Exhibit 10.62

 

KonaRed Corporation

 

SERIES A PREFERRED STOCK PURCHASE AGREEMENT

 

This Series A Preferred Stock Purchase Agreement (the “Agreement”) is made as of
October 24, 2017 by and among KonaRed Corporation, a Nevada corporation (the
“Corporation”) and Kona Holdings I LLC, a Delaware limited liability company,
and Kona Holdings II LLC, a Delaware limited liability company.

 

Kona Holdings I LLC and Kona Holdings II LLC are collectively referred to herein
in the singular as “VB.” All obligations, duties, representations, warranties
and/or rights set forth herein as to VB shall be deemed to be joint and several
obligations, duties, representations, warranties and/or rights of Kona Holdings
I LLC and Kona Holdings II LLC. Where (if anywhere) in this Agreement the
context so requires, the term VB shall be deemed to refer to Kona Holdings I LLC
and to obligations, duties, representations, warranties and/or rights of Kona
Holdings I LLC; where (if anywhere) in this Agreement the context so requires,
such term shall be deemed to refer to Kona Holdings II LLC and to obligations,
duties, representations, warranties and/or rights of Kona Holdings II LLC.
(Where the context requires or permits that such term refer to Kona Holdings I
LLC and Kona Holdings II LLC collectively and to obligations, duties,
representations, warranties and/or rights of Kona Holdings I LLC and Kona
Holdings II LLC collectively, such term shall be deemed to so refer.) Each of
Kona Holdings I LLC and Kona Holdings II LLC hereby agree that any notice,
action, election, waiver or consent given or done hereunder by Kona Holdings I
LLC shall be deemed to have been given or done by Kona Holdings I LLC on behalf
of Kona Holdings II LLC as well as on behalf of Kona Holdings I LLC itself,
pursuant to authority hereby irrevocably granted; and (in order to ensure
perfect uniformity at all times) it is expressly agreed that Kona Holdings II
LLC shall not in its own name give or do any notice, action, election, waiver or
consent hereunder but instead shall stand aside and let Kona I Holdings give or
do (or not give or not do) on behalf of both. Any such notice, action, election,
waiver or consent given or done hereunder by Kona Holdings I LLC shall be
conclusively deemed to be with respect to all Corporation securities and/or
interests owned by Kona Holdings I LLC, on the one hand, and Kona Holdings II
LLC, on the other hand, unless otherwise expressly so stated by Kona Holdings I
LLC in such notice, action, election, waiver or consent (and in any case of such
an express statement otherwise, it is agreed and required that Kona Holdings I
LLC must state the percentage of its own Corporation securities and/or interests
(of a particular class, series or type) as to which such notice, action,
election, waiver or consent is given or done hereunder and exactly the same
percentage of Kona Holdings II LLC’s Corporation securities and/or interests (of
such class, series or type) shall be unavoidably deemed to have given or done
such notice, action, election, waiver or consent too).

 

The parties hereby agree as follows:

 

1.        PURCHASE AND SALE OF SERIES A PREFERRED STOCK.

 

1.1     Authorization of Series A Preferred Stock. The Corporation shall adopt
and file with the Secretary of State of the State of Nevada on or before the
Closing (as defined below) the Certificate of Designation for the Series A
Preferred Stock in the form attached hereto within Exhibit B (the “Series A
Certificate of Designation”).

 

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1.2     Sale and Issuance of Series A Preferred Stock. Subject to the terms and
conditions of this Agreement, VB agrees to purchase at the Closing and the
Corporation agrees to sell and issue to VB at the Closing the number of shares
of Series A Preferred Stock set forth opposite each VB party’s name on Exhibit A
attached hereto, for an aggregate purchase price of $2,200,000.00.

 

1.3     Closing; Delivery. The closing of the transaction contemplated by this
Agreement shall take place at the offices of Stradling Yocca Carlson & Rauth, A
Professional Corporation, 4365 Executive Drive, Suite 1500, San Diego,
California, at 10:00 a.m., on October 24, 2017, or at such other time and place
as the Corporation and VB mutually agree upon, orally or in writing (which time
and place are designated as the “Closing”). At the Closing, the Corporation
shall deliver to VB (in the same proportions, as between Kona Holdings I LLC and
Kona Holdings II LLC, as established on Exhibit A attached hereto) certificates
representing the 1,554.26 shares of Series A Preferred Stock of the Corporation
being issued, sold and purchased (the “Stock”), and the Sales Shortfall Warrant,
the Pre-Wired Warrant #1, the Pre-Wired Warrant #2, the Existing Derivative
Securities Warrant #1, the Existing Derivative Securities Warrant #2, the
Existing Derivative Securities Warrant #3, the Existing Derivative Securities
Warrant #4, the Existing Derivative Securities Warrant #5, the Existing
Derivative Securities Warrant #6, the Existing Derivative Securities Warrant #7,
the Existing Derivative Securities Warrant #8, the Existing Derivative
Securities Warrant #9, the Existing Derivative Securities Warrant #10, the
Existing Derivative Securities Warrant #11, the Existing Derivative Securities
Warrant #12, the Existing Derivative Securities Warrant #13, the Existing
Derivative Securities Warrant #14 and the Existing Derivative Securities Warrant
#15, and in addition shall deliver to Kona Holdings I LLC the Venice Brands
Warrant, all against payment of an aggregate of $2,200,000 (in the same
proportions, as between Kona Holdings I LLC and Kona Holdings II LLC, as
established on Exhibit A attached hereto) by automatic conversion of bridge note
owed by the Corporation, by checks payable to the Corporation or by wire
transfers to a bank account designated by the Corporation.

 

1.4     Defined Terms Used in this Agreement. In addition to the terms defined
above, the following terms used in this Agreement shall be construed to have the
meanings set forth or referenced below.

 

“Articles of Incorporation” means the Corporation’s articles of incorporation as
amended to date and as supplemented by the Series A Certificate of Designation
and Series B Certificate of Designation.

 

“Basket” has the meaning set forth in Section 7.1(e).

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Corporation Plan” has the meaning set forth in Section 2.19.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

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“Existing Derivative Securities Warrant #1” means the Warrant (i.e., the pair of
warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit I attached hereto.

 

“Existing Derivative Securities Warrant #2” means the Warrant (i.e., the pair of
warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit J attached hereto.

 

“Existing Derivative Securities Warrant #3” means the Warrant (i.e., the pair of
warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit K attached hereto.

 

“Existing Derivative Securities Warrant #4” means the Warrant (i.e., the pair of
warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit L attached hereto.

 

“Existing Derivative Securities Warrant #5” means the Warrant (i.e., the pair of
warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit M attached hereto.

 

“Existing Derivative Securities Warrant #6” means the Warrant of the Corporation
in favor of VB, dated as of the date of the Closing, in the form of Exhibit N
attached hereto.

 

“Existing Derivative Securities Warrant #7” means the Warrant (i.e., the pair of
warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit O attached hereto.

 

“Existing Derivative Securities Warrant #8” means the Warrant (i.e., the pair of
warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit P attached hereto.

 

“Existing Derivative Securities Warrant #9” means the Warrant (i.e., the pair of
warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit Q attached hereto.

 

“Existing Derivative Securities Warrant #10” means the Warrant (i.e., the pair
of warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit R attached hereto.

 

“Existing Derivative Securities Warrant #11” means the Warrant (i.e., the pair
of warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit S attached hereto.

 

“Existing Derivative Securities Warrant #12” means the Warrant (i.e., the pair
of warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit T attached hereto.

 

“Existing Derivative Securities Warrant #13” means the Warrant (i.e., the pair
of warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit U attached hereto.

 

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“Existing Derivative Securities Warrant #14” means the Warrant (i.e., the pair
of warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit V attached hereto.

 

“Existing Derivative Securities Warrant #15” means the Warrant (i.e., the pair
of warrants) of the Corporation in favor of VB, dated as of the date of the
Closing, in the form of Exhibit W attached hereto.

 

“Governmental Authorization” shall mean any permit, license, registration,
qualification, certificate, clearance, variance, waiver, exemption, certificate
of occupancy, exception, franchise, entitlement, consent, confirmation, order,
approval or authorization granted by any Governmental Entity.

 

“Governmental Entity” shall mean any federal, state or local government or body
or any agency, authority, subdivision or instrumentality of any of the
foregoing, including any court, tribunal, department, bureau, administrative
agency, commission or board.

 

“Hazardous Materials” has the meaning set forth in Section 2.21.

 

“Indemnified Party” has the meaning set forth in Section 7.1(b).

 

“Indemnifying Party” has the meaning set forth in Section 7.1(b).

 

“Investor Rights Agreement” means the agreement among the Corporation and VB,
dated as of the date of the Closing, in the form of Exhibit C attached hereto.

 

“Legal Requirement” shall mean any federal, state or local law, statute, code,
ordinance, regulation, code, order, judgment, writ, injunction, decision, ruling
or decree promulgated by any Governmental Entity.

 

“Losses” has the meaning set forth in Section 7.1(a).

 

“Material Adverse Effect” means a material adverse effect on the business,
assets (including intangible assets), liabilities, financial condition, property
or results of operation of the Corporation, taken together as a whole.

 

“Pre-Wired Warrant #1” means the Warrant (i.e., the pair of warrants) of the
Corporation in favor of VB, dated as of the date of the Closing, in the form of
Exhibit G attached hereto.

 

“Pre-Wired Warrant #2” means the Warrant (i.e., the pair of warrants) of the
Corporation in favor of VB, dated as of the date of the Closing, in the form of
Exhibit H attached hereto.

 

“Related Party” has the meaning set forth in Section 2.11.

 

“Sales Shortfall Warrant” means the Warrant (i.e., the pair of warrants) of the
Corporation in favor of VB, dated as of the date of the Closing, in the form of
Exhibit F attached hereto.

 

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

 

“SEC Reports” means the Form 10-K, Form 10-Q periodic reports and Form 8-K
current reports heretofore filed by the Corporation with the SEC pursuant to the
Exchange Act.

 

“Securities” has the meaning set forth in Section 2.4.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Series A Certificate of Designation” has the meaning set forth in Section 1.1.

 

“Series B Certificate of Designation” means the Certificate of Designation for
the Corporation’s Series B Preferred Stock, in the form attached hereto within
Exhibit B, as filed with the Nevada Secretary of State.

 

“Stockholders Agreement” means the agreement among the Corporation and VB, and
Kyle Redfield, Shaun Roberts and Juan Gonzalo Camet Piccone, dated as of the
date of the Closing, in the form of Exhibit D attached hereto.

 

“Third Party Claim” has the meaning set forth in Section 7.1(a).

 

“Transaction Agreements” means this Agreement, the Investor Rights Agreement,
the Stockholders Agreement, the Venice Brands Warrant, the Sales Shortfall
Warrant, the Pre-Wired Warrant #1, the Pre-Wired Warrant #2, the Existing
Derivative Securities Warrant #1, the Existing Derivative Securities Warrant #2,
the Existing Derivative Securities Warrant #3, the Existing Derivative
Securities Warrant #4, the Existing Derivative Securities Warrant #5, the
Existing Derivative Securities Warrant #6, the Existing Derivative Securities
Warrant #7, the Existing Derivative Securities Warrant #8, the Existing
Derivative Securities Warrant #9, the Existing Derivative Securities Warrant
#10, the Existing Derivative Securities Warrant #11, the Existing Derivative
Securities Warrant #12, the Existing Derivative Securities Warrant #13, the
Existing Derivative Securities Warrant #14 and the Existing Derivative
Securities Warrant #15.

 

“VB Indemnitee” has the meaning set forth in Section 7.1(a).

 

“Venice Brands Warrant” means the Warrant of the Corporation in favor of Kona
Holdings I LLC, dated as of the date of the Closing, in the form of Exhibit E
attached hereto.

 

2.      Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants to VB that, except as set forth on a Schedule of
Exceptions previously delivered separately by the Corporation to counsel for VB,
which exceptions shall be deemed to modify these representations and warranties
as if made hereunder (it being understood that for purposes of these
representations and warranties, the phrase “to the Corporation’s knowledge”
shall mean to the actual knowledge of Kyle Redfield and/or Shaun Roberts, and it
being understood that for purposes of these representations and warranties, the
term “the Corporation” shall include any subsidiaries of the Corporation, unless
otherwise noted):

 

2.1     Organization, Good Standing and Qualification. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has all requisite corporate power and authority to
carry on its business as presently conducted and as currently proposed to be
conducted. The Corporation is duly qualified to transact

 

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business and is in good standing in each jurisdiction in which the failure so to
qualify would have a Material Adverse Effect.

 

2.2     Capitalization. The authorized capital of the Corporation consists, or
will consist, immediately before the Closing, of:

 

(a) 10,000 shares of Preferred Stock, of which 6,500 shares have been designated
Series A Preferred Stock, none of which are issued and outstanding immediately
before the Closing, and of which 810 shares have been designated Series B
Preferred Stock, none of which are issued and outstanding immediately before the
Closing. The rights, privileges and preferences of the Series A Preferred Stock
are as stated in the Articles of Incorporation. The rights, privileges and
preferences of the Series B Preferred Stock are as stated in the Articles of
Incorporation.

 

(b) 877,500,000 shares of Common Stock, 217,623,221 shares of which are issued
and outstanding immediately before the Closing. All of the outstanding shares of
Common Stock have been duly authorized, are fully paid and nonassessable and
were issued in compliance with the Securities Act and all applicable state
securities laws.

 

(c) Except for (i) the conversion privileges of the Stock, (ii) each of the
instruments which is defined as an “Existing Derivative Security” under one or
another of the series of “Existing Derivative Securities Warrants” within the
contemplated Transaction Agreements, (iii) a “Management Incentive Pool”
consisting of 36,737,032 shares of Common Stock (of which, pursuant to
arrangements contemplated by the parties hereto in connection with the Closing,
18,368,516 shares shall be subjected to stock options in favor of Kyle Redfield,
7,347,406 shares shall be subjected to stock options in favor of Shaun Roberts
and 11,021,110 shares shall from time to time be used by the Corporation’s Board
of Directors in its discretion for issuance of compensatory/incentivization
restricted stock, stock options and other derivative securities to employees,
officers, consultant and other third party service providers (but expressly
excluding Kona Holdings I LLC and Greg Willsey as potential recipients of any
compensatory/incentivization restricted stock, stock options and other
derivative securities whatever)), and (iv) other agreements expressly
contemplated by this Agreement, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal or
similar rights) or agreements, orally or in writing, for the purchase,
redemption or acquisition from the Corporation of any shares of its capital
stock. (For avoidance of doubt: the preceding sentence’s exclusion of Kona
Holdings I LLC and Greg Willsey as potential recipients of any
compensatory/incentivization restricted stock, stock options and other
derivative securities shall be deemed not to prohibit the issuance of the
various Warrants expressly contemplated by this Agreement and, further for the
avoidance of doubt, shall be deemed not to prohibit the issuance of the Venice
Brands Warrant or to affect the “5%” calculation as expressly set forth within
the Venice Brands Warrant.)

 

2.3     Subsidiaries. The Corporation does not currently own or control,
directly or indirectly, any interest in any other corporation, partnership,
trust, joint venture, limited liability company, association or other business
entity. The Corporation is not a participant in any joint venture, partnership
or similar arrangement.

 

2.4     Authorization. All corporate action on the part of the Corporation, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement and the other Transaction Agreements, the
performance of all obligations of the Corporation hereunder and thereunder and
the authorization, issuance and delivery of the Stock, the

 

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Common Stock issuable upon conversion of the Stock, the Series A Preferred Stock
issuable upon exercise of the other Transaction Agreements which contemplate the
issuance of Series A Preferred Stock, the Common Stock issuable upon conversion
of such Series A Preferred Stock, and the Common Stock issuable upon exercise of
the other Transaction Agreements which contemplate the issuance of Common Stock
(together, the “Securities”) has been taken or will be taken before the Closing,
and the Transaction Agreements, when executed and delivered by the Corporation,
shall constitute valid and legally binding obligations of the Corporation,
enforceable against the Corporation in accordance with their respective terms
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, or other laws of general application relating
to or affecting the enforcement of creditors’ rights generally, (ii) as limited
by laws relating to the availability of specific performance, injunctive relief,
or other equitable remedies, or (iii) to the extent the indemnification
provisions contained in the Investor Rights Agreement may be limited by
applicable federal or state securities laws.

 

2.5     Valid Issuance of Securities. The Securities, when issued, sold and
delivered in accordance with the terms of the Transaction Agreements for the
consideration expressed therein, will be duly and validly issued, fully paid and
nonassessable and free of restrictions on transfer other than restrictions on
transfer under the Transaction Agreements, applicable state and federal
securities laws and liens or encumbrances created by or imposed by VB. Based in
part upon the representations of VB in Section 3 of this Agreement and subject
to the provisions of Section 2.6 below, the Stock will be issued in compliance
with the Securities Act and all applicable state securities laws. The
Corporation covenants that it will take no action between the date of this
Agreement and the date of the Closing that would cause the failure of such
compliance. The Common Stock issuable upon conversion of the Stock has been duly
and validly reserved for issuance, and upon issuance in accordance with the
terms of the Series A Certificate of Designation, will be duly and validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under the Transaction Agreements, applicable
federal and state securities laws and liens or encumbrances created by or
imposed by VB. Based in part upon the representations of VB in Section 3 of this
Agreement, and subject to Section 2.6 below, the Common Stock issuable upon
conversion of the Stock will be issued in compliance with the Securities Act and
all applicable federal and state securities laws.

 

2.6    Governmental Consents and Filings. Assuming the accuracy of the
representations made by VB in Section 3 of this Agreement, no consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state or local Governmental Entity is
required on the part of the Corporation in connection with the consummation of
the transactions contemplated by this Agreement, except for filings pursuant to
Section 25102(f) of the California Corporations Code.

 

2.7    Litigation. There is no claim, action, suit, proceeding, arbitration,
complaint, charge or investigation pending or, to the Corporation’s knowledge,
currently threatened against the Corporation or any of its officers or directors
(a) that questions the validity of the Transaction Agreements or the right of
the Corporation to enter into them, or to consummate the transactions
contemplated thereby, or (b) that would reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect, or (c) that would
reasonably be expected to result in any change in the current equity ownership
of the Corporation. Neither the Corporation nor, to the Corporation’s knowledge,
any of its officers or directors, is a party or is named as subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit, proceeding or
investigation by the Corporation pending or

 

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which the Corporation intends to initiate. The foregoing includes, without
limitation, actions, suits, proceedings or investigations pending or threatened
in writing (or any basis therefor known to the Corporation) involving the prior
employment of any of the Corporation’s employees, their use in connection with
the Corporation’s business, or any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers.

 

2.8     Intellectual Property. The Corporation owns or possesses sufficient
legal rights to all trademarks, service marks, tradenames, copyrights, trade
secrets, licenses, information and proprietary rights and processes and, to the
Corporation’s knowledge, all patents, in each instance as used by it in
connection with its business, which represent all intellectual property rights
necessary to the conduct of the Corporation’s business as now conducted and as
presently contemplated to be conducted, without any known conflict with, or
infringement of, the rights of others. There are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Corporation bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names, domain
names, copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity, except, in either case, for standard
end-user, object code, internal-use software license and support/maintenance
agreements. The Corporation has not received any communications alleging that
the Corporation has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, tradenames, domain names,
copyrights, trade secrets or other proprietary rights or processes of any other
person or entity, except, in either case, for standard end-user, object code,
internal-use software license and support/maintenance agreements. The
Corporation is not aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee’s best
efforts to promote the interest of the Corporation or that would conflict with
the Corporation’s business. Neither the execution or delivery of the Transaction
Agreements, nor the carrying on of the Corporation’s business by the employees
of the Corporation, nor the conduct of the Corporation’s business as proposed,
will, to the Corporation’s knowledge, conflict with or result in a breach of the
terms, conditions, or provisions of, or constitute a default under, any
contract, covenant or instrument under which any such employee is now obligated.
The Corporation does not believe it is or will be necessary to use any
inventions of any of its employees made before or outside the scope of their
employment by the Corporation. To the Corporation’s knowledge, no product or
service marketed or sold by the Corporation violates or will violate any license
or infringes or will infringe any intellectual property rights of any other
party.

 

2.9     Violations and Defaults.

 

(a) The Corporation is not in violation or default of any provisions of its
original articles of incorporation, Series A Certificate of Designation, Series
B Certificate of Designation or Bylaws. The Corporation is not in violation or
default of any provision of federal or state statute, rule or regulation
applicable to the Corporation, the violation of which would reasonably be
expected to have a Material Adverse Effect, or of any judgment, order, writ, or
decree. The execution, delivery and performance of the Transaction Agreements by
the Corporation and the consummation of the transactions contemplated hereby or
thereby by the Corporation will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and/or giving
of notice, either a default under any such provision, judgment, order, writ,
decree or contract or statute, rule or regulation or an event which results in
the suspension, revocation, impairment,

 

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forfeiture or nonrenewal of any material permit, license, authorization or
approval applicable to the Corporation.

 

(b) The execution, delivery and performance of the Transaction Agreements by the
Corporation and the consummation of the transactions contemplated hereby or
thereby by the Corporation will not, with or without the passage of time and/or
giving of notice, violate or constitute a breach of or a default under any
agreement, contract, instrument, note, indenture, mortgage or lease to which the
Corporation is a party or by which the Corporation is bound or constitute an
event which results in the creation of any lien, charge or encumbrance upon any
assets of the Corporation.

 

2.10    Agreements; Actions.

 

(a) The Schedule of Exceptions includes a list of all agreements which are
material to the Corporation. The Corporation has made available to VB true,
correct and complete copies of each such agreement.

 

(b) Other than the transactions referred to in or contemplated by the
Transaction Agreements, there are no agreements, understandings or proposed
transactions between the Corporation and any of its officers, directors,
affiliates, or any affiliate thereof.

 

(c) Except for the Transaction Agreements and matters referred to in or
contemplated by the Transaction Agreements, there are no agreements,
understandings, instruments, contracts or proposed transactions to which the
Corporation is a party or by which it is bound that involve (i) obligations
(contingent or otherwise) of, or payments to, the Corporation in excess of,
$200,000, (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Corporation other than the license to the
Corporation of generally commercially available “off-the-shelf” third-party
products, or (iii) the grant of rights to manufacture, produce, assemble,
license, market, or sell its products to any other person or affect the
Corporation’s exclusive right to develop, manufacture, assemble, distribute,
market or sell its products.

 

(d) The Corporation has not (i) declared or paid any dividends, or authorized or
made any distribution upon or with respect to any class or series of its capital
stock, (ii) incurred any indebtedness for money borrowed individually in excess
of $100,000, (iii)  incurred any other liabilities individually in excess of
$10,000 except in the ordinary course of business, (iv) made any loans or
advances (still unrepaid) to any person, other than ordinary advances for travel
expenses, or (v) sold, exchanged or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of business.

 

(e) For the purposes of subsections (b) and (c) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Corporation has reason to believe are affiliated with that person or entity)
shall be aggregated for the purposes of meeting the individual minimum dollar
amounts of each such subsection.

 

2.11   Related-Party Transactions. Except for matters referred to in the
Transaction Agreements, no employee, officer or director of the Corporation (a
“Related Party”) or member of such Related Party’s immediate family, or any
corporation, partnership or other entity in which such Related Party is an
officer, director or partner, or in which such Related Party has an

 

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ownership interest or otherwise controls, is indebted to the Corporation, nor is
the Corporation indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the Corporation’s knowledge, none of such persons
have any direct or indirect ownership interest in any firm or corporation with
which the Corporation is affiliated or with which the Corporation has a business
relationship, or any firm or corporation that competes with the Corporation,
except that Related Parties and members of their immediate families may own
stock in (but not exceeding 1% of the outstanding capital stock of) publicly
traded companies that may compete with the Corporation. To the Corporation’s
knowledge, except for matters referred to in the Transaction Agreements no
Related Party or member of their immediate families is directly or indirectly
interested in any material contract with the Corporation. The Corporation is not
a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.

 

2.12   Voting Rights; Registration Rights. To the Corporation’s knowledge, no
stockholder of the Corporation has entered into any agreements with respect to
the voting of capital shares of the Corporation. Except as provided in the
Transaction Agreements, the Corporation is not under any obligation to register
under the Securities Act any of its currently outstanding securities or any
securities issuable upon exercise or conversion of its currently outstanding
securities.

 

2.13   Title to Property and Assets. The Corporation owns its property and
assets free and clear of all mortgages, deeds of trust, liens, loans and
encumbrances, except for statutory liens for the payment of current taxes that
are not yet delinquent and encumbrances and liens that arise in the ordinary
course of business and do not materially impair the Corporation’s ownership or
use of such property or assets. With respect to the property and assets it
leases, the Corporation is in compliance with such leases and, to its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances other
than to the lessors of such property or assets.

 

2.14   Financial Statements.

 

(a) The financial statements included in the SEC Reports (i) have been prepared
in accordance with US generally accepted accounting principles applied on a
consistent basis for the periods covered thereby, except that the quarterly
financial statements are subject to normal year-end audit adjustments; (ii) have
been derived from the books and records of the Corporation; and (iii) present
fairly in all material respects the financial condition, results of operations
and cash flows of the Corporation, as of the dates thereof and for the periods
covered thereby (with respect to the quarterly financial statements, subject to
normal year-end audit adjustments). The Corporation maintains a standard system
of accounting established and administered in accordance with US generally
accepted accounting principles.

 

(b) The unaudited balance sheet and income statement of the Corporation for the
12 months ended September 30, 2017, as previously provided to VB, (i) have been
prepared in accordance with US generally accepted accounting principles applied
on a consistent basis for the periods covered thereby, except that they are
subject to normal year-end audit adjustments and except that they do not include
the financial statements Notes called for by US generally accepted accounting
principles; (ii) have been derived from the books and records of the
Corporation; and (iii) present fairly in all material respects the financial
condition, results of operations and cash flows of the Corporation, as of the
dates thereof and for the periods covered thereby (subject to normal year-end
audit adjustments and except that they do not include the financial statements
Notes called for by US generally accepted accounting principles).

 

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(c) The spreadsheet showing the Corporation’s sales, for the 12 months ended
September 30, 2017, 2017, to the respective companies which were its top 10
customers during the 12 months ended September 30, 2017, 2017, as previously
provided to VB, is complete and accurate in all material respects.

 

(d) The Corporation’s pro forma capitalization table as of immediately after the
Closing, as previously provided to VB, is accurate and complete.

 

(e) The Corporation’s budget and forecast for the 12 months beginning October 1,
2017, as previously provided to VB, was prepared by the Corporation based upon
good faith estimates and assumptions believed by the Corporation to be
reasonable at the time made, it being recognized by VB that projections as to
future events are not to be viewed as facts and that actual results during the
12 months beginning October 1, 2017 may differ from the projected results.

 

2.15   SEC Filings. The Company has filed all required SEC Reports with the SEC,
together with all certifications required pursuant to the Sarbanes-Oxley Act of
2002. As of their respective filing dates (and taking into account any amendment
thereof filed with the SEC, the SEC Reports complied in all material respects
with the requirements of the Exchange Act applicable to such SEC Reports and
none of the SEC Reports 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 light of the circumstances under which
they were made, not misleading.

 

2.16   Changes. Since June 30, 2017, there has not been:

 

(a) any change in the assets, liabilities, financial condition or operating
results of the Corporation, except changes in the ordinary course of business
that have not been, in the aggregate, materially adverse;

 

(b) any damage, destruction or loss, whether or not covered by insurance, that
constitutes a Material Adverse Effect;

 

(c) any waiver or compromise by the Corporation of a valuable right or of a
material debt owed to it;

 

(d) any satisfaction or discharge of any lien, claim, or encumbrance or payment
of any obligation by the Corporation, except in the ordinary course of business
and the satisfaction or discharge of which would not have a Material Adverse
Effect;

 

(e) any material change to a material contract or agreement by which the
Corporation or any of its assets is bound or subject;

 

(f) any material change in any compensation arrangement or agreement with any
employee, officer, director or stockholder;

 

(g) any sale, assignment or transfer by the Corporation of any patents,
trademarks, copyrights, trade secrets or other intangible assets by the
Corporation;

 

(h) any resignation or termination of employment of any officer or key employee
of the Corporation;

 

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(i) any material change in a contingent obligation of the Corporation by way of
guaranty, endorsement, indemnity, warranty or otherwise;

 

(j) any mortgage, pledge, transfer of a security interest in, or lien, created
by the Corporation, with respect to any of its material properties or assets,
except liens for taxes not yet due or payable and liens that arise in the
ordinary course of business and do not materially impair the Corporation’s
ownership or use of such property or assets;

 

(k) any loans or guarantees made by the Corporation to or for the benefit of its
employees, officers or directors, or any members of their immediate families,
other than travel advances and other advances made in the ordinary course of its
business;

 

(l) any declaration, setting aside or payment or other distribution in respect
to any of the Corporation’s capital stock, or any direct or indirect redemption,
purchase, or other acquisition of any of such stock by the Corporation;

 

(m) to the Corporation’s knowledge, any other event or condition of any
character, other than events affecting the economy or the Corporation’s industry
generally, that could reasonably be expected to result in a Material Adverse
Effect; or

 

(n) any arrangement or commitment by the Corporation to do any of the things
described in this Section 2.16.

 

2.17   Tax Returns and Payments. All material tax returns required to have been
filed by or in respect of the Corporation (as any deadlines for filing may have
been extended by duly filed applications for extension) have been timely filed.
All such tax returns were true, correct and complete in all material respects.
All taxes due and owing by the Corporation have been timely paid. The
Corporation has timely withheld and paid to the appropriate Governmental Entity
all taxes required to have been withheld and paid by it, including in connection
with amounts paid or owing to any employee, independent contractor, creditor, or
other third party, and all Forms W-2 and 1099 and other applicable forms
required with respect thereto have been properly completed and timely filed. The
Corporation is not a “United States real property holding corporation” within
the meaning of the Code and any applicable regulations promulgated thereunder.

 

2.18   Labor Agreements and Actions. The Corporation is not bound by or subject
to (and none of its assets or properties is bound by or subject to) any written
or oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the Corporation’s knowledge, has
sought to represent any of the employees, representatives or agents of the
Corporation. There is no strike or other labor dispute involving the Corporation
pending, or to the Corporation’s knowledge threatened, which could have a
Material Adverse Effect, nor is the Corporation aware of any labor organization
activity involving its employees. The Corporation is not aware that any officer
or key employee intends to terminate their employment with the Corporation, nor
does the Corporation have any present intention to terminate the employment of
any officer or key employee. The employment of each officer and employee of the
Corporation is terminable at the will of the Corporation, subject to Section 6.1
hereof. The Corporation has complied in all material respects with all
applicable state and federal equal employment opportunity laws and with other
laws related to employment.

 

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2.19   Employee Benefits.

 

(a) The Corporation has provided to VB a complete and accurate list of each
“employee benefit plan” (as defined in Section 3(3) of ERISA), and any other
material employee plan or agreement maintained by the Corporation and with
respect to which the Corporation would reasonably be expected to have any
material liability (each, a “Corporation Plan”). The Corporation has made
available to VB correct and complete copies of (i) each Corporation Plan (or, in
the case of any such Corporation Plan that is unwritten, descriptions of the
material terms thereof), (ii) the most recent annual report on Form 5500
required to be filed with the Internal Revenue Service with respect to each
Corporation Plan (if any such report was required), (iii) the most recent
summary plan description for each Corporation Plan for which such summary plan
description is required and (iv) each material trust agreement and insurance or
group annuity Contract relating to any Corporation Plan. Each Corporation Plan
maintained, contributed to or required to be contributed to by the Corporation
has been administered in all material respects in accordance with its terms. The
Corporation and all the Corporation Plans are all in material compliance with
the applicable provisions of ERISA, the Code and all other applicable Legal
Requirements. The Corporation has not contributed or been obligated to
contribute to an “employee benefit plan” subject to Title IV of ERISA, a
“multiemployer plan,” as defined in Section 3(37) of ERISA, or an “employee
benefit plan” subject to Sections 4063 or 4064 of ERISA.

 

(b) The Corporation has no material liability for life, health, medical or other
welfare benefits for former employees or beneficiaries or dependents thereof
under Corporation Plans, other than as required by Section 4980B of the Code,
Part 6 of Title I of ERISA or other applicable Legal Requirement.

 

(c) There are no pending or, to the Corporation’s knowledge, threatened, claims,
lawsuits, arbitrations or audits asserted or instituted against any Corporation
Plan, any fiduciary (as defined by Section 3(21) of ERISA) thereto, the
Corporation or any employee or administrator thereof in connection with the
existence, operation or administration of a Corporation Plan, other than routine
claims for benefits.

 

2.20   Compliance.

 

(a) The Corporation is in compliance with all Legal Requirements applicable to
the Corporation, except for such noncompliance as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. The
Corporation holds all Governmental Authorizations necessary for the lawful
conduct of their respective businesses, and all such Governmental Authorizations
are valid and in full force and effect, except where the failure to hold the
same or of the same to be valid and in full force and effect would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Corporation is in compliance with the terms of all
Governmental Authorizations, except for such non-compliance as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

(b) All facilities operated by the Corporation have been operated in compliance
with the Federal Food Drug and Cosmetic Act and regulations and guidelines
thereunder to the extent applicable, and all similar Legal Requirements
applicable to the operation of the business and operations of the Corporation,
except for such failures to be in compliance as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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(c)  No “Bad Actor” disqualifying event described in Rule 506(d)(1)(i) to (viii)
of the Securities Act (a “ Disqualification Event ”) is applicable to the
Corporation, except for a Disqualification Event as to which Rule
506(d)(2)(ii-iv) or (d)(3) is applicable.

 

2.21   Environmental, Health and Safety Laws. The Corporation is not in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, except for violations which would
not individually or in the aggregate be reasonably expected to have a Material
Adverse Effect, and to its knowledge, no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
No Hazardous Materials (as defined below) are used or have been used, stored, or
disposed of by the Corporation or, to the Corporation’s knowledge, by any other
person or entity on any property owned, leased or used by the Corporation. For
the purposes of the preceding sentence, “Hazardous Materials” shall mean (a)
materials which are listed or otherwise defined as “hazardous” or “toxic” under
any applicable local, state, federal and/or foreign laws and regulations that
govern the existence and/or remedy of contamination on property, the protection
of the environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials or (b)
any petroleum products or nuclear materials.

 

2.22   Product Liability. There is no claim for product liability pending or
overtly threatened in writing against the Corporation..

 

2.23   Insurance. The Corporation has provided to VB a true, complete and
correct summary of all insurance policies now maintained by or on behalf of the
Corporation or with respect to its properties and assets, including the policy
number, type and period of coverage, limit, retention, and premium along with
all currently pending claims thereunder. With respect to each such insurance
policy: (a) the policy is in full force and effect; (b) neither the Corporation
or, to the Corporation’s knowledge, any insurer, is in material breach or
default (including with respect to the payment of premiums) thereunder; (c) the
full policy limits in such insurance policies are, subject to applicable
deductibles and less claims paid, available and unimpaired; and (d) such
insurance policies conform to all material contractual obligations of the
Corporation with respect to insurance. The Corporation has not received any
notification of cancellation, termination, revocation or material modification
with respect to any insurance policy within the past 3 years. There are no
claims pending under any insurance policy as to which coverage has been denied
by the insurer or as to which, after reviewing the information provided with
respect to such claim, the insurer has made any reservation of rights or advised
in writing that it intends to deny.

 

2.24   Suppliers and Customer Relationships.

 

(a) The Corporation has provided to VB a complete and accurate list of the
Corporation’s top 10 suppliers (by aggregate cost of purchases from such
suppliers) for the year ended December 31, 2016. Since January 1, 2017, the
Corporation has not received any formal notice from any such top 10 supplier or
any other person to the effect that such top 10 supplier desires or intends to
stop, materially decrease the rate of, or materially and adversely change the
terms (whether related to payment, price or otherwise) with respect to supplying
materials, products or services to the Corporation.

 

(b) The Corporation has provided to VB a complete and accurate list of the
Corporation’s top 15 customers (including any resellers of the Corporation’s
products) (by aggregate revenue attributable to such customers), for the year
ended December 31, 2016. Since

 

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January 1, 2017, the Corporation has not received any formal notice from any
such top 15 customer or any other person to the effect that such top 15 customer
desires or intends to stop, materially decrease the rate of, or materially and
adversely change the terms (whether related to payment, price or otherwise) with
respect to purchasing materials, products or services from the Corporation.

 

2.25   Confidential Information and Invention Assignment Agreements. Each
employee, consultant and officer of the Corporation has executed an agreement
with the Corporation regarding confidentiality and proprietary information
substantially in the form or forms delivered to counsel for VB. The Corporation
is not aware that any of its employees or consultants is in violation thereof,
and the Corporation will use commercially reasonable efforts to prevent any such
violation.

 

2.26   Corporate Documents. The Articles of Incorporation, Series A Certificate
of Designation, Series B Certificate of Designation and Bylaws of the
Corporation are in the form provided to counsel for VB. The copy of the minute
books of the Corporation provided to VB’s counsel contains minutes of all
meetings of directors and stockholders and all actions by written consent
without a meeting by the directors and stockholders since the date of
incorporation and reflects all actions by the directors (and any committee of
directors) and stockholders with respect to all transactions referred to in such
minutes accurately in all material respects.

 

3.        REPRESENTATIONS AND WARRANTIES OF VB. VB hereby represents and
warrants to the Corporation that:

 

3.1     Authorization. VB has full power and authority to enter into the
Transaction Agreements which require execution and delivery by VB. The
Transaction Agreements which require execution and delivery by VB, when executed
and delivered by VB, will constitute valid and legally binding obligations of
VB, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors’ rights generally, and as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable remedies, or
(b) to the extent the indemnification provisions contained in the Investor
Rights Agreement may be limited by applicable federal or state securities laws.

 

3.2     Violation and Default.

 

(a) The execution, delivery and performance by VB of the Transaction Agreements
which require execution and delivery by VB and the consummation of the
transactions contemplated hereby or thereby by VB will not result in any
violation or be in conflict with or constitute, with or without the passage of
time and/or giving of notice, a default under any provision of VB’s certificate
of formation or operating agreement or any judgment, order, writ, decree or
contract or federal or state statute, rule or regulation.

 

(b) The execution, delivery and performance by VB of the Transaction Agreements
which require execution and delivery by VB and the consummation of the
transactions contemplated hereby or thereby by VB will not, with or without the
passage of time and/or giving of notice, violate or constitute a breach of or a
default under any agreement, contract, instrument, note, indenture, mortgage or
lease to which VB is a party or by which VB is bound or constitute an event
which results in the creation of any lien, charge or encumbrance upon any assets
of VB.

 

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3.3    Purchase Entirely for Own Account. This Agreement is made with VB in
reliance upon VB’s representation to the Corporation, which by VB’s execution of
this Agreement VB hereby confirms, that the Securities to be acquired by VB will
be acquired for investment for VB’s own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that VB
has no present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, VB further represents that
it does not presently have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or to
any third person, with respect to any of the Securities.

 

3.4     Disclosure of Information. VB believes it has received all information
it considers necessary or appropriate for deciding whether to purchase the
Securities. VB further represents that it has had an opportunity to ask
questions and receive answers from the Corporation regarding the terms and
conditions of the offering of the Stock and the business, properties, prospects
and financial condition of the Corporation. The foregoing, however, does not
limit or modify the representations and warranties of the Corporation in
Section 2 of this Agreement or the right of VB to rely on such representations
and warranties.

 

3.5 Restricted Securities. VB understands that the Securities will be
characterized as “restricted securities” under the federal securities laws,
inasmuch as they are being acquired from the Corporation in a transaction not
involving a public offering, and that under such laws and applicable regulations
such Securities may not be resold without registration under the Securities Act,
except in certain limited circumstances. In this connection, VB represents that
it is familiar with Rule 144 promulgated under the Securities Act, as presently
in effect, and understands the resale limitations imposed thereby and by the
Securities Act. VB acknowledges that the Corporation has no obligation to
register or qualify the Securities for resale, except as set forth in the
Investor Rights Agreement. VB further acknowledges that if an exemption from
registration or qualification is available, it may be conditioned on various
requirements including, but not limited to, the time and manner of sale, the
holding period for the Securities, and on requirements relating to the
Corporation that are outside VB’s control, and which the Corporation is under no
obligation to satisfy and may not even be able to satisfy.

 

3.6     No Liquid Public Market. VB understands that the Corporation has made no
assurances that a liquid public market will ever exist for the Securities after
the Closing.

 

3.7     Legends. VB understands that the Securities and any securities issued in
respect of or exchange for the Securities, may bear one or all of the following
legends:

 

(a) “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.”

 

(b) Any legend set forth in or required by any other section of this Agreement
or any of the other Transaction Agreements.

 

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(c) Any legend required by the securities laws of any state to the extent such
laws are applicable to the shares represented by the certificate so legended.

 

3.8     Accredited Investor. VB is an accredited investor as defined in Rule
501(a) of Regulation D promulgated under the Securities Act.

 

3.9     No “Bad Actor” Disqualification Events. Neither (a) VB, (b) any of VB’s
directors, executive officers, other officers that may serve as a director or
officer of any company in which it invests, general partners or managing
members, nor (c) any beneficial owner of any of the Corporation’s voting equity
securities (in accordance with Rule 506(d) of the Securities Act) held by VB is
subject to any Disqualification Event, except for Disqualification Events
covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Securities Act and
disclosed reasonably in advance of the Closing in writing in reasonable detail
to the Corporation.

 

3.10   No General Solicitation. Neither VB, nor any of its officers, employees,
agents, directors, stockholders or partners has engaged the services of a
broker, investment banker or finder to contact any potential investor nor has VB
or any of VB’s officers, employees, agents, directors, stockholders or partners,
agreed to pay any commission, fee or other remuneration to any third party to
solicit or contact any potential investor. Neither VB, nor any of its officers,
directors, employees, agents, stockholders or partners has (a) engaged in any
general solicitation, or (b) published any advertisement in connection with the
offer and sale of the Stock.

 

3.11   Exculpation. VB acknowledges that it is not relying upon any person, firm
or corporation, other than the Corporation and its officers and directors, in
making its investment or decision to invest in the Corporation.

 

4.       Conditions of VB’s Obligations at Closing. The obligations of VB to the
Corporation at the Closing under this Agreement are subject to the fulfillment,
on or before the Closing, of each of the following conditions, but the
occurrence of the Closing shall be conclusively deemed to evidence that each of
such conditions has, if not satisfied, been waived by VB:

 

4.1     Representations and Warranties. The representations and warranties of
the Corporation contained in (a) Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6 and 2.7
shall be true and correct (disregarding all qualifications or limitations as to
materiality or Material Adverse Effect) on and as of the Closing and (b) all
other subsection if Section 2 shall be true and correct in all material respects
on and as of the Closing, in each case with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.

 

4.2     Performance. The Corporation shall have performed and complied with all
covenants, agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before the
Closing.

 

4.3     Compliance Certificate. The President of the Corporation shall have
delivered to VB at the Closing a certificate certifying that the conditions
specified in Sections 4.1 and 4.2 have been fulfilled.

 

4.4     No Prohibition. No order, injunction or decree (whether temporary,
preliminary or permanent) of a Governmental Entity of competent jurisdiction or
other applicable

 

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Legal Requirement shall be in effect which makes illegal, restrains, enjoins or
otherwise prohibits or prevents the Closing.

 

4.5     Qualifications. All authorizations, approvals or permits, if any, of any
Governmental Entity or regulatory body of the United States or of any state that
are required in connection with the lawful issuance and sale of the Securities
at the Closing pursuant to this Agreement shall be obtained and effective as of
the Closing.

 

4.6     Conflicting Agreements. The Corporation shall have procured amendments,
consents and/or waivers which resolve all violations, breaches and defaults
identified in the Schedule of Exceptions with respect to Section 2.9(b), or VB
shall be otherwise reasonably satisfied with the Corporation’s dealings in
respect of such matters.

 

4.7     Series A and Series B Certificate of Designation. The Corporation shall
have filed the Series A Certificate of Designation and the Series B Certificate
of Designation with the Secretary of State of Nevada before the Closing, each of
which shall continue to be in full force and effect as of the Closing Date.

 

4.8     Board of Directors. As of the Closing, the Board shall be comprised of
Kyle Redfield, Shaun Roberts, Gonzalo Camet, Richard Fischler, Brad Paris, Mark
Masten and Jim Tonkin; Brad Paris, Mark Masten and Jim Tonkin shall become,
effective immediately after the Closing, Series A Preferred Directors (as
defined in the Series A Certificate of Designation) effective immediately after
the Closing; and Gregory Willsey shall have been elected to become, effective
immediately after the Closing, a Series A Preferred Director (as defined in the
Series A Certificate of Designation).

 

4.9     Investor Rights Agreement. The Corporation shall have executed and
delivered to VB the Investor Rights Agreement in substantially the form attached
as Exhibit C.

 

4.10   Stockholders Agreement. The Corporation shall have executed and delivered
to VB and any and all (Series B Preferred Stock Purchase Agreement) Series B
Preferred Stock investors the Stockholders Agreement in substantially the form
attached as Exhibit D.

 

4.11   Warrants. The Corporation shall have executed and delivered to VB the
Venice Brands Warrant, the Sales Shortfall Warrant, the Pre-Wired Warrant #1,
the Pre-Wired Warrant #2, the Existing Derivative Securities Warrant #1, the
Existing Derivative Securities Warrant #2, the Existing Derivative Securities
Warrant #3, the Existing Derivative Securities Warrant #4, the Existing
Derivative Securities Warrant #5, the Existing Derivative Securities Warrant #6,
the Existing Derivative Securities Warrant #7, the Existing Derivative
Securities Warrant #8, the Existing Derivative Securities Warrant #9, the
Existing Derivative Securities Warrant #10, the Existing Derivative Securities
Warrant #11, the Existing Derivative Securities Warrant #12, the Existing
Derivative Securities Warrant #13, the Existing Derivative Securities Warrant
#14 and the Existing Derivative Securities Warrant #15 to VB, in substantially
the respective forms attached as Exhibit I through Exhibit V.

 

4.12   Form 15. The Corporation shall have executed and filed with the SEC, and
shall not have revoked or withdrawn, a Form 15.

 

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4.13   Secretary’s Certificate. The Secretary of the Corporation shall have
delivered to VB at the Closing a certificate certifying (i) the Articles of
Incorporation, (ii) the Bylaws of the Corporation, and (iii) resolutions of the
Board of Directors of the Corporation approving the Transaction Agreements and
the Series A Certificate of Designation and the transactions contemplated hereby
and thereby.

 

4.14   Material Adverse Effect. VB shall be reasonably satisfied that there are
no facts or circumstances that exist and that, individually or in the aggregate,
reasonably could be expected to result in a Material Adverse Effect on the
Corporation.

 

4.15   Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to VB,
and VB (or VB’s counsel) shall have received all such counterpart original and
certified or other copies of such documents as reasonably requested.

 

5.       Conditions of the Corporation’s Obligations at Closing. The obligations
of the Corporation to VB under this Agreement at the Closing are subject to the
fulfillment, on or before the Closing, of each of the following conditions, but
the occurrence of the Closing shall be conclusively deemed to evidence that each
of such conditions has, if not satisfied, been waived by the Corporation:

 

5.1     Representations and Warranties. The representations and warranties of VB
contained in Section 3 shall be true and correct in all material respects on and
as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.

 

5.2     Performance. All covenants, agreements and conditions contained in this
Agreement to be performed by VB on or before the Closing shall have been
performed or complied with in all material respects.

 

5.3     Investor Rights Agreement. VB shall have executed and delivered to the
Corporation the Investor Rights Agreement in substantially the form attached as
Exhibit C.

 

5.4     Stockholders Agreement. VB and any and all (Series B Preferred Stock
Purchase Agreement) Series B Preferred Stock investors shall have executed and
delivered to the Corporation the Stockholders Agreement in substantially the
form attached as Exhibit D.

 

5.5     Qualifications. All authorizations, approvals or permits, if any, of any
Governmental Entity or regulatory body of the United States or of any state that
are required in connection with the lawful issuance and sale of the Securities
at the Closing pursuant to this Agreement shall be obtained and effective as of
the Closing.

 

5.6     No Prohibition. No order, injunction or decree (whether temporary,
preliminary or permanent) of a Governmental Entity of competent jurisdiction or
other applicable Legal Requirement shall be in effect which makes illegal,
restrains, enjoins or otherwise prohibits or prevents the Closing..

 

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6.        SERVICE-PROVIDER MATTERS

 

6.1     Employment Agreement and Consulting Agreement. The parties acknowledge
that in connection with this Agreement the Corporation is entering into an
employment letter agreement with Kyle Redfield and a consulting letter agreement
with The Roberts Group,, LLC (in respect of consulting services to be provided
by Shaun Roberts. Such letter agreements have been reviewed by and are
acceptable to VB.

 

7.        INDEMNIFICATION AND LIMITATION OF LIABILITY

 

7.1     Indemnification.     

 

(a) Indemnification of VB, Etc. Subject to this Section 7, the Corporation
agrees to indemnify, hold harmless and defend VB and its affiliates, and each of
their respective directors, officers, managers, employees and agents (each a “VB
Indemnitee”) from and against any and all losses, damages, liabilities,
judgments, liabilities, settlements, penalties, fines, costs and expenses
(collectively, “Losses”) (i) payable to third parties, incurred by VB
Indemnitees in connection with any and all suits, actions, investigations,
claims or demands of a third party (collectively, “Third Party Claims”), or (ii)
incurred by VB directly, in either case relating to or arising from (x) the
Corporation’s breach of this Agreement or any of the other Transaction
Agreements, including without limitation any of its covenants, representations
and warranties set forth herein; (y) any breach or violation of any applicable
law by the Corporation or its affiliates, or any of their respective officers,
directors, employees or agents, in connection with the activities contemplated
by this Agreement or any of the other Transaction Agreements; or (z) the willful
misconduct of the Corporation or its affiliates or any of their respective
officers, directors, managers, employees or agents; and for each of subsections
(x)-(z), all except to the extent that such Losses are primarily caused by a VB
Indemnitee’s breach of applicable law, breach of this Agreement or any of the
other Transaction Agreements, or willful misconduct.

 

(b) Indemnification Procedure – Third Party Claims. The party or other
Indemnitee intending to claim indemnification under this Section 7.1 (an
“Indemnified Party”) shall promptly notify the other party (the “Indemnifying
Party”) of any Third Party Claim in respect of which the Indemnified Party
intends to claim such indemnification (provided, that no delay or deficiency on
the part of the Indemnified Party in so notifying the Indemnifying Party will
relieve the Indemnifying Party of any liability or obligation under this
Agreement except to the extent the Indemnifying Party has suffered actual
prejudice directly caused by the delay or other deficiency), and the
Indemnifying Party shall assume the defense thereof (with counsel selected by
the Indemnifying Party and reasonably satisfactory to the Indemnified Party)
whether or not such Third Party Claim is rightfully brought; provided, however,
that an Indemnified Party shall have the right to retain its own counsel and
participate in the defense thereof, with the fees and expenses to (unless the
Indemnifying Party does not assume the defense or unless a representation of
both the Indemnified Party and the Indemnifying Party by the same counsel would
be inappropriate due to the actual or potential differing interests between
them, in which case the reasonable fees and expenses of counsel retained by the
Indemnified Party shall be paid by the Indemnifying Party) be paid at its own
expense. Provided, that in no event shall the Indemnifying Party be required to
pay for more than one separate counsel no matter the number or circumstances of
all Indemnified Parties. If the Indemnifying Party shall fail to timely assume
the defense of and reasonably defend such Third Party Claim, the Indemnified
Party shall have the right to retain or assume control of such defense and the
Indemnifying Party shall pay (as incurred and on demand) the reasonable fees and
expenses of

 

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counsel retained by the Indemnified Party and all other reasonable expenses of
investigation and litigation. The Indemnifying Party shall not be liable for the
indemnification of any Third Party Claim settled (or resolved by consent to the
entry of judgment) by the Indemnified Party without the written consent of the
Indemnifying Party. Also, if the Indemnifying Party shall control the defense of
any such Third Party Claim, the Indemnifying Party shall have the right to
settle such Third Party Claim; provided, that the Indemnifying Party shall
obtain the prior written consent (which shall not be unreasonably withheld,
conditioned or delayed) of the Indemnified Party before entering into any
settlement of (or resolving by consent to the entry of judgment upon) such Third
Party Claim unless (A) there is no finding or admission of any violation of law
or any violation of the rights of any person or entity by an Indemnified Party,
no requirement that the Indemnified Party admit fault or culpability, and no
adverse effect on any other claims that may be made by or against the
Indemnified Party and (B) the sole relief provided is monetary damages that are
paid in full by the Indemnifying Party and such settlement does not require the
Indemnified Party to take (or refrain from taking) any action. 

 

(c) Cooperation in Defense. Regardless of who controls the Third Party Claim
defense, the other party hereto shall reasonably cooperate in the defense as may
be requested. Without limitation, the party hereto which is not the Indemnifying
Party and (if different) the Indemnified Party, and their respective directors,
officers, managers, advisers, agents and employees, shall cooperate fully with
the Indemnifying Party and its legal representatives in the investigation and
defense of any Third Party Claim.

 

(d) Expenses. As the parties intend complete indemnification, all reasonable
costs and expenses of enforcing any provision of this Section 7.1 shall also be
reimbursed by the Indemnifying Party.

 

(e) Basket. Notwithstanding anything in this Agreement to the contrary (but,
subject to Section 7.1(g)), the Corporation shall have no obligation to
indemnify the VB Indemnitees in respect of any Losses for which indemnification
is claimed under Section 7.1 with respect to Section 2, unless and until the
aggregate of such Losses arising under Section 7.1 with respect to Section 2
exceeds $50,000 (the “Basket”), at which point (subject to all the limitations
and clarifications set forth in this Section 7) the Corporation will be
obligated to indemnify the VB Indemnitees from and against all such Losses
arising under Section 7.1 (i.e., from Dollar 1 of Losses).

 

(f) De Minimis. Notwithstanding anything in this Agreement to the contrary, the
Corporation shall have no obligation to indemnify the VB Indemnitees in respect
of any individual instance (or series of instances resulting from the same facts
and circumstances) of Losses for which indemnification is claimed under Section
7.1 with respect to Section 2 if the Losses associated with such individual
instance (or series of instances resulting from the same facts and
circumstances) are less than $20,000 (the “De Minimis Claim Amount”), it also
being understood that any such individual instance (or series of instances
resulting from the same facts and circumstances) for amounts less than the De
Minimis Claim Amount shall be ignored in determining whether the Basket has been
exceeded and thereafter.

 

(g) No Sandbagging. Notwithstanding anything in this Agreement to the contrary,
to the extent VB had actual knowledge as of the time of the execution and
delivery of this Agreement of any breach or failure to be true as of the date
hereof of any representation or warranty made by the Corporation under Section 2
of this Agreement, then no VB Indemnitee may bring a

 

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claim for indemnification for any Losses under this Section 7 (or any claim for
any other right or remedy) arising out of such breach or failure to be true (to
the extent of the known breach or failure to be true, including magnitude
thereof). This subsection shall not be interpreted to deprive any VB Indemnitee
of a claim for indemnification for any Losses under this Section 7 (or any claim
for any other right or remedy) arising out of a breach or failure to be true, as
of the time of the execution and delivery of this Agreement, of any
representation or warranty made by the Corporation under Section 2 of this
Agreement if VB did not have actual knowledge as of the time of the execution
and delivery of this Agreement of such breach/ failure to be true (and, if VB
had actual knowledge of some but not all of such breach/ failure to be true,
including magnitude thereof, then the VB Indemnitees’ claim for indemnification
for any Losses under this Section 7 (or any claim for any other right or remedy)
with respect to such breach/ failure to be true shall be preserved as to the
portion or extent thereof for which VB did not have such actual knowledge). In
connection with any determination as to whether VB had actual knowledge for
purposes of this Section 7.1(g), the burden of proof shall be on the
Corporation.

 

(h) Mitigation. Following the Closing, each VB Indemnitee shall take
commercially reasonable actions to mitigate all Losses incurred or reasonably
expected to be incurred by it or any VB Indemnitee that it controls upon
becoming aware of any fact, event or circumstance that has resulted in, or would
reasonably be expected to give rise to, any such Loss; provided that any failure
to take any particular course of action shall not diminish any VB Indemnitee’s
right to indemnification hereunder so long as such VB Indemnitee acted in good
faith. The VB Indemnitees shall cooperate with the Corporation and each other
with respect to resolving any claim or liability underlying any Loss with
respect to which an Indemnifying Party is obligated to indemnify any VB
Indemnitee hereunder, including by making commercially reasonable efforts to
mitigate or resolve any such claim or liability; provided that any failure to
take any particular course of action shall not diminish any VB Indemnitee’s
right to indemnification hereunder so long as such VB Indemnitee acted in good
faith. In the event it is determined that any VB Indemnitee failed to act in
good faith to mitigate pursuant to this Section 7.1(h), such failure in and of
itself shall not preclude any VB Indemnitee’s right to recover hereunder except
to the extent of the portion of a Loss that should have been mitigated by the VB
Indemnitees’ commercially reasonable actions but that was not so mitigated.

 

7.2     Limitation of Liability. In no event shall the Corporation or its
affiliates or its or their directors, officers, employees, managers, consultants
or agents be responsible or liable in connection with this Agreement for any
special, indirect, punitive, incidental or consequential damages or lost
profits, lost savings, lost business or interruption of business to VB or any
other individual or entity regardless of the form of action or legal theory and
whether in contract, tort, strict liability or otherwise, and regardless of
whether VB or such other individual or entity may have been advised of the
possibility of such damage. In addition, in no event shall the Corporation’s
total aggregate liability for breaches of this Agreement and the other
Transaction Agreements exceed the amount actually paid by VB to the Corporation
pursuant to this Agreement and the other Transaction Agreements.

 

8.        MISCELLANEOUS.

 

8.1    Transfer; Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties, including transferees of any Securities.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and

 

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assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

 

8.2     Governing Law. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.

 

8.3    WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE
OTHER TRANSACTION AGREEMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR
THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE
PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH
PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED
THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.

 

8.4     Submission to Jurisdiction. Each of the parties irrevocably agrees that
any legal action or proceeding arising out of or relating to this Agreement
brought by any other party or its successors or assigns shall be brought and
determined in the courts of the State of California located in Los Angeles
County or the courts of the United States of America for the Central District of
California located in Los Angeles County, and appellate courts thereof, and each
of the parties hereby irrevocably submits to the exclusive jurisdiction of the
aforesaid courts for itself and with respect to its property, generally and
unconditionally, with regard to any such action or proceeding arising out of or
relating to this Agreement and the transactions contemplated hereby. Each of the
parties agrees not to commence any action, suit or proceeding relating thereto
except in the courts described above in Los Angeles County, California, other
than actions in any court of competent jurisdiction to enforce any judgment,
decree or award rendered by any such court in Los Angeles County, California as
described herein. Each of the parties further agrees that notice as provided
herein shall constitute sufficient service of process and the parties further
waive any argument that such service is insufficient. Each of the parties hereby
irrevocably and unconditionally waives, and agrees not to assert, by way of
motion or as a defense, counterclaim or otherwise, in any action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby, (a) any claim that it is not personally subject to the jurisdiction of
the courts in Los Angeles County, California as described herein for any reason,
(b) that it or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise) and (c) that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii)
the venue of such suit, action or proceeding is improper or (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.

 

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8.5     Counterparts. This Agreement may be executed and delivered in
electronically transmitted counterparts, each of which shall be deemed an
original and all of which together shall constitute one duly executed and
delivered instrument.

 

8.6     Notices. Any notice, report, request, approval or consent required or
permitted by this Agreement shall be in writing and shall be addressed to the
party to be notified at such party’s mailing address or email address as set
forth below on the signature page or on Exhibit A hereto, and (a) if to the
Corporation, with a copy to Stradling Yocca Carlson & Rauth, A Professional
Corporation, 4365 Executive Drive, Suite 1500, San Diego, CA 92121; attn: Hayden
Trubitt, or (b) if to VB, with a copy to Spring Street Business Law, 634 S.
Spring Street, Los Angeles, CA 90014; attn: Tony Borrego;

 

or, in each case, to the most recent mailing address or email address, specified
by written notice, given to the sender pursuant to this Section.

 

Any such written notice, report, request, approval or consent shall be deemed to
have been given on the earliest of (a) actual receipt, or (b) if personally
delivered to the party to whom notice is to be given, the date of delivery, or
(c) if sent by email, the date of transmission, if sent to such email address
before 5:00 p.m. at the location of receipt on a business day, or the first
business day after the date of transmission, if sent to such email address at or
after 5:00 p.m. at the location of receipt on a business day or on a day that is
not a business day, or (d) if sent by overnight courier and addressed as set
forth above, the next business day after the date of deposit with such courier
(by the courier’s stated time for enabling next-business-day delivery), or if
deposited after such stated time shall be deemed to be the second business day
after the date of deposit, or (e) if sent in the United States by United States
certified mail, return receipt requested, postage prepaid and addressed as set
forth above, on the fifth business day after such mailing.

 

8.7     Finder’s Fee. Each party represents that it neither is nor will be
obligated for any finder’s fee or commission in connection with this
transaction. VB agrees to indemnify and to hold harmless the Corporation from
any liability for any commission or compensation in the nature of a finder’s fee
arising out of this transaction (and the costs and expenses of defending against
such liability or asserted liability) for which VB or any of its officers,
employees, or representatives is responsible. The Corporation agrees to
indemnify and hold harmless VB from any liability for any commission or
compensation in the nature of a finder’s or broker’s fee arising out of this
transaction (and the costs and expenses of defending against such liability or
asserted liability) for which the Corporation or any of its officers, employees
or representatives is responsible.

 

8.8     Fees and Expenses.

 

(a) The Corporation shall (upon receiving backup documentation thereof from VB)
reimburse to VB at the Closing the reasonable out-of-pocket fees and expenses of
Spring Street Business Law, reasonable fees and expenses of experts, consultants
and the like and other expenses of VB incurred in connection with performing due
diligence with respect to the Transaction Agreements and the transactions
contemplated thereby, provided such fees and expenses do not exceed, in the
aggregate, $20,000. Provided further, however that the Corporation shall have no
obligation hereunder if the Closing does not occur due solely to actions and/or
decisions made by VB.

 

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(b) On the other hand, if the Closing does not occur for any other reason, the
Corporation shall (upon receiving backup documentation thereof from VB)
reimburse to VB up to an aggregate of $20,000 of the reasonable out-of-pocket
fees and expenses of Spring Street Business Law, reasonable fees and expenses of
experts, consultants and the like and other expenses of VB incurred in
connection with performing due diligence with respect to the Transaction
Agreements and the transactions contemplated thereby, in each case through the
time that the Corporation informs VB in writing of the Corporation’s decision
not to move forward with the Closing.

 

8.9     Attorney’s Fees. If any action at law or in equity or any arbitration
action is necessary to enforce (or defend against enforcement of) or interpret
the terms of any of the Transaction Agreements, the prevailing party shall be
entitled to reasonable attorney’s fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.

 

8.10   Amendments and Waivers. Any term of this Agreement may be amended or
waived only with the written consent of the Corporation and a majority of the
persons who are then serving as Series A Preferred Directors. Any amendment or
waiver effected in accordance with this Section shall be binding upon VB and
each transferee of the Securities, each future holder of any or all such
Securities, and the Corporation.

 

8.11   Severability. This Agreement is severable. When possible, each provision
of this Agreement will be interpreted in such manner as to be effective and
valid under applicable law; but if any provision of this Agreement is determined
by a final and binding court or arbitration judgment to be invalid, illegal or
unenforceable to any extent, such provision shall not be affected or impaired up
to the limits of such invalidity, illegality or unenforceability; the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not be affected or impaired in any way; and the parties agree to negotiate in
good faith to replace such invalid, illegal and unenforceable provision (or
portion of provision) with a valid, legal and enforceable provision that
achieves, to the greatest lawful extent under this Agreement, the economic,
business and other purposes of such invalid, illegal or unenforceable provision
(or portion of provision).

 

8.12   Further Assurances. The parties hereby covenant and agree without the
necessity of any further consideration, to execute, acknowledge and deliver any
and all such other documents and instruments and take any such other action as
may be reasonably necessary or appropriate to carry out the intent and purposes
of this Agreement. The parties acknowledge that the purpose of the issuance of
the Existing Derivative Securities Warrant #1, the Existing Derivative
Securities Warrant #2, the Existing Derivative Securities Warrant #3, the
Existing Derivative Securities Warrant #4, the Existing Derivative Securities
Warrant #5, the Existing Derivative Securities Warrant #6, the Existing
Derivative Securities Warrant #7, the Existing Derivative Securities Warrant #8,
the Existing Derivative Securities Warrant #9, the Existing Derivative
Securities Warrant #10, the Existing Derivative Securities Warrant #11, the
Existing Derivative Securities Warrant #12, the Existing Derivative Securities
Warrant #13, the Existing Derivative Securities Warrant #14 and the Existing
Derivative Securities Warrant #15 (collectively, the “Existing Derivative
Securities Warrants”) is to provide VB with anti-dilution protection in
connection with its investment under this Agreement. Accordingly, the
Corporation hereby agrees that to the extent that there are in existence as of
the date of this Agreement any outstanding options, warrants, rights (including
conversion or no-cost preemptive rights or similar rights), agreements or other
such derivative securities, orally or in writing, for the purchase or
acquisition from the Corporation of any shares of its capital stock (but
excluding, in all cases, convertible promissory

 

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notes, the Series B Preferred Stock Purchase Agreement of even date herewith and
warrants contemplated thereby, and the Transaction Agreements) that are not
included in any of the Existing Derivative Securities Warrants (the “Other
Derivatives”), the Corporation will promptly deliver a new warrant of like
tenor, mutatis mutandis, to VB covering such Other Derivatives.

 

8.13   Interpretation. The language used in this Agreement is the language
chosen by the parties to express their mutual intent, and no provision of this
Agreement shall be interpreted for or against either party because that party or
its attorney drafted the provision. When a reference is made in this Agreement
to an Article or Section, such reference shall be to an Article or Section of
this Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words “include”,
“includes” or “including” are used in this Agreement, they shall be deemed to be
followed by the words “without limitation”. The words “hereof”, “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The words “date hereof” shall refer to the date of this Agreement.
The word “or” shall not be exclusive. The word “extent” in the phrase “to the
extent” shall mean the degree to which a subject or other thing extends, and
shall not simply mean “if”. All references to “$” mean the lawful currency of
the United States of America. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. Except as
specifically stated herein, any agreement, instrument or statute defined or
referred to herein or in any agreement or instrument that is referred to herein
means such agreement, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and instruments
incorporated therein. Except as otherwise specified herein, references to a
Person are also to its successors and permitted assigns.

 

8.14   Delays or Omissions. No delay or omission to exercise any right, power or
remedy accruing to any party under this Agreement, upon any breach or default of
any other party under this Agreement, shall impair any such right, power or
remedy of such non-breaching or non-defaulting party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or
default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing.

 

8.15   No Commitment for Additional Financing. The Corporation acknowledges and
agrees that no VB party has made any representation, undertaking, commitment or
agreement to provide or assist the Corporation in obtaining any financing,
investment or other assistance, other than the purchase of the Stock as set
forth herein or in the Transaction Agreements and subject to the conditions set
forth herein or in the Transaction Agreements.  In addition, the Corporation
acknowledges and agrees that (i) no statements, whether written or oral, made by
VB or its representatives on or after the date of this Agreement shall create an
obligation, commitment or agreement to provide or assist the Corporation in
obtaining any financing or investment, (ii) the Corporation shall not rely on
any such statement by VB or its representatives, and (iii) an obligation,
commitment or agreement to provide or assist the Corporation in obtaining any
financing or

 

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investment may only be created by a written agreement, signed by VB and the
Corporation, setting forth the terms and conditions of such financing or
investment and stating that the parties intend for such writing to be a binding
obligation or agreement.  VB shall have the right, in its sole and absolute
discretion, to refuse or decline to participate in any other financing of or
investment in the Corporation, and shall have no obligation to assist or
cooperate with the Corporation in obtaining any financing, investment or other
assistance.

 

8.16   Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement among the parties hereto pertaining to the
subject matter hereof and thereof, and any and all other prior or
contemporaneous commitments, understandings and agreements, written or oral,
relating to the subject matter hereof and thereof are expressly superseded;
provided, however, for avoidance of doubt, the nondisclosure/nonuse letter
agreement of November 2016 between the Corporation and Venice Brands, LLC, as
amended on August 18, 2017, is not superseded and remains in full force and
effect. Each party disclaims any reliance on any representation, warranty,
promise, commitment, arrangement or understanding not set forth expressly in
this Agreement or in another Transaction Agreement. Each party has made no
promises, representations, warranties, covenants, or undertakings, other than
those expressly set forth herein or in another Transaction Agreement, to induce
the other party to execute or authorize the execution of this Agreement or any
of the other Transaction Agreements, and each party acknowledges that it has not
executed or authorized the execution of this Agreement in reliance upon any such
promise, representation, warranty, covenant or undertaking not expressly
contained herein or in another Transaction Agreement.

 

8.17   Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR BEFORE THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.

 

[Signature Page(s) Follow]

 

 

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IN WITNESS WHEREOF, the parties have executed this Series A Preferred Stock
Purchase Agreement as of the date first written above.

 

 

CORPORATION:

 

KONARED CORPORATION

 

By:  /s/ Kyle Redfield                                      

 

Name: Kyle Redfield

Title: President

 

Address: 1101 Via Callejon, Suite 200

San Clemente, CA 92673

Email: kyle@konared.com

 

 

VB:

 

KONA HOLDINGS I LLC

 

By:  /s/ Gregory T. Willsey                             

 

Name: Gregory T. Willsey

Title: Manager

 

KONA HOLDINGS II LLC

 

By:  /s/ Adam B. Scott                                    

 

Name: Adam B. Scott

Title: Manager

 

 

 

 

 

 

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EXHIBITS

 

Exhibit A - Schedule of Investors

 

Exhibit B - Forms of Series A Certificate of Designation and Series B
Certificate of Designation

 

Exhibit C - Form of Investors Rights Agreement

 

Exhibit D -  Form of Stockholders Agreement

 

Exhibit E -  Form of Venice Brands Warrant

 

Exhibit F – Form of Sales Shortfall Warrant

 

Exhibit G – Form of Pre-Wired Warrant #1

 

Exhibit H – Form of Pre-Wired Warrant #2

 

Exhibit I – Form of Existing Derivative Securities Warrant #1

 

Exhibit J – Form of Existing Derivative Securities Warrant #2

 

Exhibit K – Form of Existing Derivative Securities Warrant #3

 

Exhibit L – Form of Existing Derivative Securities Warrant #4

 

Exhibit M – Form of Existing Derivative Securities Warrant #5

 

Exhibit N – Form of Existing Derivative Securities Warrant #6

 

Exhibit O – Form of Existing Derivative Securities Warrant #7

 

Exhibit P – Form of Existing Derivative Securities Warrant #8

 

Exhibit P – Form of Existing Derivative Securities Warrant #8

 

Exhibit Q – Form of Existing Derivative Securities Warrant #9

 

Exhibit R – Form of Existing Derivative Securities Warrant #10

 

Exhibit S – Form of Existing Derivative Securities Warrant #11

 

Exhibit T – Form of Existing Derivative Securities Warrant #12

 

Exhibit U – Form of Existing Derivative Securities Warrant #13

 

Exhibit V – Form of Existing Derivative Securities Warrant #14

 

Exhibit W – Form of Existing Derivative Securities Warrant #15

 

29

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EXHIBIT A

 

SCHEDULE OF INVESTORS

 

 

 

Investor Name and Address

Number of Series A Shares Purchased at Closing

Total Purchase Price for Series A Shares Purchased at Closing

Proportion

       

Kona Holdings I LLC

 

Address: 101 California Avenue, Suite 430,

Santa Monica, CA 90403

Email: greg@venicebrands.com

 

1,130.37

 

$1,600,000*

16/22

Kona Holdings II LLC

 

Address: c/o Kona I Holdings LLC, 101 California Avenue, Suite 430,

Santa Monica, CA 90403

Email: greg@venicebrands.com

 

423.89

 

$600,000

6/22

       

 

TOTAL

 

1,554.26

 

$2,200,000

100%

 

 

 

 

* Payable, to the extent of $262,500, in the form of automatic conversion of
bridge note owed by the Corporation.

 

30

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EXHIBIT B

 

FORM OF
SERIES A CERTIFICATE OF DESIGNATION AND FORM OF
SERIES B CERTIFICATE OF DESIGNATION

 

 

 

 

 

31

--------------------------------------------------------------------------------

 

 

 

EXHIBIT C

 

FORM OF INVESTOR RIGHTS AGREEMENT

 

 

 

 

 

32

--------------------------------------------------------------------------------

 

 

 

EXHIBIT D

 

FORM OF STOCKHOLDERS AGREEMENT

 

 

 

 

 

33

--------------------------------------------------------------------------------

 

 

 

EXHIBIT E

 

FORM OF VENICE BRANDS WARRANT

 

 

 

 

 

 

34

--------------------------------------------------------------------------------

 

 

 

EXHIBIT F

 

FORM OF SALE SHORTFALL WARRANT

 

 

 

 

 

 

35

--------------------------------------------------------------------------------

 

 

 

EXHIBIT G

 

FORM OF PRE-WIRED WARRANT #1

 

 

 

 

 

 

36

--------------------------------------------------------------------------------

 

 

 

EXHIBIT H

 

FORM OF PRE-WIRED WARRANT #2

 

 

 

 

 

37

--------------------------------------------------------------------------------

 

 

 

EXHIBIT I

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #1

 

 

 

 

 

38

--------------------------------------------------------------------------------

 

 

 

EXHIBIT J

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #2

 

 

 

 

 

39

--------------------------------------------------------------------------------

 

 

 

EXHIBIT K

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #3

 

 

 

 

 

 

40

--------------------------------------------------------------------------------

 

 

EXHIBIT L

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #4

 

 

 

 

 

41

--------------------------------------------------------------------------------

 

 

 

EXHIBIT M

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #5

 

 

 

 

 

 

42

--------------------------------------------------------------------------------

 

 

 

 

EXHIBIT N

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #6

 

 

 

 

 

43

--------------------------------------------------------------------------------

 

 

 

EXHIBIT O

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #7

 

 

 

 

 

44

--------------------------------------------------------------------------------

 

 

 

EXHIBIT P

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #8

 

 

 

 

 

45

--------------------------------------------------------------------------------

 

 

 

EXHIBIT Q

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #9

 

 

 

 

 

46

--------------------------------------------------------------------------------

 

 

 

EXHIBIT R

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #10

 

 

 

 

 

47

--------------------------------------------------------------------------------

 

 

 

EXHIBIT S

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #11

 

 

 

 

 

48

--------------------------------------------------------------------------------

 

 

 

EXHIBIT T

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #12

 

 

 

 

 

49

--------------------------------------------------------------------------------

 

 

 

EXHIBIT U

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #13

 

 

 

 

 

50

--------------------------------------------------------------------------------

 

 

 

EXHIBIT V

 

FORM OF EXISTING DERIVATIVE SECURITIES WARRANT #14

 

 

 

 

 

 

51