursuant to the terms and provisions of that certain Agreement and Plan of Exchange dated June 18, 1993. On the Effective Date of the Exchange, DynEco Corporation (the "Company") assumed the DII Warrant and, in connection therewith, the Company and you agree to enter into this Warrant Purchase Agreement, which incorporates all of the terms and provisions of the DII Warrant previously issued to you. The Company hereby agrees with you as follows: 1. Concurrently with the execution of the Warrant Purchase Agreement (the "Agreement"), the Company will sell and deliver to you for one ($1.00) Dollar and other good and valuable consideration, a Warrant to purchase up to 392,600 shares of Common Stock of the Company for the purchase price of Seven Dollars ($7.00) per share of Common Stock (the "Warrant"). 2. The Warrant purchase right may be exercised at any time after May 1, 1993, and up until 5:00 o'clock p.m. on December 31, 1995 except that if the Company at any time after the Warrant first becomes exercisable and prior to December 31, 1995 proposes to register any of its securities, either for its own account or the account of security holders, other than a registration on Forms S-8 or S-14, or any registration on a form which does not permit secondary sales, the Company shall give written notice of such intention to each holder of Warrants ("Holder"), and, said Holder must exercise the Warrant purchase right within thirty (30) days of such notice or the Warrant shall expire with no further action taken on the part of the company. 3. The Company covenants that all shares that may be issued upon the exercise of the Warrant will, upon issuance, be validly issued, fully paid and non assessable and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants that during the period within which the Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to permit the exercise of the Warrant. 4. Neither the Warrant nor your right under this Agreement shall be transferable except (i) by consent of the Company and (ii) in compliance with all applicable federal and state securities laws to the satisfaction of the Company. The provisions of this Section 4 shall be binding upon any transferee of the Warrant. The Warrant and shares issued upon the exercise of the Warrant shall bear the following legend: NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS WARRANT OR THE SHARES PURCHASABLE HEREUNDER SHALL BE MADE EXCEPT PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED. TRANSFER OF THIS Page 1 of 4 WARRANT IS ALSO RESTRICTED BY AN AGREEMENT DATED MAY 1, 1993. A COPY OF WHICH IS AVAILABLE FROM THE ISSUER. 5. (a) The provision of this Section 5 shall be binding upon any transferee of the Warrant and upon each holder of shares of Common Stock or other Company securities issued upon exercise of the Warrant (the "Shares") until such Shares shall have been sold to the public pursuant to either an effective registration statement under the Securities Act of 1933, as amended (the 1933 Act") or an exemption from registration established to the satisfaction of the Company. You and each transferee will cause any proposed transferee of the Shares to agree to take and hold the Shares subject to the provisions of this Section 5. As used in this Section 5, the term "Shares" includes any shares of the Company's Common Stock or other securities issued in respect of the Shares pursuant to any stock split, stock dividend, recapitalization or otherwise; and the term "Warrant" includes any warrant or warrants issued in exchange for the original Warrant. (b) Prior to any proposed transfer of the Warrant or of the Shares, the holder thereof shall give written notice to the Company stating such holder's intention to effect such transfer and describing the circumstances of the proposed transfer in sufficient detail, accompanied by either (i) an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer may be effected without registration under the Securities Act, or (ii) a "no action" letter from the staff of the Securities and Exchange Commission to the effect that the staff will not recommend that enforcement action be taken if the proposed transfer is effected without registration. Subject to evidence of compliance with any applicable state securities or "blue sky" law or laws, the Company shall promptly notify the holder in writing that such holder may proceed with its transfer as described, and, if the transfer is of Shares, shall instruct its transfer agent to remove any stop-transfer restrictions against the Shares when transferred as proposed. (c) If the Company at any time after the Warrant first becomes exercisable and prior to December 31, 1995 proposes to register any of its securities, either for its own account or the account of security holders, other than a registration on Forms S-8 or S-14, or any registration on a form which does not permit secondary sales, the Company shall, each such time, give written notice of such intention to each holder of Warrants or Shares ("Holder"), and, upon written request of any Holder received by the company within twenty (20) days after the Company has given such notice, include in such registration (and all related qualifications under state securities laws) all Shares (whether issued or issuable) specified in such written request. If the registration involves any underwriting, the Company shall so advise the Holders in the notice, and the right of each Holder to have its Shares included in the registration shall be conditioned upon such Holder's Shares being included in the underwriting arrangements with underwriters (selected by the Company) on the same terms as other persons selling common stock or other Company securities to the underwriters. Notwithstanding the foregoing, if the underwriters determine that marketing factors require a limitation of the number of shares to be underwritten, the number of Shares to be registered for the account of all Holders may be limited in proportion to limitations imposed on other holders of Company Common Stock or other Company securities seeking to have their securities included in the registration pursuant to registration rights similar to those conferred upon Holders by this paragraph (c); provided, however, that priority may be given to securities to be sold for the account of the Company. The allocation shall be made in proportion, as nearly as practicable, to the respective number of shares requested to be included in such registration by each person selling Company Common Stock or other company securities to the underwriters, including Holders. Any Holder disapproving of the terms of the underwriting may withdraw therefrom by written notice to the Company, and such Holder's Shares shall be withdrawn from registration. Page 2 of 4 (d) All expenses of registration and qualification incurred in connection with a registration under paragraph (c) of this Section 5 shall be borne by the Company, except that each Holder whose Shares are being registered shall bear the fees and expenses of its own counsel, if any, and the underwriting commission or discount applicable to its Shares being sold. The Company will keep the Holders participating in a registration advised of the status of the registration and will furnish such number of preliminary and final prospectuses as such Holders may reasonably request; and such Holders will furnish to the Company such information regarding such Holders as may be required in connection with the registration. (e) The following provisions shall apply to any registration effected pursuant to paragraph (c) of this Section 5: (i) The Company shall indemnify and hold harmless such Holder and each underwriter of the Shares so registered or qualified (including any broker or dealer through whom such securities may be sold) and each person, if any, who controls any such Holder or any such underwriter within the meaning of the Securities Act from and against any and all losses, claims, damages, expenses or liabilities, joint and several, to which they or any of them may become subject under the Securities Act or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse each Holder and each of the underwriters and each such controlling person, if any, for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any actions, whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, any preliminary prospectus or the final prospectus (or the registration statement or prospectus as from time to time amended or supplemented by the Company) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, unless such untrue statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by such Holder or underwriter expressly for use therein. Promptly after receipt by any Holder or any underwriter or any person controlling such Holder or such underwriter of notice of the commencement of any action in respect of which indemnity may be sought against the Company, such Holder or such underwriter, as the case may be, will notify the Company in writing of the commencement thereof, and, subject to the provisions hereinafter stated, the Company shall assume the defense of such action (including the employment of counsel, who shall be counsel satisfactory to such Holder or such underwriter or such person, as the case may be, and the payment of legal expenses) insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against the Company. Any Holder or any underwriter or any such controlling person shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall not be at the expense of the Company unless the employment of such counsel has been specifically authorized by the Company, which authorization shall be given whenever the party seeking indemnity has been advised by its counsel that one or more legal defenses may be available to it that are not available to the Company or that for other reasons separate representation may be necessary, to avoid a conflict. The Company shall not be liable to indemnify any person for any settlement of any such action effected without the consent of the Company. (ii) Any Holder will indemnify and hold harmless the Company, each of its directors and each of its officers who have signed the registration statement and each person, if any, who controls the Company within the meaning of the Securities Act from and against any and all losses, claims, damages, expenses of liabilities, joint and several, to which they are or any of them may become subject under the Page 3 of 4 Securities Act or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse the Company and each such director, officer or controlling person for any legal and other expenses reasonably incurred by any of them in connection with investigating or defending any actions, whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary prospectus or in the final prospectus (or the registration statement or prospectus as from time to time amended or supplemented) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by such Holder expressly for use therein. Promptly after receipt of notice of the commencement of any action in respect of which indemnity may be sought against any Holder, the Company will notify such Holder in writing of the commencement thereof, and such Holder shall, subject to the provisions hereinafter stated, assume the defense of such action (including the employment of counsel, who shall be counsel satisfactory to the Company, and the payment of legal expenses) insofar as such action shall relate to an alleged liability in respect of which indemnity may be sought against such Holder. The Company and each such director, officer or controlling person shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall not be at the expense of such Holder unless the employment of such counsel has been specifically authorized by such Holder, which authorization shall be given whenever separate representation may be necessary to avoid a conflict. No Holder shall be liable to indemnify any person or any settlement of any such action effected without the consent of such Holder. (iii) The indemnity provisions of this paragraph (e) shall be in addition to any liability the indemnitor may otherwise have. If the foregoing correctly sets forth our understanding, please sign below. Very truly yours, DYNECO CORPORATION, By /s/ Donald Hewitt ---------------------------------- Donald Hewitt, Assistant Secretary Accepted as of the date written above: - ----------------------------------- - ----------------------------------- Warrant Holder(s) DYNECO CORPORATION 5151 Edina Industrial Blvd - Suite 105 Minneapolis, MN 55439 612-832-0832 Donald Hewitt 612-633-1501 Page 4 of 4