Document:

ex101.htm

Exhibit 10.1

CONVERTIBLE PROMISSORY NOTE

 

$______

 

FOR VALUE RECEIVED, OriginOil, Inc., a Nevada corporation, (the “Borrower”) with approximately 17,300,000 common shares issued and outstanding, promises to pay to ____________ a __________ corporation, or its assignees (the “Lender”) the Principal Sum along with the Interest and any other fees according to the terms herein (the “Note”). This Note shall become effective on February 4, 2013 (the “Effective Date”).

 

The Principal Sum is $_________ (_________________) plus accrued and unpaid interest and any other fees. The Consideration is $_________ (_________________)   payable by wire (there exists a $_________ original issue discount (the “OID”)). The Lender shall pay $____________ of Consideration upon closing of this Note. The Maturity Date is ninety (90) days from the Effective Date (the “Maturity Date”), unless extended according to Section 4 herein, and is the date upon which the Principal Sum of this Note, as well as any unpaid interest and other fees, shall be due and payable.

 

1.           Interest. A one-time Interest charge of $________ shall be applied to the Principal Sum.

 

2.           Conversion. The Lender has the right, at any time after the Effective Date, at its election, to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Borrower (the “Common Stock”). The conversion price shall be $0.4375 per share (the “Conversion Price”). The conversion formula shall be as follows: Number of shares of Common Stock receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. A conversion notice (the “Conversion Notice”) may be delivered to Borrower by method of Lender’s choice (including but not limited to email, facsimile, mail, overnight courier, or personal delivery), and all conversions shall be cashless and not require further payment from the Lender. If no objection is delivered from Borrower to the Lender, with respect to any variable or calculation of the Conversion Notice within 24 hours of delivery of the Conversion Notice, then the Borrower shall have been thereafter deemed to have irrevocably confirmed and irrevocably ratified such notice of conversion and waived any objection thereto. The Borrower shall deliver the shares of Common Stock from any conversion to the Lender (in any name directed by the Lender) within three (3) business days of conversion notice delivery. The Lender shall not convert any amount of this Note into shares of Common Stock that would result in the Lender beneficially owning more than 4.99% of the Borrower’s Common Stock outstanding. However, the Lender may exceed this 4.99% conversion limit by providing Borrower with at least 61 days prior written notice, and the provisions of the conversion limit shall continue to apply until such 61st day (or such later date, as determined by the Lender, as may be specified in such notice). The Conversion Price shall be subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events.

 

3.           Conversion Delays. If Borrower fails to deliver shares of Common Stock in accordance with the timeframe stated in Section 2, the Lender, at any time prior to selling all of those shares of Common Stock, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares of Common Stock and have the rescinded conversion amount returned to the Principal Sum with the rescinded conversion shares returned to the Borrower (under the Lender’s and the Borrower’s expectations that any returned conversion amounts shall tack back to the original date of this Note). In addition, for each conversion, in the event that shares of Common Stock are not delivered by the fourth business day (inclusive of the day of conversion), a penalty of $2,000 per day shall be assessed for each day after the third business day (inclusive of the day of the conversion) until share delivery is made; and such penalty shall be added to the Principal Sum of this Note (under the Lender’s and the Borrower’s expectations that any penalty amounts shall tack back to the original date of this Note).

 

 

 

  

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4.           Extensions. If the Borrower fails to pay to the Lender the Principal Sum along with all unpaid interest and any other fees by the Maturity Date, then this Note shall be automatically extended in 30-day increments. An extension fee in the amount of 25% of the then outstanding principal, interest and other fees shall be added to the Principal Sum of this Note (the “Extension Fee”) for every extension. The Extension Fee shall be assessed at the beginning of every 30-day period after the Maturity Date until this Note is paid in full by the Borrower or fully converted into shares of Common Stock by the Lender. There shall be no additional extensions after 90 days from the Maturity Date and this Note shall then be immediately due and payable. The Borrower and the Lender agree that for the purpose of determining the holding period for Rule 144, the Extension Fee(s) shall tack back to the Effective Date of this Note.

 

5.           Payment. Borrower may not make partial payments but may pay this Note in full at any time, upon five (5) days written notice to the Lender. Within five (5) days of receiving the Borrower’s notice, the Lender shall elect to either (a) accept payment or (b) convert any amount of this Note into shares of Common Stock. If the Lender elects to convert part of this Note into shares of Common Stock, then the Borrower may pay the remaining balance of this Note.

 

6.           Piggyback Registration Rights. The Borrower shall include on the next registration statement the Borrower files with SEC (or on the subsequent registration statement if such registration statement is withdrawn) all shares of Common Stock issuable upon conversion of this Note unless such shares are eligible for resale under Rule 144. Failure to do so shall result in liquidated damages of 25% of the outstanding principal balance of this Note, but not less than $25,000, being immediately due and payable to the Lender at its election in the form of cash payment or addition to the balance of this Note.

 

7.            Terms of Future Financings. So long as this Note, or other convertible note transactions currently in effect between the Lender and Borrower, are outstanding (the “Outstanding Notes”), upon any issuance (including this Note) by the Borrower or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Lender in the Outstanding Notes, then such additional or more favorable term shall, at Lender’s option, become a part of the Outstanding Notes with the Lender. The Borrower shall promptly notify the Lender of any additional or more favorable terms and respond promptly to Lender’s periodic inquiry about any favorable additional terms. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion price, conversion look back periods, interest rates, original issue discounts, loan default fees, stock sale price, private placement price per share, and warrant coverage.

 

8.           Lender’s Representations. The Lender hereby represents and warrants to the Borrower that (i) it is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), (ii) it understands that this Note and the shares of Common Stock underlying this Note (collectively, the “Securities”) have not been registered under the Securities Act by reason of a claimed exemption under the provisions of the Securities Act that depends, in part, upon the Lender’s investment intention; in this connection, the Lender hereby represents that it is purchasing the Securities for the Lender’s own account for investment and not with a view toward the resale or distribution to others, (iii) the Lender, if an entity, further represents that it was not formed for the purpose of purchasing the Securities, (iv) the Lender acknowledges that the issuance of this Note has not been reviewed by the United States Securities and Exchange Commission (the “SEC”) nor any state regulatory authority since the issuance of this Note is intended to be exempt from the registration requirements of Section 4(2) of the Securities Act and Rule 506 of Regulation D, (v) the Lender agrees not to sell, pledge, assign or otherwise transfer or dispose of the Securities unless they are registered under the Securities Act and under any applicable state securities or “blue sky” laws or unless an exemption from such registration is available, and (vi) the Lender acknowledges receipt and careful review of this Note, the Borrower’s filings with the SEC (including without limitation, any risk factors included in the Borrower’s most recent Annual Report on Form 10-K), and any documents which may have been made available upon request as reflected therein, and hereby represents that it has been furnished by the Borrower with all information regarding the Borrower, the terms and conditions of the purchase and any additional information that the Lender has requested or desired to know, and has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Borrower concerning the Borrower and the terms and conditions of the purchase.

 

9.           Borrower’s Representations. The Borrower is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full power and authority to own, lease, license and use its properties and assets and to carry out the business in which it proposes to engage. The Borrower has the requisite corporate power and authority to execute, deliver and perform its obligations under this Note and to issue and sell this Note. All necessary proceedings of the Borrower have been duly taken to authorize the execution, delivery, and performance of this Note.  When this Note is executed and delivered by the Borrower, it will constitute the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with their terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies.

 

10.           Default. The following are events of default under this Note: (i) the Borrower shall fail to pay any principal under this Note when due and payable (or payable by conversion) thereunder; or (ii) the Borrower shall fail to pay any interest or any other amount under this Note when due and payable (or payable by conversion) thereunder; or (iii) a receiver, trustee or other similar official shall be appointed over the Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; or (iv) the Borrower shall become insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; or (v) the Borrower shall make a general assignment for the benefit of creditors; or (vi) the Borrower shall file a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (vii) an involuntary proceeding shall be commenced or filed against the Borrower; or (viii) the Borrower shall lose its status as “DTC Eligible” or the borrower’s shareholders shall lose the ability to deposit (either electronically or by physical certificates, or otherwise) shares into the DTC System; or (ix) the Borrower shall become delinquent in its filing requirements as a fully-reporting issuer registered with the SEC.

 

11.           Remedies. In the event of any default, the Note Amount shall become immediately due and payable at the Mandatory Default Amount. The Mandatory Default Amount shall be 200% of the Note Amount. Commencing five (5) days after the occurrence of any event of default that results in the eventual acceleration of this Note, the interest rate on the Mandatory Default Amount shall accrue at a default interest rate equal to the lesser of ten percent (10%) per annum or the maximum rate permitted under applicable law. In connection with such acceleration described herein, the Lender need not provide, and the Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and the Lender may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. While the Mandatory Default Amount is outstanding and default interest is accruing, the Lender shall have all rights as a holder of this Note until such time as the Lender receives full payment pursuant to this paragraph, or has converted all the remaining Mandatory Default Amount and any other outstanding fees and interest into Common Stock under the terms of this Note. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Borrower’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof.

 

 

  

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12.           No Shorting. Lender agrees that so long as this Note from Borrower to Lender remains outstanding, Lender shall not enter into or effect “short sales” of the Common Stock or hedging transaction which establishes a net short position with respect to the Common Stock of Borrower. Borrower acknowledges and agrees that upon delivery of a conversion notice by the Lender, the Lender immediately owns the shares of Common Stock described in the Conversion Notice and any sale of those shares issuable under such Conversion Notice would not be considered short sales.

 

13.           Assignability. The Borrower may not assign this Note. This Note shall be binding upon the Borrower and its successors and shall inure to the benefit of the Lender and its successors and assigns and may be assigned by the Lender to anyone of its choosing without Borrower’s approval subject to applicable securities laws.

 

14.           Governing Law. This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of Nevada, without regard to the conflict of laws principles thereof. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Nevada or in the federal courts located in Clark County, in the State of Nevada. Both parties and the individuals signing this Agreement agree to submit to the jurisdiction of such courts.

 

15.           Delivery of Process by the Lender to the Borrower. In the event of any action or proceeding by the Lender against the Borrower, and only by the Lender against the Borrower, service of copies of summons and/or complaint and/or any other process which may be served in any such action or proceeding may be made by Lender via U.S. Mail, overnight delivery service such as FedEx or UPS, email, fax, or process server, or by mailing or otherwise delivering a copy of such process to the Borrower at its last known attorney as set forth in its most recent SEC filing.

 

16.           Attorney Fees. In the event any attorney is employed by either party to this Note with regard to any legal or equitable action, arbitration or other proceeding brought by such party for the enforcement of this Note or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Note, the prevailing party in such proceeding shall be entitled to recover from the other party reasonable attorneys' fees and other costs and expenses incurred, in addition to any other relief to which the prevailing party may be entitled.

 

17.           Transfer Agent Instructions. In the event that an opinion of counsel, such as but not limited to a Rule 144 opinion, is needed for any matter related to this Note or the Common Stock the Lender has the right to have any such opinion provided by its counsel. If the Lender chooses to have its counsel provide such opinion, then the Lender shall provide the Borrower with written notice. Within three (3) business days of receiving written notice, the Borrower shall instruct its transfer agent to rely upon opinions from the Lender’s counsel (the “Transfer Agent Reliance Letter”). A penalty of $2,000 per day shall be assessed for each day after the third business day (inclusive of the day of request) until the Transfer Agent Reliance Letter is delivered. If the Lender requests that the Borrower’s counsel issue an opinion, then the Borrower shall cause the issuance of the requested opinion within three (3) business days. A penalty of $2,000 per day shall be assessed for each day after the third business day (inclusive of the day of request) until the requested opinion is delivered. The Lender and the Borrower agree that all penalty amounts shall be added to the Principal Sum of this Note and shall tack back to the Effective Date of this Note, with respect to the holding period under Rule 144. In the event that the Borrower proposes to replace its transfer agent, the Borrower shall provide, prior to the effective date of such replacement, a fully executed

 

  

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Irrevocable Transfer Agent Reliance Letter in a form as initially delivered pursuant to this Note. The Borrower warrants that it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for the Securities to be issued to the Lender and it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for the Securities when required by this Note. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Lender, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note may be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of these provisions, that the Lender shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

 

18.           Notices. Any notice required or permitted hereunder (including Conversion Notices) must be in writing and either personally served, sent by facsimile or email transmission, or sent by overnight courier. Notices shall be deemed effectively delivered at the time of transmission if by facsimile or email, and if by overnight courier the business day after such notice is deposited with the courier service for delivery.

 

IN WITNESS WHEREOF, the authorized agents of the Borrower and the Lender have caused this Note to be duly executed as of the Effective Date.

 

 

OriginOil, Inc. (“Borrower”):

 

_____________________________ 

Riggs Eckelberry

President

 

______________ (the “Lender”):

 

 

_____________________________

4Exhibit 10.1

EXCLUSIVE DISTRIBUTION
AGREEMENT

In Tokyo,
on December 12, 2012.

PARTIES
and ACTING

On the one
hand, Mr. Tsutomu Matsuura, a Japanese national of full legal age, acting in representation and on behalf of Tenga Co. Ltd.
(hereinafter Tenga, the Manufacturer, or Seller, or the Concessor);with its registered office at NID Bldg. 3F, 1-29-3,Honcho, Nakano-ku,
Tokyo, Japan; in his capacity as president. He has stated that his appointment has not been revoked or limited and that he is thereby
empowered to sign the present contract.

And on the
other hand, Mr. Louis Friedman, an American national of full legal age, acting in representation and on behalf of OneUp
Innovations, Inc. (hereinafter OneUp Innovations, the Concessionaire or the Distributor), with its registered office at 2745 Bankers
Industrial Drive, Atlanta, Georgia 30360; in his capacity as president and chairman. He has stated that his appointment has not
been revoked or limited and that he is thereby empowered to sign the present contract.

WHEREAS

		I.	Tenga is engaged in the manufacture of the products listed in Appendix I.

		II.	The Distributor is engaged in the importation and distribution of Japanese / foreign goods in the
territory of United States.

		III.	The Distributor desires to purchase products listed in Appendix I from Tenga to distribute them
on an exclusivity basis in the territory as set forth below.

		IV.	The Distributor has the facilities, personnel, experience and technical skills necessary to market
and distribute Tenga’s products.

		V.	Distributor agrees to offer Tenga products to certain sub-distributors at a discount to wholesale
prices. Any such sub-distributor will comply with Tenga’s policy of total account transparency and pursue new customers,
reporting monthly to Distributor on total account activity. In addition, any sub-distributors will be prevented from selling Tenga
products to any accounts currently sold to by Distributor.

		VI.	The Distributor agrees that the margin for sales to be fixed at the agreed percentage, with 5%
of the margin contributed to marketing and the Seller agrees that an equal amount to be contributed to the marketing funds. However,
the Seller agrees that the Distributor may take a higher percentage margin on sales to certain retailers. On sales to sub-distributors,
the Seller agrees to credit the Distributor for 50% of the margin amount that is below the agreed percentage. Sales to sub-distributors
will be excluded from the marketing pool.

		VII.	Both the Distributor and the Seller agree that the marketing pool to be funded and agreed quarterly.
The Distributor and the Seller each receive credit against the marketing pool for public relations expenses, flash sale promotions,
Amazon merchandising costs, trade show participation,(limited to sqf portion of TENGA space) advertising, POP displays and other
marketing related expenses.

		VIII.	The Seller agrees that payment terms for the sea shipment will be 50% due prior to the arrival
in the port, BL to be withheld until payment is received. The balance of the shipment will be due 35 days after the first payment.

Distribution
contract between Tenga and OneUp Innovations, Inc.Page 1 of 11

     

     

    

		IX.	In order to activate this exclusive distribution agreement, the Distributor must have purchased
under the prior Distributorship Agreement dated February 17, 2010, a total of 160,000,000 Yen from the Seller during the March
1, 2012 to February 28, 2013 period.

Therefore,
the parties now

AGREE

To enter into
the present exclusive distribution contract whereby the Concessionaire will distribute Tenga’s products in accordance with
the following

CONDITIONS

One. Purpose
and appointment

By means of
the present contract, the Distributor will purchase from Tenga its products and will resell them to third parties in the Distributor’s
own name and on its own behalf. The present contract does not grant the Distributor the capacity of representative or agent of
Tenga.

The Distributor
undertakes to put on the market all of Tenga’s products offered for sale in the United States (and Tenga undertakes to provide
them in accordance with the terms set out in the present contract) currently available as well as all those products of the same
class or kind that Tenga may launch on the market during the currency of the contract. Appendix I of the present contract
lists all of the products Tenga markets in the United States as of the moment the present contract is signed.

To this end,
Tenga grants the Distributor the exclusive right to import and distribute the products referred to in the preceding paragraph through
adult novelty stores and all other wholesale outlets during the currency of the present contract in the territory of United States
(hereinafter referred to as the Territory). The Distributor will be deemed to be a concessionaire and so will not be able to offer
the products and services to the end users, except on Liberator.com and other e-commerce sites owned by Distributor.

Unless otherwise
agreed, the terms and conditions set out in the present contract shall apply to the new products presented and launched on the
market by Tenga in the course of its currency.

The Distributor
will develop Tenga’s channel by providing new customers.

Two. Order
processing

2.1. Purchase
orders

For the distribution
of the Products in the Territory, Tenga shall sell and Distributor shall purchase the Products, subject to the terms and conditions
of this Agreement, provided however, that each sales contract to be separately concluded between the parties. Unless otherwise
specifically agreed between the parties, the terms and conditions hereof shall be applied to each sales contract.

The Distributor
will purchase its products from Tenga through the issue of purchase orders or order requests (synonyms for all purposes in the
present contract) to be sent to Tenga by e-mail.

The sale and
purchase of the merchandise will be deemed to have been completed at the moment when Tenga receives the purchase order in its offices.
At that moment, Tenga’s sales force will proceed to register the purchase order on Tenga’s computer system.

The ownership
of the merchandise will be transferred to the Distributor when Tenga receives the first payment.

Distribution
contract between Tenga and OneUp Innovations, Inc.Page 2 of 11

     

     

    

The Distributor
undertakes to submit purchase orders for a minimum amount of 250,000,000 Yen (¥250,000,000) during the period beginning March
1, 2013 and ending February 28, 2014.

The Distributor
undertakes to submit purchase orders for a minimum amount of 400,000,000 Yen (¥400,000,000) during the period beginning March
1, 2014 and ending February 28, 2015.

The Distributor
undertakes to submit purchase orders for a minimum amount of 600,000,000 Yen (¥600,000,000) during the period beginning March
1, 2016 and ending February 28, 2016.

 

 

2.2. Dispatch,
transport, delivery and receipt

The Distributor
will collect the orders made on EXW terms (i.e. ex Works as set out in Inco terms 2010 formulated by the International Chamber
of Commerce) from Tenga’s warehouses.

If the Distributor
fails to collect any shipment from any of Tenga’s warehouses for over thirty (30) days, it will lose its exclusive rights
and Tenga will be entitled to sell to other distributors in the Territory.

Tenga guarantees
the quality and correct manufacture of its products. Similarly, Tenga guarantees that its products comply with all of the requirements
in the applicable American regulations.

Tenga will
supervise the optimal condition of the products ordered prior to their dispatch from its facilities. Tenga guarantees that the
products ordered will be made available to the Distributor in perfect condition at the address indicated. In this sense, Tenga
will assume the risks inherent to and liability for the products until they are delivered to the Distributor.

For this purpose,
at the moment the goods are delivered, the Distributor must confirm that the state of the same on receipt is satisfactory. Should
this not be the case, the Distributor must so indicate on the transport company’s delivery note, retain a copy of the said
delivery note and send it to Tenga within a maximum term of 24 hours from collection. Failing to act in this way shall prevent
the Distributor from lodging any subsequent claim in this regard.

Should the
distributor receive a Defective product, it will be entitled to request that Tenga replaces the same with another new one with
the same characteristics.

2.3. Returns

The Distributor
shall not be entitled to return products to Tenga except when this refers to defects or flaws in the Products. However, in all
other cases, Tenga will study ways to resolve or assist in any problematic situation regarding products, whenever this is notified
by the Distributor.

2.4. Stocks
and purchase plans

As it now
does, the Distributor will provide Tenga with real-time inventory data about its stock. The said report will set out the type of
products in stock, the number of units of each product.

The distributor
will use its best efforts to maintain the minimum stock of each product set forth in Appendix II of the present contract in order
to avoid stock outages and meet the needs of the market.

Distributor
agrees to provide wholesale order fulfillment of all Tenga products ordered within 7 days of receipt of purchase orders.

Distribution
contract between Tenga and OneUp Innovations, Inc.Page 3 of 11

     

     

    

In the last
week of each month, the Distributor shall submit a three (3) month period provisional purchase plan, and shall confirm the purchase
quantities for the purchase order two (2) months prior to its collection.

2.5. Monthly
sales and inventory report

Between the
first (1st) and fifth (5th) days of each month, the distributor will send Tenga the report of the sales effected
in the month immediately preceding broken down by customer and product so as to have a correct measure of the market. Tenga will
provide the Distributor with a template of this report.

 

2.6. After-sales
service and customer service

The Distributor
shall be fully responsible as an exclusive distributor, to operate a toll-free customer service phone number under the name of
TENGA USA. All the proprietary rights for such phone number shall be transferred from the Distributor to Tenga and become the property
of Tenga upon the expiration or termination of the Agreement. The Distributor shall cooperate in a good faith for the completion
of such transfer.

Tenga will
handle products that are “Dead On Arrival” (DOA) from customers who have acquired defective products from the Distributor
within the fifteen (15) days following the date of the distributor’s invoice.

During the
product guarantee period, Tenga will handle all Return Merchandise Authorizations / Return Goods Authorizations (RMA/RGA) from
the Distributor’s customers.

2.7. Marketing
Promotion

Marketing
promotion fee including booth cost of the trade fair and advertisement cost for trade journals and papers shall be pulled out from
the marketing pool which is agreed and funded by both distributor and the seller.

Three.
Economic terms and conditions

3.1. Price
lists

Tenga will
send to the Distributor by e-mail new price lists at least one (1) month before they enter into force. By means of the present
contract, the Distributor accepts the Distributor’s Sale Price (DSP) that Tenga will notify in this way with every
new price list release. This should be understood to be without prejudice to any special prices that Tenga and the Distributor
may have negotiated in advance for certain products.

3.2. Currency,
billing, payments and prompt-payment discounts

As
the currency of legal tender in Japan is the yen (¥), all prices, regardless of the document they may be reflected in, shall
be understood, unless expressly indicated otherwise, to have been set in yens (¥).

Excluding
any specific cases expressly reflected in any clause of the present contract, all payments will be effected in yens (¥)
by means of a bank transfer to TENGA account, 50% of the whole amount 7 days prior to the arrival of sea shipment in the port,
BL to be withheld until the payment is received. The remaining balance of the shipment is due 35 days from the first payment. The
Distributor should have sufficient inventory at all times; however, in the event of unexpected high sales, the seller agrees to
supply the product by air shipment with 50% of the whole amount to be paid at the time of order placement. The remaining balance
of the shipment is due 35 days from the first payment.

Distribution
contract between Tenga and OneUp Innovations, Inc.Page 4 of 11

     

     

    
 

3.3. Co-marketing
payments

At the beginning
of each calendar quarter, both the Distributor and the Seller will discuss the marketing plan for the quarter and upon mutual agreement,
5% of fixed margin from the Distributor’s expected sales, and the same amount from the Seller, will be put towards the marketing
fund.

3.4. Minimum
Purchase Amount and sales targets

The Distributor
shall make its best efforts to sell and promote the Seller’s complete products line in the Territory. Distributor must purchase
the Products at least the minimum purchase amount as set out above in the paragraph of clause 2.1.

3.5. Repurchase
guarantee

In the event
of the termination of the contract, the Distributor will be able to sell back to Tenga, at the buy-back price of 90 % of the price
of purchase by the Distributor from Tenga, the stock acquired in the sixty (60) days preceding the date of termination providing
that the products and their packaging are in perfect condition and unopened. Any debts outstanding between the parties will be
offset. Should there not be sufficient balance in the Distributor’s account, Tenga will pay the difference to the concessionaire
within a term not greater than that defined in this contract for payments to be made by the Distributor.

3.6. Manufacturer's
Suggested Distributor Price

Distributor
should try to do its best to follow Manufacturer's Suggested Retail
Price (MSRP, hereinafter) and Minimum Advertising Price (“MAP”) decided by Tenga. The Distributor shall
never sell the Products for prices below those set forth in Appendix I, unless otherwise noted in this agreement, and will use
its best efforts to enforce MAP pricing with wholesalers, sub-distributors and e-tailers . Any other form of price dumping is likewise
forbidden.

Four. Communications
and notifications between the parties

For the purposes
of the present contract, all communications effected between the parties will be deemed valid if given through ordinary mail, telefax,
e-mail, courier service or any other means that both parties may use providing they enable a written record to be retained of the
contents of the said communications.

In order to
ensure reliable and fluid communications, the parties will make use of the contact information contained in the present contract.

All email correspondence
between Tenga and OneUp will also be distributed to the CFO, the Vice President of Sales and the CEO of OneUp. Response to any
Tenga inquires should be one working day and no more than 3 days. Should OneUp fail to respond within 3 days, Tenga will send by
Certified Mail notice of termination if dialog is not established within 7 working days.

 

Five. Intellectual
property

Tenga and
Tenga Egg are brand names and registered trade marks (“distinctive signs”) of Tenga Co., Ltd. Tenga hereby grants the
Distributor a non-exclusive license to use the Tenga brand for the Territory indicated in the first clause of the present contract.
The Distributor will conform any use of the Tenga brand to the manual for applications of Tenga’s corporate image and to
any and all other instructions received from Tenga in the course of the currency of this contract.

The Distributor
will help the distinctive signs of Tenga and, in particular, the Tenga brand itself to grow by including it in advertisements,
publications, mailings, posters and so forth in accordance with the marketing campaigns approved by Tenga.

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The present
distribution contract does not imply the assignment of any kind of exploitation right regarding any patent for which the rights
belong to Tenga either as a result of having invented the same or else through its capacity as the assignee of the said rights.
The Distributor will not be able to exploit any of the said rights, not even for commercial purposes, unless Tenga expressly assigns
in writing the necessary exploitation rights for the purpose.

Six. Protection
of personal information

Both parties
undertake to comply with all their obligations with regard to data protection and conform to all of the requirements arising for
them from the various applicable statutory provisions. Should there be at any time any need to access personal information as a
consequence of this distribution relationship, the parties will sign and attach to this contract (as Appendix III) the terms
and conditions on which such access will be effected, always respecting the minimums required under applicable regulations.

In any case,
the Distributor will deliver to Tenga the name and postal address of its wholesale customers for the purposes of stock management,
turnover, mean sales times and other statistical information. If necessary, the Distributor will obtain from its individual wholesale
customers their consent to transfer such data to Tenga in Japan for these purposes. Should this not be done, Tenga will be able
to pass on to the Distributor any and all penalties imposed on Tenga in this regard where Tenga has not been at fault. Similarly,
the Distributor will be able to pass on to Tenga any and all penalties imposed on the Distributor in this regard through any use
of the data transferred for purposes other than those indicated in this contract with proper consent from the persons affected.

Seven.
Confidentiality

The Distributor
shall keep all Trade Secrets (as defined in the last paragraph of the present article) as confidential for Tenga and shall not
disclose or reveal them or commit any similar act to any third party other than its employees who needs to know or access for the
sales of the Products by the Distributor.

The Distributor’s
confidentiality obligations under the previous paragraph shall remain in force for five (5) years from the expiration or termination
of the Agreement regardless of reason.

“Trade
secrets” means specifications, structures, effects, benefits, materials, designs and any other information including this
Agreement, whether or not they be stored in recording media, concerning the Products, any information concerning development, production,
sales and any other distribution method of the Products, and any technical information, knowledge, know-how, Intellectual Property
Rights and any other information disclosed as “confidential” to the Distributor from Tenga.

Eight.
Non competition

The Distributor
will not be able to manufacture, sell or distribute – without written approval from Tenga- similar, copied, cloned or counterfeit
products or those in violation of any of Tenga’s patents. In the event of any doubt regarding whether a product constituting
a substitute for any of those marketed by Tenga is counterfeit or in breach of any of its patents in accordance with the foregoing
prohibition, the Distributor will inform Tenga of this. Tenga must determine whether the said product is counterfeit or is in breach
of any of its patents within the maximum term of three (3) months and, if it is not, Tenga must consent to its distribution by
the Distributor.

In case the
Distributor breaches its obligations under the previous paragraph, Tenga may terminate this Agreement without prior notice.

The Distributor
undertakes to notify Tenga of any information of which it becomes aware regarding the existence or circulation on the market of
counterfeit products or products that violate any of Tenga’s patents. In each case, the parties will negotiate the share-out
of the legal costs for the elimination of such products from the U.S. market.

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Nine. Amendments
and validity

Alterations
to, gaps in and extensions of the contract

Should either
party detect, in the course of the currency of the contract, any oversight in the same or wish to extend its content, contact will
be established with the other party by any of the means foreseen within the term of five (5) working days for the negotiation and
signing of a rider to the present document in the form of an appendix.

Any lack of
agreement regarding the oversight detected or the extension of its content shall not affect the validity of what has been signed
and shall in no case imply the termination of the contract. For the corresponding purposes, it will be necessary to pursue the
rest of the channels foreseen herein.

 

Ten. Partial
nullity and validity of the contract

Should any
of the clauses in the present contract be or be declared ineffectual, unenforceable or null and void, the rest of the contract
and the rights and obligations deriving from the same shall continue to be in full force and valid.

In such a
case, the parties undertake to replace the provision that is ineffectual, unenforceable or null and void by another that is effective,
enforceable and valid so as to reflect the spirit and intention of the provision to be replaced.

Eleven.
Duration and termination of the contract

11.1. Duration

The present
contract shall come into force on the date it is signed (that appearing in the heading) and shall be valid for thirty-eight (38)
months counted from the 1st day of the month following its signing.

This Agreement
may be renewed and extended for a term agreed upon through consultation and acceptance by and between both parties.

The Distributor
shall not, without prior written consent of Tenga, assign, sell, pawn, collateralize, or otherwise transfer all or any part of
this Agreement, nor any rights and obligations hereunder.

11.2. Termination

Each
party may terminate this Agreement upon written notice to the other party if the other party breaches any obligations of this Agreement
and fails to correct such breach within thirty (30) days following written notice by the other party specifying such breach.

11.3. Rescission

Both parties
are entitled to rescind the present contract, without the need for any prior notice, in the following cases:

		·	When either of the parties issues any bad promissory note or check or is declared to be in a situation
of suspension of payments.

		·	When either of the parties becomes subject to provisional seizure, provisional disposition, compulsory
execution, auction, disposition for failure to pay taxes and public dues or files for or is filed against for bankruptcy procedures
including but not limited to, insolvency, corporate rehabilitation, and civil rehabilitation

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		·	When either of the parties fails to comply, in whole or in part, with any of its legal obligations
or any other obligations arising out of the present contract.

		·	When either of the parties transfers its rights to third parties, is involved in a transaction
for the global assignment of its assets, merger or takeover or where there is a change in the shareholders holding more than fifty
(50) per cent of the capital and implying the loss of control over the company or its organ of governance.

In addition,
Tenga may rescind the present contract:

		·	When the Distributor fails to maintain sufficient volumes of stock to attend to the exclusive market
assigned to it by Tenga in due time and manner.

		·	When the Distributor does not conform to the indications or instructions received from Tenga in
connection with the use of the Tenga brand and the rest of the trade marks held by the same or in connection with any violation
or potential violation of Tenga’s patent rights.

		·	When the quarterly sale is severely behind its scheduled target and it doesn’t improve during
the following quarter.

		·	When the Distributor doesn’t purchase from Tenga a minimum of JPY100,000,000 within a 6 month
period.

Twelve.
Compensation for termination

In the event
of termination of the contract, no compensation will be given to the Distributor other than the repurchase of the products in stock
on the terms and conditions reflected in the present contract.

This compensation
shall not apply when the contract is rescinded by Tenga on the grounds of a failure to comply by the Distributor with any of its
obligations.

Thirteen.
Other limitations, guarantees, warranties, indemnities and compensations

Limitation

Tenga shall
not sell directly to the customers in the Territory, unless the exclusivity of the Distributor is revoked pursuant to this Agreement.

Guarantees

The Distributor
guarantees to Tenga that it complies with all of its legal obligations. Specifically, it expressly declares that it complies with
all of its legal obligations in the areas of labor and tax law and is up to date with its payments to the State and Federal tax
agencies. Similarly, it declares that it complies with all of the obligations affecting it under business legislation and other
statutes pertaining to the exercise of commercial activities.

In this sense,
the Distributor guarantees to hold Tenga harmless and to provide compensation for any damages (including loss of earnings and legal
expenses) that Tenga may suffer due to any lack of truthfulness in these declarations.

Product Liability
Insurance

The Distributor
shall purchase product liability insurance with coverage against personal and property damage in an amount of one million US dollars
(US$ 1,000,000) or more and immediately provide Tenga with a copy of the policy attesting to its purchase.

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Warranties

Tenga warrants
that the Products are guaranteed to be free from defects in material and/or to perform as advertised when properly used, and maintained
in accordance with written instructions. Should any part(s) prove to be defective within one year from date of purchase, Tenga
will replace defective Products FOB distributor’s warehouse, or branch, without charge on the next scheduled shipment from
Tenga, and/or provide a credit on the next invoice for the returned Products provided the defective part(s) is returned to the
Distributor’s warehouse and if requested returned freight pre-paid by Tenga to location of Tenga’s choice.

Except for
the warranties expressly set forth herein, no other warranty or representation, express or implied, including without limitation
warranties of merchantability or fitness for any particular purpose, is made by Tenga.

Limitation
of Liability

In no event
Tenga shall be liable to the Distributor or any third party for loss of profits nor indirect, special or any other damages arising
out of action or inaction of the Distributor or customer’s use or inability to use the Products.

Fourteen.
Applicable law, dispute settlement and venue

This Agreement
shall be governed by and construed and interpreted under the laws of Japan.

Any dispute,
argument or difference (hereinafter collectively referred to as “Disputes”) arising from or in relation to this Agreement
or individual agreements shall be finally settled by arbitration with one arbitrator appointed by the Japan Commercial Arbitration
Association (hereinafter referred to as "JCAA") in Tokyo and in accordance with the commercial arbitration rules of the
JCAA.A decision made by arbitrator shall be final and binding upon the parties to the Dispute, etc., who shall comply with the
decision and shall not raise any objection thereto even if the arbitrator does not question the parties or add any reason for making
such decision.

IN WITNESS
WHEREOF, the parties hereto have executed two originals of this Agreement on the day above written, affixing their signatures thereto
and retaining one each.

 

 

	
        OneUp Innovation
        Inc.

        pp

        /s/ Louis S.
        Friedman

        February 7, 2013

        Signed by: Mr. Louis
        Friedman

        CEO
	
        Tenga Co. Ltd.

        pp

        /s/ Tsutomu Matsuura

        February 7, 2013

        Signed by: Mr. Tsutomu
        Matsuura

        President

 

 

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Appendix I

 

Products
to be marketed and current price list

 

 

 

 

The terms
and conditions reflected in the present contract will be assumed to apply to all purchases made by the distributor from Tenga during
the currency of the same.

 

 

 

 

 

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Appendix
II

 

Minimum
stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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