Exhibit 10.3
 
SALE RESTRICTION AGREEMENT
 
THIS SALE RESTRICTION AGREEMENT (the "Agreement") is made and entered into as of
September 29, 2017 (the "Effective Date"), by and between KonaRed Corporation, a
Nevada corporation (the "Company"), and VDF FutureCeuticals, Inc., an Illinois
corporation (the "Shareholder").
 
WHEREAS, the Shareholder and the Company are parties to (i) the Coffee Fruit
Patent License, Coffeeberry® Trademark License and Raw Materials Supply
Agreement, dated as of January 28, 2014, as amended (the "License Agreement"),
by and between the Shareholder and the Company, (ii) the VDF FutureCeuticals
Premium Hawaiian Coffee Fruit Purchase Agreement, dated as of November 6, 2015,
as amended (the "Supply Agreement"), by and between the Shareholder and the
Company, (iii) the Senior Convertible Note, dated as of January 28, 2014, as
amended (the "Note"), issued by the Company to the Shareholder, (iv) the Pledge
and Security Agreement, dated as of January 28, 2014 (the "Security Agreement"),
by and between the Shareholder and the Company, (v) the Warrant, dated as of
January 28, 2014, as amended (the "Warrant"), issued by the Company to the
Shareholder, (vi) the Registration Rights Agreement, dated as of January 28,
2014 (the "Registration Rights Agreement"), by and between the Shareholder and
the Company, and (vii) the Investor Rights Agreement, dated as of January 28,
2014, as amended (the "Investor Rights Agreement" and, together with  the
License Agreement, the Supply Agreement, the Note, the Security Agreement, the
Warrant and the Registration Rights Agreement, collectively, the "VDF-KonaRed
Agreements"), by and between the Shareholder and the Company.
 
WHEREAS, the parties have agreed to certain restrictions on the Shareholder's
ability to publicly sell though market transactions the shares of Company common
stock, par value $0.001 per share ("Common Stock"), that were acquired by the
Shareholder upon completion of the Share Conversion (as defined in the Note) of
the Note or that may be acquired by the Shareholder upon the exercise of the
Warrant (collectively, the "Covered Shares").
 
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
 
1.             Quarterly Sales Limit.
 
(a)          Subject to Sections 1(b) and 1(c), the Shareholder will be
permitted to publicly sell through transactions on a stock exchange or
over-the-counter market upon which the Common Stock is traded up to 1,050,000 of
the Covered Shares (the "Quarterly Sales Limit") in each three-month period,
without the prior written consent of the Company, with the first three-month
period commencing on the first day of the month in which the Effective Date
occurs (the "Restriction Period Commencement Date"); provided, however, if the
Shareholder does not sell at least 4 million of the Covered Shares during the
twelve-month period commencing on the Restriction Period Commencement Date (the
"Initial Restriction Period"), then the Quarterly Sales Limit shall terminate as
of the end of the Initial Restriction Period and no longer be in force or
effect.  If the Shareholder sells at least 4 million of the Covered Shares
during the Initial Restriction Period, then the Quarterly Sales Limit shall
continue in force and effect for a subsequent twelve-month period commencing at
the end of the Initial Restriction Period (the "Second
 
 

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Restriction Period").  If, during the Second Restriction Period, the Shareholder
does not sell at least 4 million of the Covered Shares, not including any
Covered Shares sold during the Initial Restriction Period, then the Quarterly
Sales Limit shall terminate and no longer be in force or effect as of the end of
the Second Restriction Period. If, during the Second Restriction Period, the
Shareholder sells at least 4 million of the Covered Shares, not including any
Covered Shares sold during the Initial Restriction Period, then the Quarterly
Sales Limit shall continue in force and effect for a subsequent twelve-month
period commencing at the end of the Second Restriction Period (the "Final
Restriction Period").  If not terminated earlier as set forth above, the
Quarterly Sales Limit shall terminate at the end of the Final Restriction
Period.
 
(b)         Sales by the Shareholder of the Covered Shares other than (i) sales
made in reliance on Rule 144 or Rule 144A promulgated under the Securities Act
of 1933, as amended (the "Securities Act") or (ii) pursuant to any registration
statement under the Securities Act shall not be subject to, or otherwise taken
into account in determining compliance with, the Quarterly Sales Limit.
 
(c)         The restrictions set forth in Section 1(a) shall not apply to any
transfer by the Shareholder or any Permitted Transferee (as defined below) of
the Covered Shares (i) to any Affiliate of the Shareholder or such Permitted
Transferee, as applicable, (ii) as a bona fide gift or gifts to any donee or
donees of the Shareholder or such Permitted Transferee, as applicable, or (iii)
to any trust for the direct or indirect benefit of the Shareholder or such
Permitted Transferee, as applicable, or the immediate family of the Shareholder
or such Permitted Transferee, as applicable; provided, that such Affiliate,
donee or donees and trustee of such trust agree in writing to be bound by the
restrictions set forth herein.  For purposes of this Agreement, (x) "immediate
family" shall mean any relationship by blood, marriage or adoption, not more
remote than first cousin, (y) "Affiliate" shall mean with respect to any Person,
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person and (z) "Permitted
Transferee" shall mean any Person described in clause (i), (ii) or (iii) above.
 
(d)         Without limiting the rights of the Shareholder under Sections
1(a)-(c) above, the Shareholder acknowledges that the Company is not providing
any guarantee to the Shareholder that the Shareholder will be able to sell the
Covered Shares.  The Company is listed on the OTCQB as of the date of this
Agreement and, at its own discretion, the Company may elect to delist from the
OTCQB or move to another qualified exchange.
 
(e)         Each certificate for the Covered Shares and any subsequent
certificate issued to any Permitted Transferee of any such certificate, shall be
stamped or otherwise imprinted with the legend in substantially the following
form:
 

i)
"TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
CONDITIONS SPECIFIED IN A SALE RESTRICTION AGREEMENT DATED SEPTEMBER 29, 2017,
AS AMENDED AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH CONDITIONS MAY BE
OBTAINED FROM THE COMPANY UPON WRITTEN REQUEST AND WITHOUT CHARGE."

 

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2.             Registration Rights Agreement.  The Shareholder shall not
exercise its right to demand registration of the Covered Shares pursuant to
Section 2.1 of the Registration Rights Agreement at any time when the Quarterly
Sales Limit is in effect.  The restriction set forth in the preceding sentence
shall not limit the right of the Shareholder to require incidental registration
of Covered Shares pursuant to Section 2.2 of the Registration Rights Agreement.
 
3.             Adjustments to Prevent Dilution.  If, at any time during the Term
of this Agreement, there is a change in the number of issued and outstanding
shares of Common Stock, or securities convertible or exchangeable into shares of
Common Stock, in each case, as a result of a reclassification, stock split
(including reverse stock split), stock dividend or stock distribution,
recapitalization, merger, combination, exchange of shares, subdivision or other
similar transaction, there will be a proportional adjustment to the Quarterly
Sales Limit to provide the Shareholder with the same economic effect as
contemplated by this Agreement prior to such event.
 
4.             Beneficial Ownership.  Except as otherwise provided in this
Agreement or any other agreements between the parties, the Shareholder shall be
entitled to all of the rights of beneficial ownership of the Covered Shares,
including the right to vote the Covered Shares for any and all purposes.
 
5.             Transfer Agent.  In accordance with the terms and conditions set
forth in this Agreement, the Company may impose stop-transfer instructions
preventing the Transfer Agent from effecting any actions in violation of this
Agreement.
 
6.             Term and Termination.  The term of this agreement shall commence
on the Effective Date and shall continue in full force and effect until the
earlier of (i) termination of the Quarterly Sales Limit in accordance with
Section 1 and (ii) the occurrence of a Change of Control (the "Term"); provided,
that the parties may mutually agree in writing to terminate this Agreement prior
to the expiration of the Term.  Upon expiration of the Term, this Agreement
shall terminate and shall be of no further force or effect.
 
7.             Notices.  All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally, by
facsimile (with receipt confirmed telephonically or via email) or sent by
certified, registered or express mail, postage prepaid.  Any such notice shall
be deemed given if delivered personally or facsimile, on the date of such
delivery or such confirmation is received, or if sent by reputable overnight
courier, on the first business day following the date of such mailing, as
follows:
 
if to the Company:

 
KonaRed Corporation
1101 Via Callejon #200
San Clemente, California 92673
Attention: Kyle Redfield
Facsimile: (808) 442-9922
Email: kyle@konared.com

 
 

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with a copy to (which shall not constitute notice):
     
Stradling Yocca Carlson & Rauth, P.C.
4365 Executive Drive, suite 1500
San Diego, CA 92121
Attention: Hayden Trubitt
Facsimile: (858) 408-4251
Email: htrubitt@sycr.com

 
if to Shareholder:

 
VDF FutureCeuticals, Inc.
2692 N. State Rt. 1-17
Momence, Illinois 60954
Attention: J. Randal Wexler
Facsimile: (815) 472-3529
Email: RWexler@futureceuticals.com
     
with a copy to (which shall not constitute notice):
     
Sidley Austin LLP
 
One South Dearborn
 
Chicago, Illinois  60603
 
Attention: Pran Jha
 
Facsimile: (312) 853-7036
Email: pjha@sidley.com

8.             Amendments and Waivers. This Agreement and any of the provisions
hereof may be amended, waived (either generally or in a particular instance and
either retroactively or prospectively), modified or supplemented, in whole or in
part, only by written agreement of the Company and the Shareholder; provided,
that the observance of any provision of this Agreement may be waived in writing
by the party that will lose the benefit of such provision as a result of such
waiver.  The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent breach, except as
otherwise explicitly provided for in such waiver.  Except as otherwise expressly
provided herein, no failure on the part of any party to exercise, and no delay
in exercising, any right, power or remedy hereunder, or otherwise available in
respect hereof at law or in equity, shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.  The execution of a counterpart signature page to this
Agreement after the date hereof by any Person as provided for herein shall not
require consent of any party hereto and shall not be deemed an amendment to this
Agreement.
 

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9.             Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or was otherwise
breached and further agree that money damages or other remedy at law would not
be a sufficient or adequate remedy for any breach or violation of, or a default
under, this Agreement by them and that, in addition to all other remedies
available to them, each of them shall be entitled to an injunction restraining
such breach, violation or default or threatened breach, violation or default and
to any other equitable relief, including, without limitation, specific
performance of the terms and provisions of this Agreement.  Any requirements for
the securing or posting of any bond with respect to such remedy are hereby
waived by each of the parties hereto.  Each party further agrees that, in the
event of any action for an injunction or other equitable remedy in respect of
such breach or enforcement of specific performance, it will not assert the
defense that a remedy at law would be adequate.
 
10.          Governing Law; Waiver of Jury Trial.
 
(a)         Governing Law.  This Agreement shall be construed and enforced in
accordance with, and the rights and obligations of the parties hereto shall be
governed by, the laws of the State of New York, without giving effect to
principles of conflicts of laws.
 
(b)         Waiver of Jury Trial.  With respect to any action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby, each of the parties hereby irrevocably, to the extent not prohibited by
applicable law that cannot be waived, waives, and covenants that it will not
assert (whether as plaintiff, defendant or otherwise), any right to trial by
jury in any action arising in whole or in part under or in connection with this
Agreement or the transactions contemplated hereby, whether now existing or
hereafter arising, and whether sounding in contract, tort or otherwise, and
agrees that any of them may file a copy of this paragraph with any court as
written evidence of the knowing, voluntary and bargained-for agreement among the
parties irrevocably to waive its right to trial by jury in any action or
proceeding whatsoever between them relating to this Agreement or the
transactions contemplated hereby.  Such action or proceeding shall instead be
tried by a judge sitting without a jury.
 
11.           Severability.  If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
 
12.           Entire Agreement.  This Agreement and the documents referred to
herein or delivered pursuant hereto, are intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein.  There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein. 
This Agreement and the documents referred to herein or delivered pursuant
hereto, supersede all prior agreements and understandings between the parties
with respect to such subject matter.
 

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13.           Third Party Beneficiaries.  This Agreement is for the sole benefit
of the parties hereto and their respective successors and permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other Person, other than a Permitted Transferee, any legal or equitable right,
benefit or remedy of any nature whatsoever, under or by reason of this
Agreement.
 
14.           Counterparts.  This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, all 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.
 
15.           Definitions.
 
(a)          "Change of Control" means (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 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 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.
 
(b)         "Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint-stock
company, company, limited liability company, trust, unincorporated association
or any other entity of whatever nature.
 
(c)          "Transfer Agent" means the Company's transfer agent as of the
relevant date.

* * * * * * * *
 
 
 
 
 
 
 
 

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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first above written.
 
 

  VDF FUTURECEUTICALS, INC.                  
 
By:
/s/ J. Randal Wexler       Name: J. Randal Wexler       Title: Vice President
and General Counsel                             KONARED CORPORATION            
        By: /s/ Kyle Redfield       Name: Kyle Redfield       Title: Chief
Executive Officer