Throwdown Industries Holdings, LLC
Throwdown Industries, LLC
Throwdown Industries, INC.

XFIT BRANDS, INC.

 

 

 

AMENDED AND RESTATED NOTE PURCHASE AGREEMENT

 

 

 

Dated as of December 16, 2016

 

 

 

 

 

Throwdown Industries Holdings, LLC
Throwdown Industries, LLC
Throwdown Industries, INC.

 

XFIT BRANDS, INC.

 

9.00% Senior Secured Fixed Rate Notes due 2020

 

AMENDED AND RESTATED NOTE PURCHASE AGREEMENT

 

December 16, 2016

 

PIMCO Funds: Private Account Portfolio Series: PIMCO High Yield Portfolio
c/o Pacific Investment Management Company LLC
650 Newport Center Drive
Newport Beach, California 92660

 

Ladies and Gentlemen:

 

Throwdown Industries Holdings, LLC, a Delaware limited liability company
(“Holdings”), Throwdown Industries, LLC, a Delaware limited liability company
(“TD LLC”), Throwdown Industries, INC., a California corporation (“TDI”) and
XFIT BRANDS, INC., a Nevada corporation (“XFIT” and, together with Holdings, TD
LLC and TDI, each, an “Obligor” and, collectively, the “Obligors”), hereby
jointly and severally agrees with PIMCO Funds: Private Account Portfolio Series:
PIMCO High Yield Portfolio, a separate investment portfolio of PIMCO Funds, a
Massachusetts business trust (the “Purchaser”), as follows:

 

Section 1. Authorization of Notes. The Obligors have authorized the issue of
$3,500,000.00 aggregate principal amount of its 9.00% Senior Secured Fixed Rate
Notes due July 12, 2020 (collectively, the “New Notes” and, together with the
Existing Notes and any notes issued in replacement therefor, the “Notes”).
Certain capitalized terms used in this Agreement are defined in Exhibit A;
references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a
Schedule or an Exhibit attached to this Agreement. As used herein, the term
“this Agreement” and references thereto shall mean this Agreement as it may from
time to time be amended, supplemented or otherwise modified.

 

Section 2. Issue of New Notes.

 

(a)       Interest. The New Notes will be dated the date of delivery thereof,
and will bear interest at the rate of 9.00% per annum, payable in arrears on the
12th day of each calendar month, commencing on January 12, 2016, and on the
maturity date and each other date on which principal is due and payable, or, if
any such day is not a Business Day, the immediately succeeding Business Day
(each, a “Payment Date”). Accrued interest shall be computed on the basis of a
360-day year of twelve 30-day months.

 

 

 

 

(b)       Principal. The Applicable Percentage of the entire outstanding
principal balance of the New Notes shall be due and payable on June 12, 2020, or
such earlier date on which the New Notes are accelerated pursuant to Section 17
following an Event of Default or subject to optional redemption by XFIT, on
behalf of the Obligors, in accordance with Section 2(c) below. The “Applicable
Percentage” means (i) in the case of a redemption or principal payment,
repayment or prepayment, whether optional or mandatory, following an Event of
Default, by application of proceeds in connection with the exercise of remedies
or otherwise, or upon any acceleration or deemed acceleration of the principal
of the Notes, in each case, on or prior to June 12, 2019, 107% or (ii) in the
case of a redemption or principal payment, repayment or prepayment, whether
optional or mandatory, following an Event of Default, by application of proceeds
in connection with the exercise of remedies or otherwise, or upon any
acceleration or deemed acceleration of the principal of the Notes, in each case,
after June 12, 2019, 100%.

 

(c)       Redemption. XFIT, on behalf of the Obligors, may redeem the New Notes,
in whole or in part, at any time, at its option, at a redemption price equal to
the Applicable Percentage of the principal amount of the New Notes to be
redeemed, plus accrued and unpaid interest on the principal amount of New Notes
to be redeemed to, but excluding, the redemption date. If less than all of the
New Notes are to be redeemed, the Notes shall be redeemed on a pro rata basis.

 

Notice of any such redemption must be mailed by first-class mail or
electronically delivered to the registered holder of the New Notes to be
redeemed no less than 30 days prior to the redemption date and shall specify the
designated redemption date and the aggregate principal amount to be redeemed
thereon. Notice of redemption having been given, the New Notes to be so redeemed
shall, on the redemption date, become due and payable at the redemption price
provided for herein, and from and after such date (unless the Obligors shall
default in the payment of the redemption price and accrued interest) such New
Notes shall cease to bear interest. In the event of redemption of the New Notes
in part only, new Notes for the unredeemed portion thereof will be issued in the
name of the Purchaser.

 

Section 3. Exchange of Existing Notes; Sale and Purchase of New Notes; Issuance
of Exchange Shares. Subject to the terms and conditions hereof and in reliance
on the representations and warranties of the Obligors contained herein, the
Purchaser agrees as follows:

 

(a)       Exchange of Existing Notes. Purchaser agrees to exchange the entire
aggregate principal amount of its Existing Notes (at 100% of par) on the
Restatement Date for an aggregate principal amount of New Notes equal to the
entire aggregate principal amount of its Existing Notes.

 

(b)       Conversion of Accrued and Unpaid Interest. Purchaser agrees to accept
1,990,639 shares of XFIT’s common stock, $0.0001 par value per share (the
“Common Stock”) on the Restatement Date, representing payment in full of all
accrued and unpaid interest on the Existing Notes (assuming a conversion price
of $0.14 per share) as of the Restatement Date. Prior to delivery of the Common
Stock, Purchaser agrees to deliver a certificate containing certain investment
representations and warranties substantially in the form set out in Exhibit B to
this Agreement (the “Purchaser Certificate”).

 

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(c)        Purchase of New Notes. The Purchaser agrees to purchase, and each of
the Obligors, jointly and severally, agrees to sell, additional New Notes in an
aggregate principal amount equal to $1,000,000, such that the initial principal
balance of all New Notes issued on the Restatement Date (including New Notes
exchanged for Existing Notes pursuant to Section 3(a)) is equal to $3,500,000.
The New Notes shall be issued in the name of the Purchaser for the initial
principal balance of the New Notes substantially in the form set out in Exhibit
C, with such changes therefrom, if any, as may be approved by the Purchaser and
the Obligors.

 

(d)       Use of Proceeds. The Obligors shall use the proceeds of the additional
issuance of the New Notes on the Effective Date as follows: (i) on the Effective
Date, the Obligors shall pay in full all obligations of the Obligors under that
certain settlement and release agreement, dated as of August 15, 2016, between
Absolute Metals, LLC and TDI; and (ii) on the Effective Date or, if later,
within one (1) Business Day following presentation of an invoice therefor, the
Obligors shall pay the fees and expenses of Purchaser (including the legal fees
and expenses of Latham & Watkins LLP). The balance of the proceeds of the
additional issuance of the New Notes shall be used as general working capital of
the Obligors, including, but not limited to. The balance of the proceeds of the
additional issuance of the New Notes shall be used as general working capital of
the Obligors, including, but not limited to, new turf installations to be
undertaken by XFit's sports surface division..

 

Section 4. Closing. The Restatement Date Transactions, including delivery of the
New Notes, Common Stock and Warrant to the Purchaser, shall be made at the
offices of Latham & Watkins LLP, 885 Third Avenue, New York, New York 10022 at
10:00 A.M., New York time on the Restatement Date, against payment therefor by
delivery by the Purchaser to the Obligors of immediately available funds in the
aggregate amount of $1,000,000 by wire transfer to the following account:

 

The New Notes so delivered shall be registered in the Purchaser’s name or
otherwise as the Purchaser shall have advised XFIT in writing not less than one
Business Day prior to the Restatement Date.

 

Section 5. Conditions to Effectiveness. The effectiveness of this Agreement,
including the Purchaser’s obligation to purchase and pay for the additional New
Notes to be sold by the Obligors to the Purchaser on the Restatement Date, is
subject to the fulfillment to the Purchaser’s satisfaction, on or prior to the
Restatement Date, of the following conditions:

 

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(a)       Representations and Warranties. The representations and warranties of
the Obligors in this Agreement and the other Transaction Documents shall be true
and correct on the Restatement Date.

 

(b)       Performance; No Default. Each of the Obligors shall have performed and
complied with all agreements and conditions contained in this Agreement and each
other Transaction Document required to be performed or complied with by it on or
prior to the Restatement Date and, after giving effect to the Restatement Date
Transactions, no Default or Event of Default shall have occurred and be
continuing. As of the Restatement Date, no event or circumstance has occurred
that may have a Material Adverse Effect.

 

(c)       Documents. The Purchaser shall have received duly executed copies of
this Agreement, the New Notes, the Warrant, a certificate evidencing the Common
Stock and each of the other Transaction Documents and original or copies of such
other documents as the Purchaser may reasonably request.

 

(d)       Legal Opinion. The Purchaser shall have received an opinion of counsel
to the Obligors in form and substance satisfactory to the Purchaser.

 

(e)       Officer’s Certificate. The Obligors shall have delivered to the
Purchaser an officer’s certificate, dated as of the Closing Date, certifying
that the conditions specified in Sections 5(a), 5(b), 5(g), 5(h) and 5(i) have
been fulfilled.

 

(f)       Secretary’s Certificate. The Purchaser shall have received a
certificate of the Secretary or an Assistant Secretary (or equivalent officer)
of the Obligors certifying:

 

(i)       that attached thereto are true and complete copies of all resolutions
and other consents adopted by such Obligor authorizing and approving the
execution, delivery, filing and performance of this Agreement and the other
Transaction Documents and the consummation of the Restatement Date Transactions,
and that all such resolutions and consents are in full force and effect as of
the Restatement Date and are all the resolutions and consents adopted in
connection with the transactions contemplated hereby and thereby;

 

(ii)       that attached thereto are true and complete copies of the certificate
of incorporation or formation and by-laws or limited liability company agreement
of such Obligor and that such organizational documents are in full force and
effect as of the Restatement Date;

 

(iii)       the names and signatures of the officers of the Obligors authorized
to sign this Agreement, the other Transaction Documents and the other documents
to be delivered hereunder and thereunder; and

 

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(iv)       that attached thereto are true and complete copies of good standing
certificates (or their equivalent) for each Obligor from the secretary of state
or similar Governmental Authority of the jurisdiction under the Laws in which
such Obligor is organized and a foreign qualification certificate (or its
equivalent) for such Obligor from the secretary of state or similar Governmental
Authority of each jurisdiction in which such Obligor has qualified, or is
required to qualify, to do business as a foreign corporation.

 

(g)       Changes in Structure. No Obligor shall have changed its jurisdiction
of formation or been a party to any merger or consolidation and no Obligor shall
have succeeded to all or any substantial part of the liabilities of any other
entity.

 

(h)       No Governmental Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any Governmental Order which is in
effect and has the effect of making the transactions contemplated by this
Agreement or any other Transaction Document illegal, otherwise restraining or
prohibiting consummation of such transactions or causing any of the transactions
contemplated hereunder or thereunder to be rescinded following completion
thereof.

 

(i)       Authorization and Consents. The Purchaser shall have received duly
executed copies of all approvals, consents, filings and waivers necessary to
complete the transactions contemplated herein and in the other Transaction
Documents.

 

(j)       Fees and Expenses. The Obligors, jointly and severally, shall have
paid all of the fees, expenses and disbursements incurred by any Obligor or the
Purchaser (including Purchaser’s reasonable attorneys’ fees) in connection with
the Restatement Date Transactions.

 

Section 6. [Reserved].

 

Section 7. Representations and Warranties by the Obligors. The Obligors jointly
and severally represent and warrant to the Purchaser as of the date hereof that:

 

(a)       Organization; Power and Authority. Each Obligor is a corporation or
limited liability company duly incorporated or organized, validly existing and
in good standing under the Laws of the state of California, Delaware or Nevada,
as the case may be, and has full company power and authority to (i) enter into
this Agreement and the other Transaction Documents to which such Obligor is a
party, to carry out its obligations hereunder and thereunder and to consummate
the Original Closing Date Transactions and the Restatement Date Transactions and
(ii) own, operate or lease the properties and assets now owned, operated or
leased by it and to carry on its business as it has been and is currently
conducted. Each Obligor is duly licensed or qualified to do business and is in
good standing in each jurisdiction, as set forth in Schedule II, in which the
properties owned or leased by it or the operation of its business as currently
conducted makes such licensing or qualification necessary, except where such
failure could not reasonably be expected to have a Material Adverse Effect.

 

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(b)       Authorization, etc. This Agreement and any other Transaction Document
to which any of the Obligors is a party, the performance by the Obligors of
their respective obligations hereunder and thereunder and the consummation by
the Obligors of the Original Closing Date Transactions and the Restatement Date
Transactions have been duly authorized by all necessary action on the part of
each Obligor, and this Agreement and each other Transaction Document has been
duly executed and delivered by the Obligors and constitutes a legal, valid and
binding obligation of the Obligors enforceable against the Obligors in
accordance with its terms.

 

(c)       Compliance with Laws, Other Instruments, etc. The Obligors have
complied, and are now complying, in all material respects with all Laws
applicable to them or their respective businesses, properties or assets. The
execution, delivery and performance by the Obligors of this Agreement and each
other Transaction Document will not:

 

(i)       contravene, result in any breach of, or constitute a default under, or
result in the creation of any Encumbrance in respect of any property of any
Obligor under any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, or its organizational documents or any other agreement or
instrument to which any Obligor is bound or by which any Obligor or any of its
properties may be bound or affected;

 

(ii)       conflict with or result in a breach of any of the terms, conditions
or provisions of any order, judgment, decree, or ruling of any court, arbitrator
or Governmental Authority applicable to any Obligor or its property; or

 

(iii)       violate any provision of any statute or other rule or regulation of
any Governmental Authority applicable to any Obligor.

 

All Permits required for the Obligors to conduct their respective businesses
have been obtained by them and are valid and in full force and effect. All fees
and charges with respect to such Permits have been paid in full. No event has
occurred that, with or without notice or lapse of time or both, would reasonably
be expected to result in the revocation, suspension, lapse or limitation of any
Permit applicable to any Obligor.

 

(d)       Common Stock. The Common Stock has been duly authorized and validly
issued and is fully paid and non-assessable, has been issued (subject to the
accuracy of Purchaser’s representations and warranties contained in the
Purchaser Certificate) in compliance with all securities laws and is not subject
to any pre-emptive or similar rights.

 

(e)       Governmental Authorizations, etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority or any other Person is required in connection with the execution,
delivery or performance by any of the Obligors of this Agreement or any other
Transaction Document.

 

(f)       Private Offering by the Obligors. None of the Obligors nor anyone
acting on their behalf has offered the Notes or any similar securities for sale
to, or solicited any offer to buy any of the same from, or otherwise approached
or negotiated in respect thereof with, any Person other than the Purchaser. None
of the Obligors nor anyone acting on their behalf has taken, or will take, any
action that would subject the issuance or sale of the Notes to the registration
requirements of the Securities Act.

 

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(g)       Litigation; Observance of Agreements, Statutes and Orders. There are
no actions, suits or proceedings pending or, to the Knowledge of any of the
Obligors, threatened against any of the Obligors or any outstanding Governmental
Orders affecting any of the Obligors or any of their respective properties in
any court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could if adversely determined,
have a Material Adverse Effect. No injunction, writ, temporary restraining order
or any order of any nature has been issued by, or sought from, any court or
other Governmental Authority purporting or seeking to enjoin or restrain the
execution, delivery or performance of this Agreement or any other Transaction
Document or directing that the transactions provided for herein or therein not
be consummated as herein or therein provided.

 

(h)       No Default. No Obligor is (i) in default under any term of any
agreement or instrument to which it is a party or by which it is bound, or any
order, judgment, decree or ruling of any court, arbitrator or Governmental
Authority or (ii) in violation of any applicable law, ordinance, rule or
regulation of any Governmental Authority, except in the case of clause (ii),
where such failure could not reasonably be expected to have a Material Adverse
Effect.

 

(i)       Financial Statements. XFIT has filed with the Securities and Exchange
Commission (the “SEC”) (which is available to the Purchaser on the SEC’s
website) a complete copy of its annual report on Form 10-K for the year ended
June 30, 2016 (the “Annual Report”). The financial statements contained in the
Annual Report (i) have been prepared in accordance with GAAP applied on a
consistent basis throughout the period involved and (ii) are based on the books
and records of XFIT and fairly present the financial condition of XFIT and its
consolidated subsidiaries as of the respective dates they were prepared and the
results of operations of XFIT and its consolidated subsidiaries for the periods
indicated.

 

(j)       Undisclosed Liabilities. Except as set forth in the Annual Report or
on Schedule XII-A, no Obligor has any Liabilities.

 

(k)       Absence of Certain Changes, Events and Conditions. Except as set forth
in the Annual Report or Schedule XII-B, since December 31, 2013, there has not
been, with respect to any Obligor, any of the following occurrences which
continue to exist as of the date hereof:

 

(i)       event, occurrence or development that has had, or could have,
individually or in the aggregate, a Material Adverse Effect;

 

(ii)       amendment of the charter, by-laws or other organizational documents
of such Obligor;

 

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(iii)       split, combination or reclassification of any shares of its Equity
Interests;

 

(iv)       issuance, sale or other disposition of any of its Equity Interests,
or grant of any options, warrants or other rights to purchase or obtain
(including upon conversion, exchange or exercise) any of its Equity Interests;

 

(v)       declaration or payment of any dividends or distributions on or in
respect of any of its Equity Interests or redemption, purchase or acquisition of
its Equity Interests;

 

(vi)       material change in any method of accounting or accounting practice of
such Obligors;

 

(vii)       incurrence, assumption or guarantee of any Indebtedness except
unsecured current obligations and Liabilities incurred in the ordinary course of
business consistent with past practice;

 

(viii)       transfer, assignment, sale or other disposition of any of the
assets shown or reflected in the Financial Statements or cancellation, discharge
or payment of any material debts, liens or entitlements;

 

(ix)       transfer, assignment or grant of any license or sublicense of any
rights under or with respect to any Intellectual Property, other than licenses
granted in the ordinary course of business and consistent with past practice to
manufacturers to produce products bearing Obligor logos;

 

(x)       any capital investment in, or any loan to, any other Person;

 

(xi)       acceleration, termination, material modification or amendment to or
cancellation of any material Contract (including, but not limited to, any
Material Contract) to which such Obligor is a party or by which it is bound;

 

(xii)       any material Capital Expenditures;

 

(xiii)       imposition of any Encumbrance upon any of such Obligor’s
properties, capital stock or assets, tangible or intangible;

 

(xiv)       adoption, modification or termination of any: (A) material
employment, severance, retention or other agreement with any current or former
employee, officer, director, independent contractor or consultant, (B) Benefit
Plan or (C) collective bargaining or other agreement with a Union, in each case
whether written or oral;

 

(xv)       any loan to (or forgiveness of any loan to), or entry into any other
transaction with, any of its stockholders, members, directors, officers and
employees;

 

(xvi)       entry into a new line of business or abandonment or discontinuance
of existing lines of business;

 

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(xvii)       adoption of any plan of merger, consolidation, reorganization,
liquidation or dissolution or filing of a petition in bankruptcy under any
provisions of federal or state bankruptcy Law or consent to the filing of any
bankruptcy petition against it under any similar Law;

 

(xviii)       acquisition by merger or consolidation with, or by purchase of a
substantial portion of the assets or stock of, or by any other manner, any
business or any Person or any division thereof; or

 

(xix)       any Contract to do any of the foregoing, or any action or omission
that would result in any of the foregoing.

 

(l)       Taxes. Each Obligor:

 

(i)       has timely filed all Tax Returns that it was required to file. All
such Tax Returns were complete and correct in all respects. All Taxes due and
owing by any Obligor (whether or not shown on any Tax Return) have been timely
paid;

 

(ii)       has withheld and paid each Tax required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, customer, shareholder or other party, and complied with
all information reporting and backup withholding provisions of applicable Law;

 

(iii)       has not been given or requested any extensions or waivers of
statutes of limitations with respect to any Taxes of any Obligor;

 

(iv)       fully paid all deficiencies asserted, or assessments made, against
any Obligor as a result of any examinations by any taxing authority;

 

(v)       is not a party to any Action by any taxing authority, and there are no
pending or threatened Actions by any taxing authority against any Obligor;

 

(vi)       has delivered to the Purchaser copies of all federal, state, local
and foreign income, franchise and similar Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by, any Obligor for
all Tax periods ending after December 31, 2009;

 

(vii)       has not been a member of an affiliated, combined, consolidated or
unitary Tax group for Tax purposes; and

 

(viii)       has no Liability for Taxes of any Person (other than an Obligor)
under Treasury Regulations Section 1.1502-6 (or any corresponding provision of
state, local or foreign Law), as transferee or successor, by contract or
otherwise.

 

(m)       Use of Proceeds. No Obligor is and, after giving effect to the sale of
the additional New Notes and the receipt of the proceeds therefrom and the other
Restatement Date Transactions, no Obligor will be, an “investment company” or an
entity “controlled” by an “investment company” as such terms are defined in the
Investment Company Act of 1940, as amended.

 

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(n)       Anti-Money Laundering Laws. The operations of the Obligors are and
have been conducted at all times in compliance in all material respects with
applicable financial recordkeeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, the money laundering
statutes of all jurisdictions where the Obligors conduct business, and the rules
and regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Money Laundering Laws”) and no action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving any of the Obligors with respect to the Money Laundering Laws is
pending or, to the knowledge of any Obligor, threatened.

 

(o)       Foreign Assets Control Regulations, etc. None of the Obligors nor, to
the Knowledge of the Obligors, any officer, agent, employee or Affiliate of any
Obligor is (i) currently subject to any U.S. sanctions administered or enforced
by the Office of Foreign Assets Control of the U.S. Treasury Department, the
U.S. Department of State, the United Nations Security Council, the European
Union, Her Majesty’s Treasury, or other relevant sanctions authority
(collectively, “Sanctions”) or (ii) located, organized or resident in a country
that is the subject of Sanctions (including, without limitation, Cuba, Iran,
North Korea, Sudan, Russia, the Crimea region of Ukraine and Syria). The
Obligors and their respective affiliates are not now knowingly engaged in any
dealings or transactions with any individual or entity, or in any country or
territory, that is the subject or target of Sanctions and will not use the
proceeds of the additional New Notes or otherwise make available such proceeds
to any Person, for the purpose of financing the activities of any Person that is
the subject or target of Sanctions.

 

(p)       Material Contracts. Schedule VI lists each Material Contract for each
Obligor. Each Material Contract is valid and binding on the applicable Obligor
in accordance with its terms and is in full force and effect. None of the
Obligors nor, to the Knowledge of any Obligor, any other party thereto is in
breach of or default under (or is alleged to be in breach of or default under),
or has provided or received any notice of any intention to terminate, any
Material Contract for any Obligor. No event or circumstance has occurred that,
with notice or lapse of time or both, would constitute an event of default under
any Material Contract or result in a termination thereof or would cause or
permit the acceleration or other changes of any right or obligation or the loss
of any benefit thereunder. Complete and correct copies of each Material Contract
(including all modifications, amendments and supplements thereto and waivers
thereunder) have been made available to the Purchaser.

 

(q)       Title to Assets, Real Property. Each applicable Obligor has good and
valid (and, in the case of owned Real Property, good and marketable fee simple)
title to, or a valid leasehold interest in, all Real Property and personal
property and other assets reflected in the Financial Statements or acquired
after the date thereof. All such properties and assets (including leasehold
interests) are free and clear of Encumbrances except for the following
(collectively referred to as “Permitted Encumbrances”):

 

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liens for Taxes not yet due and payable or being contested in good faith by
appropriate procedures and for which there are adequate accruals or reserves on
the Financial Statements;

 

mechanics, carriers’, workmen’s, repairmen’s or other like liens arising or
incurred in the ordinary course of business consistent with past practice or
amounts that are not delinquent and which are not, individually or in the
aggregate, material to the business of the Obligors; or

 

easements, rights of way, zoning ordinances and other similar encumbrances
affecting Real Property which are not, individually or in the aggregate,
material to the business of the Obligors.

 

Schedule III lists (A) the street address of each parcel of Real Property; (B)
if such property is leased or subleased by an Obligor, the landlord under the
lease, the rental amount currently being paid, and the expiration of the term of
such lease or sublease for each leased or subleased property; and (C) the
current use of such property. With respect to owned Real Property, each Obligor
has delivered or made available to the Purchaser true, complete and correct
copies of the deeds and other instruments (as recorded) by which such Obligor
acquired such Real Property, and copies of all title insurance policies,
opinions, abstracts and surveys in the possession of any Obligor and relating to
the Real Property.

 

With respect to leased Real Property, each Obligor has delivered or made
available to the Purchaser true, complete and correct copies of any leases
affecting the Real Property. No Obligor is a sublessor or grantor under any
sublease or other instrument granting to any other Person any right to the
possession, lease, occupancy or enjoyment of any leased Real Property. The use
and operation of the Real Property in the conduct of the applicable Obligor’s
business do not violate in any material respect any Law, covenant, condition,
restriction, easement, license, permit or agreement. No material improvements
constituting a part of the Real Property encroach on real property owned or
leased by a Person other than the applicable Obligor. There are no Actions
pending nor, to the Knowledge of any Obligor, threatened against or affecting
the Real Property or any portion thereof or interest therein in the nature or in
lieu of condemnation or eminent domain proceedings.

 

Intellectual Property. Schedule IV lists all Obligor Intellectual Property that
is subject to the Obligor Intellectual Property Registrations including
registered trademarks, domain names and copyrights, issued and reissued patents
and pending applications for any of the foregoing or used in or necessary for
any Obligor’s current or planned business or operations. All (A) required
filings and fees related to the Intellectual Property Registrations have been
timely filed with and paid to the relevant Governmental Authorities and
authorized registrars, and all Intellectual Property Registrations are otherwise
in good standing; (B) right, title and interest in and to the Obligor
Intellectual Property, is owned by the applicable Obligor, exclusively and is
free and clear of Encumbrances; and (C) Obligor Intellectual Property is free of
any infringements, violations or misappropriations.

 

11

 

 

Each Obligor is in full compliance with all legal requirements applicable to the
Obligor Intellectual Property and such Obligor’s ownership and use thereof.

 

Schedule IV lists all licenses, sublicenses and other agreements whereby any
Obligor is granted rights, interests and authority, whether on an exclusive or
non-exclusive basis, with respect to any Licensed Intellectual Property that is
used in or necessary for any Obligor’s current or planned business or
operations. All such agreements are valid, binding and enforceable between the
applicable Obligor and the other parties thereto, and such Obligor and such
other parties are in full compliance with the terms and conditions of such
agreements.

 

The Obligor Intellectual Property and Licensed Intellectual Property as
currently or formerly owned, licensed or used by the Obligors or proposed to be
used, and the Obligors’ conduct of their respective business as currently and
formerly conducted and proposed to be conducted have not, do not and will not
infringe, violate or misappropriate the Intellectual Property of any Person. No
Obligor has received any communication, and no Action has been instituted,
settled or, to any Obligor’s Knowledge, threatened that alleges any such
infringement, violation or misappropriation, and none of the Obligor
Intellectual Property is subject to any outstanding Governmental Order.

 

Schedule IV lists all licenses, sublicenses and other agreements pursuant to
which any Obligor grants rights or authority to any Person with respect to any
Obligor Intellectual Property or Licensed Intellectual Property. All such
agreements are valid, binding and enforceable between the applicable Obligor and
the other parties thereto, and such Obligor and such other parties are in full
compliance with the terms and conditions of such agreements. No Person has
infringed, violated or misappropriated, or is infringing, violating or
misappropriating, any Obligor Intellectual Property.

 

(r)       Inventory. All inventory of each Obligor, whether or not reflected on
the Financial Statements, consists of a quality and quantity usable and salable
in the ordinary course of business consistent with past practice, except for
obsolete, damaged, defective or slow-moving items that have been written off or
written down to fair market value or for which adequate reserves have been
established. All such inventory is owned by the applicable Obligor free and
clear of all Encumbrances, and no inventory is held on a consignment basis. The
quantities of each item of inventory (whether raw materials, work-in-process or
finished goods) are not excessive, but are reasonable in the present
circumstances of the applicable Obligor.

 

The accounts receivable reflected on the Financial Statements and the accounts
receivable arising after the date thereof (i) have arisen from bona fide
transactions entered into by the applicable Obligor involving the sale of goods
or the rendering of services in the ordinary course of business consistent with
past practice; (ii) constitute only valid, undisputed claims of the applicable
Obligor not subject to claims of set-off or other defenses or counterclaims
other than normal cash discounts accrued in the ordinary course of business
consistent with past practice; and (iii) subject to a reserve for bad debts
shown on the Financial Statements or, with respect to accounts receivable
arising after the date thereof, on the accounting records of the applicable
Obligor, are collectible in full within 30 days after billing. The reserve for
bad debts shown on the Financial Statements or, with respect to accounts
receivable arising after the date thereof, on the accounting records of the
Obligors have been determined in accordance with GAAP, consistently applied,
subject to normal year-end adjustments and the absence of disclosures normally
made in footnotes.

 

12

 

 

(s)       Customers and Suppliers. No Obligor has received any notice, and no
Obligor has any reason to believe, that any Material Customer or Material
Supplier has ceased, or intends to cease on or after the date hereof, to use any
Obligor’s goods or services, or supply goods or services to any Obligor, or to
otherwise terminate or materially reduce its relationship with any Obligor.

 

(t)       Insurance. Schedule VIII sets forth a true and complete list of all
Insurance Policies and true and complete copies of such Insurance Policies have
been made available to the Purchaser. Such Insurance Policies are in full force
and effect and shall remain in full force and effect following the consummation
of the transactions contemplated by this Agreement. Neither the Obligors nor any
of their respective Affiliates has received any written notice of cancellation
of, premium increase with respect to, or alteration of coverage under, any of
such Insurance Policies. The Insurance Policies are of the type and in the
amounts customarily carried by Persons conducting a business similar to the
Obligors and are sufficient for compliance with all applicable Laws and
Contracts to which any Obligor is a party or by which it is bound. There are no
claims related to the business of the any Obligor pending under any such
Insurance Policies as to which coverage has been questioned, denied or disputed
or in respect of which there is an outstanding reservation of rights.

 

(u)       Environmental Matters. Each of the Obligors jointly and severally
represents and warrants the following regarding environmental matters:

 

(i)       Each Obligor is currently and has been in compliance with all
Environmental Laws and has not received from any Person any: (A) Environmental
Notice or Environmental Claim; or (B) written request for information pursuant
to Environmental Law, which, in each case, either remains pending or unresolved,
or is the source of ongoing obligations or requirements as of the date this
representation is made.

 

(ii)       Each Obligor has obtained and is in material compliance with all
Environmental Permits (each of which is disclosed in Schedule V) necessary for
the ownership, lease, operation or use of the business or assets of such Obligor
and all such Environmental Permits will be in full force and effect through the
date this representation is made in accordance with Environmental Law, and no
Obligor is aware of any condition, event or circumstance that might prevent or
impede, after the date hereof, the ownership, lease, operation or use of the
business or assets of any Obligor as currently carried out.

 

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(iii)       No real property currently or formerly owned, operated or leased by
any Obligor is listed on, or has been proposed for listing on, the National
Priorities List (or CERCLIS) under CERCLA, or any similar state list.

 

(iv)       There has been no Release of Hazardous Materials in contravention of
Environmental Law with respect to the business or assets of any Obligor or any
real property currently or formerly owned, operated or leased by any Obligor,
and no Obligor has received an Environmental Notice that any real property
currently or formerly owned, operated or leased in connection with the business
of any Obligor (including soils, groundwater, surface water, buildings and other
structure located on any such real property) has been contaminated with any
Hazardous Material which could reasonably be expected to result in an
Environmental Claim against, or a violation of Environmental Law or term of any
Environmental Permit by, any Obligor.

 

(v)       No Obligor has retained or assumed, by contract or operation of Law,
any liabilities or obligations of third parties under Environmental Law.

 

(vi)       No Obligor is aware of, nor does any Obligor reasonably anticipate,
any condition, event or circumstance concerning the Release or regulation of
Hazardous Materials that might prevent, impede or materially increase the costs
associated with the ownership, lease, operation, performance or use of the
business or assets of any Obligor as currently carried out.

 

(vii)       Schedule V contains (A) a complete and accurate list of all active
or abandoned aboveground or underground storage tanks owned or operated by any
Obligor and (B) a complete and accurate list of all off-site Hazardous Materials
treatment, storage, or disposal facilities or locations used by any Obligor and
any predecessors of any Obligor as to which any Obligor may retain liability,
and none of these facilities or locations has been placed or proposed for
placement on the National Priorities List (or CERCLIS) under CERCLA, or any
similar state list, and no Obligor has received any Environmental Notice
regarding potential liabilities with respect to such off-site Hazardous
Materials treatment, storage, or disposal facilities or locations used by any
Obligor.

 

(viii)       The Obligors have listed in Schedule V and provided or otherwise
made available to the Purchaser (A) any and all environmental reports, studies,
audits, records, sampling data, site assessments, risk assessments, economic
models and other similar documents with respect to the business or assets of the
Obligors or any currently or formerly owned, operated or leased real property
which are in the possession or control of any Obligor related to compliance with
Environmental Laws, Environmental Claims or an Environmental Notice or the
Release of Hazardous Materials; and (B) any and all material documents
concerning planned or anticipated Capital Expenditures required to reduce,
offset, limit or otherwise control pollution and/or emissions, manage waste or
otherwise ensure compliance with current or future Environmental Laws
(including, without limitation, costs of remediation, pollution control
equipment and operational changes).

 

14

 

 

(v)       Employee Benefit Matters. Schedule X contains a true and complete list
of each Benefit Plan. With respect to each Benefit Plan, the Obligors has made
available to the Purchaser accurate, current and complete copies of each of the
following: (i) where the Benefit Plan has been reduced to writing, the plan
document together with all amendments; (ii) where the Benefit Plan has not been
reduced to writing, a written summary of all material plan terms; and (iii) in
the case of any Benefit Plan that is intended to be qualified under Section
401(a) of the Code, a copy of the most recent determination, opinion or advisory
letter from the Internal Revenue Service.

 

Each Benefit Plan, other than any Multiemployer Plan, has been established,
administered and maintained in accordance with its terms and in compliance with
all applicable Laws (including ERISA and the Code), except where such failure to
comply could not reasonably be expected to have a Material Adverse Effect. Each
Qualified Benefit Plan is so qualified and has received a favorable and current
determination letter from the Internal Revenue Service, or with respect to a
prototype plan, can rely on an opinion letter from the Internal Revenue Service
to the prototype plan sponsor, to the effect that such Qualified Benefit Plan is
so qualified and that the plan and the trust related thereto are exempt from
federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, and nothing has occurred that could reasonably be expected to cause the
revocation of such determination letter from the Internal Revenue Service or the
unavailability of reliance on such opinion letter from the Internal Revenue
Service, as applicable, nor has such revocation or unavailability been
threatened. Nothing has occurred with respect to any Benefit Plan that has
subjected or could reasonably be expected to subject any Obligor to a penalty
under Section 502 of ERISA or to tax or penalty under Section 4975 of the Code.
All benefits, contributions and premiums relating to each Benefit Plan have been
timely paid in accordance with the terms of such Benefit Plan and all applicable
Laws and accounting principles, and all benefits accrued under any unfunded
Benefit Plan have been paid, accrued or otherwise adequately reserved to the
extent required by, and in accordance with, GAAP. There is no pending or, to any
Obligor’s Knowledge, threatened Action relating to a Benefit Plan (other than
routine claims for benefits).

 

None of the Obligors nor any of their respective ERISA Affiliates has (i)
incurred or reasonably expects to incur, either directly or indirectly, any
material Liability under Title I or Title IV of ERISA or related provisions of
the Code or foreign Law relating to employee benefit plans; (ii) failed to
timely pay premiums to the Pension Benefit Guaranty Corporation; (iii) withdrawn
from any Benefit Plan; or (iv) engaged in any transaction which would give rise
to liability under Section 4069 or Section 4212(c) of ERISA.

 

15

 

 

With respect to each Benefit Plan, except as otherwise disclosed on Schedule X,
(i) no such plan is a Multiemployer Plan, and all contributions required to be
paid by any Obligor or its ERISA Affiliates have been timely paid to the
applicable Multiemployer Plan; (ii) no such plan is a “multiple employer plan”
within the meaning of Section 413(c) of the Code or a “multiple employer welfare
arrangement” (as defined in Section 3(40) of ERISA); (iii) no Action has been
initiated by the Pension Benefit Guaranty Corporation to terminate any such plan
or to appoint a trustee for any such plan; (iv) no such plan is subject to the
minimum funding standards of Section 302 of ERISA or Section 412 of the Code,
and no such plan has failed to satisfy the minimum funding standards of Section
302 of ERISA or Section 412 of the Code; and (v) no “reportable event,” as
defined in Section 4043 of ERISA, has occurred with respect to any such plan.

 

Except as otherwise disclosed on Schedule X, other than as required under
Section 601 et. seq. of ERISA or other applicable Law, no Benefit Plan provides
post-termination or retiree welfare benefits to any individual for any reason,
and none of the Obligors nor any of their respective ERISA Affiliates has any
Liability to provide post-termination or retiree welfare benefits to any
individual.

 

Neither the execution of this Agreement nor any of the transactions contemplated
by this Agreement will (either alone or upon the occurrence of any additional or
subsequent events): (i) entitle any current or former director, officer,
employee, independent contractor or consultant of any Obligor to severance pay
or any other payment; (ii) accelerate the time of payment, funding or vesting,
or increase the amount of compensation due to any such individual; (iii) limit
or restrict the right of any Obligor to merge, amend or terminate any Benefit
Plan; or (iv) increase the amount payable under or result in any other material
obligation pursuant to any Benefit Plan.

 

(w)       Employment Matters. Except as otherwise disclosed on Schedule XI, (i)
all compensation, including wages, commissions and bonuses, payable to
employees, independent contractors or consultants of any Obligor for services
performed on or prior to the date this representation is made have been paid in
full (or accrued in full on the balance sheet contained in the Financial
Statements) and there are no outstanding agreements, understandings or
commitments of any Obligor with respect to any employment, compensation,
commissions or bonuses; (ii) no Obligor is, and no Obligor has ever been, a
party to, bound by, or negotiating any collective bargaining agreement or other
Contract with a Union, and there is not, and has never been, any Union
representing or purporting to represent any employee of any Obligor, and, to
each Obligor’s Knowledge, no Union or group of employees is seeking or has
sought to organize employees for the purpose of collective bargaining; (iii)
there has never been, nor has there been any threat of, any strike, slowdown,
work stoppage, lockout, concerted refusal to work overtime or other similar
labor disruption or dispute affecting any Obligor or any of its employees; no
Obligor has any duty to bargain with any Union; (iv) each Obligor is and has
been in compliance in all material respects with the terms of the collective
bargaining agreements and other Contracts listed on Schedule XI, all applicable
Laws pertaining to employment and employment practices, including all Laws
relating to labor relations, equal employment opportunities, fair employment
practices, employment discrimination, harassment, retaliation, reasonable
accommodation, disability rights or benefits, immigration, wages, hours,
overtime compensation, child labor, hiring, promotion and termination of
employees, working conditions, meal and break periods, privacy, health and
safety, workers’ compensation, leaves of absence and unemployment insurance; (v)
all individuals characterized and treated by any Obligor as independent
contractors or consultants are properly treated as independent contractors under
all applicable Laws; (vi) all employees classified as exempt under the Fair
Labor Standards Act and state and local wage and hour laws are properly
classified; and (vii) there are no Actions against any Obligor pending, or to
the Knowledge of any Obligor, threatened to be brought or filed, by or with any
Governmental Authority or arbitrator in connection with the employment of any
current or former applicant, employee, consultant, volunteer, intern or
independent contractor of any Obligor, including, without limitation, any claim
relating to unfair labor practices, employment discrimination, harassment,
retaliation, equal pay, wage and hours or any other employment related matter
arising under applicable Laws.

 

16

 

 

(x)       Books and Records. The minute books and stock record books of the each
Obligor, all of which have been made available to the Purchaser, are complete
and correct and have been maintained in accordance with sound business
practices. The minute books of each Obligor contain, in all material respects,
accurate and complete records of all meetings, and actions taken by written
consent of, the stockholders, the board of directors and any committees of the
board of directors of the applicable Obligor, and no meeting, or action taken by
written consent, of any such stockholders, board of directors or committee has
been held for which minutes have not been prepared and are not contained in such
minute books.

 

(y)       Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement or any other Transaction Document
based upon arrangements made by or on behalf of any Obligor.

 

(z)       Foreign Corrupt Practices Act. None of the Obligors nor, to the
Knowledge of any Obligor, any other person associated with or acting on behalf
of any Obligor, including, without limitation, any director, officer, agent,
employee or Affiliate of any Obligor has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating to
political activity or to influence official action; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment; or (iv) violated or is in violation
of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended,
and the rules and regulations thereunder; and each Obligor has instituted and
maintains policies and procedures designed to ensure compliance therewith.

 

17

 

 

(aa) Transactions with Affiliates. There are no Contracts or other transactions
between or among any of the Obligors, on the one hand, and any officer,
director, employee, present or former stockholder (including any spouse, parent,
sibling, descendants (including adoptive relationships and stepchildren) of any
such natural persons, or trust or other entity in which any such natural persons
or such other individuals owns or otherwise holds any beneficial interest in) or
Affiliate of any of the Obligors, on the other hand.

 

(bb) Full Disclosure. No representation or warranty by any Obligor in this
Agreement, any other Transaction Document or any certificate or other document
furnished or to be furnished to the Purchaser pursuant to this Agreement or any
other Transaction Document contains any untrue statement of a material fact, or
omits to state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they are made, not misleading.

 

(cc) Pledge Agreement. The Pledge Agreement is effective to create in favor of
the Purchaser legal, valid and enforceable Encumbrances on, and security
interests in, the Collateral and, assuming all appropriate filings or recordings
are made in the appropriate offices as may be required under applicable laws,
the Pledge Agreement constitutes a fully perfected first priority Encumbrance
on, and a security interest in, all right, title and interest of each Obligor in
such Collateral subject to no other Encumbrances other than Permitted
Encumbrances.

 

Section 8. Representations and Warranties by the Purchaser. The Purchaser
represents and warrants to each Obligor that it is acquiring the New Notes for
its own account for investment. The Purchaser agrees that if it should in the
future determine to transfer, sell, assign, pledge, hypothecate or otherwise
dispose of the New Notes, or any interests therein, such transfer, sale or other
disposition shall not be made in violation of Section 5 of the Securities Act.

 

Section 9. Affirmative Covenants. Unless the Obligors have received the prior
written consent or waiver of the Purchaser, each Obligors jointly and severally
shall comply with and be subject to each of the following covenants:

 

(a)       Annual Financial Statements. Within 90 days after the end of each
fiscal year of XFIT, XFIT shall deliver to the Purchaser copies of its
consolidated financial statements consisting of a balance sheet of XFIT and its
consolidated subsidiaries as at the end of such fiscal year and statements of
income, stockholders’ equity and cash flows of XFIT and its consolidated
subsidiaries for such fiscal year, setting forth in comparative form the
corresponding figures for the preceding fiscal year (if applicable), certified
by and containing an opinion, unqualified as to scope, of a firm of independent
certified public accountants selected by XFIT and acceptable to the Purchaser;
provided that the foregoing delivery requirement shall be satisfied if XFIT
shall have filed with the SEC its Annual Report on Form 10-K for such fiscal
year, which is available to the public via EDGAR or any successor system.

 

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(b)       Quarterly Financial Statements. Within 45 days after the end of each
of the first three quarters of each fiscal year of XFIT, XFIT shall deliver to
the Purchaser copies of financial statements consisting of consolidated balance
sheets of XFIT and its consolidated subsidiaries as at the end of such quarter
and statements of income, stockholders’ equity and cash flows of XFIT and its
consolidated subsidiaries for each such quarter, setting forth in comparative
form the corresponding figures for the corresponding periods of the preceding
fiscal year (if applicable), all in reasonable detail and certified (subject to
normal year-end audit adjustments) by a senior financial officer of XFIT as
having been prepared in accordance with GAAP; provided that the foregoing
delivery requirement shall be satisfied if XFIT shall have filed with the SEC
its Quarterly Report on Form 10-Q for such fiscal quarter, which is available to
the public via EDGAR or any successor system.

 

(c)       Board Minutes. Each Obligor shall deliver to the Purchaser upon
request copies of the minutes of each meeting of the board of directors or other
governing body of such Obligor, each action taken by written consent of the
members or stockholders, the board of directors or other governing body and any
committees of the board of directors or other governing body of such Obligor,
all of which shall be complete and correct and maintained in accordance with
sound business practices, and no meeting, or action taken by written consent, of
any such stockholders, board of directors, other governing body or committee
shall be held for which minutes are not prepared.

 

(d)       Corporate Existence, etc. Each Obligor shall at all times maintain (i)
under the Laws of the state of California, Delaware or Nevada, as the case may
be, its valid company existence and good standing, (ii) its due license and
qualification to do business and good standing in each jurisdiction set forth on
Schedule II and, following the date of this Agreement, each other jurisdiction
in which the properties owned or leased by it or the operation of its business
makes such licensing or qualification necessary and (iii) all Permits necessary
to the conduct of its businesses.

 

(e)       Compliance with Law. Each Obligor shall comply with all Laws
applicable to it or its business, properties or assets.

 

(f)       Contractual Obligations. Each Obligor shall (i) comply with all
contractual obligations, unless and to the extent such obligations are being
contested in good faith by appropriate proceedings and adequate reserves (as
determined in accordance with GAAP) have been established on its books and
financial statements of such Obligor for such obligations; and (ii) perform and
observe all of its obligations and covenants set forth in each of the
Transaction Documents.

 

(g)       Payment of Taxes, Fees and Claims. Each Obligor shall (i) pay and
discharge all Taxes due and owing by such Obligor before the same becomes
delinquent and before penalties accrue thereon, unless and to the extent such
Taxes are being contested in good faith by appropriate procedures and adequate
accruals or reserves (as determined in accordance with GAAP) have been
established on the books and financial statements of such Obligor for such
Taxes; (ii) pay when due all transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees (including any penalties
and interest) incurred in connection with this Agreement (including any real
property transfer Tax and any other similar Tax). Each Obligor shall, at its own
expense, timely file any Tax Return or other document with respect to such Taxes
or fees (and the Purchaser shall cooperate with respect thereto as necessary);
(iii) pay and discharge all claims for labor, material and supplies which, if
unpaid and delinquent, would become under applicable Law a Lien upon property of
any Obligor, unless and to the extent such claims are being contested in good
faith by appropriate procedures and adequate accruals or reserves (as determined
in accordance with GAAP) have been established on the books and financial
statements of the Obligors for such claims.

 

19

 

 

(h)       Maintenance of Assets, Insurance, and Records; Inspection. Each
Obligor shall (i) maintain and keep its properties and assets in good repair,
working order and condition, ordinary wear and tear excepted; (ii) maintain with
financially sound and reputable insurance companies (x) property and casualty
and other insurance covering risks and hazards of such types and in such amounts
as are customary for adequately-insured companies of similar size engaged in
similar industries and lines of business, and (y) directors and officers
liability insurance with coverage of no less than $1,000,000 per occurrence/in
an amount per occurrence and on terms and conditions satisfactory to the
Purchaser; and (iii) keep adequate books, accounts and records in accordance
with past custom and practice as used in the preparation of the Financial
Statements, which books, accounts and records shall fairly present the financial
condition and results of operations of the Obligors. Such books, accounts and
records shall be available for inspection by one or more representatives of the
Purchaser during normal business hours and upon not less than three (3) Business
Days’ prior notice.

 

(i)       Other Covenants. Each Obligor shall (i) own, exclusively or jointly
with other Persons, all right, title and interest in and to, or have a valid
license for, and shall maintain all Intellectual Property necessary to the
conduct of its business, free and clear of Encumbrances, (ii) enter into and
maintain in full force and effect binding, written agreements with every current
and former employee of such Obligor, and with every current and former
independent contractor, whereby such employees and independent contractors (x)
assign to the applicable Obligor any ownership interest and right they may have
in the Obligor Intellectual Property and (y) acknowledge the applicable
Obligor’s exclusive ownership of all Obligor Intellectual Property, and (iii)
remain in full compliance with all legal requirements applicable to the Obligor
Intellectual Property and the applicable Obligor’s ownership and use thereof.

 

Section 10. Negative Covenants. Each Obligor jointly and severally covenants
that so long as any of the Notes are outstanding:

 

(a)       Merger, Consolidation, etc. No Obligor will consolidate with or merge
with any other Person or convey, transfer or lease all or substantially all of
its assets in a single transaction or series of transactions to any Person
unless:

 

20

 

 

the successor formed by such consolidation or the survivor of such merger or the
Person that acquires by conveyance, transfer or lease substantially all of the
assets of such Obligor as an entirety, as the case may be, shall be a solvent
corporation or limited liability company organized and existing under the laws
of the United States or any State thereof (including the District of Columbia)
with a net worth equal to or in excess of such Obligor immediately following the
consummation of such transaction, and such Person shall have (x) executed and
delivered to each holder of any Notes its assumption of the due and punctual
performance and observance of each covenant and condition of this Agreement and
the Notes and (y) caused to be delivered to each holder of any Notes an opinion
of nationally recognized independent counsel, or other independent counsel
satisfactory to the Purchaser, to the effect that all agreements or instruments
effecting such assumption are enforceable in accordance with their terms and
comply with the terms hereof; and

 

immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing.

 

No such conveyance, transfer or lease of all or substantially all of the assets
of any Obligor shall have the effect of releasing any Obligor or any successor
thereof that shall theretofore have become such in the manner prescribed in this
Section 10(a) from its liability under this Agreement or the other Transaction
Documents.

 

(b)       No Other Indebtedness. No Obligor will incur, assume, become liable in
respect of or suffer to exist any Indebtedness other than (i) the Notes, (ii)
Indebtedness incurred in connection with the Kodiak Securities Purchase
Agreement and the related Unsecured Note; (iii) Indebtedness under that certain
Wells Fargo Business Line of Credit as in effect as February 12, 2016 in an
amount at any one time not to exceed $35,000 in the aggregate; (iv) obligations
arising under the Crown Receivables Sale Agreement; and (v) as otherwise
approved in writing by the Purchaser (collectively, clauses (i) through (v),
“Permitted Indebtedness”).

 

(c)       Liens. No Obligor will cause or permit (upon the happening of a
contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to an Encumbrance; provided, that an Obligor may create
or incur or suffer to be created or incurred or to exist:

 

(i)       Encumbrances to secure taxes, assessments and other government charges
in respect of obligations not overdue or liens on properties to secure claims
for labor, material or supplies in respect of obligations not overdue;

 

(ii)       Encumbrances on properties in respect of judgments or awards that
have been in force for less than the applicable period for taking an appeal so
long as execution is not levied thereunder or in respect of which the applicable
Obligor shall at the time in good faith be prosecuting an appeal or proceedings
for review and in respect of which a stay of execution shall have been obtained
pending such appeal or review;

 

21

 

 

(iii)       Encumbrances of carriers, warehousemen, mechanics and materialmen,
and other like liens on properties in existence less than 90 days from the date
of creation thereof in respect of obligations not overdue;

 

(iv)       Encumbrances on real estate consisting of easements, rights of way,
zoning restrictions, restrictions on the use of real property and defects and
irregularities in the title thereto, landlord’s or lessor’s liens and other
minor liens; provided, that none of such liens interferes materially with the
use of the property affected in the ordinary conduct of the business of such
Obligor;

 

(v)       purchase money security interests in or purchase money mortgages on
real or personal property acquired after the date hereof to secure purchase
money Indebtedness, incurred in connection with the acquisition of such
property, which security interests or mortgages cover only the real or personal
property so acquired; and

 

(vi)       Encumbrances in favor of Crown Financial, LLC on accounts receivable
as provided under the Crown Receivables Sale Agreement; and

 

(vii)       liens in favor of and for the benefit of the Purchaser.

 

(d)       Restricted Payments. No Obligor will, directly or indirectly, declare,
pay, or make any Restricted Payments.

 

(e)       Dispositions. No Obligor will Dispose of any of its property, whether
now owned or hereinafter acquired, nor shall Holdings, TD LLC or TDI issue or
sell, nor shall XFIT permit Holdings, TD LLC or TDI to issue or sell, any Equity
Interests of Holdings, TD LLC or TDI to any Person, except:

 

(i)       the sale or Disposition of machinery and equipment no longer used or
useful in the business of the applicable Obligor;

 

(ii)       the Disposition of obsolete or worn-out Property in the ordinary
course of business;

 

(iii)       the sale of inventory in the ordinary course of business;

 

(iv)       the Disposition of accounts receivable to Crown Financial, LLC for
cash consideration payable on the date of sale in an amount no less than 70% of
the outstanding face amount thereof, in each case, in accordance with the terms
of the Crown Receivables Sale Agreement; and

 

(v)       Dispositions of other property in any fiscal year of XFIT so long as
(A) the purchase price paid to the Obligors for such property shall have a fair
market value not exceeding $50,000 in the aggregate for all Obligors and (B) the
purchase price paid to the Obligors for such property shall be paid solely in
cash.

 

(f)       Capital Expenditures. No Obligor will make or commit to make any
Capital Expenditure, except Capital Expenditures of an Obligor in the ordinary
course of business not exceeding $100,000 in the aggregate for all Obligors in
any fiscal year of XFIT.

 

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Section 11. Further Assurances. Following the date hereof, each of the parties
hereto shall, and shall cause their respective Affiliates to, execute and
deliver such additional documents, instruments, conveyances and assurances and
take such further actions as may be reasonably required to carry out the
provisions hereof and give effect to the transactions contemplated by this
Agreement.

 

Section 12. Indemnification.

 

(a)       Survival. The representations and warranties contained herein and in
the other Transaction Documents shall survive the execution and delivery of this
Agreement, the Restatement Date and the termination of this Agreement. All
covenants and agreements of the parties contained herein shall survive the
execution and delivery of this Agreement, the Restatement Date and the
termination of this Agreement indefinitely or for the period explicitly
specified therein.

 

(b)       Indemnification by Obligors. Each Obligor shall jointly and severally
indemnify and defend the Purchaser and its Affiliates and their respective
Representatives (collectively, the “Purchaser Indemnitees”) against, and shall
hold each of them harmless from and against, and shall pay and reimburse each of
them for, any and all Losses incurred or sustained by, or imposed upon, the
Purchaser Indemnitees based upon, arising out of, with respect to or by reason
of:

 

(i)       any inaccuracy in or breach of any of the representations or
warranties of any Obligor contained in this Agreement or any other Transaction
Document or in any certificate or instrument delivered by or on behalf of any
Obligor pursuant to this Agreement or any other Transaction Document;

 

(ii)       any breach or non-fulfillment of any covenant, agreement or
obligation to be performed by any Obligor pursuant to this Agreement or any
other Transaction Document; or

 

(iii)       otherwise relating to or arising out of this Agreement, any other
Transaction Document or any transaction contemplated hereby or thereby, or any
amendment, supplement or modification of, or any waiver or consent under or in
respect of, this Agreement, any other Transaction Document or any transaction
contemplated hereby or thereby.

 

(c)       Effect of Investigation. Neither the representations, warranties and
covenants of the Obligors, nor the right to indemnification of any Purchaser
Indemnitee making a claim under this Section 12 with respect thereto, shall be
affected or deemed waived by reason of any investigation made by or on behalf of
a Purchaser Indemnitee (including by any of its Representatives) or by reason of
the fact that a Purchaser Indemnitee or any of its Representatives knew or
should have known that any such representation or warranty is, was or might be
inaccurate or by reason of a Purchaser Indemnitee’s waiver of any condition set
forth in Section 7.

 

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Section 13. Waiver, Change or Modification; Counterparts. No course of dealing
between any Obligor and the Purchaser (or any Person acting on its behalf) or
delay on the part of the Purchaser in exercising any rights hereunder or under
the Notes shall operate as a waiver of any rights of the Purchaser, except to
the extent expressly waived in writing by the Purchaser. This Agreement may not
be changed orally, but only by an agreement in writing signed by, or on behalf
of, each of the Obligors and the Purchaser. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but such counterparts shall together constitute but one and the same
instrument

 

Section 14. Replacement of Notes. Upon receipt of evidence reasonably
satisfactory to XFIT, on behalf of the Obligors, of the loss, theft,
destruction, defacing or mutilation of any Note, then in each such case the
Obligors will execute and deliver a new Note of like tenor and unpaid principal
amount, in lieu of such lost, stolen, destroyed, defaced or mutilated Note, and
dated the date to which interest has been paid on such Note (or, if no interest
has been so paid, dated the date of such Note).

 

Section 15. Payment. The Obligors will pay for the benefit of the holders of the
Notes (by wire transfer of immediately available funds) to an account specified
to XFIT in writing and maintained by the Purchaser all amounts (other than the
final payment of principal) payable in respect of any Note or Notes without
presentment or surrender of any such Note. Such account is initially designated
by the Purchaser as set forth on Schedule I hereto.

 

Section 16. Events of Default. Each of the following events shall constitute an
“Event of Default” hereunder and under the Notes:

 

(a)       Payment Default. Any Obligor shall default in the payment of any
amount owing hereunder, under the Notes or under any other Transaction Document
when due, and the Obligors do not cure such default within five (5) Business
Days after the earlier of Knowledge or notice from Purchaser of such default;

 

(b)       Representation and Warranty Breach. Any representation, warranty or
certification made herein or in any other Transaction Document by any Obligor or
any certificate furnished to the Purchaser pursuant to the provisions hereof or
thereof or any information with respect to any Obligor furnished in writing by
on behalf of any Obligor shall prove to have been untrue or misleading in any
material respect as of the time made or furnished;

 

(c)       Covenant Default. The failure of any Obligor to perform, comply with
or observe any term, covenant or agreement applicable to such Obligor contained
in this Agreement or any other Transaction Document, and if such failure is
capable of being cured, the Obligors do not cure such default within ten (10)
Business Days after the earlier of Knowledge or notice from Purchaser of such
failure;

 

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(d)       Judgments. A judgment or judgments for the payment of money in excess
of $100,000 in the aggregate for all Obligors shall be rendered against one or
more Obligors by one or more courts, administrative tribunals or other bodies
having jurisdiction and the same shall not be satisfied, discharged (or
provision shall not be made for such discharge) or bonded, or a stay of
execution thereof shall not be procured, within fifteen (15) days from the date
of entry thereof;

 

(e)       Cross Default. Any Obligor shall be in default (beyond any and all
applicable periods of notice and cure) under any note, indenture, loan
agreement, guaranty, hedge agreement or other payment obligation in excess of
$100,000 in the aggregate for all Obligors;

 

(f)       Insolvency Event. Any of the following events shall occur: (i) any
Obligor shall discontinue or abandon operation of its business; (ii) any Obligor
shall fail generally to, or admit in writing its inability to, pay its debts as
they become due; (iii) a proceeding shall have been instituted in a court having
jurisdiction seeking a decree or order for relief in respect of such Obligor in
an involuntary case under any applicable bankruptcy, insolvency, liquidation,
reorganization or other similar law now or hereafter in effect, or for the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator or other similar official of such Obligor, or for any
substantial part of its property, or for the winding up or liquidation of its
affairs, which proceeding shall not have been timely contested and shall result
in an order for relief which shall remain unstayed for a period of thirty (30)
days, (iv) the commencement by any Obligor of a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or such Obligor’s consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator or other similar official of such Obligor, or for any
substantial part of its property, or any general assignment for the benefit of
creditors or (v) any Obligor shall take any company action in furtherance of, or
the action of which would result in any of the actions set forth in the
preceding clauses (i), (ii), (iii) or (iv);

 

(g)       Enforceability. For any reason, this Agreement or any other
Transaction Document at any time shall not be in full force and effect or shall
not be enforceable in accordance with its terms, or any Encumbrance granted
pursuant hereto or pursuant to any other Transaction Document shall fail to be
perfected and of first priority, or any Obligor shall contest the validity,
enforceability, perfection or priority of any Encumbrance granted pursuant to
this Agreement or pursuant to any other Transaction Document or any Obligor
shall seek to disaffirm, terminate, limit or reduce its obligations hereunder or
under any other Transaction Document;

 

(h)       Material Adverse Effect. A Material Adverse Effect shall occur;

 

(i)       Change in Control. A Change in Control shall have occurred;

 

(j)       Going Concern. Any Obligor’s audited financial statements or notes
thereto or other opinions or conclusions stated therein shall be qualified or
limited by reference to the status of such Obligor as a “going concern” or
reference of similar import;

 

25

 

 

(k)       Inability to Perform. Any Obligor shall admit in writing its inability
to, or its intention not to, perform any of its obligations under this Agreement
or any other Transaction Document; or

 

(l)       Governmental Action. Any Obligor shall become the subject of a cease
and desist order of any Governmental Authority or enter into a memorandum of
understanding or consent agreement with the Governmental Authority, any of
which, may have, or is purportedly the result of any condition which could have,
a Material Adverse Effect.

 

Section 17. Remedies.

 

Upon the occurrence of an Event of Default, at the option of the Purchaser,
exercised by written notice to the Obligors (which option shall be deemed to
have been exercised, even if no notice is given, immediately upon the occurrence
of an Event of Default described in Section 16(f), the Applicable Percentage of
the entire outstanding principal amount of the Notes and all other amounts
payable hereunder and under the other Transaction Documents shall become
immediately due and payable.

 

To the extent permitted by any applicable law, the Obligors shall jointly and
severally be liable to the Purchaser for interest on any amounts owing by any
Obligor hereunder or under any other Transaction Document from the date any
Obligor becomes liable for such amounts until such amounts are paid in full.
Interest on any sum that accrued after the related Event of Default shall be at
a rate equal to eighteen percent (18%) per annum.

 

The Obligor shall jointly and severally be liable to the Purchaser for (i) the
amount of all legal or other expenses including, without limitation, all
out-of-pocket costs and expenses of the Purchaser in connection with the
enforcement of this Agreement or any other Transaction Document, including
without limitation, the fees and expenses of counsel in connection with or as a
result of an Event of Default and (ii) any other loss, damage, cost or expense
arising or resulting from the occurrence of an Event of Default.

 

The Purchaser shall have, in addition to any other rights specified hereunder,
any rights and remedies otherwise available to it under any other Transaction
Document or other agreement or applicable law, including without limitation, the
rights and remedies of a secured creditor under the applicable uniform
commercial code. All rights and remedies hereunder are cumulative and not
exclusive of any other rights or remedies which the Purchaser may have.

 

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Section 18. Amendment and Restatement of Existing Note Purchase Agreement.

 

(a)       Effect of Amendment and Restatement of Existing Note Purchase
Agreement. As of the Restatement Date, this Agreement shall amend and restate
the Existing Note Purchase Agreement, but shall not constitute a novation
thereof or in any way impair or otherwise affect the rights or obligations of
the parties thereunder (including with respect to Existing Notes and
representations and warranties made thereunder) except as such rights or
obligations are amended or modified hereby. The Existing Note Purchase Agreement
as amended and restated hereby shall be deemed to be a continuing agreement
among the parties, and all documents, instruments and agreements delivered
pursuant to or in connection with the Existing Note Purchase Agreement not
amended and restated in connection with the entry of the parties into this
Agreement shall remain in full force and effect, each in accordance with its
terms, as of the date of delivery or such other date as contemplated by such
document, instrument or agreement to the same extent as if the modifications to
the Existing Note Purchase Agreement contained herein were set forth in an
amendment to the Existing Note Purchase Agreement in a customary form, unless
such document, instrument or agreement has otherwise been terminated or has
expired in accordance with or pursuant to the terms of this Agreement, the
Existing Note Purchase Agreement or such document, instrument or agreement or as
otherwise agreed by the required parties hereto or thereto.

 

(b)       Ratification of Other Transaction Documents. Each party hereto hereby
agrees that (a) notwithstanding the effectiveness of the amendment and
restatement of the Existing Note Purchase Agreement, the Transaction Documents
are, and shall continue to be, in full force and effect and are hereby ratified
and confirmed in all respects and (b) the Transaction Documents and all of the
Collateral described therein do, and shall continue to, secure the payment of
all of the obligations set forth therein and herein.

 

Section 19. Miscellaneous.

 

(a)       Successors and Assigns. All covenants and other agreements contained
in this Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of their respective successors and permitted assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not, provided that no Obligor may assign its rights or obligations
hereunder or any interest herein without the prior written consent of the
Purchaser. Any assignment by any Obligor without such consent required above
shall be null and void.

 

(b)       Public Announcements. No Obligor shall issue any press release or make
any other public announcement or disclosure with respect to this Agreement and
the transactions contemplated herein without the prior written consent of the
Purchaser, except for any press release, public announcement or other public
disclosure that is required by applicable law or governmental regulations or by
order of a court of competent jurisdiction. Prior to making any such required
disclosure, the applicable Obligor shall have given written notice to the
Purchaser describing in reasonable detail the proposed content of such
disclosure and shall permit the Purchaser to review and comment upon the form
and substance of such disclosure.

 

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(c)       Expenses. Whether or not the transaction hereby contemplated shall be
consummated, the Obligors shall jointly and severally pay all of the fees,
expenses and disbursements incurred by any Obligor and, to the extent provided
in the Expense Letter, the Purchaser in connection with the negotiation,
execution and delivery of the Transaction Documents.

 

(d)       Severability. Each provision of this Agreement shall be considered
severable and if for any reason any provision that is not essential to the
effectuation of the basic purposes of the Agreement is determined by a court of
competent jurisdiction to be invalid or unenforceable and contrary to existing
or future applicable law, such invalidity shall not impair the operation of or
affect those provisions of this Agreement that are valid. In that case, this
Agreement shall be construed so as to limit any term or provision so as to make
it enforceable or valid within the requirements of any applicable law, and in
the event such term or provision cannot be so limited, this Agreement shall be
construed to omit such invalid or unenforceable provisions.

 

(e)       Construction. Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.

 

(f)       Headings. The headings in this Agreement are for reference only and
shall not affect the interpretation of this Agreement.

 

(g)       Entire Agreement. This Agreement and the other Transaction Documents
constitute the sole and entire agreement of the parties to this Agreement with
respect to the subject matter contained herein and therein, the Original Closing
Date Transaction, the Restatement Date Transaction and supersede all prior and
contemporaneous understandings and agreements, both written and oral, with
respect to such subject matter. In the event of any inconsistency between the
statements in the body of this Agreement and those in the other Transaction
Documents, the Exhibits and Schedules, the statements in the body of this
Agreement will control.

 

(h)       Notices. All notices, requests, consents and other communications and
transmissions hereunder, or under or in respect of any Note, shall be in writing
and shall be deemed to have been duly given to any party when delivered
personally (by courier service or otherwise), upon receipt or three (3) days
after being mailed by registered first-class mail, postage prepaid and return
receipt requested in each case to the applicable address set forth below:

 

(i)       if to the Purchaser, at PIMCO Funds: Private Account Portfolio Series:
PIMCO High Yield Portfolio, c/o Pacific Investment Management Company LLC, 650
Newport Center Drive, Newport Beach, California 92660, Attn: General Counsel
with a copy to Latham & Watkins LLP, 885 Third Avenue, New York, New York
10022-4834, Attn: Loren N. Finegold;

 

28

 

 

(ii)       if to XFIT, at Attn: David E. Vautrin, 25731 Commercentre Drive, Lake
Forest CA 92630, with a copy to Joseph Galda, Esq., 1055 Westlakes Drive, Suite
300, Berwyn, Pennsylvania 19312;

 

(iii)       if to the Obligors, at Attn: David E. Vautrin, 25731 Commercentre
Drive, Lake Forest CA 92630, with a copy to Joseph Galda, Esq., 1055 Westlakes
Drive, Suite 300, Berwyn, Pennsylvania 19312; and

 

(iv)       or, in each case, at such other address in the United States of
America as shall have been furnished in writing pursuant to this Section 14.

 

(i)       No Third-party Beneficiaries. Except as provided in Section 12 herein,
this Agreement is for the sole benefit of the parties hereto and their
respective successors and permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other Person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.

 

(j)       Governing Law. THIS AGREEMENT AND ALL CLAIMS OR CAUSES OF ACTION
(WHETHER IN CONTRACT, TORT OR OTHERWISE) THAT MAY BE BASED UPON, ARISE OUT OF OR
RELATE IN ANY WAY HERETO OR THERETO OR THE NEGOTIATION, EXECUTION OR PERFORMANCE
THEREOF OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, UNLESS OTHERWISE
EXPRESSLY SET FORTH THEREIN, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW THAT WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAW OF THE
STATE OF NEW YORK.

 

(k)       Waiver of Jury Trial. EACH OF THE OBLIGORS AND THE PURCHASER HEREBY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT
OF, OR RELATING TO, THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

 

[SIGNATURE PAGE FOLLOWS]

 

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If the foregoing correctly sets forth our understanding, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding contract between the
Purchaser and the Obligors.

 

  Very truly yours,       THROWDOWN INDUSTRIES
HOLDINGS, LLC         By: /s/ David E. Vautrin   Name: David E. Vautrin   Title:
CEO         THROWDOWN INDUSTRIES, LLC         By: /s/ David E. Vautrin   Name:
David E. Vautrin   Title: CEO         THROWDOWN INDUSTRIES, INC.         By: /s/
David E. Vautrin   Name: David E. Vautrin   Title: CEO         XFIT BRANDS, INC.
        By: /s/ David E. Vautrin   Name: David E. Vautrin   Title: CEO

 

30

 

 

The foregoing Note Purchase Agreement
is hereby accepted as of the date first
set forth above.

 

PIMCO FUNDS: PRIVATE ACCOUNT PORTFOLIO SERIES:
PIMCO HIGH YIELD PORTFOLIO
By: Pacific Investment Management Company LLC,

as its Investment Advisor, acting through Investors

Fiduciary Trust Company, in the Nominee Name of IFTCO

 

By: /s/ T. Christian Stracke   Name: T. Christian Stracke   Title: Managing
Director  

 

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