Document:

Executive Employment Agreement

 Exhibit 10.39 
 ORANGE 21 INC. 
 EXECUTIVE EMPLOYMENT AGREEMENT 
 This Executive Employment Agreement (the “Agreement”) is entered effective October 12, 2006, by and between Orange 21 Inc., a
Delaware corporation (“Employer”), and Jerry Collazo (“Employee”), with respect to the following facts: 
 A. Whereas, Employee has agreed to serve as Chief Financial Officer of Employer; 
 B. Whereas, Employer is a Delaware corporation
engaged in the business of the design, manufacture, sale, and distribution of sunglasses and related products bearing Employer’s trade name; and 
 C. Whereas, Employer wishes to secure and Employee wishes to provide ongoing services on the terms and conditions set forth herein; 
 NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows: 
 1. Employment. Employer hereby agrees to employ Employee as its Chief Financial Officer, and Employee hereby agrees to be employed by Employer in such capacity, subject to the terms and conditions in this Agreement. 
 2. At Will Employment. The parties acknowledge and agree that: (a) Employee’s employment is not for a specified term and may be
terminated by Employer or Employee at any time with or without cause; (b) this provision is intended to be the complete and final expression of the parties’ understanding regarding the terms and conditions under which Employee’s
employment may be terminated; (c) no representation contrary to this provision is valid; and (d) this provision may not be augmented, contradicted, or modified in any way, except by a writing signed by Employee and by Employer’s Chief
Executive Officer. Nothing in this Agreement is intended to or shall be construed to contradict, modify or alter this at-will relationship. 
 3. Compensation. Employer shall pay Employee the following forms of compensation: 
 a. Base Salary.
Employee shall be paid a gross annual salary of $250,000 (“Base Salary”), payable on a pro-rated basis according to Employer’s payroll schedule and subject to applicable withholdings and other payroll deductions. The Base
Salary is subject to adjustment at the end of each calendar year by the Board of Directors of Employer (the “Board”) in its sole and absolute discretion. 
 b. Commissions, Profit Sharing and Bonuses. Each year, in the sole and absolute discretion of the Board, Employee may be entitled
to participate in commission programs, profit sharing programs and bonus programs. The terms and conditions of any such programs will be established by the Board each year and Employee will be notified of such 

 
terms and conditions for such year. For 2006, the terms and conditions of such programs as such programs apply to Employee are outlined on
Exhibit A, attached hereto. 
 e. Stock Options; Restricted Stock. 
 (i) Pursuant to the terms and conditions of a Notice of Stock Option Grant and Stock Option Agreement and Employer’s 2004 Stock
Incentive Plan, Employee shall be granted an option to purchase up to 20,000 shares of Employer’s common stock. Beginning in 2007, from time to time, in the sole and absolute discretion of the Board, Employee may be granted additional options
to purchase shares of common stock of Employer on terms and conditions established by the Board. 
 (ii) Pursuant to the terms
and conditions of a Notice of Restricted Share Award and Restricted Share Agreement and Employer’s 2004 Stock Incentive Plan, Employee shall be granted 20,000 restricted shares of Employer’s common stock. 
 d. Car; Phone. During the term of this Agreement, Employee shall be entitled to a monthly car allowance of $500.00. In addition,
Employer shall either provide or pay the cost of a mobile telephone for Employee’s use in connection with the performance of his duties under this Agreement. 
 4. Duties. Employee will expend his best efforts on behalf of Employer and will abide by all applicable federal, state and local laws, regulations or ordinances. As an employee of the Company, Employee agrees:
(a) to devote Employee’s utmost knowledge and best skill to the performance of Employee’s duties under this Agreement; (b) to devote Employee’s full business time to the rendition of such services, subject to absences for
customary vacations and for temporary illness; and (c) not to engage in any other gainful occupation, business, or activity that requires Employee’s personal attention or creates a conflict of interest with Employee’s responsibilities
under this Agreement without the prior approval of the Board of Directors. Notwithstanding the foregoing, Employee shall be permitted, to the extent such activities do not interfere with his performance of his duties and responsibilities and do not
violate Section 11 of this Agreement, to serve on civic or charitable boards or committees and serve on the boards of other companies. 
 5. Personnel Policies and Procedures. Employer shall have the authority to establish from time to time personnel policies and procedures to be followed by its employees. Employee agrees to comply with the policies and procedures of
Employer. To the extent any provisions in Employer’s personnel policies and procedures differ from the terms of this Agreement, the terms of this Agreement shall control. 
 6. Expenses. Employee is authorized to incur ordinary and necessary expenses in connection with the performance of his duties that are consistent
with the policies of Employer as outlined in Employer’s Travel and Expense Guidelines, which may from time to time be modified or amended by Employer’s Chief Executive Officer. Employer will reimburse Employee for all such expenses upon
the presentation by Employee of an itemized account of 

 
such expenditures with supporting documentation. Employee agrees to submit expense reimbursement requests within thirty (30) days after he incurs such
expenses. 
 7. Insurance. Employee shall be entitled to participate in any insurance or other employee benefit program maintained by
Employer for the benefit of similarly situated employees, subject to the terms and conditions of Employer’s benefit program documents. 
 8. Vacation. Employee shall be entitled to three (3) weeks of vacation in each calendar year. Vacation shall be earned on a monthly basis at a rate calculated by dividing the number of days of vacation per year by twelve (12).
For example – if the Employee is entitled to 15 days of vacation per year, the Employee will accrue 1.25 days of vacation for each month worked during the year. Vacation not taken during the applicable fiscal year shall be carried over to the
following fiscal year, for a maximum vacation accrual of six (6) weeks vacation time. Vacation shall be taken at times consistent with the reasonable needs of the business of Employer. Accrued but unused vacation days shall be paid in a cash
lump sum upon Employee’s Termination Date, as defined in Section 9 below. 
 9. Termination. Employee’s
employment may be terminated upon occurrence of one of the following events: 
 a. By Death. This Agreement shall
automatically terminate upon Employee’s death. 
 b. By Mutual Agreement. This Agreement may be terminated at any
time by mutual agreement of the parties hereto. 
 c. Disability. If Employee is prevented from fully performing the
essential functions of Employee’s duties under this Agreement because of any illness or physical or mental disability, with or without reasonable accommodation, for a period or periods of more than ninety (90) days in the aggregate during
any calendar year or thirty (30) consecutive days in any twelve (12)-month period, Employer may terminate Employee’s employment in its sole discretion in accordance with state and federal law. 
 d. By Employer For Cause. This Agreement may be terminated by Employer at any time for Cause. For purposes of this Agreement,
“Cause” shall mean, as determined by the Chief Executive Officer in his sole discretion: 
  

	 	(i)	Commission of a felony or any lesser crime or offense involving fraud, embezzlement, dishonesty, breach of trust, or breach of fiduciary duty; or 

  

	 	(ii)	Conduct that has caused demonstrable and serious injury to Employer or any of its affiliates, monetary or otherwise; or 

  

	 	(iii)	The order of a regulatory agency that Employee be removed from any office, authority, or employment with Employer; or 

  

	 	(iv)	Willful misconduct, refusal to perform, or substantial disregard of duties properly assigned to Employee by Employer; or 

	 	(v)	Breach of duty of loyalty to Employer or any of its affiliates or other act of fraud or dishonesty with respect to Employer or any of its affiliates; or 

  

	 	(vi)	Breach by Employee of the terms of any agreement between or among Employee and Employer; or 

  

	 	(vii)	Employee’s violation of any policy of Employer 

 “Termination Date” shall mean the date Employee’s employment relationship with Employer terminates. This Agreement terminates effective the Termination Date. 
 e. By Employer Without Cause. Employer may, at any time, terminate Employee’s employment without Cause and for reasons not
specified above. 
 10. Effect of Termination. Upon termination of the employment relationship, all rights of Employee under this
Agreement shall cease (but not obligations) and Employee shall cease to be an employee of Employer. Employee shall have no right to receive any payments or benefits hereunder except for the following, where applicable: 
 a. Employee’s Base Salary payable pursuant to Section 3(a) hereof up to the Termination Date, including any accrued and
unused vacation; 
 b. Any commissions, profit sharing or bonuses, in accordance with the terms established by the Board from
time to time, as provided by Section 3(b) above (provided that any such commissions, profit sharing or bonuses shall, where applicable and to the extent earned in accordance with the criteria established by the Board, be pro-rated
through the Termination Date). 
 c. Reimbursement of expenses incurred in accordance with Section 6 hereof prior
to the Termination Date to the extent not previously reimbursed by Employer; and 
 d. If Employee is terminated pursuant to
Section 9(e), a severance payment in the amount established by the Board from time to time for such Employee (it be understood and acknowledged that the severance payment for the year 2006 shall be set forth on Exhibit A, attached
hereto, and that the Board shall not reduce such amounts for future years of service). Employee acknowledges and agrees that his receipt of the severance payment shall be conditioned upon Employee executing and delivering a separation and release
agreement in a form acceptable to Employer. 
 11. Non-Competition; Nondisclosure of Proprietary Information. 
 a. Non-Competition. During Employee’s employment by Employer, Employee shall not, directly or indirectly, own, manage,
operate, control, invest or acquire an interest in, or otherwise engage or participate (whether as a proprietor, partner, stockholder, director, 

 
officer, employee, joint venturer, investor, or other participant) in any “Competitive Business” (as hereinafter defined) in the United States,
without regard to: (i) whether the Competitive Business has its office or other business facilities within the United States; (ii) whether any of the activities of Employee occur or are performed within the United States; or
(iii) whether Employee resides in, or reports to an office within, the United States. For purposes of this Section 11, “Competitive Business” shall mean the business of design, manufacture, sale, and distribution of
sunglasses, motocross or snow goggles, and related products and accessories, and any other business in which Employer becomes engaged during the term of Employee’s employment with Employer. 
 b. Nondisclosure. During the period that Employee is employed by Employer, and for an infinite period thereafter, Employee shall
not disclose, directly or indirectly, any confidential or proprietary information regarding any aspect of Employer, including any information relating to its finances, business, operations, products, procedures, business practices, marketing plans,
trademarks, customer lists, and pricing information, that is not public knowledge (“Proprietary Information”), to any third parties or to other employees of Employer except Employees who have a demonstrable need to know the
Proprietary Information for purpose of advancing the business of Employer. Employee also agrees that he shall not use any Proprietary Information in his possession for any purpose other than as required to fulfill his responsibilities as a employee
of Employer. Employee shall promptly notify Employer of any Proprietary Information prematurely or improperly disclosed. Proprietary Information includes not only information belonging to Employer that existed before the date of this Agreement, but
also information developed by Employee for Employer or its employees during the term of this Agreement and thereafter. 
 c.
Return of Proprietary Information and Employer’s Property. Employee will not remove any Proprietary Information from the offices of Employer or the premises of any facility in which Employer is performing services, or allow such removal,
unless permitted in writing by the Chief Executive Officer as necessary for the performance of Employee’s obligations under this Agreement. Immediately upon Employer’s request, or Employee’s Termination Date, Employee shall return any
documents or other written materials that contain Proprietary Information, and any property that belongs to Employer, including copies of any computer programs or data owned by Employer. 
 d. Remedies. The parties to this Agreement hereby agree that: (i) if Employee breaches this Section 11, the damage
to Employer will be substantial, although difficult to ascertain, and money damages will not afford Employer an adequate remedy, and (ii) if Employee is in breach of this Section 11, or threatens a breach of this
Section 11, Employer shall be entitled, in addition to all other rights and remedies as may be provided by law, to specific performance, injunctive and other equitable relief to prevent or restrain a breach of this this
Section 11. 
 12. Developed Information. 
 a. Disclosure and Assignment of Developed Information. During Employee’s employment with Employer, Employee will, without
additional compensation, promptly 

 
disclose and, to the full extent allowed by law and subject to creation of such property, assign to Employer, all rights to which Employee may be entitled
with respect to patents, trade secrets, copyrights, mask works, trademarks, inventions, discoveries, designs, formulae, processes, methods, manufacturing techniques, improvements, ideas, copyrightable works, and other intellectual property:
(a) which relate to Employer’s past, present or demonstrated or reasonably foreseeable future business or research, whether or not developed during normal working hours; or (b) which are developed with the use or aid of any Employer
equipment, supplies or facilities; or (c) which use or are based on or developed from any proprietary or confidential information of Employer, or of a third party, access to which Employee obtains through Employer or in the course of his duties
at Employer; or (d) which result from any work, service, or duty Employee performs for Employer, and Employee agrees to waive any pre-emptive or other rights that he may have in such property. At all times, both during and after his employment
with Employer, Employee will do whatever is reasonably requested by Employer, at Employer’s expense, to assist Employer or its designee in obtaining and enforcing its rights throughout the world with respect to the assignments which Employee
has made or is obligated to make to Employer or its designee under this Agreement. Employee is not obligated to assign to Employer or its designee any rights in inventions which Employee develops entirely on his own time without using
Employer’s equipment, supplies, facilities, or trade secrets, except for inventions: (i) which relate at the time of conception or reduction to practice to Employer’s business, or actual or demonstrably anticipated research or
development, or (ii) which result from any work performed by Employee for Employer. In addition, to the extent permitted by federal copyright law, the parties agree that any works resulting from Employee’s work under this Agreement shall
be “works for hire” as defined in federal copyright law. 
 b. Preexisting Developments. Employee must notify
management of any and all inventions, discoveries, developments, improvements, and trade secrets which have been made or conceived or first reduced to practice by Employee alone or jointly with others prior to employment with Employer or during his
employment but which does not fall within the assignable developments described in Section 12(a) and which Employee desires to remove from the operation of this Agreement. If Employee does not so notify management, Employee represents
that he has made no inventions, improvements, or developments at the time of signing this Agreement that are to be removed from the operation of this Agreement. If Employee fails to make any required disclosure or breaches any term of
Section 12(a), Employee agrees that any applicable limitations periods shall be tolled and shall not run as to any claim, right, or cause of action Employer may have relating to such disclosure or breach that would have been discovered
had the required disclosure been made, until such time as Employer obtains actual knowledge of the facts giving rise to its claim. 
 c. Assignment of Developed Information. Employee agrees that all Developed Information shall be the sole property of, and assigned to, Employer and its assigns and Employee agrees, including following the date of termination of this
Agreement, to execute any and all documents reasonably requested by Employer to effect the foregoing. 

 d. Preexisting Developments. Employee must notify management of any and all
inventions, discoveries, developments, improvements, and trade secrets which have been made or conceived or first reduced to practice by Employee alone or jointly with others prior to employment with the Company that Employee desires to remove from
the operation of this Agreement. If Employee does not so notify management, Employee represents that he has made no inventions, improvements or developments at the time of signing this Agreement that are to be removed from the operation of this
Agreement. This Agreement does not apply to an invention that qualifies fully as a nonassignable invention under the provisions of Section 2870 of the California Labor Code. Employee acknowledges that he has reviewed the notification in
Exhibit B and agrees that his signature acknowledges receipt of the notification. 
 13. Solicitation of Employees
Prohibited. Employee will be called upon to work closely with employees of Employer in performing services under this Agreement. All information about such employees that becomes known to Employee during the course of his employment with
Employer, and that is not otherwise known to the public, including compensation or commission structure, is confidential and shall not be used by Employee in soliciting employees of Employer at any time during or after termination of his employment
with Employer. During Employee’s employment and for two (2) years following the termination of Employee’s employment, Employee shall not directly or indirectly ask, solicit, or encourage any employee(s) of Employer to leave their
employment with Employer. Employee further agrees that he shall make any subsequent employer aware of this non-solicitation obligation. 
 14. Representation Concerning Prior Agreements. Employee warrants that he is not bound by any non-competition and/or non-solicitation or other agreement that would preclude, limit, or in any manner affect his employment with
Employer. Employee further represents that he can fully perform the duties of his employment without violating any obligations he may have to any former employer, including, but not limited to, misappropriating any proprietary information acquired
from a prior employer. Employee agrees that he will indemnify and hold Employer harmless from any and all liability and damage, including attorneys’ fees and costs, resulting from any breach of this provision. 
 15. Notices. All notices, demands, requests, consents, statements, satisfactions, waivers, designations, refusals, confirmations, denials, and
other communications that may be required or otherwise provided for or contemplated hereunder shall be in writing and shall be deemed to be properly given and received: (a) upon delivery, if delivered in person or by facsimile or e-mail
transmission with receipt acknowledged; or (b) one business day after having been deposited for overnight delivery with Federal Express or another comparable overnight courier service; or (c) three (3) business days after having been
deposited in any post office or mail depository regularly maintained by the U.S. Postal Service and sent by registered or certified mail, postage prepaid, addressed to Employee’s residence address (or such other address as Employee may specify
in a written notice to Employer), or to Employer’s principal office. 
 16. Successors and Assigns. The rights and obligations of
Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Employer. Employee shall not be entitled to assign any of his rights or obligations under this Agreement. 

 
Employee agrees that his obligations under Sections 11, 12 and 13 of this Agreement shall survive the termination of this Agreement.

 17. Entire Agreement. Employee acknowledges receipt of this Agreement and agrees that this Agreement represents the entire
Agreement with Employer concerning the subject matter hereof, and supersedes any previous oral or written communications, representations, understandings, or agreements with Employer or any officer or agent thereof. Employee understands that no
representative of Employer has been authorized to enter into any agreement or commitment with Employee that is inconsistent in any way with the terms of this Agreement. 
 18. Amendments. No amendment or modification of the terms or conditions of this Agreement shall be valid unless in writing and signed by Employee and Employer’s Chief Executive Officer. 
 19. Severability. Each term, condition, covenant, or provision of this Agreement shall be viewed as separate and distinct, and in the event that
any such term, covenant, or provision shall be held by a court of competent jurisdiction to be invalid, the remaining provisions shall continue in full force and effect. 
 20. Waiver. A waiver by either party of a breach of any provision(s) of this Agreement shall not constitute a general waiver or prejudice the other party’s right to demand strict compliance with that
provision or any other provisions in this Agreement. 
 21. Indemnification. Employer agrees to provide Employee with a defense and
indemnification in accordance with the provisions of the California Labor Code against any third party claims related to or arising out of Employee’s employment with or positions held for Employer; provided, however, that Employer
shall not be liable, and shall not provide a defense or indemnification for any claim wherein the Employee has not satisfied Employer’s standards of conduct. 
 22. Arbitration. 
 a. Agreement to Arbitrate. To the fullest extent permitted
by law, Employee and Employer agree to arbitrate any controversy, claim or dispute between them arising out of or in any way related to this Agreement, the employment relationship between Employer and Employee and any disputes upon termination of
employment, including but not limited to breach of contract, tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, family and medical leave, compensation or benefits claims, intellectual property
claims, constitutional claims; and any claims for violation of any local, state or federal law, statute, regulation or ordinance or common law. For the purpose of this agreement to arbitrate, references to “Employer” include all parent,
subsidiary or related entities and their employees, supervisors, officers, directors, agents, pension or benefit plans, pension or benefit plan sponsors, fiduciaries, administrators, affiliates and all successors and assigns of any of them, and this
agreement shall apply to them to the extent Employee’s claims arise out of or relate to their actions on behalf of Employer. By executing this Agreement, Employee and the Employer are both waiving the right to a jury trial with respect to any
such disputes. 

 b. Consideration. The mutual promise by Employer and Employee to arbitrate any and
all disputes between them rather than litigate them before the courts or other bodies, provides the consideration for this agreement to arbitrate. 
 c. Initiation of Arbitration. Either party may exercise the right to arbitrate by providing the other party with written notice of any and all claims forming the basis of such right in sufficient detail to
inform the other party of the substance of such claims. In no event shall the request for arbitration be made after the date when institution of legal or equitable proceedings based on such claims would be barred by the applicable statute of
limitations. All issues of arbitrability shall be governed by the Federal Arbitration Act. 
 d. Arbitration Procedure.
The arbitration will be conducted in San Diego, California by a single neutral arbitrator and in accordance with the then current rules for resolution of employment disputes of the American Arbitration Association (“AAA”) (available
on-line at www.adr.org) or JAMS (available on-line at www.jamsadr.com). The parties are entitled to representation by an attorney or other representative of their choosing. The arbitrator shall have the power to enter any award that could be entered
by a judge of the trial court of the State of California, and only such power, and shall follow the law. The parties agree to abide by and perform any award rendered by the arbitrator. The arbitrator shall issue the award in writing and therein
state the essential findings and conclusions on which the award is based. Judgment on the award may be entered in any court having jurisdiction thereof. Any final judgment rendered by the arbitrator may only be appealed on the grounds of improper
bias or improper conduct of the arbitrator. 
 e. Costs of Arbitration. Employer shall bear the costs of the
arbitration filing and hearing fees and the fees of the arbitrator. 
 23. Attorneys’ Fees. Each side will bear its own
attorneys’ fees in any dispute unless a statutory section at issue, if any, authorizes the award of attorneys’ fees to the prevailing party. 
 24. Construction. The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing Employer,
but Employee has participated in the negotiation of its terms. Furthermore, Employee acknowledges that Employee has had an opportunity to review and revise the Agreement and has had it reviewed by legal counsel, if desired, and, therefore, the rule
of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.
 24. Employee Acknowledgment. Employee acknowledges that he has been advised by Employer to consult with independent counsel of his own choice, at his expense, concerning this Agreement, that he has had the
opportunity to do so, and that he has taken advantage of that opportunity to the extent that he desires. Employee further acknowledges that he has read and understands this Agreement, is fully aware of its legal effect, and has entered into it
freely based on his own judgment. 
 25. Governing Law. This Agreement shall be governed by and interpreted in accordance with the
laws of the State of California, without regard to conflicts of laws principles. Each party consents to the jurisdiction and venue of the state or federal courts in San Diego, 

 
California, if applicable, in any action, suit, or proceeding arising out of or relating to this Agreement. 
 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. 
  

									
	 Orange 21 Inc.
	 		 	 Employee:

				
	By	 	 /s/ Barry Buchholtz
	 		 	/s/ Jerry Collazo
		 	 Barry Buchholtz
	 		 	 Name:
	 	 Jerry Collazo

		 	 Chief Executive Officer
	 		 	 Address:
	 	  
		 		 		 		 	  
		 		 		 		 	  

 EXHIBIT A 
 TERMS OF (1) COMMISSION PROGRAM, (2) PROFIT SHARING, (3) BONUS 
 PROGRAM,
(4) STOCK OPTION AND (5) SEVERANCE PROGRAM APPLICABLE 
 FOR FISCAL YEAR 2006  
 (AS APPLICABLE) 
 (note: to be
completed, if applicable, or marked “not applicable” otherwise) 
  

			
	COMMISSION PROGRAM:	  	not applicable
		
	PROFIT SHARING:	  	not applicable
		
	BONUS PROGRAM:	  	 (i) up to 20% of annual compensation based on achieving Employer’s financial goals; and (ii) up to 20% of annual compensation based on achieving
the MBOs listed below.
  
 MBO’s

		
	STOCK OPTIONS:	  	not applicable
		
	SEVERANCE PROGRAM:	  	$125,000

 EXHIBIT B 
 LIMITED EXCLUSION NOTIFICATION TO EMPLOYEES IN CALIFORNIA 
 THIS IS TO NOTIFY you in accordance with
Section 2872 of the California Labor Code that the foregoing Agreement between you and Company does not require you to assign or offer to assign to Company any invention that you developed entirely on your own time without using Company’s
equipment, supplies, facilities or trade secret information except for those inventions that either: 
 (1) Relate at the time of conception
or reduction to practice of the invention to Company’s business, or actual or demonstrably anticipated research or development of Company; or 
 (2) Result from any work performed by you for Company. 
 To the extent a provision in the foregoing Agreement purports to require
you to assign an invention otherwise excluded from the preceding Section, the provision is against the public policy of California and is unenforceable. 
 This limited exclusion does not apply to any patent or invention covered by a contract between Company and the United States or any of its agencies requiring full title to such patent or invention to be in the United
States. 
 I ACKNOWLEDGE RECEIPT of a copy of this notification. 
  

									
	 ORANGE 21 INC.
	 		 	 By:
	 	 /s/Jerry Collazo

				
	By:	 	 /s/ Barry Buchholtz
	 		 	 Jerry Collazo

	  
 Title
	 	  
 Chief Executive
Officer
	 		 	 (Printed Name of Employee)

			
	 Date: October 12, 2006
	 		 	 Date: October 12, 2006Notice of Restricted Share Award and Restricted Share Agreement

 Exhibit 10.40 
 ORANGE 21 INC. 2004 STOCK INCENTIVE PLAN 
 NOTICE OF RESTRICTED SHARE AWARD 

 

	 	Participant’s Name and Address:	Jerry Collazo 

                                       
                                        
                                        
                                        
                                 
                                       
                                        
                                        
                                        
                                 
 You (the “Participant”) have been granted Shares of Stock of the Company (the “Award”), subject to the terms and
conditions of this Notice of Restricted Share Award (the “Notice”), the Orange 21 Inc. 2004 Stock Incentive Plan (the “Plan”), as amended from time to time, and the Restricted Share Agreement (the
“Agreement”) attached hereto, as follows. Unless otherwise indicated, all below terms shall have the meaning as set forth in the Plan. 
  

			
	Award Number	  	7
		
	Date of Award	  	October 12, 2006
		
	Vesting Commencement Date	  	October 12, 2006
		
	 Total Number of Shares
 of Stock Awarded
	  	
	(the “Shares”)	  	20,000

 Vesting Schedule: 
 Subject to the Participant’s Service and other limitations set forth in this Notice, the Plan and the Agreement, the Shares shall “vest”
in accordance with the following schedule: 
 The Shares shall vest over a four-year period in accordance with the following: (i) 25% of
the Shares shall vest twelve months after the Vesting Commencement Date, and (ii) thereafter 1/48 of the Shares shall vest on each monthly anniversary of the Vesting Commencement Date. 
 During any authorized leave of absence, the vesting of the Shares as provided in this schedule shall be suspended. Vesting of the Shares shall resume
upon the Participant’s termination of the leave of absence and return to service to the Company (or Parent or Subsidiary). The Vesting Schedule of the Shares shall be extended by the length of the suspension. 
 In the event of the Participant’s change in status from Employee, Outside Director or Consultant to any other status of Employee, Outside Director
or Consultant, the Shares shall continue to vest in accordance with the Vesting Schedule set forth above. 
 For purposes of this Notice and
the Agreement, the term “vest” shall mean, with respect to any Shares, that such Shares are no longer subject to forfeiture to the Company. Shares that have not vested are deemed “Restricted Shares.” If the Participant would
become vested in a fraction of a Restricted Share, such Restricted Share shall not vest until the Participant becomes vested in the entire Share. 

 Vesting shall cease upon the date of termination of the Participant’s Service for any reason,
including death or disability. In the event the Participant’s Service is terminated for any reason, including death or disability, any Restricted Shares held by the Participant immediately following such termination of Service shall be deemed
reconveyed to the Company and the Company shall thereafter be the legal and beneficial owner of the Restricted Shares and shall have all rights and interest in or related thereto without further action by the Participant. The foregoing forfeiture
provisions set forth in this Notice as to Restricted Shares shall apply to the new capital stock or other property (including cash paid other than as a regular cash dividend) received in exchange for the Shares in consummation of any transaction
described in Section 11 of the Plan and such stock or property shall be deemed Additional Securities (as defined in Section 4 of the Agreement) for purposes of the Agreement, but only to the extent the Shares are at the time covered by
such forfeiture provisions. 
 The Award shall be subject to the provisions of Section 11 of the Plan in the event of a Change in
Control. 
 IN WITNESS WHEREOF, the Company and the Participant have executed this Notice and agree that the Award is to be governed by the
terms and conditions of this Notice, the Plan and the Agreement. 
  

			
	 ORANGE 21 INC.,
 a Delaware corporation

		
	By:	 	 /s/ Barry Buchholtz

	 Title:
	 	 Chief Executive Officer

 THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE SHARES SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE
PARTICIPANT’S SERVICE (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS AWARD OR ACQUIRING SHARES HEREUNDER). THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE, THE AGREEMENT NOR THE PLAN SHALL CONFER UPON THE
PARTICIPANT ANY RIGHT WITH RESPECT TO CONTINUATION OF THE PARTICIPANT’S SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE PARTICIPANT’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE THE PARTICIPANT’S SERVICE AT ANY TIME, WITH OR
WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE PARTICIPANT ACKNOWLEDGES THAT UNLESS THE PARTICIPANT HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY, THE PARTICIPANT’S STATUS IS AT WILL. 
 As a condition to receiving the Shares, the Participant agrees to refrain from making an election pursuant to Section 83(b) of the Code with respect
to the Shares. 
 The Participant acknowledges receipt of a copy of the Plan and the Agreement and represents that he or she is familiar with
the terms and provisions thereof, and hereby accepts the Award subject to all of the terms and provisions hereof and thereof. The Participant has reviewed this Notice, the Agreement and the Plan in their entirety, has had an opportunity to 

 
obtain the advice of counsel prior to executing this Notice and fully understands all provisions of this Notice, the Agreement and the Plan. The Participant
hereby agrees that all questions of interpretation and administration relating to this Notice, the Plan and the Agreement shall be resolved by the Committee in accordance with Section 11 of the Agreement. The Participant further agrees to the
venue selection in accordance with Section 12 of the Agreement. The Participant further agrees to notify the Company upon any change in the residence address indicated in this Notice. 

					
			
	 Dated: October 12, 2006
	 		 	 Signed: /s/ Jerry Collazo

 Award Number: 7 
 ORANGE 21 INC. 2004 STOCK INCENTIVE PLAN 
 RESTRICTED SHARE AGREEMENT 
 1. Issuance of Shares. Orange 21 Inc., a Delaware corporation (the “Company”), hereby issues to the Participant (the
“Participant”) named in the Notice of Restricted Share Award (the “Notice”), the Total Number of Shares of Stock Awarded set forth in the Notice (the “Shares”), subject to the Notice, this
Restricted Share Agreement (the “Agreement”) and the terms and provisions of the Orange 21 Inc. 2004 Stock Incentive Plan (the “Plan”), as amended from time to time, which are incorporated herein by reference. All
Shares issued hereunder will be deemed issued to the Participant as fully paid and nonassessable shares, and the Participant will have the right to vote the Shares at meetings of the Company’s stockholders. The Company shall pay any applicable
stock transfer taxes imposed upon the issuance of the Shares to the Participant hereunder. Unless otherwise indicated, all below terms shall have the meaning as set forth in the Plan. 
 2. Transfer Restrictions. The Shares issued to the Participant hereunder may not be sold, transferred by gift, pledged, hypothecated, or otherwise
transferred or disposed of by the Participant prior to the date when the Shares become vested pursuant to the Vesting Schedule set forth in the Notice. Any attempt to transfer Restricted Shares in violation of this Section 2 will be null and
void and will be disregarded. 
 3. Escrow of Stock. For purposes of facilitating the enforcement of the provisions of this Agreement,
the Participant agrees, immediately upon receipt of the certificate(s) for the Restricted Shares, to deliver such certificate(s), together with an Assignment Separate from Certificate in the form attached hereto as Exhibit A, executed in
blank by the Participant with respect to each such stock certificate, to the Secretary of the Company, or his or her designee, to hold in escrow for so long as such Restricted Shares have not vested pursuant to the Vesting Schedule set forth in the
Notice, with the authority to take all such actions and to effectuate all such transfers and/or releases as may be necessary or appropriate to accomplish the objectives of this Agreement in accordance with the terms hereof. The Participant hereby
acknowledges that the appointment of the Secretary of the Company (or his or her designee) as the escrow holder hereunder with the stated authorities is a material inducement to the Company to make this Agreement and that such appointment is coupled
with an interest and is accordingly irrevocable. The Participant agrees that such escrow holder shall not be liable to any party hereto (or to any other party) for any actions or omissions unless such escrow holder is grossly negligent relative
thereto. The escrow holder may rely upon any letter, notice or other document executed by any signature purported to be genuine and may resign at any time. Upon the vesting of Restricted Shares, the escrow holder will, without further order or
instruction, transmit to the Participant the certificate evidencing such Shares. 

 4. Additional Securities and Distributions. 
 (a) Any securities or cash received (other than a regular cash dividend) as the result of ownership of the Restricted Shares (the
“Additional Securities”), including, but not by way of limitation, warrants, options and securities received as a stock dividend or stock split, or as a result of a recapitalization or reorganization or other similar change in the
Company’s capital structure, shall be retained in escrow in the same manner and subject to the same conditions and restrictions as the Restricted Shares with respect to which they were issued, including, without limitation, the Vesting Schedule
set forth in the Notice. The Participant shall be entitled to direct the Company to exercise any warrant or option received as Additional Securities upon supplying the funds necessary to do so, in which event the securities so purchased shall
constitute Additional Securities, but the Participant may not direct the Company to sell any such warrant or option. If Additional Securities consist of a convertible security, the Participant may exercise any conversion right, and any securities so
acquired shall constitute Additional Securities. In the event of any change in certificates evidencing the Shares or the Additional Securities by reason of any recapitalization, reorganization or other transaction that results in the creation of
Additional Securities, the escrow holder is authorized to deliver to the issuer the certificates evidencing the Shares or the Additional Securities in exchange for the certificates of the replacement securities. 
 (b) The Company shall disburse to the Participant all regular cash dividends with respect to the Shares and Additional Securities (whether
vested or not), less any applicable withholding obligations. 
 5. Taxes. 
 (a) No Section 83(b) Election. As a condition to receiving the Shares, the Participant agrees to refrain from making an
election pursuant to Section 83(b) of the Code with respect to the Shares. 
 (b) Tax Liability. The Participant
is ultimately liable and responsible for all taxes owed by the Participant in connection with the Award, regardless of any action the Company (or Parent or Subsidiary) takes with respect to any tax withholding obligations that arise in connection
with the Award. Neither the Company (nor any Parent or Subsidiary) makes any representation or undertaking regarding the treatment of any tax withholding in connection with the grant or vesting of the Award or the subsequent sale of Shares subject
to the Award. The Company (and any Parent or Subsidiary) does not commit and is under no obligation to structure the Award to reduce or eliminate the Participant’s tax liability. 
 (c) Payment of Withholding Taxes. Prior to any event in connection with the Award (e.g., vesting) that the Company determines may
result in any tax withholding obligation, whether United States federal, state, local or non-U.S., including any employment tax obligation (the “Tax Withholding Obligation”), the Participant must arrange for the satisfaction of the
minimum amount of such Tax Withholding Obligation in a manner acceptable to the Company. 

 (i) By Share Withholding. The Participant authorizes the Company to, upon the
exercise of its sole discretion, withhold from those Shares issuable to the Participant the whole number of Shares sufficient to satisfy the minimum applicable Tax Withholding Obligation. The Participant acknowledges that the withheld Shares may not
be sufficient to satisfy the Participant’s minimum Tax Withholding Obligation. Accordingly, the Participant agrees to pay to the Company (or any Parent or Subsidiary) as soon as practicable, including through additional payroll withholding, any
amount of the Tax Withholding Obligation that is not satisfied by the withholding of Shares described above. 
 (ii) By
Sale of Shares. Unless the Participant determines to satisfy the Tax Withholding Obligation by some other means in accordance with clause (iii) below, the Participant’s acceptance of this Award constitutes the Participant’s
instruction and authorization to the Company and any brokerage firm determined acceptable to the Company for such purpose to sell on the Participant’s behalf a whole number of Shares from those Shares issuable to the Participant as the Company
determines to be appropriate to generate cash proceeds sufficient to satisfy the minimum applicable Tax Withholding Obligation. Such Shares will be sold on the day such Tax Withholding Obligation arises (e.g., a vesting date) or as soon thereafter
as practicable. The Participant will be responsible for all broker’s fees and other costs of sale, and the Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale. To
the extent the proceeds of such sale exceed the Participant’s minimum Tax Withholding Obligation, the Company agrees to pay such excess in cash to the Participant. The Participant acknowledges that the Company or its designee is under no
obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the Participant’s minimum Tax Withholding Obligation. Accordingly, the Participant agrees to pay to the Company
(or any Parent or Subsidiary) as soon as practicable, including through additional payroll withholding, any amount of the Tax Withholding Obligation that is not satisfied by the sale of Shares described above. 
 (iii) By Check, Wire Transfer or Other Means. At any time not less than five (5) business days (or such fewer number of
business days as determined by the Committee) before any Tax Withholding Obligation arises (e.g., a vesting date), the Participant may elect to satisfy the Participant’s Tax Withholding Obligation by delivering to the Company an amount that the
Company determines is sufficient to satisfy the Tax Withholding Obligation by (x) wire transfer to such account as the Company may direct, (y) delivery of a certified check payable to the Company, or (z) such other means as specified
from time to time by the Committee. 
 6. Stop-Transfer Notices. In order to ensure compliance with the restrictions on transfer set
forth in this Agreement, the Notice or the Plan, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and, if the Company transfers its own securities, it may make appropriate notations to the same
effect in its own records. 
 7. Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares
that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such
Shares shall have been so transferred. 

 8. Restrictive Legends. The Participant understands and agrees that the Company shall cause the
legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:

 THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THAT CERTAIN RESTRICTED SHARE AGREEMENT BETWEEN THE COMPANY AND
THE NAMED STOCKHOLDER. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH SUCH AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. 
 9. Entire Agreement: Governing Law. The Notice, the Plan and this Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof, and may not be modified adversely to the Participant’s interest except by
means of a writing signed by the Company and the Participant. These agreements are to be construed in accordance with and governed by the internal laws of the State of California without giving effect to any choice of law rule that would cause the
application of the laws of any jurisdiction other than the internal laws of the State of California to the rights and duties of the parties. Should any provision of the Notice or this Agreement be determined to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable. 
 10. Construction. The captions used in the Notice and
this Agreement are inserted for convenience and shall not be deemed a part of the Award for construction or interpretation. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the
singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise. 
 11.
Administration and Interpretation. Any question or dispute regarding the administration or interpretation of the Notice, the Plan or this Agreement shall be submitted by the Participant or by the Company to the Committee. The resolution of
such question or dispute by the Committee shall be final and binding on all persons. 
 12. Venue. The parties agree that any suit,
action, or proceeding arising out of or relating to the Notice, the Plan or this Agreement shall be brought in the United States District Court for the Southern District of California (or should such court lack jurisdiction to hear such action, suit
or proceeding, in a California state court in the County of San Diego) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to
the laying of venue for any such suit, action or proceeding brought in such court. If any one or more provisions of this Section 12 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such
provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable. 

 13. Notices. Any notice required or permitted hereunder shall be given in writing and shall be
deemed effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier service or upon deposit in the United States mail by certified mail (if the parties are within the United States), with
postage and fees prepaid, addressed to the other party at its address as shown in these instruments, or to such other address as such party may designate in writing from time to time to the other party. 
 END OF AGREEMENT 

 EXHIBIT A 
 STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE 
 FOR VALUE RECEIVED,
                                       
  hereby sells, assigns and transfers unto                             ,
            (            ) shares of the Common Stock of Orange 21 Inc., a Delaware corporation (the
“Company”), standing in his name on the books of, the Company represented by Certificate No.                     
herewith, and does hereby irrevocably constitute and appoint the Secretary of the Company attorney to transfer the said stock in the books of the Company with full power of substitution. 
 DATED:
                             
  

	
	
	   

 [Please sign this document but do not date it. The date and information of the transferee will be
completed if and when the shares are assigned.]

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