Bodie vs. Marani

Case 8:14-cv-00308-JLS-AN Document 1 Filed 03/03/14 Page 1 of 56 Page ID #:1

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28CORRIGAN & MORRIS, LLP

ATTORNEYS AT LAW 201 SANTA MONICA BLVD.

SUITE 475 SANTA MONICA, CA. 90401

(310) 394-2800

COMPLAINT- 2

Note, a true and correct copy of which is attached hereto at Exhibit 1 (the Convertible Note); Subscription Agreement, a true and correct copy of which is

attached hereto at Exhibit 2; and Common Stock Purchase Warrant, a true and correct copy of which is attached hereto at Exhibit 3 (the Warrant). A dispute has arisen between Bodie and Marani with respect to the proper computation of Bodies debt, conversion rights and Warrant exercise.

2. With respect to the conversions of the Convertible Note, the dispute arises out of the conversion prices applied to Bodies conversions of its debt into Marani stock. Bodie contends that Marani was required to disclose to Bodie any and all issuances of stock and other securities at prices below Bodies conversion price, and, whenever such an event occurred, that Bodie was automatically entitled thereafter to the benefit of the lowest price applicable to any third party, if lower than Bodies conversion prices. Such contention is based on sections 2.1(c) and 2.1(d) of the Convertible Note. Bodie contends that events occurred while the Convertible Note was outstanding that triggered a conversion price adjustment pursuant to section 2.1(c); but because Marani failed to disclose to Bodie the events, stock issuances and terms thereof that would trigger a conversion price adjustment under the terms of the Convertible Note, as required by section 2.1(d), Bodie was unaware of such conversion price adjustment events and inadvertently converted its debt into Marani stock at conversion prices substantially greater than the prices to which Bodie was entitled under section 2.1(c) of the Convertible Note. Bodie contends that, computed at the proper adjusted conversion prices, Bodie would be entitled to at least 62 million shares of Marani stock in excess of what Bodie received upon the exercise of its conversion rights. Based on the market value of such shares following the conversions, Bodie could have sold such shares for more than $1 million.

3. In addition, Bodie contends that with respect to two conversions, in November 2010 and November 2011, respectively, Bodie attempted to convert its shares at conversion prices well below $.001 and was told by Marani that it could


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(310) 394-2800

COMPLAINT- 3

not honor such conversions because its bylaws precluded Marani from issuing shares below its stated par value of $.001. Accordingly, Marani insisted that Bodie conversion prices be set at par value, instead of the prices computed under section 2.1(c) of the Convertible Note, resulting in a drastic reduction in the number of shares issued to Bodie pursuant to such exercise. Bodie contends that Marani was not entitled to reduce or limit Bodies contract rights based on such self-imposed restriction and that Bodie is entitled to be made whole for damages suffered as a result of Maranis improper limitation on Bodies conversion rights. Bodie contends that the damages suffered as a result of the par value restriction exceeded $100,000.

4. Separately, with respect to Bodies Warrant exercise on December 5, 2013, Bodie claims that Bodies own error in computing the number of shares to which Bodie was entitled when it exercised its cashless warrant exercise to purchase 4 million shares of Marani common stock under the Warrant, which number was adopted by Marani, caused Bodie to be shorted by 181,820 shares of Marani common stock. Bodie suffered damages of at least $3000 as a result of such discrepancy in the number of shares issued to Bodie.

5. As a result of all of the foregoing, Bodie has suffered money damages in an amount in excess of this Courts judicial minimum, and in any event in excess of $1 million, in an amount to be determined at trial.

6. Bodie is informed and believes that Marani contends that Bodie converted all of its debt at conversion prices consistent with the proper interpretation of the Convertible Note and Warrant, and that it owes Bodie no more stock and no more debt.

PARTIES 7. Bodie is a Delaware corporation, whose sole officer is located in

Michigan. 8. Bodie is informed and believes and based thereon alleges that Marani

is a Nevada corporation with its principal offices located in Tustin, California.


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(310) 394-2800

COMPLAINT- 4

JURISDICTION AND VENUE 9. This Court has jurisdiction over this action pursuant to 28 U.S.C.

1332(a)(2) in that the action is between a plaintiff corporation organized under the laws of Delaware and managed in the state of Michigan and the defendant is a Nevada corporation with its principal offices in the state of California; and the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs.

10. Venue is proper in this judicial district pursuant to 28 U.S.C. 1391(a), in that it is a judicial district in which a substantial part of the events or omissions giving rise to the claims occurred, or a substantial part of the property which is the subject of the action is situated. Bodie is informed and believes that substantially all of the actions of Marani alleged herein took place from its principal offices formerly located in North Hollywood, California and, thereafter, in Tustin, California. Although the Convertible Note includes a choice of New York venue, there appears to be insufficient nexus with the State of New York to provide a basis upon which to bring this action in its courts. Plaintiff would not oppose a motion to transfer venue to the District Court for the Southern District of New York, should the Court deem such a transfer to be warranted and just and provided the District Court for the Southern District of New York would accept such a transfer.

COMMON ALLEGATIONS 11. Paragraph 2.1 of the Convertible Note provides a mechanism to

compute the conversion price for the debt obligations under that instrument. That provision provides, in relevant part:

(a) The Holder shall have the right from and after February 14, 2010 and then at any time until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note and accrued interest, at the election of the Holder (the date of giving of such notice of conversion being a "Conversion Date") into fully paid and nonassessable shares of Common Stock as such stock exists on the date of issuance of this Note,


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(310) 394-2800

COMPLAINT- 5

or any shares of capital stock of Borrower into which such Common Stock shall hereafter be changed or reclassified, at the conversion price as defined in Section 2.1(b) hereof (the "Conversion Price"), determined as provided herein. Upon delivery to the borrower of a completed Notice of Conversion, a form of which is annexed hereto, Borrower shall issue and deliver to the Holder within three (3) business days after the Conversion Date (such third day being the "Delivery Date") that number of shares of Common Stock for the portion of the Note converted in accordance with the foregoing. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal of the Note (and any interest) to be converted, by the Conversion Price. (b) Subject to adjustment as provided for in Section 2.1(c) hereof, the Conversion Price per share of Common Stock shall be $0.04 for 180 days after the Closing Date ("Conversion Price"). Commencing 180 days after the Closing Date, the Conversion Price per share of Common Stock shall be equal to the lesser of (i) $0.04, or (ii) seventy-five percent (75%) of the average of the three lowest closing bid prices of the Company's Common Stock for the twenty trading days preceding a Conversion Date. (c) The Conversion Price and the number and kind of shares or other securities to be issued upon conversion of this Note, shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:

D. Share Issuance. So long as this Note is outstanding, if the Borrower shall issue or agree to issue any shares of Common Stock other than with respect to any Excepted Issuances for a consideration less than the Conversion Price in effect at the time of such issue, then, and thereafter successively upon each such issue, the Conversion Price shall be reduced to such other lower issue price. For purposes of this adjustment, the issuance of any security carrying the right to convert such security into shares of Common Stock or of any warrant, right or option


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(310) 394-2800

COMPLAINT- 6

to purchase Common Stock shall result in an adjustment to the Conversion Price upon the issuance of the above-described security and again upon the issuance of shares of Common Stock upon exercise of such conversion or purchase rights if such issuance is at a price lower than the then applicable Conversion Price.

(d) Whenever the Conversion Price is adjusted pursuant to Section 2.1 (c) above, the Borrower shall promptly provide notice to the Holder setting forth the Conversion Price after such adjustment and setting forth a statement of the facts requiring such adjustment.

Emphasis added.

12. In late 2013 and early 2014, Plaintiff, through counsel, made several written demands on Defendant, through its counsel, demanding compliance with sections 2.1(c) and 2.1(d) of the Convertible Note. Nevertheless, as of the date of this Complaint, the Defendant has failed and refused to disclose, during the life of the Convertible Note or thereafter, sufficient facts for Bodie to determine any adjustment in the Conversion Price and has not set forth a statement of facts that Defendant has conceded would require an adjustment to the Conversion Price.

13. On or around February 19, 2014, after Bodies final conversion notice was given and the shares issued to it, Marani disclosed, for the first time, in a filing with the Securities and Exchange Commission, that On November 7, 2013 the Company issued 30,000,000 free trading shares at a cost of $0.001, per share, to Eco Investment Properties, the assignee of a portion of a certain promissory note in the amount of $30,000. Because the Marani shares issued on November 7, 2013 were issued at a price that was a small fraction of the Conversion Price applied to Bodies two later conversions, such conversions were executed at conversion prices inadvertently inflated in computing the shares to which it was entitled. As a result, Marani issued to Bodie upon such conversions only a fraction of the number of shares to which Bodie was entitled upon making that conversion.


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(310) 394-2800

COMPLAINT- 7

14. On February 19, 2014, upon learning that Marani had issued shares at $.001 per share as early as November 7, 2013, Bodie made demand on Marani to disclose all conversion price adjustment events during the pendency of the Convertible Note, including all facts relevant to the November 7, 2013 issuance to Eco Investment Properties referenced in Maranis February 19, 2014 SEC filing documents, and to re-compute the number of shares due to Bodie pursuant to corrected conversion prices. Marani failed and refused to do so, and, instead, unilaterally dictated that the matter was closed by Marani. Marani has failed to comply with section 2(c) of the Convertible Note.

15. Bodies conversions of its debt under the Convertible Note were made on the following dates and conversion prices (the debt includes interest of $31,907.23 and principal of $100,000.00): DATE

DEBT CON-VERTED

CON-VERSION PRICE APPLIED BY MARANI

CON-VERSION RATE UNDER SECTION 2.1(c) OF CON-VERTIBLE NOTE

SHARES DUE TO BODIE UNDER SECTION 2.1(c) OF CON- VERTIBLE NOTE

NUMBER OF SHARES MARANI SHORTED BODIE UPON CONVERSION

10/3/2010 $ 9,333.33 .00188741 Unknown Unknown Unknown 10/12/2010 $ 5,041.99 .00130083 Unknown Unknown Unknown 10/25/2010 $ 4,500.00 .00054 Unknown Unknown Unknown 11/2/2010 $ 9,333.33 .001 Unknown Unknown Unknown 11/2/2011 $ 9,333.00 .001 Unknown Unknown Unknown 2/29/2012 $ 1,799.01 .0001425 Unknown Unknown Unknown 3/25/2012 $ 5,000.00 .000285 Unknown Unknown Unknown 9/30/2013 $12,000.00 .0008 Unknown Unknown Unknown 12/2/2013 $50,000.00 .0051 Not more

than .001 At least 50,000,000

At least 40,196,079

1/23/2014 $25,566.57 .00705 Not more than .001

At least 25,566,570

At least 21,940,107

Totals $131,907.23 Unknown At least 62,136,186


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(310) 394-2800

COMPLAINT- 8

16. With respect to the conversions on November 2, 2010 and November 2, 2011, the

$.001 exercise price was compelled by Marani on the grounds that the lower conversion price

dictated by section 2.1(c) of the Convertible Note was prohibited by the Companys bylaws

because the par value was $.001. Such limitation is not supported by the Convertible Note;

Warrant or Subscription Agreement. Indeed, the third paragraph of the Subscription Agreement

represents that Maranis common stock has a par value of $.00001, not $001. Even if the

Maranis bylaws would prohibit Marani from issuing shares at below its par value, such

restriction is within the control of Maranis shareholders, not Bodie. Such a restriction, in the

face of an express representation by Marani to the contrary in the Subscription Agreement,

cannot be wielded as a sword by Marani to avoid its contractual obligations to Bodie. Marani

must make Bodie whole for the damages suffered as a result of its failure and refusal to issue the

number of shares to which Bodie is entitled under the terms of the Convertible Note, regardless

of the true par value of such shares.

FIRST CLAIM FOR RELIEF Breach of Convertible Note

17. Plaintiff realleges paragraphs 1 through 16, inclusive. 18. On or around February 1, 2010, Bodie entered into a written

agreement with Marani pursuant to the terms of the Convertible Note at Exhibit 1. 19. Bodie complied with all of its obligations to Marani under the terms

of the Convertible Note, including, without limitation, paying to Marani $100,000 on or around February 1, 2010.

20. Marani breached its promises and covenants under the terms of the Convertible Note in at least the ways alleged above, including, without limitation:

a. Marani failed to convert Bodies debt into stock at the conversion prices dictated by section 2.1(c) of the Convertible Note;

b. Marani failed to provide Bodie with notice of conversion price adjustment events and all facts relevant thereto, pertaining to its issuances of securities that would cause a conversion price


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(310) 394-2800

COMPLAINT- 9

adjustment under section 2.1(c), despite its express obligation to do so on a timely basis under section 2.1(d) of the Convertible Note.

c. Marani failed and refused to issue to Bodie shares at the conversion price dictated by sections 2.1(b) and 2.1(c) on the grounds that such conversion price was less than Maranis purported par value of $.001 in November 2010 and November 2011, and, in doing so, failed and refused to make Bodie whole for such breaches.

21. As a direct and proximate result of such breaches by Marani, Bodie converted substantially all of its debt at conversion prices that were very substantially higher than the conversion price mandated by section 2.1(c) of the Convertible Note and the express promises therein made by Marani.

22. As a direct and proximate result of such breaches by Marani, Bodie suffered the loss of at least 62,136,186 shares of Marani Brands, Inc. common stock and the cash proceeds of such stock had such shares been delivered on a timely basis to Bodie, which Bodie alleges would exceed $1 million.

23. In addition to the recovery of such damages in an amount to be determined at trial, which Bodie anticipates would be substantially higher than $75,000, Bodie is entitled to interest on all outstanding debt deemed owed prior to the maturity date of the Convertible Note, January 31, 2011, at the rate of 8% per annum, and 12% per annum thereafter on all outstanding balances pursuant to sections 1.2 and 1.3 of the Convertible Note. In addition, Bodie is entitled to recover its attorneys fees and costs in pursuing this action pursuant to section 5.6 of the Convertible Note.

SECOND CLAIM FOR RELIEF Declaratory Relief re Conversion Price And Shares Due To Plaintiff

24. Plaintiff realleges paragraphs 1 through 23, inclusive. 25. An actual and justiciable dispute exists between Bodie and Marani

with respect to Bodies right to have Marani disclose timely all price and stock


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(310) 394-2800

COMPLAINT- 10

issuance data necessary to determine the correct conversion prices applicable to its conversions of debt under section 2.1(d) of the Convertible Note; as well as what is owed, in terms of money or stock issuances, to Bodie by Marani as a result of adjustments to such conversion price under section 2.1(c) of the Convertible Note. Bodie submits that it is entitled to such disclosure and to application of the correct conversion prices as to all of its previous conversion, and Marani contends that the matter is closed and that Bodie is entitled to no further information or retroactive adjustments to its conversion prices.

26. Bodie is entitled to declaratory relief with respect to Maranis disclosure obligations under the Convertible Note and the determination by this Court of such issue is in the interests of judicial economy and the parties.

THIRD CLAIM FOR RELIEF Breach of Warrant

27. Plaintiff realleges paragraphs 1 through 16, inclusive. 28. On or around February 1, 2010, Marani issued to Bodie the Warrant

attached hereto at Exhibit 3. 29. Bodie complied with all of its obligations to Marani under the terms

of the Warrant. 30. Marani breached its promises and covenants under the terms of the

Warrant by failing to issue to Bodie the correct number of shares after Bodie exercised its rights under the Warrant pursuant to its cashless exercise provision. Pursuant to section 2 of the Warrant, Bodie was entitled to exercise its Warrant based on a cashless exercise notice as to the entire 4 million shares represented by that Warrant. On or around December 5, 2013, Bodie exercised its Warrant rights, in their entirety, by sending to Bodie a warrant exercise notice, a true and correct

copy of which is attached hereto at Exhibit 4. 31. Bodie made a computation error in that notice at Exhibit 4. The

Warrants exercise price was $.001. Thus, the 4 million shares generated a $4000 purchase price. To pay that $4000 on a cashless basis, a certain number of


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(310) 394-2800

COMPLAINT- 11

shares would be deducted from the 4 million total to repay to Marani the $4000. Because the fair market value of the Marani stock at that time was $.0165 per share, as that term is defined in the Warrant, the number of shares to be deducted from the 4 million share issuance was to be calculated as follows: $4000 divided by $.0165. The result is 242,424 shares. The number of shares to which Bodie was entitled was 3,757,576 (4 million minus 242,424). Another way of getting to the same number is to follow the formula set forth at section 2 of the Warrant: 4,000,000 (.0165-.001)/.0165, or 3,757,576.

32. Unfortunately, in Bodies own exercise notice, Bodie miscalculated the cashless exercise formula. As a result, Marani shorted Bodie by 181,820 shares pursuant to Bodies exercise of its 4 million Warrant shares, issuing instead only 3,575,756 shares.

33. Marani breached its obligations to Bodie under the Warrant by failing to issue to Bodie the additional 181,820 shares to which Bodie is entitled under the terms of the Warrant.

34. As a direct and proximate result of such breach by Marani, Bodie suffered the loss of 181,820 shares of Marani Brands, Inc. common stock and the cash proceeds of such stock had such shares been delivered on a timely basis to Bodie.

35. In addition to the recovery of such damages in an amount to be determined at trial, which Bodie anticipates would be approximately $3,000, Bodie is entitled to recover its attorneys fees and costs in pursuing this action pursuant to section 14 of the Warrant.

PRAYER FOR RELIEF

WHEREFORE, Bodie prays for relief and judgment against Marani, as

follows:

1. Awarding compensatory damages in favor of Bodie against Marani

for all damages sustained as a result of Maranis breach of the Convertible Note, in

an amount exceeding $1 million to be proven at trial, including interest together


C9i~\tJ~l ""~tt ] NEITHER THE ISSUANCE AND SALE OF TID!: SECURITIES REPRESENTED BY TillS NOTE NOR TID!: SECURITIES INTO Wmcu THESE SECURITIES ARE CONVERTffiLE HAVE BEEN REGISTERED UNDER TRE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLlJ: STATE SECURITIES LAWS . THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED PLEDGED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AIVIENDED, OR (B) AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, IN ITS SOLE, BUT REASONABLE DISCRETION, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT 'To RULE 144 OR RULE 144A UNDER SAID ACT.

Principal AmoWlt: $100.000 Issue Date:'PebruaryJ, 2010

CONVERtIBLE NOTE

FOR VALUE RECEIVED, MaraniBrands, hie. a Nevada corporation (hereinafter called "BOITower"), herehy promises to pay to the Bodie Investme)lt Group, we., (the "Holder"), without . demand, the sum of one hWl.dred thousand Dollars {$1 00,000), with simple and unpaid interest thereon, on February 1st, 20 II (one year after Closing nate) (the "Maturity Date"), if 110t paid sooner.

This Note has been entered into pursuant to the terms ofa Subscription Agreemel1t between the Borrower and the Holder. Unless otherwise separately deflJled herein, all capitalh:ed tetms used in this Note shall have the same meaning as is set forth in the Subscription Agreement. 111e following terms shall apply to this Nate:

ARTICLE I

GENERAL PROVISIONS

1.1 wterest Rate. Sinlple interest payable On this Note shall accrue at the annual rate of eight percent (8%), Accnled interest will be payable on the Maturity Date, accelerated or otherwise, when the principal and remaining accrued but unpaid interest shall be due and payable.

1.2 Default Interest Rate. . After the, Maturity Date, accelerated or otherwise, a default interest rate of twelve percent (12%) per annum shall apply to the amounts owed hereWlder.

J.3. Conversion Privjl..!l,ges. The Conversion rights of the Holder as set forth in Article n of only this Note shall remain in full force and effect iromediately from the date Ilereof and until the Note is paid in full regardless of the occurrence of an Event of Default. The principal amowlt of the Note and the remaiuing accrued but unpaid interest shall be payable. in full 0)) the Maturity Date, unless previou.sly paid Of converted into Common Stock in accordance with Article II hereof.

ARTICLETI

CONVERSION RIGHTS

Tho Holder shall have the right to convert the entire principal amount under this Note and the accrued but unpaid interest thereon into shares of the Borrower's Coromon Stock as set forth below.

2.1. y~ Conversion into the Borrower's Common Sto\lk.

2/112010,1:31 PM , Exhibit 1, p. 000013


(a) The Holder shall have the right &om and after February 14,2010 or sooner upon the occurrence of an Event of Default and then at any time until this Note is fully paid, to convert any outstanding and unpaid principal portion of this Note and accrued interest, at tbe election of the Holder (the date of giving of such notice of mnversion being a"Conversion Date") into fully paid Wld nonassessable shares of Common Stock as such stock exists on the date ofissuWlce of this Note, or WlY shares of capital stock of Bon'ower into which such Cormnon Stock shall hereafter be changed or reclassified, at the conversion price as defmed in Section 2. 1 (b) hereof (tbe "Conversion Price"), determined as provided herein. Upon delivery to the BOtTower of a completed Notice of Conversion, a . form of which is annexed hereto, Borrower shall issue Wld deliver to the Holder within three (3) business days after the Conversion Date (such third day being the "Delivery Date") that number of shares of Common Stock for the portion of the Note converted in I).ccordance with the foregoing. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion ofthe principal ofthe Note (and any interest) to be converted, by the Conversion Price.

(il) Subject to adjustment as provided for in Section 2.1(0) hereof, the Conversion Price per share of Common Stock shah be $0.Q4 for 180 days after the Closing Date ("Conversion Price"). Commencing 180 days after the Cle>sing Date, the Conversion Price per share of Common Stock shall be equal to the lesspr of (i) $0.04, or (ii) seventy-five percent (75%) of the average of the three lowest closing bid prices of the Company's Cormnon Stock for the twenty trading days preceding a Conversion Date. Ifthe Company files a Registration Statement for the Equity Line with Bodie Investment Group within 30 days from closing of ~his Note, tben the Investor will agree to not convert for ninety days from closing.

(c) The Conversion Price and the number and kind of shares or other securities to be issued upon conversion ofthis Note, shall be subject to adjustment from time to time upon the happening of certain eveuts while this conversion right remains outstanding, as follows:

A. Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell orconwy all or substantilj1ly all its assets to any other corporation, this Note, as to the unpaid principal portion thereof and accmed interest th.eteo.l1, shall thereafter be deemed to evidence the right to purchase such number and kind 'of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or.purchase right immediately prior to such consolidation, merger, sale or conveYance. The foregoing proviSion shall similarly apply to successive trWlsactions of a similar natnre by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser or surviving entity of the surviving corporation after Wly such consolidation, Inerger, sale or conveyance.

B. Reclassification, elc. If the Borrower at any time shall, by reclassifi.cation or otherwise, change the Common Stock into the same or a different number of securities OfWlY c.lass or classes of the Borrower's capital stock that may be issued or outstanding, this Note, as to the unpaid princ.ipal amount thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the sbares of Common Stock subject to the cOl1vel'sion of tbis Note immediately prior to such reclassification Of other change.

C. Stock Splits,. Com.binations and Dividends, Tf the shares of Cormnon Stock are subdivided or combined into a greater or smaller number of shares of Cormnon Stock, or if a dividelld is paid on the Common Stock in shares of Commoll Stock, the Conversion Price shall be propo.ctionately reduced in case of subdivision of shares or stock dividend or proportionately increased in

2 Exhibit 1, p. 000014


the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

D. Share Issuance. So long as this Note is outstanding, if the Borrower shall issue or agree to issue any shares of Common. Stock other than willI respect to any Excepted Issuances for a consideration less than the Conversion. Priee in effect at the time of such issue, the,n, and thereafter successively upon each such issue, the Conversion Price shall be reduced to such other lower issue price. For purposes of this adjustment, the issuance of any security carrying the right to convert sneh security into sh;tres of Common Stock or of any warrant, right or option to purchase Common Stock shall result inan adjustment to the Conversion Pri.;e upon the issuance ofthe above-described security and again upon the issuance of shares of Common Stock upon exercise of such conversion or purchase rights if such issuance is at a price lqwer than the then applicable Conversion Price.

(d) Whenever the Conversion Price is adjusted pursuant to Section 2.1 (0) above, the Borrower shall promptly provide notice to the Holder setting forth the Conversion Price after such adjustment and setting forth a statement ofthe facts requiring such adjustment .

. .

(e) The Borrower will reserve from its authorized and unissued shares of Common Stock, 40,000,000 shares of Common Stock, for this Note (which will be included ill the shares for the equity line). The Borrower represents that upon issuance, such shares of Common Stock will be duly and validly issued, fully paid and non-assessable. The Borrower agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of executing and issuing stock certificates to ex.ecute and issue the nc

date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.

2.5 ;tv1!!,1{imum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number ofshares of Common 'Stock which would be in excess of the sum of (i) the number of shares of CC!mmon Stock beneficially owned by the Holder and its affiliates on a Conversion Date, and Oi) the number. of shares of Common Stock issuahle UpOll the cOllversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the issued and outstanding shares of Common Stock of the BOITower on such Conversion Date. For the purposes of the I?rovision to th.e immediately precedillg sentence, beneficial ownership shall be detennined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall llot be limited W aggregate conversions of only 4.99% and aggregate conversioll by th.e Holder may exceed 4.99%. The Holder shall have the authority and obligation to determine whether the restriction contained ill this Section 2.5 will limit any conversion hereunder alld to the extent that the Holder determines that the limitation contained inlhis Section applies, the deteonillation of the amOUll! of the Note which is convertible shall he the responsibility and obligatioll of the Holder.

2.6 Egoily Line Draw. The Compauy will be obligated to draw down from the Equity Lille provided for in the Trausaction Documents to commence to redeem the outstanding principal amonnt of this Note within fifteen (15) calendar days that the registration statement for the equity line declared effective. The Company's obligations pw'Suant to this Section 2.6 are subject to the terms and provisions of the agreements governing the equity line.

ARTICLE ill

EVENT OF DEFAULT

The occurrence of any of the followillg events of default ("Event of Default") shall, at the option of the Holder hereof, make all sums of principal and accnled illterest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, upon demlllld, without presentment or grace period, all of which hereby are expressly waived, except as set forth below:

3.1 Failure to Pay Principal or Intere~t. The Borrower fails to pay any principal, interest or other sum due under this Note when due III1d the s~rne is not cured within 5 busilless days from the date.

3.2 Breach of Covenant. The Borrower breaches any material covenant or other material teon or conditioll of the Subscriptioll Agreemellt or this Note in any material respect and such breach, if subject to cure, continues for a period of twellty (20) days after written notice to the Borrower from the Holder.

3.3 Breach of Representatiolls and Warrauties. Any material represelltation or warranty of the Borrower made herein, in any Transaction DocUIIlent, or in lilly agreement, or certificate given in writing pursuant hereto or in cOMection herewith or therewith shall be false or misleading in any material respect as of the dale made aud as of the Closing Date.

3.4 Liquidatioll. Any dissolution, Jiquidati.oh or winding up of Borrower or any substantial portion of its busilless.

4 Exhibit 1, p. 000016


3.5 Cessation of Operations. Any c;;ssation of operations by Borrower or Borrower is otherwise generally unable to pay its debts as such debts become due.

3.6 Merger. The merger, consolidation or reorganization of Borrower with or into another corporation or person or entity (other than with or into a Wholly-owned subsidiary), or the sale of capital stock of Borrower by Borrower or the holders thereof, ill any case Ullder circumstances in which the holders of a majority of the voting power ofthe outstanding capital stock of Bon' ower immediately prior to such transaction shall own less than a majority in voting power of the outstanding capital stock of Borrower or the surviving or resulting oorporation or other entity, as the case may be, immediately following such transaction.

3.7 Receiver or Trustee. The Borrower shall make' an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed without the consent of the Borrower jfsuc.h receiver or trustee is not dismissed within thirty (30) days ofappointment.

3.8 Judgments. Any money judgment, writ or similar final process shall be entered or filed againstthe Borrower or any of its property or other assets for more than $100,000 based upon a final judgment by a court of competent jurisdiction for which no further appeals are possible.

3.9 BauknJt,1:tcy. Banknlptcy, insolvellCy,reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Borrower.

3.10 Delisting. Failure of the Borrower's Common Stock to be listed for trading or quotation on the OTe BB for aoy reason. . ,

3.11 Stop Trade. An SEC or judicial stop trade order or Principal Market trading suspension with respect to the Borrower's Common Stock that lasts for five (5) or more consecutive trading days.

3.12 Failure to Deliver Common Stock or Replacement Note. The Borrower's failure to deliver Common Stock to the Holder pursuant to and in the form required by this Note and Sections 7 and II ofthe Subscription Agreement, or, if required, a replacement Convertible N~te more than five (5) business days after the required delivery date of such Common Stock or replacement Convertible Note.

3.13 Reservation Default. The failure by the 13orrower to have reserved for issuance upon conversion of the Note the number of shares of Common Stock as required in the Suhscription Agreement.

3.14 Cross Default. A default by the Borro"",,,,r ofa material term, covenant, warranty or undertaking of any other agreement to which the Borrower and Holder are parties, or the occurrence of a material event of defuult.under any such other agreement which is not cured after any required notice and/or cure period.

3.15 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock, unless th~ Company provides the Holder with written notice of the decision of the Company's Board of Directors to transmit documelltation to authorize the reverse stock split-within five (5) business days of sucp. decision.

5 Exhibit 1, p. 000017


3.16 Financial Statement Restatement. A material restatement of any :financial statements filed by the Borrower after the date of this Note, if the result of such restatement would, by comparison to the unrestated financial statements, have constituted a Material Adverse Effect.

ARTICLElV

Intentionally Omitted

ARTICLE V

MISCELLANEOUS

5.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder hereof in the .exercise of any power, right or privilege hereunder shall operate as a w~ver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise the.reof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

5.2 Notices. AU notices, demands, requests, COIlSents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by a ~eputable overnight courier service with charges prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective upon hand delivery or deliver)' by facsimile, with accurate confiI1Ilation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following snch delivery (if delivered other than ona business day during normal business hOUfS where such notice is to be received), (ii) on the first business day following the date deposited with an overnight courier service with charges prepaid, or (iii) on the third business day following the date of mailing pursuant to subpart (b) above, or upon a~1ual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (I) if to the Borrower to: Marani Brands, Inc. 13152 Raymer Street Suite IA North Hollywood, CA 91605, with a copy by teJecopier only to: Martin Eric Weisberg, Esq., Attn: Martin Eric Weisberg, p.e., telecopier: (212) 888 5025, and (ii) if to the Holder, to the nanle, address and te1ecopy number set forth on the front page ofthis Note, with a copy by te1ecopier only to YosefY. Manela Esq. 323-782-0828

. 5.3 Amendment Provision. The leon "Note" and all referenc,< thereto, as used throughout thiS instrument, shall mean this instrument as originally executed, or iflater amended or supplemented, then as so amended or supplemented. .

5.4 Assignability. This Note shall be bhlding upon the Borrower and itg successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns. The Borrower may not assign its obligations under this Note.

. 5.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay. the Holder hereof reasonable out-of-pocket costs of collection, including reasonable attorneys' fees in an action in which the Holder prevails.

6 Exhibit 1, p. 000018


5.6 Governing Law. This Note shall be governed by and constrned in accordance with the laws ofthe State of New York. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the civil or state courts of New York or in the federal courts located in the State of New York. Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts. The

p~vailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or mle oflaw, then such provision shall be deemeq inoperative to the extent that it may -conflict therewith and -shall be deemed modified to conform to such statute or ruJe of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other _ provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder froin bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower's obligations to Holder, arlo enforce ajudgment or other decision in favour ofth" Holder.

5.7 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum rate permitted by applicable law. In the event that the rate of interest required lobe paid or other charges hereunder exceed the ma)l:imum rate permitted by applicable law, any payments in excess of such maximum rate shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower.

5.8 Shareholder Status. The Holder shari not have rights as a shareholder of the Borrower with respectto unconverted portions of this Note. 'However, the Holder will have all the rights of a shareholder of the Borrower with respect to the shares of Common Stock to be received by HaIdet after delivery by the Holder of a Conversion Notioe to the Borrower.

5.9

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an authorized offic6r as ofthelstday of February, 2010. -

MARAN! BRANDS, INC.

By: &~R-Name: .. argnt ud Title: Chief Executive Officer

WITNESS;

;: : ::

7 Exhibit 1, p. 000019


FEB-20-2014 09:32 CORRIGAN & MORRIS LLP 310 3942825 P.001/020

2-1-2010

SlJBSCRIPTION AGREEMENT

TIDS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of February 1" 2010 by and among Marani Brands, Inc., a Nevada corporation (the "Company"), and the subscriber identified on the signature page hereto (each a "Subscriber" and collectively the "Subscriber").

WHEREAS, the Company and the Subscribers are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D ("Regulation D") as promulgated by the United States Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "1933 Act");

WHEREAS, the parties desire that. upon the terms and subject to the conditions contained herein, the Company shall issue and sell to such Subscribers, as provided herein, and such Subscribers, in the aggregate, shall purchase up to (i) One Htmdred Thousand Dollars ($)00,000) (the "PUl'chllse Price") ofprincipa\ amount of convertible promissory notes ofthe Company (the "Note" a form of which is annexed hereto as Exhibit A, which Notes are convertible into shares of the Company's common stock, $.00001 par value (the "C()n:lnIOU Stock"), and in the Note, (ii) shares ofthe Company's Commcn Stock ("Pun:based Shares"), and (iii) share purchase warrants (the "Warrants") in the form attached hereto as Elrhibit B, to purchase shares cfthe Company's Common Stock (the "Warrant Shares"). The Notes, Purchased Shares, shares of Common Stock issuable upon conversion of the Notes (the "Shares"), the Warrants and the shares issuable upon exercise of the Warrants are collectively referred to herein as the "Securities."; and

NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in this Agreement, the Company and the Subscribers hereby agree as follows:

1. Closing Date. The "Closing Date" shall be the date that the Purchase Prioe is transmitted by wire transfer or otherwise credited to or for the benefit of the Company. The consummation of the transactions contemplated herein shall take place at the offices ofYosefY. Manela 5455 Wilshire Blvd. Suite 2123, Los Angeks, CA 90036, upon the satisfaction or waiver of all conditions to closing set forth in this Agreement. Subject to the satisfaction or waiver ofthe terms and conditions of this Agreement, on the Closing Date, each Subscriber shall purchase and the Company shall sell to each Subscriber a Note in the principal amount designated on the signature page hereto and the anl0unt of Purchased Shares determined pursuant to Section 2 below for the portion of the Purchase Price indicated, and Warrants as described in Section 3 of this Agreement. 2. Shares. The Subscriber will receive Four Million Five Hundred (4,500,000) COmmitment shares. These shares will have Registration Rights.

3. Warrants. On the Closing Date, the Company will issue and deliver Twelve Million Five Hundred Thousand (12,500,000) Warrants to the Subscriber. The number of Warrant Shares eligible for purchase by the Subscriber is set forth in the signature page ofthis Agreement. The aggregate number of the warrants for purchase by the Subscriber is Twelve Million Five Hundred Thousand (12,500,000). The Warrants shall be exercisable until five (5) years after the issue date of the Warrants. The Warrants will have and exercise price of $_0.04. Each holder of the Warrants is granted the registration rights set forth in this Agreement. Th.e Warrant exercise price and number of Warrant Shares issuable upon exercise of the Warrants shall be equitably adjusted to offset the effect of stock splits, stock dividends, and similar events, as provided for in the Warrant.

2/112010,1:18 PM Exhibit 2, p. 000020


FEB-20-2014 09:32 CORR WAN & MORR I S LLP :310 :3942825

4. Subscriber's Representations and Warranties. The Subscriber hereby represents and warrants to and agrees with the Company only as to such Subscriber that:

(a) Organization and Standing of the Subscriber. If such Subscriber is an entity, such Suhscriber is a corporation, partnership or other entity duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorpora.tion or organization.

P.002/020

(b) Authorization and power. Such Subscriber has the requisite power and authority to enter into and perform this Agreement and the other Transaction Documents (as hereinafter defined) and to purchase the Notes, Purchased Shares and Warrants being sold to it hereunder. The execution, delivery and performance of this Agreement and the other Transaction Docunlents by such Subscriber and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate or partnership action,. and no further consent or authorization of such Subscriber or its board of directors, stockholders, partners, members, as the case may be, is required. This Agreement and the other Transaction Documents have been duly authorized, executed and delivered by such Subscriber and constitutes, or shall constitute when executed and delivered, a valid and binding obligation of such Subscriber enforceable against such Subscriber in accordance with the terms thereof

(c) No Conflicts. The execution, delivery and performan.ce of this Agreeme))t and the other Transaction Documents and the consummation by such Subscriber of the transactions contemplated hereby and thereby or relating hereto do not and will not (i) result in a violation of such Subscriber's charter documents or bylaws or other organizational documents or (ii) conflict with, Or constitute a default (or an event which with n9tice or lapse of time or both would become a default) under, or give to others any rights of termination, anlendment, acceleration or cancellation of any agreement, indenture or instrument or obligation to which such Subscriber is II party or by which its properties or assets are bound, or result in a violation of any law, rule, Of regulation, or [my order, judgment or decree of any court or governmental age))cy applicable to such Subscriber or its properties Such Subscriber is not required to obtain any consent, authorization or order of; or make any filing or registration with, any COurt or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement and the other Transaction Documents or to purchase the Securities in accordance with the terms hereof.

(d) Information on Company. Such Subscriber has been furnished with or has had access at the EDGAR Website of the Commission to the Company's Form 10-KSB for the year ended June 30, 2009 as filed with the Commission, together with all subsequently filed Forms lO-QSB, Forms 8-K, and other reports and filings made with the Commission and made available at the EDGAR website (hereinafter referred to collectively as the "Reports"). Such Subscriber bas had an opportunity to ask questions and receive answers from representatives of the Company, and considered all factors such Subscriber deems material in dec.iding on the advisability of investing in the Securities. The Subscriber and its advisors, if any, have been afforded the opportunity to ask questions of the Company and to receive answers thereto concerning the Company and the transactions contemplated herein. Subscriber does not: acknowledge that any of such information is material non-public information.

(e) Information on Subscriber. Concurrently herewith, Subscriber is delivering to tile Company a completed and executed Subscriber Questionnaire, the form of which is attached hereto as Exhibit D. Such Subscriber is, and will be at the time of the conversion of the Notes and exercise ofthe Warrants, an "accredited investor", as such term is defined in Regulation D promulgated by the Commission under the 1933 Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States publicly-owned companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tal\C and other business matters as to enable such Subscriber to utilize the

2 Exhibit 2, p. 000021


FEB-20-2014 09:32 CORR WAN & MORR I S LLP :310 :3942825 P.00:3/020

infonnation made available by the COlupany to evaluate the mcrits and risks of and to make an informed investment decision with respect to the proposed purchase, which represents a speculative investment. Such Subscriber has the authority and is duly and legally qualified to purchase and own the Securities. Such Subscriber is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof. The information set forth in the Subscriber QuestiOimaire and on the signature page hereto regarding such Subscriber is accurate.

(I) Purchase ofN ote, Purchased Shares and Warrants. On the Closing Date, the Subscriber will purchase the Note, Purchased Shares and Warrants as principal for its own ace-ount fOf investment only and not with a view toward, or for resale in connection with, the public sale or any distribution thereof.

(g) Compliance with Securities Act. Such Subscriber understands and agrees that the Securities have not been registered under the 1933 Act or any applicable state securities laws, by reason oftheir issuance in a transaction that does not require registration under the 1933 Act (based in part on the accuracy of the representations and warranties of such Subscriber contained herein), and that such Securities must be held indefinitely unless a subsequent disposition is registered under the 1933 Act 01' any applicable state securities Laws or is exempt from such registrntion.

(hl Communication of Offer. The offer to sell the Securities was directly communicated to such Subscriber by the Company. At no time was such Subscriber presented with or solicited by any leaflet, newspaper or magazine artic!.e, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concun'endy with such communicated offer ...

(i) Restricted Securities. Slich Subscriber understands that the Securities have not been registered under the 1933 Act and such Subscriber will not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any of the Securities unless pursuant to an effective registration statement under the 1933 Act, or unless an exemption from registration is available. Notwithstanding anything to the contrary contained in this Agreement, such Subscriber may transfer (without restriction and without the need for an opinion of counsel) the Securities to its Affiliates (as defined below) provided that each such Affiliate is an "accredited investor" under Regulation D and such Affiliate agrees to be bound by the tel1lls and conditions ofthis Agreement. For the purposes of this Agreement, an "Affiliate" of any person or entity means any other person or cntity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity. Affiliate includes each Subsidiary of the Company. For purposes of this definition, "control" means the power to direct the management and policies of such person or fll"m, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

OJ No Governmental Review. Such Subscriber understands that no United States federal Or state agency or any other governmental or state agency has passed on or made recommendations or endorsement of the Securities or the suitability of the investm.ent in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

(k) CorrectneS2f Representations. Such Subscriber represents as to snoh Subscriber that the foregoing representations and warranties are true and correct as of the date hereof and, unless a Subscriber otherwise notifies the Company prior to the Closing Date shall be true and correct as ofthe Closing Date.

(1) Survival. The foregoing representations and warranties shall survive the Closing Date.

3 Exhibit 2, p. 000022



5. C0lllJ!!\I)Y Representations and Warranties. The Company represents and warrants to and agrees with each Subscriber tbat:

(a) Due Incorporation. The Company and each of its Subsidiaries is a corporation or other entity duly incorporated 0)" organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has the requisite corporate power to own its properties and to carry on its business as presently conducted. The Company and each of its Subsidiaries is duly qualitled as a foreign corporation to do business and is in good standing in each jurisdiction where the nature ofthe business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect (as defined below) on the Company. For purposes of this Agreement, a "Material Adverse Effect" on the Company shall mean a material adverse effect on the financial condition, results of operations, properties or business of the Company and its Subsidiaries taken as a whole. For purposes of this Agreement, "Subsidiary" means, with respect to any entity at any date, any corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity of which more than 25% of (i) the outstanding capital stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such entity, OJ) in the case of a partnership 01" linlited liability company, the interest in the capital or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint venture or . other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly througb Olle or more intermediaries, by such entity. AU the Company's Subsidiaries as ofthe Closing Date and the Company's ownership interest in such Subsidiaries are set forth 0.0 Schedule 5(a) he("eto.

(b) Outstanding Sto,'k. AU issued and ontstanding shares of capital stock of the Company have been duly authorized and vali(!ly issued lind a("e fully paid and.nonassessable.

(e) Authority; Enforceability. This Agreement, the Note, Purchased Shares, the Warrants, Security Agreement, Subsidiary Guaranty, Agreement and the Escrow Agreement, and any other agreements deJivered together with this Agreement or in connection herewith (collectively, the "Transaction Docnments") have been dnly authorized, executed and delivered by tiN Company and/or its Subsidiaries and a("e valid and binding agreements of the Company and its Subsidiaries enforceable against them in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity. The Company has full corporate power and authority necessary to enter into and deliver the Transaction Documents and to perform its obligations thereunder ..

Cd) Additiopal Issuances. There are no outstanding agreements or preemptive or similar rights affecting the Company's Common Stock or equity and no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of any shares of common stock or equity of the Company or its Subsidiaries or other equity interest in the Company except as described in the public filings and Schedule 5(d). The Common Stock ofthe Company on a fully diluted basis outstanding as of the last Business D.ay preceding the Closing Date is set forth on Schednle 5(d).

(e) Consents. No consent, approval, authorization or order of any court, govemmental agency or body or arbitrator having jurisdiction over the Company, or any of its Affiliates, the OTe Bulletin Board (the "Bulletin Board") nor the Company's shareholders is required for the execution by the Company of the Transaction Documents and complian.ce and performance by the Company of its obligations under the Transaction Documents, including, without limitation, the issWUlce

4 Exhibit 2, p. 000023



and sale of the Securities. The Transaction Documents and the Company's perfon:nance of its obligations thereunder has been unanimously approved by the Company's Board of Directors.

(f) No Violation or Conflict. Assuming the representations and warranties of such Subscribers in Se"tion 4 are true and correct and except as set forth on this Schedule 5(1), neither the issuance and sale of the Securities nor the performance by the Company of its obligations under this Agreement and all other Transaction Documents entered into by the Company relating thereto by the Company will:

(i) violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default) under (A) the articles or certificate of incorporation, charter or bylaws of the Company, (B) to the Company's knowledge, any decree, judgment, order, law, treaty, rule, regulation or determination applicable to the Company of any court, govenunental agency. or body, or arbitrator having jurisdiction over !h.e Compauy or over the properties or assetsofthe Company or any of its Affiliates, (C) to the Company's knowledge the tenus of any bond, debenture, note or any other evidence of indebtedness for borrowed money, or any agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Company is a party, by CD) the tenus of any "lock-up" or similar provision of any underwriting 01" similar agreement to which the Company, 01" any of its Affiliates is it party except for any such the violation, conflict, breach, or default of which would not have a Material Adverse Effect; or

(g) The SeQyrjties. The Securities upon issuance, conversion and exercise: (i) are, or will be, free and clear of any security interests, liens, claims or

other encumbrances, granted by the company subject to restrictions upon transfer under the 1933 Act and any applicable state securities laws;

(il) have been, or will be, duly and validly authorized and on the date of issuance ofthe Purchased Shares and Shares upon conversion ofthe Note and the Warrant Shares and upon exercise ofthe Warrants, the Shares and Warrant Shares will be duly and validly issued, fully paid and nonassessable and if registered pursuant to the 1933 A.ot and resold pursuant to an effecti.ve registration statement will be free trading and unrestricted;

(iii) will not haw been issued or sold in violation of any preemptive or other similar rights of the holders of any securities ofthe Company;

(iv) assuming the representations and w8lTanties of such Subscribers as set forth in Section 4 hereof are true and c.orrect, will not result in a violation of Section 5 under the 1933 Act.

(h) UHgation. There is no pending or, to the best knowledge ofthe Company, threatened action, suit, proceeding or investigation before any court, govermnental agency or body, or . arbitrator havingjurlsdiction over the Company, or any of its Affiliates that would affect the execution by the Company or the performance by the Company of its obligations under the Transaction Documents. Except as disclosed in the Reports or in the schedules hereto, there is no pending or, to the best knowledge ofthe Company, basis for or threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its Affiliates which litigation if adversely determined would have a Material Adverse Effect.

5 Exhibit 2, p. 000024



(i) Repolting Company. Except as set forth in Schedule 5(i) attached hereto, the Company is a publicly-held company subject to repOlting obligations pursuant to Section 13 of the Securities Exchange Act of 1934, as amended ("1934 Act") and has a class of common stock registered pursuant to Section 12(g) of the 1934 Act. Pursuantto the provisions of the 1934 Act, the Company has timely filed all reports and other materials required to be filed thereunder with the Commission during the preceding t\'Ielve months. .

G) Information Concerning COmpaIlY. The Reports contain all material information relating to the Company and its operations and financial condition as oftheir respective dates which information is required to be disclosed therein. The Reports including the financial statements therein and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein Of necessary to make the statements therein, taken as a whole, not misleading in light of the circumstances when made.

(k) Stop Tran.sfer. The Company has not and will not issue any stop transfer order or other order impeding the sale, resale or delivery of any oftbe Secnrities, except as may reasonably be believed by the Company required by any applicable federal or state securities laws or the rules and regulations ofthe principal trading market oftbe Company's Common Stock and unless contemporaneous notice of such instruction is given to the Subscribers.

(1) Defaults. The Company is not in violatioll of its articles of incorporation or bylaws. Except as sel froth on Schedule S(m) attached hereto, the Company is (i) not in default under or in violation of any otber material agreement or, which default or violation would have a Material Adverse Effect, (ii) not in default with respect to any order of aily court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out of any action, snit or proceeding under any statute or otber law respecting antitrnst, monopoly, restraint of trade, unfair competition or similar matters, and (iii) not in violation of any statute, rule or regulation of any govemmental authority which violation would have a Material Adverse Effect.

(m) Not an Integrated Offering. Neither the Company, nor any, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstallces that would cause the offer ofthe Securities pursuaut to this Agreement to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of th.e Bulletin Board which would impair the exemptions reHed upon in this Offering or the Company's ability to timely comply wjth its obligations hereunder.

(n) No General Sglicitation. Neither the Company, nor any of its Affiliates, nor to its knowledge, any person acting on its or tbeir behalf, has engaged ill any fonn of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale ofthe Securities.

(0) Listing. The Common Stock is quoted on the Bulletin Board under the symbol MRIB.OB. The Company has not received any oral or written notice that the Common Stock is not eligible nor will become ineligible for quotation on the Bulletin Board nor that the Common Stock does not meet all requirements for the continuation of sneh quotation and the Company satisfies all the requirements for the continued quotation ofthe Common Stock on the Bulletin Board ..

. (p) Dilution. The Company's executive officers and directors understand the nature ofthe Securities being sold hereby and recognize that the issuance ofthe Securities will have a potential dilutive effect on the equity holdings of other holders of the Company's equity or rights to receive equity

6 Exhibit 2, p. 000025



ofthe Company. The board ofdirectOl"s of the Company has concluded, in its good faith business judgment that the issuance ofthe Securities is jn the best interests of the Company and its shareholders. The Company specifically acknowledges that its obligation to issue the Purchased Shares, Shares upon conversion of the Notes, and the Warrant Shares npon exercise ofthe W81Tants is binding upon the Company and enforceable regardless of the dilution such jssuance may have

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permitted nominee) or such other persons as designated by such Subscriber and in such denominations to be specified at conversion representing the number of shares of Common Stock issuable upon such conversion. The Company warrants that no instructions other than these instructions have been or' will be given to the transfer agent of the Company's COimnon Stock and that the certificates representing such shares shall contain no legend other than a customary restrictive legend. If and when a Subscriber sells the Shares, assuming (i) a registration statement including such Shares is effective and the prospectus, as supplemented or amended, contained therein is current and (ii) such Subscriber or its agent confums in , writing to the transfer agent that such Subscriber has complied with the prospectus delivery requirements, the Company will reissue the Shares without restrictive legend. In the event that the Shares are sold in a manner that complies with an exemption from registration, the Company wi1\ promptly instruct its counsel to issue to the transfer agent an opinion permitting removal of the legend (indefinitely, if pursuant to Rule 144(b)(1)(i) of the 1933 Act, odor 90 days ifpursuantto other provisions ofRuJe 144 ofthe 1933 Act, provided Subscriber delivers a reasonably requested representation in support of such opinion and such other documentation as may be requested by the Company's legal counsel.)(b) A Subscriber

, will give notice of its decision to exercise its right to convert the Note, interest or part thereof by telecopying Or otherwise delivering a completed Notice of Conversion (a form of which is annexed as Exhibit A to the Note) to the Company via confirmed telecopier transmission or otherwise pursuant to Section 13(a) of this Agreement. Such Subscriber will not be required to surrender the Note until the Note has been fully converted or satisfied. Each date on which a Noti,ce of Conversion is telecopied to the Company in accordance with the provisions hereofby 6:00 PM Eastern Time (BT) (or if received by the Company after 6:00 PM ET, then the next business day) shall be deemed a "Conversion Date", The Company will itself or cause the Company's transfer agent to transmit the Company's Common Stock certificates representing the Shares issuable upon conversion of the Note to such Subscriber via express courier for receipt by such Subscriber within five(5) business days after receipt by the Company of the Notice of Conversion (such third day being the "Delivery Date"). In the event the Shares are electronically transferable, then delivery of the Shares must he made by electronic transfer provided request for such electronic transfer has been made by such Subscriber. A Note representing the balance of the Note not so converted will be provided by the Company to a Subscriber if requested by such Subscriber, provided such Subscriber delivers the original Note to the Company. In the event that a Subscriber elects not to surrender a Note for reissuance upon partial payment or conversion of a Note, such Subscriber hereby indemnifies the Company against any and all loss or damage attributable to a third-party daim in all. amount in excess of the actual amount then due under the Note.

(0) The Company understands that a delay in the delivery of the Shares in the form required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount described in Section 7.2 hereof, respectively later than the Delivery Date or the ]\.I!andatory Redemption Payment Date (as hereinafter defined) could result in economic loss to a Subscriber. As compensation to a Subscriber for such loss, the Company agrees to pay (as liquidated damages and not as a penalty) to such Subscriber for late issuance of Shares in the form required pursuant to Section 7.1 hereof upon Conversion oHhe Note in the amount of $100 per business day after the Delivery Date for each $10,000 of Note principal amount (and proportionately for other amounts) being conveJ1ed of the corresponding Shares which are not timely delivered. The Company shall pay any payments inoun'ed under this Section in immediately available funds upon demand. Furthermore, in addition to any other remedies which may be available to such Subscriber, in the event that the Company fails for any reason to effect delivery of the Shares within 7 business days after the Delivery Date or make payment withiu 7 business days after the Mandatory Redemption Payment Date (as defined in Section 7.2 below), such Subscriber will be entitled to revoke all or part of the relevant Notice of Conversion or rescind all or part of the notice of Mandatory Redemption by delivery of a notice to such effect to the Company whereupon the Company and such Subscriber shall each be restored to their respective positions immediately prior to the deUvery of such notice, except that the liquidated damages described above shall be payable through the date notice of revocation or rescission is given to the Company.

8 Exhibit 2, p. 000027


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(d) The Company agrees and acknowledges that despite the pendency of a not yet effective registration statement which includes for registration the Securities, the Subscriber is permitted to and the Company will issue to the Subscriber Shares upon conversion of the Note and Warrant Shares upon exercise of the Warrants. Such Shares will, if required by law, bear the legends described in Section 4 above and if the requirements of Rule 144 under the 1933 Act are satisfied be immediately resalable thereunder.

7.2 MandatOly Redemption at Subscriber's Election. In the event (a) the Company is prohibited from issuing Shares, (b) fails to timely deliver Shares on a Delivery Date, (e) upon the occurrence of any other Event of Default () and if any event listed in subparagraph (al, (b) or (c) is not cured during any applicable cure period and an additional twenty (20) days thereafter, then at such Subscriber's election, the Company must pay to such Subscriber ten (10) business days after request by such Subscrlber, at such Subscriber's election, a sum of money determined by (I) multiplying up to the outstanding principal amount of the Note designated by such Subscriber by 110%, or (ii) llluitiplying the number of Shares othenvise deliverable upon conversion of an amount of Note principal and/or interest designated by such Subscriber (with the date of giving of such designation being a "Deemed Conversion Date") by either the Conversion Price that would be in effect on the Deemed Conversion Date Or by the' highest closing price of the Common Stock on the Principal Market for the period commencing on the Deemed Conversion Date until the day prior to the receipt of the Mandatory Redemption Payment, whichever is greater; together with accrued hut unpaid interest thereon and any other sums arising and outstanding under the Transaction Documents ("Mandatory Redemption Payment"). The Mandatory Redemption payment must be received by such Subscriber within ten (10) business days after request ("Mandatol'Y Redemption Payment Date"). Upon receipt of the Mandatory Redemption Payment, the corresponding Note principal and interest will be deemed paid and no longer outstanding. "Change in Control" shall mean (I) the Compauy no longer having a class of shares publiCly traded or listed on a Principal Market (as hereinafter defined), (ii) the Company becoming a Subsidiary of another entity or merging into or with another entity, (iii) a majority of the board of directors of the Company as of the Closing Date no longer serving as directors of the Company, except due to natural causes, or (iv) the sale, lease, license or transfer of substantially all the assets of the Company and its Subsidil;l.ries.

7.3 Injunction. In the event the Subscriber shall elect to convert a Note or paIt thereof, the Company may not refuse conversion or exercise. based on any c1ainl that such Subscriber or anyone associated or affiliated with such Subscriber has been engaged in any violation oflaw, or for any other reason, unless, an injunction from a court, on notice, restraining and or enjoining conversion of all or part of such Note shall have been sought and obtained by the Company or at the Company's request or with the Company's assistance

7.4 Buy-In. In addition to any other rights available to a Subscriber, ifthe Company fails to deliver to such Subscriber such shares issuable upon conversion of a Note by the DeUvery Date and jf after seven (7) business days after the Delivery Date such Subscriber or a broker on such Subscriber's behalf, purchases (in an open market transactioll or otherwise) shares of Comrtlon Stock to deliver in satisfactiOll of a sale by such Subscriber of the Common Stock which such Subscriber was entitled to receive upon such conversion (a "Buy-In"), then the Company shall pay in cash to such Subscriber (in addition to any remedies available to or elected by such Subscriber) the amount by which (A) such Subscriber's total purchase price (including brokerage commissions, if any) fix the shares of Common Stock so pnrchased exceeds (B) the aggregate principal and/or interest amount ofthe Note for which such conversion was not timely honored, together with interest thereon at a rate of 3% per annum, accruing until such amount and any thereon is paid in full (which amoullt shall be paid as liquidated damages and not as a penalty). For example, jf such Subscriber purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of $300 of note principal andlor interest, the Company shall be required to pay to such Subscriber, plus int

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Subscriber shall provide the Company written notice indicating the amounts payable to such Subscriber in respect of the Buy-ln.

7.5 Adjustments. The Conversion Price, Warrant exercise price and the number of Shares issuable upon conversion ofthe Notes and Warrant Shares issuable upon exercise oftlle Warrants shall be equitabJy adjusted and as otherwise described in this Agreement, the Notes and Warrants.

7.6 Redemption. The Note shall be redeemed with the first draw downs of the Equity Line established pursuant to the Stock Purchase Agreement, if the Company uses the Equity Line.

8. Finder/Legal pees.

(a) Finder. Except as set forth on Schedule Sea) attached hereto, the Company on the one hand, and each Subscriber (for himself, herself or itself only) on the other hand, agrees to indenmiry the other against and hold the other harmless from any and all liabilities to any persons claiming brokerage commissions or finder's fees on account of services purported to have been rendered on behalf of the indemnifYing party in connection with this Agreement or the transactions contemplated hereby and arising out of such party's actions. The Company and each Subscriber represents that there are no parties entitled to receive fees, commissions, or similar payments in connection with the Offering (as such term is defined below) arising out of such party's actions.

(b) Legal Fees. The Company shall payout of escrow a cash fee of$25,OOO which will include aU legal fees associated with both transactions. The fltst $10,000 will come out of escrow from the Bridge Loan funds pursuant to the Note. The remailling $15,000 will COllie out of the first tranche of the Stock Purchase Agreement.

9. Covenants of the Company. The Company covenants and agr'ees with the Subscribers as follows:

(a) Stop Orders. The Company will advise the Subscribers, within twenty-four hours after it receives notice ofissuance by the Commission, any state securities commission 01" any other regulatory authority of any stop order or of any order prevellting or suspending any offering of any securities of the Company, or ofthe suspension of the qualification of the Common Stock of the Company for offering or sale in any judsdiction, or the initiation of any proceeding for allY such purpose.

(b) Listing/Quotation. The Company shall promptly secure the quotation or listing of the Purchased Shares, Shares and Warrant Shares upon the Principal Market each national securities exchange, or automated quotation system upon which they are or become eligible for quotation or listing (subject to official notice of issuance) and shall maintain same so long as any Warrants are outstanding. The Company will maintain the quotation or listing of its Common Stock on tile American Stock Exchange, Nasdaq Capital Market, Nasdaq Global Select Market, Nasdaq Global ]l,!Iarket, the Bulletin Board, or New York Stock Exchange (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock (the "Principal Market", and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of the Principal Market, as applicable. As of the date of this Agreement and the Closing Date, the Bulletin Board is and will be the Principal Market.

(c) M.arket RegqJatiolls. The Company shallnotiry the Commission, the Principal Market and applicable state authorities, in accordance with their requiremellts, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as lIlay

10 Exhibit 2, p. 000029


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berequired aud permitted by applicable law, rule aud regulation, for the legal and valid issuance of the Securities to the Subscribers and promptly provide oopies thereof to the Suhscrib",rs.

P. 01 1/020

(d) Filing Requirements. From the date of this Agreement and until after the earlier to occur of eighteen (8) months from the Closing Date, (ii) until all the Shares have been resold or transferred by all the Subscribers pursuant to a registration statement or pursuant to Rule 144(b)(1 )0), or (iii) the Notes are no longer outstanding (the date of such latest occurrence being the "End Datin, the Company will (Al cause its Common Stock to continue to be registered under Section 12(b) or 12(g) of the 1934 Act, CB) comply in all respects with its reporting and filing obligations under the 1934 Act, (C) voluutarilycomply with all reporting requirements that are applicable to an issuer with a class of shares registered pursuant to Section 12(g) of the '1934 Act, iithe Company is not subject to such repOlting requirements, and (D) comply with all requirements related to any registration statem