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Exhibit 10.3
 
 
EXECUTION COPY
 
 
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.
 
 
KONARED CORPORATION
 
Warrant
 
Original Issue Date: January 28, 2014
 
Warrant No. VDF1-01-28-14
 
THIS IS TO CERTIFY THAT VDF FutureCeuticals, Inc., or registered assigns, is
entitled, at any time prior to the Expiration Date (such term, and certain other
capitalized terms used herein being hereinafter defined), to purchase from
KonaRed Corporation, a Nevada corporation (the “Company”), shares of Common
Stock representing ten percent (10%) of the Fully Diluted Outstanding shares of
Common Stock of the Company (subject to adjustment as provided herein), at a
purchase price of $0.001 per share (the “Exercise Price”), all on the terms and
conditions and pursuant to the provisions hereinafter set forth.
 
1.             DEFINITIONS
 
As used in this Warrant, the following terms have the respective meanings set
forth below:
 
“After-Tax Basis” when referring to a payment that is required hereunder (the
“target amount”), shall mean a total payment (the “total amount”) that, after
deduction of all federal, state and local taxes that are required to be paid by
the recipient in respect of the receipt or accrual of such total amount, is
equal to the target amount.
 
 “Appraised Value” per share of Common Stock as of a date specified herein shall
mean the value of such a share as of such date as determined by an investment
bank of nationally recognized standing selected by the Holder and reasonably
acceptable to the Company.  If the investment bank selected by the Holder is not
reasonably acceptable to the Company, and the Company and the Holder cannot
agree on a mutually acceptable investment bank, then the Company and the Holder
shall each choose one such investment bank and the respective chosen firms shall
jointly select a third investment bank, which shall make the determination.  The
Company shall pay the
 
 
 
 

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costs and fees of each such investment bank (including any such investment bank
selected by the Holder), and the decision of the investment bank making such
determination of Appraised Value shall be final and binding on the Company and
all affected holders of Warrants or Warrant Stock.  Such Appraised Value shall
be determined as a pro rata portion of the value of the Company taken as a
whole, based on the higher of (A) the value derived from a hypothetical sale of
the entire Company as a going concern by a willing seller to a willing buyer
(neither acting under any compulsion) and (B) the liquidation value of the
entire Company.  No discount shall be applied on account of (i) any Warrants or
Warrant Stock representing a minority interest, (ii) any lack of liquidity of
the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant
Stock may constitute “restricted securities” for securities law purposes or (iv)
any other grounds.
 
“Articles of Incorporation” shall mean the articles of incorporation of the
Company, as amended.
 
“Book Value” per share of Common Stock as of a date specified herein shall mean
the consolidated book value of the Company and its Subsidiaries as of such date
divided by the number of shares of Common Stock Outstanding on such date.  Such
book value shall be determined in accordance with GAAP, except that there shall
be no reduction in such book value by reason of any amount that may be required
either as an offset to or reserve against retained earnings or as a deduction
from book value as a result of the issuance, existence, anticipated exercise of,
or anticipated cost to the Company of the repurchase of, any of the Warrants.
 
“Business Day” shall mean any day that is not a Saturday or Sunday or a day on
which banks are required or permitted to be closed in the State of New York.
 
“Bylaws” shall mean the bylaws of the Company, as amended.
 
“Change of Control” shall mean (a) any sale, transfer, lease or license of all
or substantially all of the assets of the Company in a transaction or series of
related transactions, (b) any merger, consolidation or reorganization that
results in any Person or group of Persons acting in concert (other than Shaun
Roberts, Dana Roberts and/or any trust set up solely for the benefit of Shaun
Roberts or Dana Roberts and/or their descendents) owning in excess of 50% of the
outstanding voting power of the Company, (c) any issuance or sale or series of
issuances or sales of capital stock of the Company by the Company or any holder
of such capital stock that results in any Person or group of Persons acting in
concert (other than Shaun Roberts, Dana Roberts and/or any trust set up solely
for the benefit of Shaun Roberts or Dana Roberts and/or their descendents)
owning in excess of 50% of the outstanding voting power of the Company or (d)
the voluntarily or involuntarily dissolution or liquidation of the Company or
winding up of the Company’s affairs, or the taking by the Company of any action
to effect any of the foregoing.
 
“Commission” shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
 
“Common Stock” shall mean (except where the context otherwise indicates) the
Common Stock of the Company, par value $0.001 per share, as constituted on the
Original Issue Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of any Common Stock upon any reclassification
 
 
 
 

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thereof which is also not preferred as to dividends or liquidation over any
other class of stock of the Company and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring Person (as defined in
Section 4.5 hereof) received by or distributed to the holders of Common Stock of
the Company in the circumstances contemplated by Section 4.5 hereof.
 
“Company” means KonaRed Corporation, a Nevada corporation, and any successor
corporation, including any successor by virtue of a transaction described in
Section 4.1.
 
“Company Default” means (a) the breach of any warranty or the inaccuracy at the
time when made of any representation made by the Company herein or (b) the
failure by the Company to comply with any covenant of the Company contained
herein.
 
“Convertible Securities” shall mean evidences of indebtedness, shares of stock
or other securities that are convertible into or exchangeable for, with or
without payment of additional consideration in cash or property, shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.
 
“Current Market Price” shall mean as of any specified date the average of the
daily market prices of the Common Stock of the Company for the shorter of (x)
the twenty (20) consecutive Business Days immediately preceding such date or (y)
the period commencing on the Business Day next following the first public
announcement of any event giving rise to an adjustment of the Exercise Price
pursuant to Section 4 below and ending on such date.  The “daily market price”
for each such Business Day shall be: (i) if the Common Stock is then listed on a
national securities exchange, the last sale price, regular way, on such day on
the principal stock exchange or market system on which such Common Stock is then
listed or admitted to trading, or, if no such sale takes place on such day, the
average of the closing bid and asked prices for the Common Stock on such day as
reported on such stock exchange or market system or (ii) if the Common Stock is
not then listed or admitted to trading on any national securities exchange but
is traded over-the-counter, the average of the closing bid and asked prices for
the Common Stock as reported on the OTC Bulletin Board.
 
“Designated Office” shall have the meaning set forth in Section 11 hereof.
 
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
 
“Exercise Date” shall have the meaning set forth in Section 2.2(a) hereof.
 
“Exercise Notice” shall have the meaning set forth in Section 2.2(a) hereof.
 
“Exercise Period” shall mean the period during which this Warrant is exercisable
pursuant to Section 2.1 hereof.
 
“Exercise Price” shall mean, in respect of a share of Common Stock at any date
herein specified, the initial Exercise Price set forth in the preamble of this
Warrant.
 
“Expiration Date” shall mean the fifteen anniversary of the Original Issue Date.
 
“Fair Value” per share of Common Stock as of any specified date shall mean the
higher of (i) the Book Value per share of Common Stock as of such date and (ii)
(A) if the Common Stock is publicly traded on such date, the Current Market
Price per share or (B) if the
 
 
 
 

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Common Stock is not publicly traded on such date, (1) the fair market value per
share of Common Stock as determined in good faith by the Board of Directors of
the Company and set forth in a written notice to each Holder or (2) if any such
Holder objects in writing to such price as determined by the Board of Directors
within thirty (30) days after receiving notice of same, the Appraised Value per
share as of such date.
 
“Fully Diluted Outstanding” shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all shares of Common Stock Outstanding on such date and all shares of Common
Stock issuable in respect of (x) the Warrants outstanding on such date, (y) any
Convertible Securities outstanding on such date and (z) any other Stock Purchase
Rights outstanding on such date, in each case regardless of whether or not the
conversion, exchange, subscription or purchase rights associated with such
Convertible Securities or Stock Purchase Rights are presently exercisable.
 
“GAAP” shall mean generally accepted accounting principles in the United States
of America as from time to time in effect.
 
“Holder” shall mean the Person in whose name the Warrant set forth herein is
registered on the books of the Company maintained for such purpose.
 
“Lien” shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code or comparable law of any jurisdiction).
 
“NASDAQ” shall mean the NASDAQ Global Select Market, the NASDAQ Global Market or
the NASDAQ Capital Market or any successor reporting system.
 
“Opinion of Counsel” means a written opinion of counsel (who may be an employee
of a Holder) experienced in Securities Act matters chosen by the holder of this
Warrant or Warrant Stock issued upon the exercise hereof and reasonably
acceptable to the Company.
 
“Original Issue Date” shall mean the date on which the Original Warrant was
issued, as set forth on the cover page of this Warrant.
 
“Original Warrant” shall mean the Warrants originally issued by the Company on
the Original Issue Date to VDF FutureCeuticals, Inc.
 
“Other Property” shall have the meaning set forth in Section 4.1 hereof.
 
“Outstanding” shall mean, when used with reference to Common Stock, at any date
as of which the number of shares thereof is to be determined, all issued shares
of Common Stock, except shares then owned or held by or for the account of the
Company or any Subsidiary thereof, and shall include all shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
 
 
 
 

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“Person” shall mean any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
 
“Restricted Common Stock” shall mean shares of Common Stock which are, or which
upon their issuance on the exercise of this Warrant would be, evidenced by a
certificate bearing the restrictive legend set forth in Section 8.1(a) hereof.
 
“Securities Act” shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
 
“Share Withholding Option” has the meaning set forth in Section 2.2(c) hereof.
 
“Subsidiary” means any corporation or association (a) more than 50% (by number
of votes) of the voting stock of which is at the time owned by the Company or by
one or more Subsidiaries or by the Company and one or more Subsidiaries, or any
other business entity in which the Company or one or more Subsidiaries or the
Company and one or more Subsidiaries own more than a 50% interest either in the
profits or capital of such business entity or (b) whose net earnings, or
portions thereof, are consolidated with the net earnings of the Company and are
recorded on the books of the Company for financial reporting purposes in
accordance with GAAP.
 
“Transfer” shall mean any disposition of any Warrant or Warrant Stock or of any
interest in either thereof, which would constitute a “sale” thereof within the
meaning of the Securities Act.
 
“Warrant Exercise Event” shall mean (i) the Company reports $25,000,000 or more
of gross sales in any fiscal year in its audited financial statements for such
fiscal year, (ii) the Company has a class of securities listed for trading on
the New York Stock Exchange, the American Stock Exchange or NASDAQ, (iii) the
Company maintains an aggregate market capitalization of the Company’s
outstanding capital stock of at least $125,000,000 for twenty (20) consecutive
trading days based on the closing prices for the Common Stock as reported on the
OTC Bulletin Board or (iv) a Change of Control (provided, that with respect to a
Warrant Exercise Event resulting from a Change of Control, the Warrant Exercise
Event shall be deemed to occur immediately prior to the occurrence of the Change
of Control).
 
“Warrants” shall mean the Original Warrant and all warrants issued upon transfer
of, or in substitution for, such Original Warrant or any other such Warrant.
 
“Warrant Price” shall mean an amount equal to (i) the number of shares of Common
Stock being purchased upon exercise of this Warrant pursuant to Section 2.1
hereof, multiplied by (ii) the Exercise Price.
 
“Warrant Stock” generally shall mean the shares of Common Stock issued, issuable
or both (as the context may require) upon the exercise or Warrants until such
time as such shares of Common Stock have either been (i) Transferred in a public
offering pursuant to a
 
 
 
 

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registration statement filed under the Securities Act or (ii) Transferred in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof with all transfer restrictions and
restrictive legends with respect to such Common Stock being removed in
connection with such transaction.
 
2.             EXERCISE OF WARRANT
 
2.1.  Term.
 
(a)  From and after the occurrence of any Warrant Exercise Event and until 5:00
P.M., New York time, on the Expiration Date, the Holder may at its option
exercise this Warrant, on any Business Day, for all of the number of shares of
Common Stock purchasable hereunder (as determined pursuant to Section 2.2
below).
 
(b)  The Company shall give the Holder written notice of a Warrant Exercise
Event and the expiration of the Exercise Period not less than thirty (30) days
but not more than ninety (90) days prior to such Warrant Exercise Event or the
end of the Exercise Period, as applicable.
 
2.2.  Manner of Exercise.
 
(a)  In order to exercise this Warrant, the Holder shall (i) deliver to the
Company at the Designated Office a written notice of the Holder’s election to
exercise this Warrant (an “Exercise Notice”), which Exercise Notice shall be
irrevocable, together with this Warrant and (ii) pay to the Company the Warrant
Price (the date on which both such delivery and payment shall have first taken
place being hereinafter sometimes referred to as the “Exercise Date”).  Such
Exercise Notice shall be in the form of the subscription form appearing at the
end of this Warrant as Annex A, duly executed by the Holder or its duly
authorized agent or attorney.  This Warrant may be exercised only in whole and
not in part.
 
(b)  Upon receipt of such Exercise Notice, Warrant and payment, the Company
shall, as promptly as practicable, and in any event within five (5) Business
Days thereafter, execute (or cause to be executed) and deliver (or cause to be
delivered) to the Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share, as hereafter
provided.  The stock certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as the exercising Holder
shall reasonably request in the Exercise Notice and shall be registered in the
name of the Holder or such other name as shall be designated in the Exercise
Notice.  This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the Exercise
Date.
 
(c)  Payment of the Warrant Price shall be made at the option of the Holder by
one or more of the following methods: (i) by delivery of a certified or official
bank check in the amount of such Warrant Price or by wire transfer of
immediately available funds to an account designated in writing to the Company,
(ii) by instructing the Company to withhold a number of shares of Warrant Stock
then issuable upon exercise of this Warrant with an aggregate Fair
 
 
 
 

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Value equal to such Warrant Price (the “Share Withholding Option”), (iii) by
surrendering to the Company shares of Common Stock previously acquired by the
Holder with an aggregate Fair Value equal to such Warrant Price or (iv) any
combination of the foregoing.  In the event of any withholding of Warrant Stock
or surrender of Common Stock pursuant to clause (ii) or (iii) above where the
number of shares whose Fair Value is equal to the Warrant Price is not a whole
number, the number of shares withheld by or surrendered to the Company shall be
rounded up to the nearest whole share, and the Company shall make a cash payment
to the Holder based on the incremental fraction of a share being so withheld by
or surrendered to the Company in an amount determined in accordance with Section
2.3 hereof.
 
2.3.  Payment of Taxes.  All shares of Common Stock issuable upon the exercise
of this Warrant pursuant to the terms hereof shall be validly issued, fully paid
and nonassessable, issued without violation of any preemptive or similar rights
of any stockholder of the Company and free and clear of all Liens (other than
any created by actions of the Holder).  The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issuance or delivery thereof, except for taxes on
income or gains imposed by law upon the Holder.
 
2.4.  Fractional Shares.  The Company shall not issue any fractional shares of
Common Stock upon exercise of the Warrant.  If exercise of this Warrant would
result in the issuance of a fraction of a share of Common Stock, the Company
shall round such fraction of a share up to the nearest whole share.
 
2.5.  The Company shall cause the shares of Warrant Stock, immediately upon such
exercise, to be listed on any domestic securities exchange upon which shares of
Common Stock or other securities constituting shares of Warrant Stock are listed
at the time of such exercise.
 
2.6.  Conditional Exercise.  Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in connection with a
public offering or a sale of the Company (pursuant to a merger, sale of stock,
or otherwise), such exercise may at the election of the Holder be conditioned
upon the consummation of such transaction, in which case such exercise shall not
be deemed to be effective until immediately prior to the consummation of such
transaction.
 
3.             TRANSFER, DIVISION AND COMBINATION
 
3.1.  Transfer.  Subject to compliance with Section 8 hereof, each transfer of
this Warrant and all rights hereunder shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at the
Designated Office, together with a written assignment of this Warrant in the
form of Annex B hereto duly executed by the Holder or its agent or
attorney.  Upon such surrender and delivery, the Company shall, subject to
Section 8, execute and deliver a new Warrant in the name of the assignee
specified in such instrument of assignment, and this Warrant shall promptly be
cancelled.  A Warrant, if properly assigned in compliance with Section 8, may be
exercised by the new Holder for the purchase of shares of Common Stock without
having a new Warrant issued.
 
3.2.  Expenses.  The Company shall prepare, issue and deliver at its own expense
any new Warrant required to be issued under this Section 3.
 
 
 
 

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3.3.  Maintenance of Books.  The Company agrees to maintain, at the Designated
Office, books for the registration and transfer of this Warrant.
 
4.             ADJUSTMENT PROVISIONS
 
The number of shares of Common Stock for which this Warrant is exercisable and
the Exercise Price shall be subject to adjustment from time to time as set forth
in this Section 4.
 
4.1.  Reorganization, Reclassification, Merger, Consolidation or Disposition of
Assets.  In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another Person (where the
Company is not the surviving Person or where there is any change whatsoever in,
or distribution with respect to, the Outstanding Common Stock of the Company),
sell, transfer or otherwise dispose of all or substantially all of its property,
assets or business to another Person or enter into any other similar transaction
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, (i) shares of common stock of the
successor or acquiring Person or of the Company (if it is the surviving Person)
or (ii) any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring Person
(“Other Property”) are to be received by or distributed to the holders of Common
Stock of the Company who are holders immediately prior to such transaction, then
the Holder of this Warrant shall have the right thereafter to receive, upon
exercise of this Warrant, the number of shares of common stock of the successor
or acquiring Person or of the Company, if it is the surviving Person, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event.  In such event, the aggregate Exercise Price
otherwise payable for the shares of Common Stock issuable upon exercise of this
Warrant shall be allocated among the shares of common stock and Other Property
receivable as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets in proportion to the respective fair
market values of such shares of common stock and Other Property as determined in
good faith by the Board of Directors of the Company.  In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject to such
modifications as may be reasonably deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of any shares of the common stock of such successor or acquiring
corporation for which this Warrant thus becomes exercisable, which modifications
shall be as equivalent as practicable to the adjustments provided for in this
Section 4.  For purposes of this Section 4.1, “common stock of the successor or
acquiring corporation” shall include stock of such corporation of any class that
is not preferred as to dividends or assets over any other class of stock of such
corporation and that is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities that are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock.  The
foregoing provisions of this Section 4.1 shall similarly apply to successive
reorganizations, reclassification, mergers, consolidations or disposition of
assets.
 
 
 
 

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Notwithstanding anything to the contrary contained herein, with respect to any
corporate event or other transaction contemplated by the provisions of this
Section 4.1, the Holder shall have the right to elect prior to the consummation
of such event or transaction, to give effect to the exercise rights contained in
Section 2, if applicable, instead of giving effect to the provisions contained
in this Section 4.1 with respect to this Warrant.
 
4.2.  Other Dilutive Events.  In case any event shall occur as to which the
other provisions of this Section 4 are not strictly applicable but as to which
the failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof, then, in each such case, the Holder may select an independent
banking firm of nationally recognized standing and reasonably acceptable to the
Company to make a determination as to the adjustment, if any, required to be
made on a basis consistent with the essential intent and principles established
herein as a result of such event in order to preserve the purchase rights
represented by the Warrants.  If the investment bank selected by the Holder is
not reasonably acceptable to the Company, and the Company and the Holder cannot
agree on a mutually acceptable investment bank, then the Company and the Holder
shall each choose one such investment bank and the respective chosen firms shall
jointly select a third investment bank, which shall make the determination.  The
Company shall pay the costs and fees of each such investment bank (including any
such investment bank selected by the Holders), and the decision of the
investment bank making such determination shall be final and binding on the
Company and all affected holders of Warrants or Warrant Stock.  Promptly after
receipt of the opinion of such investment bank as to any such required
adjustments, the Company shall take any actions necessary to implement same.
 
4.3.  Other Provisions Applicable to Adjustments Under this Section.  The
following provisions shall be applicable to the adjustments provided for
pursuant to this Section 4:
 
(a)  When Adjustments To Be Made.  The adjustments required by this Section 4
shall be made whenever and as often as any specified event requiring such an
adjustment shall occur.  For the purpose of any such adjustment, any specified
event shall be deemed to have occurred at the close of business on the date of
its occurrence.
 
(b)  Maximum Exercise Price.  At no time shall the Exercise Price per share of
Common Stock exceed the amount set forth in the first paragraph of the preamble
of this Warrant.
 
(c)  Notice of Adjustments.  Whenever any adjustment pursuant to this Section 4
shall be made, the Company shall forthwith prepare a certificate to be executed
by the chief financial officer of the Company setting forth, in reasonable
detail, the event requiring the adjustment and the method by which such
adjustment was calculated, describing the number and kind of any other shares of
stock or Other Property for which this Warrant is exercisable, after giving
effect to such adjustment or change.  The Company shall promptly cause a signed
copy of such certificate to be delivered to each Holder in accordance with
Section 13.2.  The Company shall keep at its principal office or at the
Designated Office, if different, copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by any Holder or any prospective transferee of a Warrant designated by a Holder
thereof.
 
 
 
 

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(d)  Independent Application.  Except as otherwise provided herein, all
subsections of this Section 4 are intended to operate independently of one
another (but without duplication).  If an event occurs that requires the
application of more than one subsection, all applicable subsections shall be
given independent effect without duplication.
 
5.             NO IMPAIRMENT
 
The Company shall not by any action, including, without limitation, amending its
charter documents or through any reorganization, reclassification, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other similar voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of the Holder
against impairment.  Without limiting the generality of the foregoing, the
Company shall take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant, free and clear of all
Liens, and shall use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction over
it as may be necessary to enable the Company to perform its obligations under
this Warrant.
 
6.             RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH
OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
 
From and after the Original Issue Date, the Company shall at all times reserve
and keep available for issuance upon the exercise of the Warrants such number of
its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants.  All shares of Common
Stock issuable pursuant to the terms hereof, when issued upon exercise of this
Warrant with payment therefor in accordance with the terms hereof, shall be duly
and validly issued and fully paid and nonassessable, not subject to preemptive
rights and shall be free and clear of all Liens.  If any shares of Common Stock
required to be reserved for issuance upon exercise of Warrants require
registration or qualification with any governmental authority under any federal
or state law (other than under the Securities Act or any state securities law)
before such shares may be so issued, the Company will in good faith and as
expeditiously as possible and at its expense endeavor to cause such shares to be
duly registered.
 
7.             NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
 
7.1.  Notices of Corporate Actions.  In the event of: (a) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares of capital stock of any class or any other securities, (b) any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger involving the
Company and any other Person or any transfer or other disposition of all or
substantially all the assets of the Company to another Person, (c) any voluntary
or involuntary dissolution, liquidation or winding-up of the Company, (d) any
amendment of the Articles of Incorporation or (e) any registration or public
offering of Common Stock, the Company shall mail to each Holder of a Warrant in
accordance with the provisions of Section 13.2 hereof a notice specifying (i)
the date or expected date on which any such record is to be taken for the
purpose of such dividend, distribution or right,
 
 
 
 

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and the amount and character of such dividend, distribution or right and (ii)
the date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, disposition, dissolution,
liquidation or winding-up is to take place, the time, if any such time is to be
fixed, as of which the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for the securities or Other Property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, disposition, dissolution, liquidation or
winding-up and a description in reasonable detail of the transaction.  Such
notice shall be mailed to the extent practicable at least thirty (30), but not
more than ninety (90) days prior to the date therein specified.  In the event
that the Company at any time sends any other notice to the holders of its Common
Stock, it shall concurrently send a copy of such notice to each Holder of a
Warrant.
 
7.2.  Closing of Transfer Books.  The Company shall not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
 
8.             TRANSFER
 
The Holder, by acceptance of this Warrant, agrees to be bound by the provisions
of this Section 8.
 
8.1.  Restrictive Legends.
 
(a)  Except as otherwise provided in this Section 8, each certificate for
Warrant Stock initially issued upon the exercise of this Warrant, and each
certificate for Warrant Stock issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with two legends in
substantially the following forms:
 
“THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT.”
 
(b)  Except as otherwise provided in this Section 8, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
 
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN
 
 
 
 

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THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.”
 
8.2.  Termination of Securities Law Restrictions.  Notwithstanding the foregoing
provisions of Section 8 and the legend requirements of Section 8.1 shall
terminate as to any particular Warrant or shares of Restricted Common Stock when
the Company shall have received from the holder thereof an Opinion of Counsel to
the effect that such legend is not required in order to ensure compliance with
the Securities Act.  Whenever the restrictions imposed by Section 8.1 shall
terminate as to this Warrant, as hereinabove provided, the Holder hereof shall
be entitled to receive from the Company, at the expense of the Company, a new
Warrant not bearing such restrictive legend set forth in Section 8.1(b).
 
Wherever the restrictions imposed by this Section shall terminate as to any
share of Restricted Common Stock, as hereinabove provided, the holder thereof
shall be entitled to receive from the Company, at the Company’s expense, a new
certificate representing such Common Stock not bearing the restrictive legend
set forth in Section 8.1(a).
 
8.3.  Listing on Securities Exchange.  If the Company shall list any shares of
Common Stock on any securities exchange, it shall at its expense, to the extent
permitted by the rules of such securities exchange, list thereon, maintain and,
when necessary, increase such listing of, all shares of Warrant Stock issued or,
to the extent permissible under the applicable securities exchange rules,
issuable upon the exercise of this Warrant.
 
9.             SUPPLYING INFORMATION; RULE 144
 
The Company shall cooperate with each holder of a Warrant and each holder of
Warrant Stock in supplying such information as may be reasonably necessary for
such holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Warrant or shares of
Warrant Stock.  The Company shall use its best efforts to at all times make
public information available so as to afford the holders of the Warrants and the
Warrant Stock the benefits of Rule 144 of the Commission in connection with
resales, and upon request of any Holder shall provide such Holder with such
financial statements, reports and other information as may be required to permit
such Holder to sell Warrants or shares of Warrant Stock to one or more
“Qualified Institutional Buyers” under Rule 144A of the Commission, in each case
as such Rule may be amended from time to time or replaced or supplemented by any
similar rule or regulation hereafter adopted by the Commission.
 
10.           LOSS OR MUTILATION
 
Upon receipt by the Company from any Holder of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of this
Warrant and an indemnity reasonably satisfactory to it (it being understood that
the written indemnification agreement or affidavit of loss of the Holder shall
be a sufficient indemnity) and, in case of mutilation, upon surrender and
cancellation hereof, the Company will execute and deliver in lieu hereof a new
Warrant of like tenor to such Holder; provided, however, in the case of
mutilation, no indemnity shall be required if this Warrant in identifiable form
is surrendered to the Company for cancellation.
 
 
 
 

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11.           OFFICE OF THE COMPANY
 
As long as any of the Warrants remain outstanding, the Company shall maintain an
office or agency, which may be the principal executive offices of the Company
(the “Designated Office”), where the Warrants may be presented for exercise,
registration of transfer, division or combination as provided in this
Warrant.  Such Designated Office shall initially be the office of the Company at
2829 Ala Kalani Kaumaka St., Suite F-133 Koloa, HI 96756.  The Company may from
time to time change the Designated Office to another office of the Company or
its agent within the United States by notice given to all registered holders of
Warrants at least ten (10) Business Days prior to the effective date of such
change.
 
12.           FINANCIAL AND BUSINESS INFORMATION
 
Until the Expiration Date, the Company shall deliver to each holder of Warrants
or of Warrant Stock one copy of each of the following items:
 
(i)  as soon as available, and in any event within forty-five (45) days after
the end of each of the first three quarters of each fiscal year, unaudited
interim consolidated balance sheets of the Company and its Subsidiaries as at
the end of such quarter and the related consolidated statements of income, cash
flow, stockholders equity and changes in financial position of the Company and
its Subsidiaries as at the end of and for such quarter, setting forth in each
case in comparative form the corresponding figures for and as at the end of the
corresponding quarter of the preceding fiscal year, all in reasonable detail and
certified by a principal financial officer of the Company, as prepared in
accordance with GAAP consistently applied (subject to year end adjustments and
the absence of footnotes), and fairly presenting the consolidated financial
position and results of operations of the Company and its Subsidiaries for such
periods;
 
(ii)  within ninety (90) days after the end of each fiscal year of the Company,
consolidated balance sheets of the Company and its Subsidiaries as at the end of
such year and the related consolidated statements of income, stockholders’
equity and changes in financial position of the Company and its Subsidiaries for
such fiscal year, setting forth in each case in comparative form the
consolidated figures for the previous fiscal year, all in reasonable detail and
accompanied by a report thereon of independent public accountants of recognized
national standing selected by the Company, which report shall state that such
consolidated financial statements present fairly the financial position of the
Company and its Subsidiaries as at the dates indicated and the results of their
operations and changes in their financial position for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years (except as
otherwise specified in such report) and that the audit by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards;
 
 
 
 

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(iii)  promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available by the
Company to the holders of any class of its securities generally or by any
Subsidiary of the Company to the holders of any class of its securities
generally; and
 
(iv)  with reasonable promptness, such other information relating to the Company
and its Subsidiaries as the Holder may, from time to time, reasonably request.
 
13.           MISCELLANEOUS
 
13.1.  Nonwaiver.  No course of dealing or any delay or failure to exercise any
right hereunder on the part of the Company or the Holder shall operate as a
waiver of such right or otherwise prejudice the rights, powers or remedies of
such Person.
 
13.2.  Notice Generally.  Any notice, demand, request, consent, approval,
declaration, delivery or communication hereunder to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing and
either delivered in person with receipt acknowledged or sent by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
 
(a)  if to any Holder of this Warrant or holder of Warrant Stock issued upon the
exercise hereof, at its last known address appearing on the books of the Company
maintained for such purpose;
 
(b)  if to the Company, at its Designated Office;
 
or at such other address as may be substituted by notice given as herein
provided.  The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice.  Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, or three (3) Business Days after the same
shall have been deposited in the United States mail, or one (1) Business Day
after the same shall have been delivered to Federal Express or another overnight
courier service.
 
13.3.  Indemnification.  The Company shall indemnify, save and hold harmless the
Holder hereof and the holders of any Warrant Stock issued upon the exercise
hereof from and against any and all liability, loss, cost, damage, reasonable
attorneys’ and accountants’ fees and expenses, court costs and all other
out-of-pocket expenses incurred in connection with or arising from a Company
Default.  This indemnification provision shall be in addition to the rights of
such Holder or holders to bring an action against the Company for breach of
contract based on such Company Default.
 
13.4.  Limitation of Liability.  No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder to pay the Exercise Price for any Warrant
Stock other than pursuant to an exercise of this Warrant or any liability as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
 
 
 
 

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13.5.  Remedies.  Each holder of Warrants and/or Warrant Stock, in addition to
being entitled to exercise its rights granted by law, including recovery of
damages, shall be entitled to specific performance of its rights provided under
this Warrant.  The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Warrant and hereby agrees, in an action for specific performance, to
waive the defense that a remedy at law would be adequate.
 
13.6.  Successors and Assigns.  Subject to the provisions of Sections 3.1 and
8.1, this Warrant and the rights evidenced hereby shall inure to the benefit of
and be binding upon the successors of the Company and the permitted successors
and assigns of the Holder hereof.  The provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant and to
the extent applicable, all holders of shares of Warrant Stock issued upon the
exercise hereof (including transferees), and shall be enforceable by any such
holder.
 
13.7.  Amendment.  This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.
 
13.8.  Severability.  Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Warrant.
 
13.9.  Headings.  The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
 
13.10.  GOVERNING LAW; JURISDICTION.  IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEVADA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF
WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH
RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF
NEVADA.  THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
LOCATED IN NEVADA, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION
TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER
OF THIS WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT.
 
 
 
 
 
 

 
 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and
its corporate seal to be impressed hereon and attested by its Secretary or an
Assistant Secretary.
 

  KONARED CORPORATION                
 
By:
“Shaun Roberts”       Name:       Title:          

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

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ANNEX A
 
SUBSCRIPTION FORM
 
[To be executed only upon exercise of Warrant]
 
 
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of ______ shares Common Stock of KonaRed
Corporation  and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_________________ whose address is
___________________________________________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
 
 

            (Name of Registered Owner)                       (Signature of
Registered Owner)                       (Street Address)                      
(City) (State) (Zip Code)  

 
 
 
NOTICE:
The signature on this subscription must correspond with the name as written upon
the face of the within Warrant in every particular, without alteration or
enlargement or any change whatsoever.

 
 
 
 
 
 
 
 
 

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ANNEX B
 
ASSIGNMENT FORM
 
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
 
Name and Address of Assignee
 
 
 
 
 
and does hereby irrevocably constitute and appoint ________ _____________
attorney-in-fact to register such transfer onto the books of KonaRed Corporation
maintained for the purpose, with full power of substitution in the premises.
 
 

Dated:     Print Name:                       Signature:                      
Witness:    

 
 
 
NOTICE:
The signature on this assignment must correspond with the name as written upon
the face of the within Warrant in every particular, without alteration or
enlargement or any change whatsoever.

 
 
 
 
 
 
 
 
 
 
 
 

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