Exhibit 10.1

 

This Bottling Agreement (this “Agreement”), dated as of October 9, 2015 (the “Effective Date”), is made and entered into by and between True Drinks, Inc. , a Delaware corporation (“ Company ”), and Niagara Bottling, LLC , a Delaware limited liability company (“ Packer ”).

 

RECITALS

 

Whereas , Packer fills, packs and provides bottling services and products desired by Company;

 

Whereas , Company is a developer, marketer and distributor of bottled products who desires to purchase bottled products produced by Packer; and

 

WHEREAS, Vincent C. Smith is a financial investor (“Investor”) in the Company and has agreed to provide the financial backing of Company as evidenced by the Personal Guaranty of Bottling Agreement executed on October 9, 2015 ; and

 

WHEREAS, in the event of any change in or transfer of the Investor, or the like, such new Investor in the Company must be approved in writing by the Packer prior to any such change or transfer occurring; and

 

Whereas , Packer desires to sell to Company and Company desires to purchase from Packer an uninterrupted supply of bottled products sufficient to meet Company’s ongoing requirements under the terms and conditions contained herein.

 

Now, Therefore , in consideration of the foregoing recitals and the mutual promises hereinafter set forth, and intending to be legally bound thereby, the parties hereto agree as follows:

 

AGREEMENT

 

1.   Definitions/Exhibits .

 

1.1   Definitions .   In this Agreement, except as expressly provided or as the context otherwise requires:

 

“3PL” means a warehousing facility operated by a third party logistics provider.

 

“Annual Commitment” means the annual forecast of minimum Case quantities delivered by Company to Packer pursuant to Section 2.1.

 

“Annual Production Schedule” means for each Contract Year during the Term, the production of Cases will take place based on Rolling 3 Month Forecasts provided by Company to Packer.  Packer will then schedule the production of Cases, as Packer determines in its sole discretion, but in any event, in support of the Company’s Rolling 3-Month Forecast and its then current Annual Commitment.  Company shall issue Purchase Order’s to Packer as needed and as requested by Packer in order to support meeting the Company’s Rolling 3-Month Forecasts and its then current Annual Commitment.

 

“Bottled Product” means those products set forth on Exhibit A which shall be processed and bottled by Packer in accordance with the Specifications.  If the parties agree to add any new or additional Bottled Product, Exhibit A shall be amended in writing accordingly.

 

“Bottles” means those beverage containers which conform to the Bottle Specifications.  Furthermore, Packer reserves the right to modify the Bottle Specifications for the Bottle’s design in order to maximize the through put of the Bottles and Cases through bottling lines, machines and the supply chain with the Packer having sole determination of such acceptable through put, and Company will be provided reasonable approval of any material changes to the Bottle Specification, with said approval not to be unreasonably conditioned or withheld.

 

“Bottle Specifications” means those specifications related to the dimensions, technical, mechanical and structural elements of the Bottle, cap and label, excluding the Company Marks, as provided in Exhibit G.

 

“Case” means a pack of 24 (twenty four) Bottles of Bottled Product in a printed corrugated tray and registered shrink film.

 

“Commencement of Production Date” means the date that the Packer determines in its sole discretion that Packer has completed its Ramp-Up and is prepared to begin producing Bottled Product to meet the Company’s first production under the Company’s first Annual Commitment.

 

“Company Marks” means the content displayed upon the label, cap and Bottled Product packaging including, but not limited to, the trademarks, trade names, trade dress, copyright, logos, artwork, nutritional facts, or other advertising slogans owned by Company or licensed by Company from a third party, excluding any content belonging to Packer.

 

“Company Materials” means all goods and substances supplied by Company to be used in the production and packaging of the Bottled Product by Packer, including, but not limited to, the items listed in Exhibit D and such other items as the parties may agree from time to time, in which case Exhibit D shall be amended in writing accordingly.

 

“Contract Year” means a twelve (12) month period of time beginning on the Commencement of Production Date.

 

“Minimum Per Flavor Run” means twenty thousand (20,000) Cases unless Packer decides, in its sole discretion, to run a lesser quantity.

 

“Minimum Run” means a minimum of three hundred eighty five thousand (385,000) Cases per individual production run requested by Packer via a Purchase Order unless Packer decides, in its sole discretion, to request or run a lesser quantity.

 

“Order Release” means Company notifies Packer via EDI on a specific shipment of Bottled Product.

 

“Packer Controlled Location” means any of Packer’s manufacturing plants or 3PL’s.

 

“Packer Materials” means all goods, labor and substances supplied by Packer to be used in the production and packaging of the Bottled Product by Packer, including, but not limited to, the items listed in Exhibit D and such other items as the parties may agree from time to time, in which case Exhibit D shall be amended in writing accordingly.

 

“Packing Fees” means those fees described in Exhibit E and charged to Company by Packer under this Agreement and any Purchase Order.  On each anniversary of the Commencement of Production Date during the Term of the Agreement, the Packing Fees may be changed by the parties based upon changes in the PPI Index and Resin Index pursuant to Section 4.3 in which case Exhibit E shall be amended in writing accordingly.  Furthermore, in the event there is a material change in the Specifications, the Bottle Specifications or there is any change that necessitates a change to the Packer Materials that increases Packer’s costs, the parties agree in good faith to adjust the fees on Exhibit E.

 

“Purchase Order” means a binding written request by Company to Packer issued no less than forty-five (45) days prior to the date of a scheduled production run pursuant to a request by Packer for a certain quantity of Cases.  Each Purchase Order’s aggregate quantity of Cases and schedule shall be determined by the Packer in its sole discretion.  However, Packer shall schedule necessary production from time to time to meet the Company’s then current Rolling 3-Month Forecast and meet but not exceed the Company’s then current Annual Commitment unless Packer, in its sole discretion is able to exceed the then current Annual Commitment if so requested by Company.  Packer will promptly notify Company no less than five (5) days before Packer requires the issuance of a Purchase Order.  Each Purchase Order shall specify the number of Cases per flavor such that the aggregate number of Cases equals the amount of Cases requested by the Packer for the subject production run and that each amount of Cases per flavor is no less than the Minimum Per Flavor Run.  Company further expressly understands that Packer’s efficiency and ability to meet the Company’s Annual Commitment is directly impacted by the number of flavors per run and, therefore, shall not request more than four (4) Minimum Flavor Runs per Purchase Order.  No Purchase Order shall be effective unless agreed to in writing by Packer.

 

“Ramp-Up” means the following estimated start-up schedule for the Packer’s supply of Bottle Product to the Company.  During the period of time April 2016 through May 2016 (“Ramp Up Period”), Packer agrees to manufacture, to the extent commercially reasonable and Company agrees to issue a Purchase Order for 385,000 (Three Hundred Eighty-Five Thousand) Cases by February 1, 2016 .  The Company agrees to buy and take possession of any and all Cases produced during the Ramp-Up Period that meet the Specifications and Bottle Specifications.  All Cases purchased during the Ramp Up production shall count toward the Company’s June 1, 2016 through May 31, 2017 Annual Commitment.  When the Ramp-Up is complete the remaining portion of the Annual Commitment shall become effective and the Commencement of Production Date established.

 

“Rolling 3-Month Forecast” means on the first business day of each month during the Term, the Company shall deliver to Packer in writing its then current Rolling 3-Month Forecast.  Company shall issue its first (1 st ) Rolling 3-Month Forecast by May 1, 2016 with such forecast used by Packer to determine production, if any, for Company’s July 2016 – August 2016 demand.  Packer will use good faith efforts to determine the number of Cases Packer will need to produce to meet the Company’s then current Rolling 3-Month Forecast as well as the Company’s then current Annual Commitment, and in consideration with Packer’s production commitments to its other customers.  Furthermore, Company expressly agrees and understands that Packer intends to produce the Company’s then Annual Commitment periodically, as determined solely by the Packer, throughout the Contract Year.  Accordingly, Packer shall request Purchase Orders in writing from Company and Company shall provide written Purchase Orders to meet the demand pursuant to the Rolling 3-Month Forecast and in support of the Company’s then current Annual Commitment.

 

“Shelf Life” means the length of time that Bottled Product may be stored without becoming unfit for use or sale.  The Shelf Life for the Bottled Product contemplated under this Agreement is twelve (12) months from the date of production.

 

“Specifications” means those specifications provided by Company containing recipes, formulae, know-how and processes for producing the Bottled Product (i) included in the Co-Packer Manual including any modifications thereof or improvements thereon, and (ii) as otherwise set forth in a Purchase Order accepted in writing by Packer.  Specifications may also include (i) quality control requirements for the processing and packaging of Bottled Products (e.g. HACCP); (ii) quality control requirements and instructions for receiving, handling, storing and using raw materials, ingredients, liquid, and other goods and materials provided to Packer by Company or its authorized vendors, and (iii) other types of instructions for manufacturing and handling Bottled Products (e.g. pallet configurations for shipping).  The Specifications may be amended from time to time upon thirty (30) days prior written notice to Packer; provided, however, that any such modifications shall be subject to the approval of Packer to be given or denied in writing within fifteen (15) days after the date of notice.

 

“Territory” means North America which consists of Canada, United States of America and Mexico.

 

1.2   Exhibits .   The following exhibits are attached hereto and are expressly incorporated into this Agreement.

 

2.   Requirements / Forecasts / Orders / Delivery.

 

2.1 Requirements / Forecasts .  Packer shall manufacture and deliver to the Company the quantity of Bottled Products required by Company via Purchase Orders.  Not later than February 1 of each year during the Term, Company shall deliver to Packer its minimum volume requirements for Bottled Products for the following Contract Year, which amount shall be deemed the “ Annual Commitment ”, provided that the Annual Commitment shall not be less than 3,200,000 (three million, two hundred thousand) Cases taken and paid for pursuant to Section 4 during each Contract Year.  Packer shall have thirty (30) days to accept the Annual Commitment in writing.  Once accepted by Packer, such Annual Commitment shall be deemed binding upon the parties for the following Contract Year.   If the Annual Commitment is rejected by Packer, the prior Contract Year’s Annual Commitment shall be in effect for such subsequent year.

 

Company shall, by way of delivery of Purchase Orders from time to time, order its Annual Commitment, provided that the provisions of Section 2.3 shall apply if Company orders, takes possession of and pays for less than the then applicable Annual Commitment by the last day of any such Contract Year and pursuant to Section 4.  Company understands that Packer has based pricing on the volumes contemplated in this Section 2.1.  Company shall promptly notify Packer in writing via its Annual Commitment and its Rolling 3 Month Forecasts of its demand for Cases.  Packer shall determine, in its sole discretion, the total amount of Cases it wishes to run to meet the Company’s then current Rolling 3 Month Forecast by notifying Company in writing of its intent to produce a certain quantity of Cases to meet the Company’s then current demand.  Company shall then promptly, but no later than five (5) days from notification by Packer, issue a Purchase Order to the Packer for the required number of Cases to be produced by the Packer.  Packer shall allocate sufficient packaging capacity at its plants, reserve production time sufficient to produce the then applicable Annual Commitment and meet the scheduled delivery times for Bottled Products, in each case, as provided by Company, all in accordance with the terms of this Agreement.  Packer’s obligation to produce Bottled Products under this Agreement shall not exceed its aggregate plant capacity and its obligations to its other customers but shall at least meet the Annual Commitment of each Contract Year during the Term.  In addition to the foregoing, Packer and Company shall negotiate in good faith to expand Packer’s capacity where Annual Commitments would so require and financially justify such expansion, as determined solely by Packer.

 

2.2 Production Requests / Orders .   Except as otherwise agreed upon by the parties, Company shall deliver to Packer a Purchase Order, pursuant to Section 2.1, by the forty-fifth (45 th ) day prior to the day in which Packer determines it wishes to produce on behalf of the Company.  The Purchase Order shall be binding as to case quantity per flavor.  Production shall thereafter be scheduled by Packer based on the Purchase Order and the Company Materials in Packer’s inventory. Throughout the Term of the Agreement, Company shall also transmit Order Releases via EDI.  Order Releases shall specify the specific quantity and flavors of Cases, requested delivery dates and delivery information sufficient for a bill of lading.  Company shall not be liable for any Bottled Product not ordered pursuant to a Purchase Order.  Purchase Orders shall also specify additional packing information, as applicable. Packer will not commence work on a Purchase Order until it provides Company with written acceptance.

 

 

2.3   Take or Pay .  The Company may either; (i) order, purchase, take possession of and make payment for the Annual Commitment of Cases, or (ii) pay $2.00 (two dollars) per Case for the shortfall amount of Cases not ordered, taken and paid, pursuant to Section 4, of the Annual Commitment.

 

2.4   Scheduling .   Packer shall give Company the schedule for commencement of any run scheduled for filling a Purchase Order within fifteen (15) days of receiving such Purchase Order.  Company understands Packer’s production schedule may change rapidly and unexpectedly and agrees to work in good faith with Packer to accommodate the same.

 

2.5   Delivery of Company Materials/Ownership .   Company shall deliver to Packer’s plant(s) all Company Material required to fulfill a Purchase Order no later than two (2) weeks prior to the commencement of the scheduled run and shall use best efforts to ensure Packer continuously has approximately 10-12 days of Company Materials on hand at all times.  The Company Materials shall at all times be deemed the property of the Company.

 

2.6   Delivery .   Packer shall deliver the Bottled Product as soon as reasonably feasible following completion of the run, provided, that Packer shall have seventy-two (72) hours after completion of the run to perform quality assurance testing in accordance with the Co-Packer Manual, and Company shall accept delivery of the Bottled Product FOB Packer’s loading docks located at the Packer Controlled Location(s).  Title and risk of loss shall pass to Company at a Packer Controlled Location when the Bottled Products are loaded onto delivery vehicles for transportation to any destination other than a Packer Controlled Location.  Packer shall use its best efforts to load Bottled Products onto delivery vehicles on a first in, first out (“FIFO”) basis, per SKU.

 

2.7   Rejection of Non-Conforming Goods .   Where Packer has failed to produce Bottled Products in compliance with Packer’s warranty or where the Bottled Products deviate from the Company’s Specifications, the Company may reject such non-complying Bottled Product by written notice specifying discrepancies for which the Bottled Product is being rejected.  To the extent the Bottled Product is being rejected due to an act or omission solely caused by Packer, Packer shall, at its expense and under Company supervision, promptly recall, if necessary, any rejected Bottled Products.  If the Bottled Product is being rejected for any other reason than stated above, Packer shall, at Company’s expense, promptly recall, if necessary, and destroy any rejected Bottled Product and Company shall reimburse or credit Packer for all direct and reasonable costs, including but not limited to the Packing Fees.  All non-conforming Bottled Products, except for short-coded Bottled Products, shall be destroyed.    Company may accept or reject any and all expired Bottled Products, but if the Company accepts any expired Bottled Product, Company expressly agrees to accept said Bottled Products on the same terms and conditions contained within this Agreement.  Any expired Bottled Product that is rejected shall be destroyed at the Company’s sole expense.

 

2.8   Quality Assurance Testing .   At Packer’s expense, Packer shall conduct testing of the Bottled Product in accordance with the Co-Packer Manual or as otherwise reasonably requested by Company.  With seventy-two (72) hours prior notice, the Company shall be entitled to be present for, and to perform onsite sensory inspections of each batch run of Bottled Products.  All samples of the Bottled Product used in such testing, and all copies of quality control reports shall be forwarded to Company within seventy-two (72) hours after Packer’s receipt of the test results.  Retained samples of the finished Bottled Product shall be invoiced to Company in accordance with the Packing Fees.  In the event finished Bottled Product has failed quality assurance testing in accordance with the Co-Packer Manual, Packer agrees to schedule a replacement production run as soon as possible after the discovery of such failure, provided packaging and ingredient supply is available.  If the quality assurance failure is due to any act or omission of Packer, Packer shall incur all costs associated with replacing the Bottled Product including delivery of ingredients and packaging materials if required and shall reimburse Company for all costs of replacing the Company Materials, if any.  Packer shall be afforded the required seventy-two (72) hours following the replacement run to complete required quality assurance testing.  If no act or omission of the Packer contributed to the quality assurance failure, Company shall incur all costs associated with replacing the Bottled Product including expedited delivery of ingredients and packaging materials if required and shall reimburse Company for all costs of replacing the Company Materials, if any.  Packer shall not release Bottled Products for shipment and commercial consumption unless they comply with the Specifications and all applicable laws.  Packer’s Quality Assurance Record Review detailing the specifications of the batch shall be sent to Company per production run.  Packer’s manufacturing plant shall meet all requirements established by state, local and/or federal regulations.

 

 

2.9   Kosher and Organic Certification.   At Packer’s expense, Packer shall be certified to run Organic and/or Kosher products if needed for the production of the Company’s products.  Also at Packer’s expense, the line shall be and shall remain Kosherized if required prior to production of Company’s products.  The Company will pay for the Organic and Kosher certification of its products as well as the ongoing maintenance payments associated with its Bottled Product.

 

2.10 Exclusivity.   The parties agree that within the Territory the Packer shall be the exclusive manufacturer and supplier of the Bottled Product contemplated hereunder.  Only in the event Packer is unable to manufacture for the Company a volume of Bottled Product in excess of the Annual Commitment, after Company having first given the Packer the opportunity to produce the then excess amount of Bottled Product, is Company allowed to have the Bottled Product manufactured by an alternative packer and only for a duration not to exceed twelve (12) months.  No less than sixty (60) days prior to the expiration of said twelve (12) month period, Company must provide Packer a first right of refusal, at the same terms and conditions contained herein, to manufacture any incremental volume in excess of the Annual Commitment (“Incremental Volume”).  In Packer’s sole discretion, Packer may agree to produce the Incremental Volume in addition to the Annual Commitment of the prior Contract Year.  Packer’s acceptance of the Incremental Volume creates a Revised Annual Commitment for the then current and upcoming Contract Year (Annual Commitment + Incremental Volume = Revised Annual Commitment) and the Annual Commitment for any future years cannot be less than the Revised Annual Commitment.  Notwithstanding the foregoing, if Company requests an increase in the Annual Commitment and/or an Incremental Volume and Investor declines to increase its Investor Obligation pursuant to Section 10.5 and Packer declines the increase in the Annual Commitment or the Incremental Volume on the basis of the Investor declining to increase its Investor Obligation to provide sufficient financial backing of the Company to cover the increase in Annual Commitment and/or Incremental Volume, then Company is precluded from having an alternative manufacturer provide the increase in Annual Commitment and/or Incremental Volume of Bottled Product for the Territory.  However, if Company provides suitable alternative financial backing for at least the increase in Annual Commitment and/or Incremental Volume, with determination of such suitability solely at the discretion of the Packer and such approval of alternative financial backing by Packer to not be unreasonably withheld, then the limitation in the preceding sentence shall not apply.

 

2.11 Bottle Design . Packer reserves the right, in Packer’s sole discretion, to change the Bottle Specifications to maintain maximum production throughput or for other material reasons.  Packer will work with Company to maintain the desired intent of the bottle design to the extent possible and Company will be provided reasonable approval of any material changes to the Bottle Specification, with said approval not to be unreasonably conditioned or withheld.  The parties understand and acknowledge that neither Company nor any of Company’s employees, agents or other representatives have any claim of ownership or right to the Bottle Specifications and Packer has the exclusive right to use the Bottle Specifications without any limitation whatsoever.  Additionally, Packer has the exclusive right to use the Bottle Specifications without any limitation to pursue intellectual property protection.

 

Notwithstanding the foregoing, during the Term of this Agreement, Packer cannot use the Bottle to make a kids focused product that directly competes with the Company’s “AquaBall” drink. AquaBall includes all of the following attributes:

 

A healthy, kids focused, naturally-flavored drinking water that is clear in color, made with reverse osmosis water, non-carbonated, hot filled, sugar-free but sweetened, zero calories, vitamin-enhanced, contains no juice content, and is preservative free.

 

2.12   Expired Bottled Product .  Company bears the sole risk for expired Bottled Products (not within the Shelf Life) and shall be responsible to pay Packer the Packing Fees and any transportation costs and/or disposal fees, as may be applicable, for any expired Bottled Product.  The foregoing sentence is contingent on the Packer Controlled Location using commercially reasonable efforts to ship on a FIFO basis.  Packer agrees that any expired Bottled Product for which Company pays Packing Fees shall count towards Company’s then current Annual Commitment and applicable rebates.

 

 

2.13 Intentionally Omitted .

 

2.14 Personal Guaranty of Bottling Agreement.   As a condition precedent to the execution of this Agreement, the Investor shall make a personal guaranty to Packer to provide the financial backing of Company pursuant to the Personal Guaranty of Bottling Agreement.  Notwithstanding the preceding sentence, Packer, in its sole discretion may, at any time, relieve the Investor of its obligation to provide this personal guaranty.  In the event of any change in or substitution of the Investor with a replacement investor of equal or greater resources and creditworthiness, such replacement investor in the Company must be approved in writing by the Packer prior to any such change or substitution occurring.  Any replacement investor shall execute a Personal Guaranty of Bottling Agreement as a condition precedent to Packer releasing Investor from its personal guaranty.  At any time, at the Company’s request, Packer shall evaluate Company’s credit worthiness to determine if the Personal Guaranty of the Investor can be removed as a condition of this Agreement.

 

2.15 Electronic Data Interchange (“EDI”).   Each party agrees to utilize EDI for all order and payment transactions, such as:

 

a.

Order Releases submitted by Company

b.

Confirmation of Order Releases by Packer

c.

Invoicing submitted by Packer

d.

Payment of Order Releases by Company

 

3.   Provision of Materials, Manufacture and Storage of Bottled Product.

 

3.1   Materials for Manufacture .   Except for the Company Materials, all other materials and labor required to prepare, produce, and package the Bottled Product shall be furnished by Packer, at Packer’s sole cost.  In the event Company decides to discontinue Packer’s manufacturing of any particular flavor, Company and Packer shall use best efforts to run out any Packer Materials that are item or flavor specific to the discontinued flavor.  Company shall compensate Packer for any such Packer Materials that cannot be used.  In the event any Packer Materials are not used for more than ninety (90) days, Packer shall notice Company and Company shall either issue Purchase Orders (s) to use up the Packer Materials within thirty (30) days from date of notification or compensate Packer for any such materials that are not used .

 

3.2   Packing .   Packer will use the highest quality business practices to ensure that the Bottled Product is produced, bottled and packaged according to the Specifications and the Co-Packer Manual.

 

3.3   Loss Allowance .   Allowance for the loss of ingredients and raw materials for the production runs of the Bottled Product will be three percent (3%) (such percentage to be measured by comparing dollar value of scrap, discard or other loss to total dollar value of the materials in the relevant run).  Packer will reimburse Company for (or absorb the cost of) the cost of raw material losses.  Packer will use commercially reasonable efforts to operate in such a manner so there is as little scrap, discard or other loss of finished Bottled Product as possible.  In the event of a loss in excess of the Allowable Scrap Percentage, Packer will reimburse Company for the weighted average value of such loss, based on Company’s actual costs of all Company Materials purchased throughout the Contract Year. Company acknowledges and agrees that Loss Allowance does not include non-conforming raw materials or initial startup. With respect to any ingredients or Company Materials that are perishable, Packer shall use commercially reasonable efforts to use such ingredients or Company Materials on a first-in, first-out basis.

 

3.4   Non-Conforming Materials .   Packer shall promptly notify Company of any claim of non-conforming or defective Company Materials as soon as reasonably practicable after any such defect is discovered by Packer.  Promptly upon receipt of notice of a defect, non-conformance or damage of any kind, Company shall replace the affected Company Materials and such replacement shall be made as quickly as commercially reasonable.  Packer shall not be held responsible for any delays in the manufacturing of Bottled Products that arise out of the receipt of nonconforming or defective Company Materials.

 

 

3.5   Storage and Handling .   Packer and Packer Contracted 3PL’s will store and handle the Bottled Product in a safe and dry location.

 

4.   Payment / Pricing / Price Adjustments.

 

4.1   Payment .  Company shall pay the Packing Fees and any other fees which may be due within fifteen (15) days of receipt of electronic invoice delivered via EDI, which shall be issued upon Delivery as defined in Section 2.6.  Any sums not paid when due shall bear interest at the lower of one and a half percent (1.5%) per month or the highest rate permitted by law.  The Packing Fees and other compensation specified in this Agreement are exclusive of any sales, use or similar taxes, duties, or license fees payable as a result of or in connection with the transactions contemplated by this Agreement, all of which shall be the sole responsibility of Company. Furthermore, California Redemption Value (“CRV”), redemption values, bottle deposit and Processing/ Handling Fees, licensing fees or other fees are not included in the quoted pricing and are the responsibility of the Company as may be applicable.

 

4.2 Pricing .  The pricing for the services provided hereunder are detailed in Exhibit E and Exhibit F .

 

4.3 Price Adjustments .  The Pricing contained in Exhibit E may be modified as provided for below.

 

(a)             PPI Price Adjustment.   “PPI Price Adjustment” means the annual price adjustment of 60% of the Case price pursuant to Exhibit E (“Case Price”), beginning on the first anniversary of the Commencement of Production Date  (the "PPI Adjustment Date"), in which case the Case Price shall be amended in writing accordingly.  Price adjustments, if any, shall be based upon increases or decreases in the Producer Price Index for soft drink manufacturing (the " PPI Index"). The PPI Index published within one month from the Commencement of Production Date shall be the "Base Index." The PPI Index published one month before each PPI Adjustment Date shall be the "Comparison Index."  As of each PPI Adjustment Date, the Case Price payable during the ensuing twelve-month period shall be determined by increasing or decreasing 60% the initial Case Price by a percentage equal to the percentage increase or decrease, if any, in the Comparison Index over the Base Index.  For the period beginning August 14, 2015, the PPI Price Adjustment percentage shall be the average between the percentage increase or decrease in the PPI Index on August 14, 2015, compared with the Base Index (“PPI Adjustment True Up Percentage”).   The Case Price payable as of the first commencement of production shall be adjusted by increasing or decreasing 60% of the Case Price by a percentage equal to the percentage increase or decrease, if any, in the PPI Adjustment True Up Percentage.

 

(b)             Resin Price Adjustment .  “Resin Price Adjustment” means the annual price adjustment of 20% of the Case Price, beginning on the first anniversary of the Commencement of Production Date, in which case the Case Price shall be amended in writing accordingly.  Adjustments, if any, shall be based upon increases or decreases in the   IHS PET Bottle Resin, North America, Contract-Net Transaction, Cents/Pound Price Index (“IHS”) using the preceding twelve (12) month average net transaction price.   The Case Price payable during the ensuing twelve (12) month period shall be determined by multiplying 20% of the initial Case Price by a percentage equal to the percentage increase or decrease, if any, in the 12 month average IHS price point over the previous twelve (12) month period average.   Packer shall promptly give the Company notice of any adjusted Case Price which shall take effect annually.   For the period of time between August 14, 2015 (with the August IHS 2015 serving as the baseline) and the Commencement of Production Date, increases or decreases in the IHS, if any, will be used to determine a net transaction change percentage (“True Up IHS Transaction Percentage”).   The Case Price will then be re-set as of the Commencement of Production Date by multiplying 20% of the initial Case Price by a percentage equal to the percentage increase or decrease, if any, of the True Up IHS Transaction Percentage.

 

(c)             Exhibit F .  The parties agree that the Pricing contained within Exhibit F is subject to change.

 

 

5.   Warranties.

 

5.1   Packer Warranties .   Packer warrants that:

 

(a)   In addition to all other warranties expressed or implied by law, Packer warrants that the Bottled Products shall meet all of the Specifications and shall be free of defects in workmanship or materials, and be wholesome and fit for human consumption.

 

(b)   It will follow the standards set forth in the Co-Packer Manual and will not commence packing any Product until it has received standards specifically applicable to that Product.  Company may update standards applicable to any Bottled Product and shall provide any such updates to Packer in advance and in writing.

 

(c)   All of the Bottled Products delivered or sold to Company shall be free from any lawful security interest, lien or other encumbrance.

 

(d)   Each Bottled Product shall be free from adulteration.

 

(e)   EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, PACKER MAKES NO WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WHETHER OF MERCANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, OR OTHERWISE, WITH RESPECT TO THE BOTTLED PRODUCTS.

5.2   Company Warranties .   Company represents and warrants that:

 

(a)            It owns the intellectual property or possesses the rights to license to Packer the use of the Company Marks and that Packer’s use of the Company Marks will not =infringe upon the rights of any third party.

 

(b)            It owns the licenses and/or rights to use Company Materials, product formulations and/or recipes and the Company Materials, product formulations and/ or recipes will not illegally infringe upon the rights of any other person or entity;

 

(c)            It will comply with each and every term set forth in this Agreement;

 

(d)            All Company Materials supplied pursuant to this Agreement shall be free of material defects, be merchantable and fit for the intended purpose of this Agreement and shall comply with all applicable laws (including but not limited to label and packaging compliance); and

 

(e)            The Specifications comply with all applicable local, state and federal laws governing the manufacture of the Bottled Products.

5.3   Liabilities .   Packer’s sole liabilities for breach of its warranties under this Agreement are the directly attributable costs for the following:

(a)   Recall and/or product withdrawal costs (freight, storage, remediation and/or destruction of product);

 

(b)   Lab analysis costs;

 

(c)   Replacement costs; and

 

(d)   Reasonable legal representation costs.

 

The above list, Section 5.3 (a-d), is the Company’s exclusive remedy for Packer’s breach of Section 5.1 or any other obligation under this Agreement.

 

 

6.   Limited Intellectual Property License.   Company hereby grants Packer a royalty free, non-exclusive right and license to use the Company Marks in fulfillment of Packer’s obligations under this Agreement in the Territory. Company retains all rights to the Intellectual Property and all goodwill accruing as a result of any use thereof shall accrue to Company.  Upon the termination or expiration of this Agreement, Packer shall immediately cease use of the Company Marks.

 

7.   Insurance/Indemnity/Recall.

 

7.1   Packer Indemnity .   Packer shall indemnify, defend and hold Company harmless from and against any and all claims, suits, demands, actions, costs, liabilities, losses and expenses of any kind whatsoever, including but not limited to injury to person (including death) or property, including reasonable attorneys’ fees, arising out of, resulting from or otherwise connected with any allegation of (i) harm, injury, damage or loss arising out of or in connection with the Bottled Product solely to the extent caused by Packer or a third party for whose actions Packer is responsible; (ii) the defective manufacture, bottling, packaging or storage of the Bottled Product or breach of any warranty by Packer; or (iii) any negligent act, misfeasance or nonfeasance by Packer or a third party for whose actions Packer is responsible.  This indemnification provided by Packer is limited to the extent any loss arises out of or results from Company’s negligence or willful misconduct, Company Marks or Company Materials, or Packer’s adherence to any Specifications that were provided by Company.

 

7.2   Packer Insurance .   Packer shall obtain and maintain, and will continue to maintain at all times during the Term of this Agreement, at its own expense, commercial general liability insurance and product liability insurance on an occurrence basis in an amount not less than One Million Dollars ($1,000,000) per occurrence in respect of bodily injury and property damage and Two Million Dollars ($2,000,000) aggregate.  Packer shall further carry property damage insurance for its personal property.  Packer agrees to provide Company with certificates of insurance evidencing such insurance coverages and endorsements to the extent specified above.  Such certificates shall provide that such insurance coverage may be non-renewed, terminated or materially modified only upon at least thirty (30) days’ prior written notice by the insurance carrier to Company.

 

7.3   Company Indemnity .   Company shall indemnify, defend and hold Packer harmless from and against any and all claims, suits, demands, actions, costs, liabilities, losses and expenses of any kind whatsoever, including but not limited to injury to person (including death) or property, including reasonable attorney fees, arising out of, resulting from or otherwise connected with any allegation of; (i) harm, injury, damage or loss arising out of or in connection with the Bottled Product to the extent arising out of the Company Materials and/or Company Marks, (ii) any negligent act, misfeasance or nonfeasance by Company, (iii) any breach of Company’s warranties or obligations contained herein, (iv) any claim or action by a third party for infringement arising out of or connected to the Company Marks and/or Company Materials, or (v) misbranding, false or misleading advertising (including but not limited to comparative, environmental, unfair competition and/ or unfair business practice claims), adulteration, defective or improper warnings, and/or nutrition laws arising out of the Company Marks, Company Materials, or formulations and Specifications provided by the Company .  Company shall not settle any claim or law suit without the express written consent of the Packer.  Packer reserves the right to control its own defense at any time.

 

7.4   Company Insurance .   Company shall obtain and maintain, and will continue to maintain at all times during the Term of this Agreement, at its own expense, commercial general liability insurance and product liability insurance in an amount not less than Two Million Dollars ($2,000,000) per occurrence and with a general aggregate of not less than Three Million Dollars ($3,000,000) (such limits may be met by the amounts provided for by an umbrella or excess liability policy).  Company agrees to provide Packer with a certificate of insurance evidencing such insurance coverage, which shall name Packer and its subsidiaries, employees, agents, affiliates and assigns as an additional insured.  Such certificates shall provide that such insurance coverage may be non-renewed, terminated or materially modified only upon at least thirty (30) days’ prior written notice by the insurance carrier to Packer.

 

 

7.5   EXCEPT FOR CLAIMS BY A THIRD PARTY SEEKING INDEMNIFICATION FOR PERSONAL INJURY OR CLAIMS MADE AGAINST EITHER PARTY BY A CONSUMER, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT, PUNITIVE, CONSEQUENTIAL OR EXEMPLARY DAMAGES, LOSS OF PROFIT OR LOSS OF BUSINESS, WITH RESPECT TO OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE, EVEN IF THE PARTY HAS BEEN WARNED OF THE POSSIBILITY OF SUCH DAMAGE.

 

7.6   Recalls .   In the event (i) any governmental authority issues a request, directive or order that the Bottled Products be recalled or gives notice of or makes an inspection at any of the plants for other than normal and routine notices or inspections, or (ii) a court of competent jurisdiction orders such a recall, or (iii) Company determines, after consultation with Packer, that the Bottled Products should be recalled, then Company shall notify all regulatory authorities of any such recall and shall take all reasonable steps necessary to effectuate such recall, or in the case of a plant inspection for other than normal and routine inspections Packer shall provide notice thereof to Company.  In connection therewith and in addition to Packer’s obligation under Section 7.1 hereof, Packer shall indemnify and promptly reimburse Company for all of Company’s directly attributable costs and expenses related to such recall if such recall is based on the sole acts or omissions of Packer.  In the event the recall arises from causes or events attributable to both parties, then such cost shall be allocated on a pro-rata basis.  Except as provided in this Section 7.6, Company shall be solely responsible for all costs and expenses related to any recall.

 

8.   Inspection and Records.

 

8.1   Inspection .   Packer shall permit Company and its representatives to enter upon the premises of Packer used for the preparation or production of the Bottled Product during normal business hours and with no less than a seventy-two (72) hour prior written notice. Packer shall provide; (i) reasonable assistance to conduct inspections, counts and quality control audits of Bottled Products and Company Materials, and (ii) the results of any quality or safety tests performed by Packer or which were performed at Packer’s direction with respect to such facilities.  Company and its representatives shall have the right to visually inspect any Company Materials and finished Bottled Products inventory on-hand at the end of a production run that takes place during said inspection.

 

8.2   Records .   Packer shall keep at its plant proper and complete records, including, but not limited to, the Co-Packer Manual and the Specifications, and any and all other records relating to the Bottled Product, Bottles, Company Materials, cartons, pallets and other Packer Materials used for the production of the Bottled Product.  Packer shall, during reasonable business hours, while this Agreement remains in force, make said records available to Company and its representatives upon reasonable prior written request, but no less than seventy-two (72) hours’ notice, by Company.

 

9.   Force Majeure .   Packer shall not be liable for, or be considered to be in breach of or default under this Agreement on account of any delay in delivery or failure to deliver the Bottled Product on account of force majeure, including, but not limited to, fire, flood, earthquake, volcanic activity, wind, drought, and other acts of the elements, court order, act, omission, delay or failure to act by civil military or governmental authority, power outages, equipment failures, strike, lockout and other labor dispute, riot, insurrection, sabotage, war or factors outside of Packer’s reasonable control (each, an “Event of Force Majeure”).

 

 

10.   Term and Termination.

 

10.1   Term .   Except as otherwise set forth in Section 10.2, this Agreement shall commence on the Effective Date and continue through the fifth anniversary of the last day prior to the Commencement of Production Date 2021 (the “Initial Term”).  Upon the expiration of the Initial Term, this Agreement will automatically renew for additional one (1) year terms (each, an “Additional Term”, and together with the Initial Term, the “Term”) unless one party provides the other party with written notice of termination with not less than one hundred eighty (180) days’ notice, after the expiration of the Initial Term.

 

10.2   Termination .   Notwithstanding anything to the contrary contained in Section 10.1, this Agreement may be terminated immediately:

 

(a)   By either party in the event that the other party breaches any of its obligations under this Agreement in any material respect and such breach has not been cured or has continued for a period of thirty (30) days after the non-breaching party has given the breaching party  written notice of such breach;

 

(b)   By either party, if the other party makes an assignment for the benefit of creditors, the appointment of a trustee or receiver or similar officer of any court for the other party, or the institution of bankruptcy or similar proceedings by or against the other party.  In the event the Company undergoes any occurrence in the previous sentence, the Investor, as defined in the Recitals of this Agreement, shall become fully and irrevocably liable for the financial obligations of the Company hereunder and this irrevocable financial obligation shall survive termination of this Agreement;

 

(c)   By Packer, in the event Company has failed to provide to Packer the Annual Commitment by February 1 for the upcoming Contract Year and fails to provide Annual Commitment within ten (10) days after Packer has given Company notice of failure to provide Annual Commitment by February 1.

 

(d)   By either party in the occurrence of an Event of Force Majeure that continues for a consecutive ninety (90) day period.

 

(e)   By either party after the expiration of the Initial Term, with no less than a one hundred and eighty (180) day written notice to the other party.

 

10.3   Effect of Termination .   Upon termination of this Agreement, and provided that Company has paid in full all amounts which it owes to Packer hereunder, if any, Packer shall release for pick-up by Company all Bottled Product or other Company Materials in Packer’s possession which are the property of Company.

 

(a)   In the event of termination of this Agreement pursuant to Section 10.2(d) or (e) above, each party shall be responsible for fulfilling their obligations under this Agreement through to the effective date of termination.

 

(b)   In the event of termination of this Agreement by Packer pursuant to Section 10.2 (a), (b), or (c), the Company shall be responsible for paying $2.00 per Case for the total shortfall amount (ie, the Annual Commitment amount for the relevant year or years set forth below less any Cases already paid for) owed by the Company to the Packer as follows:

 

 

 

10.4   Intentionally Omitted .

 

10.5 Maximum Liability Cap for Investor.   In the event that Company, for any reason, has not fulfilled its payment/financial obligations to Packer as detailed herein, the terms and conditions contained within this Agreement and the Personal Guaranty of Bottling Agreement related to the obligations of the Investor to pay Company’s unpaid debts shall take immediate effect.  The Investor shall be required to pay any and all amounts owed by Company to Packer under this Agreement in connection with the purchase of Bottled Product and the shortfall amount as described in Section 10.3(b) and 10.4 up to a maximum amount as set forth in the following chart contained within this Section 10.5 for the Contract Year in which the Company has not fulfilled its payment/financial obligations to Packer.  The amounts set forth in the chart below represent the Investor’s maximum liability, including any and all debts or liabilities owed by the Company to the Packer when the Annual Commitment does not exceed three million two hundred thousand (3,200,000) Cases.

 

Notwithstanding the foregoing, to the extent the Annual Commitment exceeds three million two hundred thousand (3,200,000) Cases in any given Contract Year pursuant to Section 2.1 or Section 2.10 (in the event Packer agrees to manufacture the Incremental Volume which increases the Annual Commitment during any given Contract Year), the dollar amount of “Investor’s Obligation” specified in the chart of this Section 10.5 shall increase proportionately (see Section 10.6 for calculation examples).  The amounts contained within the chart below provide the Investor’s maximum liability to Packer only to the extent the Annual Commitment remains at 3.2 Million.

 

The Investor shall have the option to decline a future increase in its then current Investor’s Obligation based on an increase in the then current Annual Commitment pursuant to Section 2.1.  However, the Packer may, at its sole discretion, decline an increase in the Annual Commitment based solely upon the Investor’s election to decline an increase to the Investor’s Obligation.

 

 

10.6 Illustrative Examples of Financial Liability.

 

(a)             Minimum Annual Commitment- Assumptions: Annual Commitment is at the minimum of 3,200,000 Cases; 500,000 Cases have been produced pursuant to a Purchase Order; 100,000 Cases have been delivered to the Company and 400,000 Cases/Bottled Product remain in inventory and no amounts in respect of the foregoing have been paid by Company to Packer yet; the Company breaches this Agreement pursuant to 10.2(a) in Contract Year 1.  The financial liability would be calculated as follows:

 

·

$3,175,000 is owed to Packer by Company for built inventory and the past due invoices, calculated as follows:

Ø

500,000 Cases X $6.35 Packaging Fees/Pricing per Case pursuant to Section 1 of Exhibit E = $3,175,000

PLUS (+)

·

$18,200,000 which is the Take or Pay obligation pursuant to the Chart in Section 10.3,  calculated as follows:

Ø

Annual Commitment of 3.2 Million Cases X 3 = 9.6 Million Cases X $2.00 per Case = $19,200,000.

Ø

$19,200,000 minus $1,000,000 (500,000 Cases of remaining Bottled Product inventory and delivered Bottled Product multiplied by $2.00 per Case) = $18,200,000

COMPANY’S TOTAL LIABILITY :                                                                       $21,375,000 ($3,175,000 + $18,200,000)

INVESTOR’S TOTAL LIABILITY:                                                                        $10,000,000 shall be owed by the Investor to Packer in the event the Company is unable to pay its total financial obligation of $21,375,000.

 

(b)             Scaling Liability with Rise in Annual Commitment-Investor Accepts Assumption of Additional Liability Pursuant to Section 10.5 -   Assumptions:  Company requests and Packer accepts an increase to the Annual Commitment to 6,200,000 Cases; The Investor accepts an increase in its Investor’s Obligation based on an increase in the then current Annual Commitment to 6,200,000 Cases pursuant to Section 2.1 and Section 10.5; 500,000 Cases have been produced pursuant to a Purchase Order; 100,000 Cases have been delivered to the Company and 400,000 Cases remain in inventory   and no amounts in respect of the foregoing have been paid by Company to Packer yet; the Company breaches this Agreement pursuant to Section 10.2(a) in Contract Year 1. The financial liability would be calculated as follows:

 

·

$3,175,000 is owed to Packer by Company for built inventory and the past due invoices, calculated as follows:

Ø

500,000 Cases X $6.35 Packaging Fee/Pricing per Case pursuant to Section 1 of Exhibit E = $3,175,000

PLUS (+)

·

$36,200,000 which is the Take or Pay obligation pursuant to the Chart in Section 10.3, calculated as follows:

Ø

Annual Commitment of 6.2 Million Cases X 3 = 18.6 Million Cases X $2.00 per Cases = $37,200,000

Ø

$37,200,000 minus $1,000,000 (500,000 Cases of remaining Bottled Product inventory and delivered Bottled Product multiplied by $2.00 per Case) = $36,200,000

COMPANY’S TOTAL LIABILITY:                                                                             $39,375,000 ($3,175,000 + $36,200,000)

INVESTOR’S TOTAL LIABILITY:                                                                             $18,854,770 shall be owed by the Investor to Packer in the event the Company is unable to pay its total financial obligation of $39,375,000.  Investor’s financial obligation is calculated as follows:

Ø

$10 Million (Investor’s Maximum Liability at 9.6 Million Cases = 3.2 Million Cases X 3) / 9.6 Million Cases = $1.0417

Ø

$1.0417 X 18.1 Million Cases (18.6 Million Cases, minus 500,000 Cases) = $18,854,770

(c)       Scaling Liability with Rise in Annual Commitment-Investor Declines Assumption of Additional Liability Pursuant to Section 10.5-- Assumptions: Company requests and Packer accepts an increase to the Annual Commitment to 6,200,000 Cases; The Investor declines an increase in its Investor’s Obligation based on an increase in the then current Annual Commitment to 6,200,000 Cases pursuant to Section 2.1 and Section 10.5; 500,000 Cases have been produced pursuant to a Purchase Order; 100,000 Cases have been delivered to the Company and 400,000 Cases remain in inventory and no amounts in respect of the foregoing have been paid by Company to Packer yet; the Company breaches this Agreement pursuant to Section 10.2(a) in Contract Year 1.     The financial liability would be calculated as follows:

·

$3,175,000 is owed to Packer by Company for built inventory and the past due invoices, calculated as follows:

 

Ø

500,000 Cases X $6.35 Packaging Fee/Pricing per Case pursuant to Section 1 of Exhibit E = $3,175,000

 

PLUS (+)

 

·

$36,200,000 which is the Take or Pay obligation pursuant to the Chart in Section 10.3, calculated as follows:

 

Ø

Annual Commitment of 6.2 Million Cases X 3 = 18.6 Million Cases X $2.00 per Cases = $37,200,000

 

Ø

$37,200,000 minus $1,000,000 (500,000 Cases of remaining Bottled Product inventory and delivered Bottled Product multiplied by $2.00 per Case) = $36,200,000

 

 

                INVESTOR’S TOTAL LIABILITY:                                                                             $10,000,000 shall be owed by the Investor to Packer in the event the Company is unable to pay its total financial obligation of $39,375,000

11.   Confidentiality.

 

11.1   Definition .   “Confidential Information” shall mean any technical, financial, business, marketing, new product ideas, production information, trade secrets, pricing information, financial statements or other financial information, certain secret and proprietary information concerning formulae, flavors, flavor systems, colors, product development plans and other related information, proprietary technologies, customer or consumer information or other data in written, electronic, verbal or any other form which is disclosed by or on behalf of either party or its affiliates to the other party (or any representative of the party) or which is otherwise made available to a party (or any representative of a party) by either party or its affiliate(s) in connection with or with respect to this Agreement and which it has not released publicly and which the disclosing party considers to be confidential.  Without limitation of the foregoing sentence, Confidential Information shall include (i) any request for proposal or request for quote or responses thereto related to this Agreement and all information referenced or included therein, (ii) all notes, documents, drawings, photographs, samples, analyses, computations, studies, reports and other documents and records prepared by either party or any of its representatives incorporating or based upon in whole or in part any of the Confidential Information, and (iii) all information and data that either party or any of its representatives derive or develop from any of the Information.  Notwithstanding the foregoing, the term “Confidential Information” shall NOT include any information or other data which:

 

(a)   is already in the possession of the other party or its representative(s) at the time it is disclosed or made available to that party or its representative(s), provided that such information or data is not known by that party or its representative(s) to be subject to another confidentiality agreement with, or other obligation of confidentiality to, the disclosing party or another party;

 

 

(b)   was or becomes generally available to the public other than as a result of a disclosure by the receiving party or one of its representatives in violation of this Agreement;

 

(c)   was or becomes available to the receiving party or its representative(s) on a non-confidential basis from a source other than the disclosing party or one of its affiliates, provided that such source is not known by the receiving party or its representative(s) to be bound by a confidentiality agreement with, or other obligation of confidentiality to, the disclosing party or another party; or

 

(d)   is expressly identified by the disclosing party as not being proprietary or confidential.  As used in the first sentence of this Section 10.1, the term “consumer information” shall mean any information or data relating to an individual person, whether or not such individual person is a customer of the disclosing party or of any affiliate of the disclosing party.

 

11.2   Non-Disclosure .   Each party shall hold the other party’s Confidential Information in confidence using the same standard of care as it uses to protect its own confidential information of a similar nature, but in no event less than reasonable care and shall not disclose the Confidential Information of the other to any third party without the other’s prior written consent, except as expressly permitted under this Agreement.  Each party agrees that it will not, except as required by governmental regulation or court order, directly or indirectly, disclose, reveal or otherwise communicate any confidential information acquired from the other party or its suppliers in the negotiation or implementation of this Agreement to any other person, firm or corporation.  Company recognizes that Packer is using special methods to achieve the production of the Bottled Product and such methods will not be identified publically in any press release and/ or in any other form of communication to third parties unless the Packer gives prior written consent.  Confidentiality agreements, if any, signed by both parties shall remain in full effect and enforced during the Term of this Agreement.

 

11.3   Exceptions .   Notwithstanding the foregoing, either party may make disclosures as required or requested by a court of law or any governmental entity or agency, including but not limited to disclosures required by any regulatory authority, provided that such party provides the other with reasonable prior notice to enable such party to seek confidential treatment of such information.

 

11.4   Remedies .   Each party acknowledges that a breach or threatened breach of this Section 10 would cause irreparable harm to the non-breaching party, the extent of which would be difficult to ascertain.  Accordingly, each party agrees that, in addition to any other remedies to which a party may be legally entitled, the non-breaching party shall have the right to seek immediate injunctive or other equitable relief in the event of a breach of this Section 11 by the other party or any of its employees or agents.

 

12.   General Provisions.

 

12.1   Governing Law .   The parties irrevocably submit that jurisdiction and venue for the purpose of all issues of law, fact or equity arising out of and/or in any way related to the Agreement, any related purchase order, or any additions, amendments or supplements thereto, shall only be in the state or federal courts located in the County of San Bernardino, California.  The interpretation of the Agreement, as well as any dispute related to or arising from the Agreement, shall be governed by California law.

 

12.2   Dispute Resolution and Attorney’s Fees .  In the event of any dispute arising out of or related to the Agreement or a purchase order, the parties shall, within thirty (30) days of such dispute, meet in person to discuss potential amicable resolution of this dispute.  This provision shall not be interpreted to release, postpone or alter either party’s obligations set forth herein.  In the event the parties are unable to adequately resolve any claim or dispute through dispute resolution, any forthcoming legal proceeding arising out of or relating to this Agreement, the party prevailing in such legal dispute shall be entitled to recover all reasonable fees and expenses (including, without limitation, costs of investigation, reasonable attorneys’ fees and litigation expenses) incurred in connection therewith.

 

 

12.3   No Assignment .   Neither party may assign, delegate or transfer this Agreement, in whole or in part, or any right or obligation hereunder, without the prior express written consent of the other party, unless such assignment is in connection with the sale of all or substantially all of the assets of a party.  Any purported assignment, delegation or transfer in contravention to this Section 12.3 shall be null and void.  In the event Company is purchased by another company, merges with another company or the ownership or control of Company changes (or anything of this nature), any and all obligations under this Agreement shall transfer to and be irrevocably binding upon the new ownership, new company or controlling party.

 

12.4   Amendment .   No amendment, waiver, termination or variation of the terms, conditions, warranties, covenants, agreements and undertakings set out herein shall be of any force or effect unless the same is reduced to writing duly executed by or on behalf of all parties hereto.

 

12.5   Waiver .   No waiver of any of the provisions of this Agreement will constitute a waiver of any other provision (whether or not similar) and no waiver will constitute a continuing waiver, unless otherwise expressly provided.

 

12.6   Entire Agreement .   This Agreement, together with the Personal Guaranty of Bottle Agreement executed by Vincent C. Smith, Investor, and dated October 9, 2015, constitute the entire agreement between the parties pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties hereto and there are no warranties, statutory or otherwise, or representations or other agreements between the parties in connection with the subject matter hereof except as specifically set forth herein and therein.

 

12.7   Notice .   All notices to a party to this Agreement by another party must be in writing and delivered to or sent by facsimile transmission addressed to the party as follows:

 

A party may, by notice to the other party, change its address for notices to some other no less convenient address suitable for delivery of notices by hand and facsimile transmission and will so change its address whenever its current address ceases to be so suitable.  A notice so given will be deemed to have been received by the party to whom it is given (i) on the day of delivery, if delivered, or (ii) upon electronic acknowledgement of receipt thereof if sent by facsimile or electronic transmission.

 

12.8   Severability .   Each provision of this Agreement is intended to be several and accordingly (i) the unenforceability or invalidity of any particular provision under any applicable law will not affect the validity of any other provision insofar as such law is applicable, or of this Agreement insofar as such law is not applicable, except that if, on the reasonable constructions of this Agreement as a whole, the applicability of the other provision presumes the validity and enforceability of the particular provision, the other provision will be deemed also to be invalid or unenforceable, and (ii) if any provision of this Agreement is invalid or unenforceable, the balance of this Agreement will be construed and enforced as if all invalid or unenforceable provisions and all provisions so deemed to be invalid or unenforceable were not contained herein.

 

12.9   Binding Effect .   This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors, administrators, and permitted assigns.

 

12.10   Relationship .   It is acknowledged and understood between the parties hereto that their relationship under this Agreement is not one of principal and agent or of partnership or joint venture.

 

12.11   Execution By Facsimile; Counterparts .   This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which together constitute one and the same instrument.  Delivery of an executed copy of this Agreement by telecopy or other means of electronic communication producing a printed copy will be deemed to be an execution and delivery of this Agreement on the date of such communication by the parties so delivering such a copy.  The party so delivering such a copy via electronic communication shall deliver an executed original of this Agreement to the other party upon request.

 

IN WITNESS WHEREOF the corporate seals of the parties hereto have been affixed in the presence of their duly authorized officers as of the Effective Date.

 

COMPANY:	TRUE DRINKS, INC.     By: / s/ Dan Kerker                          Name: Dan Kerker ___________ Its: Chief Financial Officer _____
INVESTOR:             PACKER:	VINCENT C. SMITH     By: /s/ Vincent C. Smith _______ Name: Vincent C. Smith _______     Niagara Bottling, LLC     By : /s/ Gina M. Mercer ________ Name: Gina M. Mercer ________ Its: Legal Contracts Administrator

EXHIBIT A

 

Bottled Products

 

AquaBall :

Healthy, kids, ready to drink, flavored water beverages filled in PET bottles, in the following flavors:

Flavors:  Fruit Punch, Berry, Strawberry Lemonade, Grape.

 

 

Maximum number of flavor types is four (4), unless mutually agreed by the parties.

 

EXHIBIT B

 

Company Marks

 

[See attached]

 

EXHIBIT C

 

Co-Packer Manual

 

[Provided under separate cover]

 

The Company agrees to work expeditiously to provide the Packer with Company’s Co-Packer Manual as soon as reasonably possible but in any event, no later than February 1, 2016.  Packer reserves the right to reject or accept the requirements of the Company’s Co-Packer Manual.

 

EXHIBIT D

 

Materials

 

1.   Company Materials :

 

All ingredients except reverse osmosis water

 

2.   Packer Provided Materials :

a.

All Labor

b.

Bottles

c.

Colored Caps and Ink for printing on caps, if necessary, or engraved “call out” - Packer has the choice of providing printed or engraved caps and reserves the right to approve printing or engraved statements to be affixed on caps.  No more than four (4) colors total will be allowed unless Packer accepts, in its sole discretion, to make more than four (4) different colored caps (one color per respective flavor for caps).

d.

Labels

e.

Corrugated Trays

f.

Registered Shrink Wrap

g.

Electricity

h.

Reverse osmosis water

i.

Glue, if and when applicable

j.

Pallet Stretchwrap

k.

Pallets

 

EXHIBIT E

 

Packing Fees and Pricing

 

 

1.   Packaging Fees / Pricing :  Company shall pay to Packer $6.35 per Case of Bottled Product FOB Packer Controlled Location.  Pricing is subject to the final Bottle Specifications.  Packer reserves the right, at any time, to modify the Bottle Specifications in order to more efficiently or effectively produce, store and or ship Bottles and/or Cases, and Company will be provided reasonable approval of any material changes to the Bottle Specifications, with said approval not to be unreasonably conditioned or withheld.

2.   Film Only Tertiary Packaging Price Reduction Option: Provided the final Bottle Specifications allow for a “nested” or “brick” packaging option, the price per case can be reduced by $0.07 per 24 pack if a film only pack is selected.  The Company expressly acknowledges that one hundred percent (100%) of the new case configuration must be a 24 pack that is converted to one film only SKU-“Nested” or “Brick”, whichever is feasible, if any.

 

3.   Rebates per Contract Year:   In any given Contract Year of the Term, the Company can earn a Rebate per Contract Year by purchasing and paying the Packer for the annual volume of cases per Contract Year as follows :

 

Contract Year Number of Cases Purchased and Paid for by Company	Rebate Per Case
4.2 Million	$0.10
5.2 Million or more	$0.20

 

For purposes of calculating the Rebates, delivered volumes, taken and paid pursuant to Section 4 of the Agreement shall be tallied on a Contract Year basis and shall be re-set annually with such subsequent rebate opportunity starting on the Commencement of Production Date for the upcoming Contract Year.  Cases produced during the Ramp-Up period are eligible for rebate consideration.

 

Rebates to be paid in the form of a credit by Packer to Company toward invoices of Bottled Product then owed by the Company to the Packer or to be owed by Company to Packer during the Term.

 

 

EXHIBIT F

DELIVERY, STORAGE AND SHIPPING DETAILS

1.

Shipping Costs :  Except for shipping costs from a Packer manufacturing plant to a 3PL, all other shipping costs for moving Bottled Product shall be the responsibility of the Company. The decision to move inventory from a Packer’s manufacturing plant to a 3PL is at the sole discretion of the Packer.  If requested by Company, Packer shall coordinate the shipping with Packer’s carrier partners and offer Packer’s then current freight rates to the Company, provided all shipments are full truckload shipments.

 

2.

Storage, Handling and Bottled Product Storage Space Allocation :  Packer will handle and store the Bottled Product in a Packer Controlled Location(s).  Packer will allocate a maximum of four thousand (4,000) Pallets to Company across all Packer Controlled Locations for no additional charge (“Pallet Space Allowance”).  All Bottled Products will be stored in a safe and dry environment.  In the event Company orders, but does not take delivery of Bottled Products such that there are more full pallets of Bottled Products than the Pallet Space Allowance, then Packer shall charge Company $0.67 (zero dollars and sixty-seven cents) per pallet per day for the number of pallets in excess of the Pallet Space Allowance.  An invoice for pallets in excess of the Pallet Space Allowance will be issued to Company for payment at the conclusion of each month, and shall be due Net 15 days from the invoice date.  In withdrawing the Bottled Product from inventory for delivery to Company, Packer will use commercially reasonable efforts to ship the Bottled Product on a FIFO basis unless otherwise instructed by Company in writing.

 

3.

Maximum Storage Time:   The Shelf Life of the Bottled Product is twelve (12) months from the date of production.  Therefore, Packer will store the Bottled Product for a maximum amount of time not to exceed nine (9) months from the production date.  At the expiration of nine (9) months in storage, Packer will invoice Company for the Bottled Product and Company shall retrieve the Bottled Product at Company’s sole cost and according to the terms of this Agreement herein.

 

 

EXHIBIT G

 

BOTTLE SPECIFICATIONS

 

Packer will provide the Bottle Specifications as soon as reasonably practicable, but prior to the Commencement of Production Date.  Bottle Specifications may change from time to time, in Packer’s sole discretion, and Company will be provided reasonable approval of any material changes to the Bottle Specifications, with said approval not to be unreasonably conditioned or withheld.

 

Exhibit 10.2

 

-9-

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Exhibit 10.3

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND, ACCORDINGLY, MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144, OR (III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

PURSUANT TO THE TERMS OF SECTION 1 OF THIS WARRANT, ALL OR A PORTION OF THIS WARRANT MAY HAVE BEEN EXERCISED, AND THEREFORE THE ACTUAL NUMBER OF WARRANT SHARES REPRESENTED BY THIS WARRANT MAY BE LESS THAN THE AMOUNT SET FORTH ON THE FACE HEREOF.

True Drinks Holdings, Inc.

Warrant To Purchase Common Stock

Warrant No: 20151009-01

Number of Shares of Common Stock (subject to adjustment): 17,500,000

Date of Issuance: October 9, 2015 (“ Issuance Date ”)

True Drinks Holdings, Inc., a Nevada corporation (the “ Company ”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Vincent C. Smith, the registered holder hereof or its permitted assigns (the “ Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, upon the exercise of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “ Warrant ”) at the Exercise Price (as defined below) then in effect, at any time or times on or after the Issuance Date and until the Expiration Date (as defined below), Seventeen Million Five Hundred Thousand (17,500,000) fully paid nonassessable shares of Common Stock (as defined below)   (as such amount may be adjusted in accordance with the terms of this Warrant, the “ Warrant Shares ”).  Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 14 .

 

This Warrant is being issued in connection with, and as partial consideration for, that certain Personal Guaranty of Bottling Agreement (the “ Guaranty ”), dated October 9, 2015, executed by Vincent C. Smith for the benefit of Niagara Bottling, LLC, a California limited liability (“ Niagara ”).  The Guaranty was entered into in connection with that certain Bottling Agreement, dated October 9, 2015, by and between the Company and Niagara.  The rights granted to the Holder hereunder shall be deemed to be earned in full immediately upon the execution of the Guaranty, and such rights shall not be impacted in any way by the subsequent revocation or termination of the Guaranty (in accordance with its terms).

 

The terms and conditions of the Warrant are as follows:

 

1.        EXERCISE OF WARRANT.

 

(a)        Mechanics of Exercise .  Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(e)), this Warrant may be exercised by the Holder at any time on or after the Issuance Date until the Expiration Date, in whole or in part (but not as to fractional shares), by (i) delivery of a written notice, in the form attached hereto as Exhibit A (the “ Exercise Notice ”), of the Holder’s election to exercise this Warrant and (ii) if the Holder is not electing a Cashless Exercise (as defined below) pursuant to Section 1(d) of this Warrant, payment to the Company of an amount equal to the Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (such amount, the “ Cash Exercise Price ”) in cash or wire transfer of immediately available funds (any such exercise, a “ Cash Exercise ”) (the items referred to in clauses (i) and (ii) above, as applicable, the “ Exercise Delivery Documents ”).  The Holder shall

not be required to surrender this Warrant in order to effect a partial exercise hereunder; provided, however , that in the event that this Warrant is exercised in full or for the remaining unexercised portion hereof, the Holder shall deliver this Warrant to the Company for cancellation within a reasonable time after such exercise.  On or before the first Trading Day following the date on which the Company has received the Exercise Delivery Documents, the Company shall transmit by facsimile or e-mail transmission a confirmation of receipt of the Exercise Delivery Documents to the Holder and the Company’s transfer agent for the Common Stock (the “ Transfer Agent ”). On or before the second Trading Day following the date on which the Company has received all of the Exercise Delivery Documents (such date, the “ Share Delivery Date ”), the Company shall, (X) provided that the Transfer Agent is participating in The Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer Program (the “ FAST Program ”) and so long as the Warrant Shares are not required to bear a legend regarding restriction on transferability, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s (or its designee’s) balance account with DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent is not then participating in the FAST Program, or if the certificates evidencing the Warrant Shares to be received are required to bear a legend regarding restriction on transferability, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder (or its designee), for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise.  Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares, as the case may be.  If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant is greater than the number of Warrant Shares being acquired upon such exercise, then the Company shall as soon as practicable, and in no event later than three Trading Days after any such exercise, and at its own expense, issue a new Warrant (in accordance with Section 6(d)) representing the right to purchase the number of Warrant Shares purchasable under this Warrant immediately prior to such exercise, less the number of Warrant Shares with respect to which this Warrant is then being exercised.  The Company shall pay any and all taxes and other expenses of the Company (including overnight delivery charges) that may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant; provided , however , that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder or an affiliate thereof.  The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

 

(b)        Exercise Price .  For purposes of this Warrant, “ Exercise Price ” means $0.188 .  The Exercise Price is subject to adjustment as provided herein.

 

(c)        Cashless Exercise .  Notwithstanding anything contained herein to the contrary, the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Cash Exercise Price, elect instead to receive upon such exercise the “ Net Number ” of shares of Common Stock determined according to the following formula (a “ Cashless Exercise ”):

 

                                                    Net Number = (A x B) - (A x C)

                                                                                         B

For purposes of the foregoing formula:

 

A=

the total number of shares with respect to which this Warrant is then being exercised.

 

B=

the arithmetic average of the Closing Sale Prices of the Common Stock for the five (5) consecutive Trading Days ending on the date immediately preceding the date of the Exercise Notice.

 

C=

the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

(d)        Rule 144 .  For purposes of Rule 144(d) promulgated under the Securities Act, as in effect on the date hereof, assuming the Holder is not an “affiliate” of the Company (within the meaning of such term under the Securities Act), it is intended that the Warrant Shares issued in a Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the Issuance Date.

 

(e)        Disputes .  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed in accordance with Section 1(a).

 

2.        ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES .  The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

 

(a)        Voluntary Adjustment By Company . The Company may at any time during the term of this Warrant reduce (but not increase) the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

 

(b)        Adjustment upon Subdivision or Combination of Common Stock .  If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased.  If the Company at any time on or after the Issuance Date combines (by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased.  Any adjustment under this Section 2(b) shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

(c)        Adjustment Upon Issuance of Shares of Common Stock . If the Company at any time on or after the Issuance Date issues or sells, or in accordance with this Section 2(c) is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company) for consideration per share (the amount of such consideration, the “ New Issuance Price ”) less than a price equal to the Exercise Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such price, the “ Applicable Price ”) (the foregoing a “ Dilutive Issuance ”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be automatically reduced to an amount equal to the New Issuance Price; provided, however, that no adjustment pursuant to this Section 2 (c) shall be made if such adjustment would increase the Exercise Price or decrease the number of Warrant Shares then in effect.  Without limiting the foregoing, the following shall be applicable to adjustments made pursuant to this Section 2(c):

 

(1)           Issuance of Options . If the Company in any manner grants or sells any Options, and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option, or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option, is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 2 (c) (1) , the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option, or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option” shall be equal to the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon (1) the granting or sale of such Option, (2) exercise of such Option, and (3) conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable upon the exercise of any such Option, or upon

conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option. Except as contemplated below, once an adjustment is made to the Exercise Price in accordance with this Section  2(c)(1) with respect to a particular issuance of Options or Convertible Securities,  no further adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock or of such Convertible Securities upon the exercise of such Options, or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities issued upon exercise of such Options.

 

(2)           Issuance of Convertible Securities . If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange of such Convertible Securities is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 2(c) (2) , the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange of such Convertible Securities” shall be equal to the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon (1) the issuance or sale of the Convertible Security and (2) conversion, exercise or exchange of such Convertible Security, and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable upon conversion, exercise or exchange thereof.  Except as contemplated below, once an adjustment is made to the Exercise Price in accordance with this Section  2(c)(2) with respect to a particular issuance of Convertible Securities,  no further adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock upon the conversion, exercise or exchange of such Convertible Securities.

 

(3)           Change in Option Price or Rate of Conversion . If (1) the purchase or exercise price provided for in any Options, (2) the additional consideration, if any, payable upon the issuance, conversion, exercise or exchange of any Convertible Securities, or (3)the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock, increases or decreases at any time, the Exercise Price in effect at the time of such increase or decrease shall be adjusted to reflect the Exercise Price that would have been in effect had such Options or Convertible Securities provided for such increased or decreased purchase or exercise price, additional consideration, or conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 2 (c) (3) , if the terms of any Options or Convertible Securities that were outstanding as of the date of issuance of this Warrant are adjusted in the manner described in the immediately preceding sentence, then such Options or Convertible Securities, and the shares of Common Stock deemed issuable upon the exercise, conversion or exchange of such Options or Convertible Securities, shall be deemed to have been issued as of the date of such adjustment.

 

(4)           Calculation of Consideration Received . If (i) any Options or Convertible Securities are issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company, together comprising one integrated transaction, and (ii) all such Options or Convertible Securities (as applicable) so issued or sold are, or may become, exercisable and/or convertible for an aggregate number of shares of Common Stock that exceeds (as applicable) either (1) if Common Stock was the primary security issued or sold in such transaction, the aggregate number of shares of Common Stock so issued or sold in such transaction or (2) if Options or Convertible Securities were the primary securities issued or sold in such transaction, the aggregate number of shares of Common Stock so deemed issued or sold in such transaction that underlie all Options or Convertible Securities that constituted the primary securities in such transaction, then (x) such Options or Convertible Securities (as applicable) will be deemed to have been issued for consideration equal to the fair market value thereof and (y) the other securities issued or sold or deemed to have been issued or sold in such integrated transaction shall be deemed to have been issued for consideration equal to the difference of (I) the aggregate

consideration received by the Company minus (II) the aggregate fair market value of such Options or Convertible Securities (as applicable).  If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair market value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the volume-weighted average closing price of such security for the five (5) Trading Days immediately preceding the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair market value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be. The fair market value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation, the fair market value of such consideration shall be determined in accordance with Section 12.

 

(5)           Record Date . If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

 

(d)       Other Events.  If any event occurs of the type contemplated by the provisions of this Section 2, but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights or phantom stock rights), then the Company’s Board of Directors will make an appropriate adjustment in the Exercise Price and the number of Warrant Shares so as to protect the rights of the Holder; provided that no such adjustment pursuant to this Section 2(d) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.

 

3.        FUNDAMENTAL TRANSACTIONS .

 

(a)        Fundamental Transactions .  The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes (unless the Company is the Successor Entity) all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(a), pursuant to a written agreement to deliver to the Holder, in exchange for such Warrants, warrants of the Successor Entity evidenced by a written instrument reasonably satisfactory in form and substance to the Holder, and substantially similar in form and substance to this Warrant, providing, among other things, that the securities of the Successor Entity shall be exercisable for a number of shares of capital stock of the Successor Entity that is substantially equivalent to the number of shares of Common Stock acquirable by the Holder upon exercise of this Warrant prior to such Fundamental Transaction, and providing for an exercise price for the securities of the Successor Entity that is substantially equivalent to the Exercise Price in effect prior to such Fundamental Transaction (in each case, after taking into account the relative value of the shares of Common Stock as determined by reference to such Fundamental Transaction and the value of the shares of the capital stock of the Successor Entity, with the intent of the parties being to protect the aggregate economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and (ii) the Successor Entity (including its Parent Entity, as applicable) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be

substituted for the Company (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer to the Successor Entity), and may exercise every right and power of the Company, and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein.

 

(b)        Applicability to Successive Transactions .   The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and shall be applied (without regard to any limitations on the exercise of this Warrant).

 

4.        NONCIRCUMVENTION .  The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issuance or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith comply with all the provisions of this Warrant and take all actions consistent with effectuating the purposes of this Warrant.  Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as this Warrant is outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of this Warrant, 100% of the number of shares of Common Stock issuable upon exercise of this Warrant then outstanding (without regard to any limitations on the exercise of this Warrant).

 

5.        WARRANT HOLDER NOT DEEMED A STOCKHOLDER .  Except as otherwise specifically provided herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be deemed the holder of any of the Warrant Shares for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notices of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

 

6.        REISSUANCE OF WARRANTS .

 

(a)        Transfer of Warrant .  If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company and deliver the completed and executed Assignment Form, in the form attached hereto as Exhibit B , whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 6(d)), registered in such name as the Holder may request on the Assignment Form, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant are being transferred, a new Warrant (in accordance with Section 6(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.

 

(b)        Lost, Stolen or Mutilated Warrant .  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 6(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

 

(c)        Exchangeable for Multiple Warrants .  This Warrant is exchangeable, upon the surrender hereof by the Holder to the Company, for a new Warrants (in accordance with Section 6(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender and set forth in such new Warrant; provided, however, that no Warrants for fractional shares of Common Stock shall be issued.

 

(d)        Issuance of New Warrants .  Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or, in the case of new Warrants being issued pursuant to Section 6(c), the Warrant Shares which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant, which shall be the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

 

7.        REGISTRATION RIGHTS .  The Company agrees that if, at any time within thirty (30) calendar days following the Issuance Date, it enters into any agreement or arrangement pursuant to which it sells and issues any additional shares of its capital stock in a financing transaction (any such transaction, a “ New Financing ”), including any transaction in which it sells and issues any additional shares of Series C Convertible Preferred Stock, and pursuant to which the Company agrees, through the execution of a registration rights agreement (or similar agreement) to register the shares of capital stock issued in the New Financing (or the shares of capital stock underlying the Options or Convertible Securities issued in the New Financing) under the Securities Act, the Company will include the Warrant Shares as “registrable securities” within such registration rights agreement.  The treatment of the Warrant Shares pursuant to such registration rights agreement shall be substantially similar to the treatment of the “registrable securities” pursuant to that certain Registration Rights Agreement, dated August 13, 2015, entered into between the Company and the Purchasers named therein (the “ Registration Rights Agreement ”).  To the extent the Company does not enter into a New Financing transaction within the referenced time period, the Company agrees to enter into a registration rights agreement covering the registration of the Warrant Shares on substantially similar terms as set forth in the Registration Rights Agreement within sixty (60) days following the Issuance Date.

 

8.        NOTICES .

 

(a)       Whenever the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant is adjusted pursuant to the terms hereof, the Company shall promptly mail to the Holder a notice setting forth the adjusted number of Warrant Shares and/or the adjusted Exercise Price and a brief statement of the facts requiring such adjustment(s).

 

(b)       If, during the period of time between the Issuance Date and the Expiration Date, (i) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (iii) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (iv) the approval of any stockholders of the Company shall be required in connection with any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (v) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder, at least ten (10) days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall

 

be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the subsidiaries of the Company, the Company shall simultaneously file such notice with the SEC pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

9.        AMENDMENT AND WAIVER .  Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Required Holders; provided, that, except as contemplated by Section 2, the number of Warrant Shares subject to this Warrant, the Exercise Price and the Expiration Date may not be amended, and the right to exercise this Warrant may not be altered or waived, without the written consent of the Holder.  Any such amendment shall apply to all Warrants and be binding upon all registered holders of such Warrants.

 

10.        GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL .  This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of California, without reference to the choice of law provisions thereof.  The Company and, by accepting this Warrant, the Holder, each irrevocably submits to the exclusive jurisdiction of the courts of the State of California located in Orange County and the United States District Court for the Central District of California for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Warrant.  The Company and, by accepting this Warrant, the Holder, each irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  The Company and, by accepting this Warrant, the Holder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE HOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

11.           CONSTRUCTION; HEADINGS .  This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any person as the drafter hereof.  The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

 

12.                DISPUTE RESOLUTION .  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile or e-mail transmission within two (2) Business Days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder.  If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two (2) Business Days submit via facsimile or e-mail transmission the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder, which approval shall not be unreasonably withheld.  The Company shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten (10) Business Days from the date it receives the disputed determinations or calculations.  The prevailing party in any dispute resolved pursuant to this Section 11 shall be entitled to be paid for its reasonable expenses incurred in resolving such dispute, including all costs and fees paid or incurred in good faith, in relation to the resolution of such dispute.  Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

13.             REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF .  The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant.

 

14.          TRANSFER .  Subject to compliance with applicable securities laws, and to the requirements of Section 6, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of the Warrant to the Company, together with a written assignment of this Warrant substantially in the form of the Assignment Form attached hereto.

 

15.           CERTAIN DEFINITIONS .  For purposes of this Warrant, the following terms shall have the following meanings:

 

(a)       “ Bloomberg ” means Bloomberg Financial Markets.

 

(b)       “ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law to remain closed.

 

(c)       “ Closing Bid Price ” and “ Closing Sale Price ” means, for any security as of any date, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported on the OTCQB Marketplace.  If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

 

(d)       “ Common Stock ” means (i) the Company’s shares of Common Stock, par value $0.001 per share, and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.

 

(e)          “ Convertible Securities ” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock.

 

(f)       “ Eligible Market ” means the New York Stock Exchange, Inc., the NYSE MKT, the NASDAQ Global Market, the NASDAQ Global Select Market, or the NASDAQ Capital Market.

 

(g)        “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

(h)       “ Expiration Date ” means 11:59 p.m. Pacific Standard Time on the fifth anniversary of the Issuance Date or, if such date falls on a day that is not a Trading Day, then at 11:59 p.m. Pacific Standard Time on the next Trading Day.

 

(i)       “ Fundamental Transaction ” means that the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person (but excluding a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company), or (ii) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), (v) reorganize, recapitalize or reclassify its Common Stock, or (vi) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock.

 

(j)        “ Options ” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

(k)          “ Parent Entity ” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed for trading on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

(l)       “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

 

(m)             “ Principal Market ” means the OTCQB Marketplace.

 

(n)       " Required Holders " means the Holders of a majority of the Warrant Shares evidenced by this Warrant as of the date of determination.

 

(o)       “ Securities Act ” means the Securities Act of 1933, as amended.

 

(p)       “ Successor Entity ” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

 

(q)       “ Trading Day ” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00 p.m., New York time).

 

 [Signature Page Follows]

IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set forth above.

TRUE DRINKS HOLDINGS, INC.   By: /s/ Lance Leonard Name: Lance Leonard Title: Chief Executive Officer

 EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

True Drinks Holdings, Inc.

The undersigned holder hereby exercises the right to purchase _________________ shares of Common Stock (“ Warrant Shares ”) of True Drinks Holdings, Inc., a Nevada corporation (the “ Company ”), [evidenced by the attached Warrant to Purchase Common Stock (the “ Warrant ”) (only include this provision if Warrant is being exercised in full)].  Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

     1.            Form of Exercise Price .  The Holder intends that payment of the Exercise Price shall be made as a:

     2.            Payment of Exercise Price .  In the event that the holder has elected a “Cash Exercise” with respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the Cash Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

     3.            Delivery of Warrant Shares .  The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant and, after delivery of such Warrant Shares, _____________ Warrant Shares remain subject to the Warrant.

Date: _______________ __, ______

   Name of Registered Holder

By:   _____________________________

         Name:

          Title:

 EXHIBIT B

ASSIGNMENT FORM

 

True Drinks Holdings, Inc.

(To assign the foregoing Warrant, execute this form and supply required information.  Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to:

 

Name:
	(Please Print)
Address :
	(Please Print)
Dated: _______________ __, ______
Holder’s Signature:
Holder’s Address :

 

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 

B-1

 

Exhibit 10.4

 

AMENDMENT NO. 1 TO THE SECURITIES PURCHASE AGREEMENT

 

     This Amendment No. 1 (the “ Amendment ”) to the Securities Purchase Agreement, dated August 13, 2015 (the “ Purchase Agreement ”), is entered into as of October 16, 2015 by and between True Drinks Holdings, Inc., a Nevada corporation (the “ Company ”), and each of the parties (individually, a “ Purchaser ” and collectively the “ Purchasers ”) identified in the signature pages hereto. Unless otherwise specified herein, all capitalized terms set forth in this Amendment shall have the meanings as set forth in the Purchase Agreement.

 

RECITALS

 

     WHEREAS , on August 13, 2015, the Company and the Purchasers entered into the Purchase Agreement, wherein the Purchasers agreed to purchase an aggregate total of 17,648 shares of Series C Convertible Preferred Stock (the “ Preferred Stock ”) for $113.33 per share over the course of three Investment Dates, and, as additional consideration, the Company agreed to issue to the Purchasers Warrants to acquire that number of shares of the Company’s common stock, par value $0.001 per share (“ Common Stock ”), at a price of $0.17 per share (the “ Exercise Price ”), equal to 35% of that number of shares of Common Stock determined by dividing (i) the Stated Value (as such term is defined in the Certificate of Designation) of the Preferred Stock purchased by such Purchaser on any particular Investment Date by (ii) the Exercise Price;

 

     WHEREAS , Section 4(b) of the Purchase Agreement contains certain covenants restricting the Company’s ability to issue certain of the Company’s equity securities, referred to in the Purchase Agreement as a Subsequent Placement, with the exception of the issuance of Excluded Securities;

 

     WHEREAS , Purchaser Red Beard Holdings, LLC, a California limited liability company (“ Red Beard ”) has expressed an interest in purchasing an additional 8,823 shares of Preferred Stock on the same terms as set forth in the Purchase Agreement, in order to provide the Company with additional working capital;

 

     WHEREAS , on October 9, 2015, the Company issued to Mr. Vincent C. Smith, a principal of Red Beard, a five-year warrant to purchase 17.5 million shares of Common Stock, at an exercise price of $0.188 per share, as consideration for the execution by Mr. Smith of a personal guaranty relating to certain of the Company’s commercial obligations (the “ Personal Guaranty Warrant ”); and

 

     WHEREAS , the Company and the Purchasers now desire to enter into this Amendment to: (i) permit Red Beard to purchase an additional 8,823 shares of Preferred Stock (“ Additional Investment ”); and (ii) amend the definition of Excluded Securities in the Purchase Agreement to include the Personal Guaranty Warrant.

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned parties agree as follows:

1.            Section 1(b) of the Purchase Agreement is hereby amended and replaced in its entirety with the following:

“(b)            Amounts; Timing of Funding . Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, each Purchaser, severally and not jointly, agrees to purchase, no later than the following dates, the Securities issuable upon receipt of the aggregate Purchase Price set forth opposite each date (each date, an “ Investment Date ”) on such Purchaser’s Execution Page:

 

2.            Section 4(b) of the Purchase Agreement is hereby amended and replaced in its entirety with the following:

“(b)            Additional Issuance of Securities .  The Company agrees that, for the period commencing on the date hereof and ending on the earlier to occur of (i) the date immediately following the first anniversary of the Initial Investment Date (provided that such period shall be extended by the number of days during such period and any extension thereof contemplated by this proviso on which the Registration Statement is not effective or any prospectus contained therein is not available for use); or (ii) the date that the arithmetic average of the closing sale price of the Common Stock is at least $0.30 for ten (10) consecutive trading days   (the “ Restricted Period ”), neither the Company nor any of its Subsidiaries shall directly or indirectly issue, offer, sell, grant any option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any equity security or any equity-linked or related security (including, without limitation, any “equity security” (as that term is defined under Rule 405 promulgated under the Securities Act), any convertible securities, any debt, any preferred stock or any purchase rights (any such issuance, offer, sale, grant, disposition or announcement (whether occurring during the Restricted Period or at any time thereafter) is referred to as a “ Subsequent Placement ”). Notwithstanding the foregoing, this Section 4(b) shall not apply in respect of the issuance of:

 

(i)            shares of Common Stock or standard options to purchase Common Stock to directors, officers, consultants or employees of the Company in their capacity as such pursuant to an Approved Share Plan (as defined below);

 

(ii)            shares of Common Stock issued upon the conversion or exercise of, or otherwise on account of, Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by clause (A) above) issued prior to the date hereof, provided that the conversion, exercise or other method of issuance (as the case may be) of any such Convertible Security is made solely pursuant to the conversion, exercise or other method of issuance (as the case may be) provisions of such Convertible Security that were in effect on the date immediately prior to the date of this Agreement, the conversion, exercise or issuance price of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by clause (A) above) is not lowered, none of such Convertible Securities are (other than standard options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by clause (A) above) (nor is any provision of any such Convertible Securities) amended or waived in any manner (whether by the Company or the holder thereof) to increase, or which results in an increase in, the number of shares issuable thereunder and none of the terms or conditions of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Share Plan that are covered by clause (A) above) are otherwise changed or waived (whether by the Company or the holder thereof) in any manner that adversely affects any of the Purchasers;

 

(iii)            the Conversion Shares,

 

(iv)            the Warrants;

 

(v)            the Warrant Shares; and

 

(vi)            the warrant issued to Vincent C. Smith on October 9, 2015 (each of the foregoing in clauses (i) through (vi), collectively the “ Excluded Securities ”).

 

“ Approved Share Plan ” means any employee benefit plan which has been approved by the board of directors of the Company, including the Purchaser Designee, if any, prior to or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee, officer, director or consultant for services provided to the Company in their capacity as such.

 

“ Convertible Securities ” means any capital stock, convertible debenture or other security of the Company or any of its Subsidiaries that is, or may become, at any time and under any circumstances directly or indirectly convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any capital stock or other security of the Company (including, without limitation, Common Stock) or any of its Subsidiaries.”

3.            Section 7 of the Purchase Agreement is hereby amended to add a new Section 7(j) as follows:

“(j)            Reservation of Shares .  On or before the date that is sixty (60) days following the Final Investment Date set forth in Section 1(b) , the Company shall reserve such number of shares of its authorized but unissued shares of Common Stock to provide for full conversion of the Preferred Stock and the issuance of the Conversion Shares in connection therewith, the full exercise of the Warrants and the issuance of the Warrant Shares in connection therewith, and the full exercise of the warrant described in Section 4(b)(vi) above and the issuance of shares of Common Stock in connection therewith, and as otherwise required by the Preferred Stock, the Warrants and the Registration Rights Agreement (collectively, the “ Issuance Obligations ”).  In the event such number of shares becomes insufficient to satisfy the Issuance Obligations, the Company shall take all necessary action to authorize and reserve such additional shares of Common Stock necessary to satisfy the Issuance Obligations.”

4.            In addition to the conditions set forth in Section 7 of the Purchase Agreement, the obligation of each Purchaser to purchase the Preferred Stock and Warrants on the Final Investment Date is subject to the Company’s execution and delivery of the Amendment No. 1 to the Registration Rights Agreement, in the form attached hereto as Exhibit A .

                (a)                       Except as the same may be qualified by any attachment hereto updating disclosures in any existing exhibit to the Purchase Agreement, the representations, warranties and covenants of the Company made in the Transaction Documents remain true and accurate and are hereby incorporated in this Amendment by reference and reaffirmed as of the date hereof.

                (b)                      The Company has performed, in all material respects, all obligations required to be performed by it under the Transaction Documents, and no default exists thereunder or an event which, with the passage of time or giving of notice or both, would constitute a default.

                (c)                      The execution, delivery and performance of this Amendment are within the power of the Company and are not in contravention of law, of the Company’s Articles of Incorporation, Bylaws or the terms of any other documents, agreements or undertakings to which the Company is a party or by which the Company is bound.  No approval of any person, corporation, governmental body or other entity not provided herewith is a prerequisite to the execution, delivery and performance by the Company of this Amendment or any of the documents submitted to the Purchasers in connection with the this Amendment, to ensure the validity or enforceability thereof.

(d)                      When executed on behalf of the Company, this Amendment will constitute the legally binding obligations of the Company, enforceable in accordance with their terms, subject to the effect of applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws now existing or hereafter enacted relating to or affecting the enforcement of creditors’ rights generally, and the enforceability may be subject to limitations based on general principles of equity (regardless of whether such enforceability is considered a proceeding in equity or at law).

6.           In the event any conflicts between this Amendment and the terms and conditions set forth in the Purchase Agreement arise, the terms and conditions set forth herein shall control. Notwithstanding the execution of this Amendment, all other terms and conditions of the Purchase Agreement shall remain in full force and effect in accordance with their terms and are hereby ratified and confirmed.  The Purchasers do not, in any way, waive the Company’s obligations to comply with any of the provisions, covenants and terms of the Purchase Agreement (as amended hereby) and the other Transaction Documents.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

IN WITNESS WHEREOF , this Amendment is executed as of the day and year first written above.

ADDRESS:			TRUE DRINKS HOLDINGS, INC.
18552 MacArthur Boulevard, Suite 325 Irvine, CA 92612
			By: /s/ Lance Leonard Name: Lance Leonard Title: Chief Executive Officer
ADDRESS:			PURCHASER:   RED BEARD HOLDINGS, LLC
			By: /s/ Vincent C. Smith Name: Vincent C. Smith Title:  Manager

 

 

[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE SECURITIES PURCHASE AGREEMENT]

EXHIBIT A

AMENDMENT NO. 1 TO THE REGISTRATION RIGHTS AGREEMENT

 

 

 

 

---

 

Exhibit 10.5

 

AMENDMENT NO. 1 TO THE REGISTRATION RIGHTS AGREEMENT

     This Amendment No. 1 (the “ Amendment ”) to the Registration Rights Agreement, dated August 13, 2015 (the “ Agreement ”), is entered into as of October 16, 2015 by and between True Drinks Holdings, Inc., a Nevada corporation (the “ Company ”), and each of the parties (individually, a “ Purchaser ” and collectively the “ Purchasers ”) identified in the signature pages hereto. Unless otherwise specified herein, all capitalized terms set forth in this Amendment shall have the meanings as set forth in the Purchase Agreement (as defined below).

RECITALS

     WHEREAS , on August 13, 2015, in connection with that certain Securities Purchase Agreement, dated August 13, 2015 (the “ Purchase Agreement ”), the Company and the Purchasers entered into the Agreement, wherein the Company undertook obligations to register with the SEC certain shares held by the Purchasers;

     WHEREAS , pursuant to that certain Amendment No. 1 to the Securities Purchase Agreement, dated as of the date hereof, by and between the Company and the Purchasers party thereto, Purchaser Red Beard Holdings, LLC, a California limited liability company (“ Red Beard ”) has agreed to purchase from the Company an additional 8,823 shares of Preferred Stock on the same terms as set forth in the Purchase Agreement;

     WHEREAS , on October 9, 2015, the Company issued to Mr. Vincent C. Smith (the “ Additional Purchaser ”), a principal of Red Beard, a five-year warrant to purchase 17.5 million shares of Common Stock, at an exercise price of $0.188 per share, as consideration for the execution by Mr. Smith of a personal guaranty relating to certain of the Company’s commercial obligations;

     WHEREAS , the Company and the Purchasers now desire to enter into this Amendment to cause the Additional Purchaser to become a party to the Agreement and to cause the Agreement to apply to the newly purchased shares and the shares issuable upon the exercise of the warrant issued in connection with the personal guaranty.

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned parties agree as follows:

1.           In the Recitals to the Agreement, the definition of “ Purchase Agreement ” is amended and restated as “that certain Securities Purchase Agreement, dated August 13, 2015, by and among the Company and the Purchasers, as amended by that certain Amendment No. 1 to the Securities Purchase Agreement, dated October 16, 2015.”

2.           Section 1 of the Agreement is hereby amended to add the following definitions:

“ Guaranty Shares ” means the shares of Common Stock issuable upon the exercise of the Guaranty Warrant.

 

“ Guaranty Warrant ” means, that certain Warrant dated October 9, 2015 by and between the Company and Vincent C. Smith.

 

3.           The following definitions set forth in Section 1 of the Agreement are hereby amended and restated in their entirety as follows:

 “ Purchasers ” means (i) Vincent C. Smith and (ii) the Purchasers identified in the Purchase Agreement and any Affiliate or permitted transferee (as defined in Section 7(c)) of any Purchaser who is a subsequent holder of the Guaranty Warrant, any Series C Warrants or Registrable Securities.

 “ Registrable Securities ” means (i) the Shares, (ii) the Warrant Shares, (iii) the Guaranty Shares, and (iv) any other securities issued or issuable with respect to or in exchange for Registrable Securities, whether by merger, charter amendment or otherwise; provided , that, a security shall cease to be a Registrable Security upon (A) sale pursuant to a Registration Statement or Rule 144 under the 1933 Act, or (B) such security becoming eligible for sale without restriction and without current public information by the Purchasers pursuant to Rule 144.

 

4.           The Additional Purchaser, by his signature below, hereby becomes a “Purchaser” under the Agreement with the same force and effect as if originally named therein as a “Purchaser”.

5.           In the event any conflicts between this Amendment and the terms and conditions set forth in the Agreement arise, the terms and conditions set forth herein shall control. Notwithstanding the execution of this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect in accordance with their terms and are hereby ratified and confirmed.  The Purchasers do not, in any way, waive the Company’s obligations to comply with any of the provisions, covenants and terms of the Agreement (as amended hereby).

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

IN WITNESS WHEREOF , this Amendment is executed as of the day and year first written above.

ADDRESS:			TRUE DRINKS HOLDINGS, INC.
18552 MacArthur Boulevard, Suite 325 Irvine, CA 92612
			By: /s/ Lance Leonard Name: Lance Leonard Title: Chief Executive Officer
ADDRESS:			PURCHASER:   RED BEARD HOLDINGS, LLC
			By: /s/ Vincent C. Smith Name: Vincent C. Smith Title:  Manager

IN WITNESS WHEREOF , this Amendment is executed as of the day and year first written above.

ADDRESS:			PURCHASER
			_____________________________ Vincent C. Smith

 

 

[SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE REGISTRATION RIGHTS AGREEMENT]

 

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