Exhibit 10.63

 

KonaRed Corporation

 

SERIES B PREFERRED STOCK PURCHASE AGREEMENT

 

This Series B Preferred Stock Purchase Agreement (the “Agreement”) is made as of
October 24, 2017 by and among KonaRed Corporation, a Nevada corporation (the
“Corporation”), and Juan Gonzalo Camet Piccone, SFC Investment SA and GH Car
Care, LLC.

 

Juan Gonzalo Camet Piccone, SFC Investment SA and GH Car Care, LLC are
collectively referred to herein in the singular (and with neutral gender) as
“Series B Investor.” All obligations, duties, representations, warranties and/or
rights set forth herein as to Series B Investor shall be deemed to be joint and
several obligations, duties, representations, warranties and/or rights of Juan
Gonzalo Camet Piccone, SFC Investment SA and GH Car Care, LLC. Where (if
anywhere) in this Agreement the context so requires, the term Series B Investor
shall be deemed to refer to only one of, or to each separate one of
respectively, Juan Gonzalo Camet Piccone, SFC Investment SA and GH Car Care, LLC
and to obligations, duties, representations, warranties and/or rights of only
one of, or to each separate one of respectively, Juan Gonzalo Camet Piccone, SFC
Investment SA and GH Car Care, LLC. (Where the context requires or permits that
such term refer to Juan Gonzalo Camet Piccone, SFC Investment SA and GH Car
Care, LLC collectively and to obligations, duties, representations, warranties
and/or rights of Juan Gonzalo Camet Piccone, SFC Investment SA and GH Car Care,
LLC collectively, such term shall be deemed to so refer.)

 

The parties hereby agree as follows:

 

1.    PURCHASE AND SALE OF SERIES B PREFERRED STOCK.

 

1.1     Authorization of Series B 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 B
Preferred Stock in the form attached hereto within Exhibit B (the “Series B
Certificate of Designation”).

 

1.2     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 Series B Investor mutually agree upon, orally or in
writing (which time and place are designated as the “Closing”). At the Closing,
the Corporation shall deliver to Series B Investor (in the same proportions, as
among the Series B Investor persons, as established on Exhibit A attached
hereto) certificates representing the 252.17 shares of Series B Preferred Stock
of the Corporation being issued, sold and purchased (the “Stock”), and the
Series B Pre-Wired Warrant #1 and the Series B Pre-Wired Warrant #2, all against
payment of an aggregate of $356,949 (in the same proportions, as among the
Series B Investor persons, as established on Exhibit A attached hereto) by
satisfaction of debt owed by the Corporation, checks payable to the Corporation
or by wire transfers to a bank account designated by the Corporation.

 

1.3     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.

 

 

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“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.

 

“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).

 

“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.

 

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

 

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

 

“SEC Reports” means the Form 10-K and Form 10-Q periodic 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.

 

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

 

“Series A Preferred Stock Purchase Agreement” means the Series A Preferred Stock
Purchase Agreement of even date herewith by and among the Corporation, Kona
Holdings I LLC and Kona Holdings II LLC.

 

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

 

“Series B Investor Indemnitee” has the meaning set forth in Section 7.1(a).

 

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

 

2.   Representations and Warranties of the Corporation. The Corporation hereby
represents and warrants to Series B Investor that, except as set forth on a
Schedule of Exceptions previously delivered separately by the Corporation to
counsel for Series B Investor, 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 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 (other than 1,554.26 shares issued essentially simultaneously
with the Closing pursuant to the closing under the Series A Preferred Stock
Purchase Agreement), 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
and 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 as

 

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defined in the Series A Preferred Stock Purchase Agreement, (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 Venice Brands, 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 the Series A Preferred Stock Purchase
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 Venice Brands, 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 the Series A
Preferred Stock Purchase 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, the performance of all obligations of the
Corporation hereunder and the authorization, issuance and delivery of the Stock
and the Common Stock issuable upon conversion of the Stock (together, the
“Securities”) has been taken or will be taken before the Closing, and this
Agreement, when executed and delivered by the Corporation, shall constitute a
valid and legally binding obligation of the Corporation, enforceable against the
Corporation in accordance with its 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, or (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.

 

2.5     Valid Issuance of Securities. The Stock, when issued, sold and delivered
in accordance with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid and nonassessable and free
of restrictions on transfer other than restrictions on transfer under applicable
state and federal securities laws and liens or encumbrances created by or
imposed by Series B Investor. Based in part upon the representations of Series B
Investor 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 B
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 applicable

 

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federal and state securities laws and liens or encumbrances created by or
imposed by Series B Investor. Based in part upon the representations of Series B
Investor 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 Series B Investor 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 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 Agreement,
nor the carrying on of

 

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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 Agreements by the
Corporation and the consummation of the transactions contemplated hereby 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, forfeiture or nonrenewal of any material permit,
license, authorization or approval applicable to the Corporation.

 

(b) The execution, delivery and performance of the Agreement by the Corporation
and the consummation of the transactions contemplated hereby 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 counsel for
Series B Investor true, correct and complete copies of each such agreement.

 

(b) Other than the transactions referred to in or contemplated by this
Agreement, 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 this Agreement and matters referred to in or contemplated by this
Agreement, 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.

 

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(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 this
Agreement, 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 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 this Agreement 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. To the Corporation’s knowledge, except in the Stockholders
Agreement contemplated by the Series A Preferred Stock Purchase Agreement, no
stockholder of the Corporation has entered into any agreements with respect to
the voting of capital shares of the Corporation.

 

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

 

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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 August 31, 2017, as previously made available to the Series B
Investors upon request, (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).

 

(c) The spreadsheet showing the Corporation’s sales, for the 12 months ended
August 31, 2017, to the respective companies which were its top 10 customers
during the 12 months ended August 31, 2017, as previously made available to the
Series B Investors upon request, is complete and accurate in all material
respects.

 

(d) The Corporation’s budget and forecast for the 12 months beginning October 1,
2017, as previously made available to the Series B Investors upon request, 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;

 

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(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;

 

(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.

 

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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.

 

2.19   Employee Benefits.

 

(a) The Corporation has provided to counsel for Series B Investor 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 counsel for Series B Investor 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.

 

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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.

 

(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 Series B Investor 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

 

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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 counsel for Series B Investor 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 counsel for Series B Investor 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 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 Series B Investor.
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 Series B Investor. The copy
of the minute books of the Corporation provided to Series B Investor’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 Series B Investor. Series B Investor
hereby represents and warrants to the Corporation that:

 

3.1     Authorization. Series B Investor has full power and authority to enter
into this Agreement. This Agreement, when executed and delivered by Series B
Investor, will constitute valid and legally binding obligations of Series B
Investor, enforceable in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors’ rights

 

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generally, and as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.

 

3.2     Violation and Default.

 

(a) The execution, delivery and performance by Series B Investor of this
Agreement and the consummation of the transactions contemplated hereby by Series
B Investor 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 Series B Investor’s organizational documents (if
applicable) or any judgment, order, writ, decree or contract or federal or state
statute, rule or regulation.

 

(b) The execution, delivery and performance by Series B Investor of this
Agreement and the consummation of the transactions contemplated hereby by Series
B Investor 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 Series B
Investor is a party or by which Series B Investor is bound or constitute an
event which results in the creation of any lien, charge or encumbrance upon any
assets of Series B Investor.

 

3.3     Purchase Entirely for Own Account. This Agreement is made with Series B
Investor in reliance upon Series B Investor’s representation to the Corporation,
which by Series B Investor’s execution of this Agreement Series B Investor
hereby confirms, that the Securities to be acquired by Series B Investor will be
acquired for investment for Series B Investor’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 Series B Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, Series B Investor 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. Series B Investor believes it has received
all information it considers necessary or appropriate for deciding whether to
purchase the Securities. Series B Investor 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 Series B Investor to
rely on such representations and warranties.

 

3.5     Restricted Securities. Series B Investor 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,
Series B Investor 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. Series B Investor
acknowledges that the Corporation has no obligation to register or qualify the
Securities for resale. Series B Investor 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

 

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that are outside Series B Investor’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. Series B Investor understands that the
Corporation is “going dark.” Series B Investor understands that the Corporation
has made no assurances that a liquid public market will ever exist for the
Securities after the Closing.

 

3.7     Series A Deal Is Significantly Better Than Series B. Series B Investor
is familiar with the Series A Preferred Stock Purchase Agreement and understands
that although it has some similarity to this Agreement, and although the Series
A Certificate of Designation has some similarity to the Series B Certificate of
Designation, in fact the Series B Preferred Stock is in some ways materially
inferior to the rights of the Series A Preferred Stock and in addition the
investors under the Series A Preferred Stock Purchase Agreement are obtaining
substantially greater rights and other securities (e.g., through the Transaction
Agreements, as defined in the Series A Preferred Stock Purchase Agreement) than
the Series B Investor is obtaining under this Agreement – even though the
investors under the Series A Preferred Stock Purchase Agreement are paying the
same price per share of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement as the Series B Investor is paying per share
of Series B Preferred Stock pursuant to this Agreement.

 

3.8     Legends. Series B Investor 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 AFFECTED 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.

 

(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.

 

3.9    No “Bad Actor” Disqualification Events. Neither (a) Series B Investor,
(b) any of Series B Investor’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 Series B Investor 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   Accredited Investor. Series B Investor is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

 

3.11   No General Solicitation. Neither Series B Investor, nor any of its
officers, employees, agents, directors, stockholders or partners has engaged the
services of a broker,

 

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investment banker or finder to contact any potential investor nor has Series B
Investor or any of Series B Investor’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 Series B Investor, 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.

 

3.12   Exculpation. Series B Investor 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 Series B Investor’s Obligations at Closing. The obligations
of Series B Investor 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
Series B Investor:

 

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     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.

 

4.4     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.

 

4.5     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
Series B Investor shall be otherwise reasonably satisfied with the Corporation’s
dealings in respect of such matters.

 

4.6     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.

 

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4.7     Series A Preferred Stock Purchase Agreement. The Series A Preferred
Stock Purchase Agreement shall have been executed and delivered by all parties
thereto and the closing contemplated by the Series A Preferred Stock Purchase
Agreement shall have occurred.

 

4.8     Warrants. The Corporation shall have executed and delivered to Series B
Investor the Series B Pre-Wired Warrant #1 and the Series B Pre-Wired Warrant
#2, in substantially the respective forms attached as Exhibit C and Exhibit D.

 

4.9     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
Series B Investor, and Series B Investor (or Series B Investor’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 Series B Investor 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
Series B Investor 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 Series B Investor on or before the Closing shall
have been performed or complied with in all material respects.

 

5.3     Series A Preferred Stock Purchase Agreement. The Series A Preferred
Stock Purchase Agreement shall have been executed and delivered by all parties
thereto and the closing contemplated by the Series A Preferred Stock Purchase
Agreement shall have occurred.

 

5.4     NDA. The Series B Investor persons shall have executed and delivered to
the Corporation the nondisclosure/nonuse letter agreement contemplated by
Section 8.15.

 

5.5     Qualifications. All authorizations, approvals or permits, if any, of any
governmental authority 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 made available for review by
counsel for Series B Investor and are acceptable to Series B Investor.

 

7.    INDEMNIFICATION AND LIMITATION OF LIABILITY

 

7.1     Indemnification.     

 

(a) Indemnification of Series B Investor, Etc. Subject to this Section 7, the
Corporation agrees to indemnify, hold harmless and defend Series B Investor and
its affiliates, and each of their respective directors, officers, managers,
employees and agents (each a “Series B Investor 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 Series B Investor 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 Series B Investor
directly, in either case relating to or arising from (x) the Corporation’s
breach of this Agreement, 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 (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 Series B Investor
Indemnitee’s breach of applicable law, breach of this Agreement, 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 counsel retained by the Indemnified Party and all other reasonable
expenses of investigation and

 

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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 Series B Investor 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 Series B Investor 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 Series B Investor
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 Series B Investor 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 Series B Investor Indemnitee may
bring a claim for indemnification for any Losses under this Section

 

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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).

 

(h) Mitigation. Following the Closing, each Series B Investor Indemnitee shall
take all commercially reasonable actions to mitigate all Losses incurred or
reasonably expected to be incurred by it or any Series B Investor 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. The
Series B Investor 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 Series B
Investor Indemnitee hereunder, including by making commercially reasonable
efforts to mitigate or resolve any such claim or liability. Any failure to
mitigate pursuant to this Section 7.1(h) in and of itself shall not preclude any
Series B Investor Indemnitee’s right to recover hereunder except to the extent
of the portion of a Loss that could have been mitigated.

 

7.2     Exclusive Remedy. Following the Closing, except (a) for specific
performance or other injunctive relief to which Series B Investor hereto may be
entitled pursuant to this Agreement (including with respect to any covenants,
agreements and obligations that by their terms contemplate performance following
Closing), and (b) as may be otherwise expressly provided hereunder, the sole and
exclusive remedy for any and all claims arising under, out of, or related to
this Agreement or the subject matter hereof shall be the rights of
indemnification set forth in Section 7.1, subject to such restrictions as set
forth herein (e.g., as to cap, Basket and De Minimis Claim Amount), and Series B
Investor will not have any other entitlement, remedy or recourse, whether in
contract, tort or otherwise, it being agreed that all of such other remedies,
entitlements and recourse are expressly waived and released by Series B Investor
to the fullest extent permitted by law.

 

7.3     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 Series B
Investor 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 Series B Investor 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
exceed the amount actually paid by Series B Investor to the Corporation pursuant
to this Agreement.

 

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 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

 

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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.

 

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

 

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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 Series B Investor, 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. Series B Investor 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 Series B
Investor or any of its officers, employees, or representatives is responsible.
The Corporation agrees to indemnify and hold harmless Series B Investor 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. Each party shall bear its own expenses in the
negotiation, preparation and performance of this Agreement.

 

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 this Agreement, 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 the holders of at
least a majority of the Common Stock issued or issuable upon conversion of the
Stock 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 each person within Series B Investor 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;

 

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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.

 

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.

 

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8.15   No Commitment for Additional Financing. The Corporation acknowledges and
agrees that no Series B Investor 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 and subject to the conditions set forth herein.  In
addition, the Corporation acknowledges and agrees that (i) no statements,
whether written or oral, made by any Series B Investor 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 any
Series B Investor or its representatives, and (iii) an obligation, commitment or
agreement to provide or assist the Corporation in obtaining any financing or
investment may only be created by a written agreement, signed by a Series B
Investor 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.  Each Series B Investor party 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, each nondisclosure/nonuse letter
agreement between or among the Corporation and any or all Series B Investor
persons 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.   Each
party has made no promises, representations, warranties, covenants, or
undertakings, other than those expressly set forth herein, to induce the other
party to execute or authorize the execution of this Agreement, 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.

 

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 B 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

 

 

SERIES B INVESTOR:

 

JUAN GONZALO CAMET PICCONE

 

 /s/ Juan Gonzalo Camet Piccone                    

 

SFC INVESTMENT SA

 

By:  /s/ Santiago Fernández                                        

Name: Santiago Fernández

Title: President

 

GH CAR CARE, LLC

 

By:  /s/ William L. Driscoll                                       

Name: William L. Driscoll 

Title: President

 

 

 

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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 Series B Pre-Wired Warrant #1

 

Exhibit D - Form of Series B Pre-Wired Warrant #2

 

 

 

 

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EXHIBIT A

 

SCHEDULE OF INVESTORS

 

 

Investor Name and Address

Number of Series B Shares Purchased at Closing

Total Purchase Price for Series B Shares Purchased at Closing

Proportion

       

Juan Gonzalo Camet Piccone

Castillo de Malpica 108; 28691,

Villanueva de la Canada;

Madrid, Spain

Email: gonzalo.kred@gmail.com

144.10

$203,968*

57.14%

SFC Investment SA

Torre SFC, Piso 24, Calle 55,

Obarrio, Panama

Email: santiago.fernandez@sfc.com.pa

72.75

$102,981*

28.85%

GH Car Care, LLC

1145 Broadway Plaza, Suite 1500,

Tacoma, WA 98402

Email: BillDriscoll@lincolnparkpartners.com

35.32

$50,000

14.01%

       

 

TOTAL

252.17

$356,949

100%

 

 

* Payable in the form of full satisfaction of debt (inclusive of any accrued
interest) owed by the Corporation.

 

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EXHIBIT B

 

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

 

 

 

 

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EXHIBIT C

 

FORM OF SERIES B PRE-WIRED WARRANT #1

 

 

 

 

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EXHIBIT D

 

FORM OF SERIES B PRE-WIRED WARRANT #2

 

 

 

 

 

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