UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of
report (Date of earliest event reported):
April 25, 2019
Commission
File Number:
001-32420
True Drinks Holdings, Inc.
(Exact
name of registrant as specified in its charter.)
Nevada
(State
or other jurisdiction of incorporation or
organization)
|
84-1575085
(IRS
Employer Identification No.)
|
2 Park Plaza, Suite 1200, Irvine, California 92614
(Address
of principal executive offices)
949-203-3500
(Registrant's
Telephone number)
Not Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (17 CFR
230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17
CFR 240.12b-2)
Emerging
growth company [ ]
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. [ ]
Item 1.01 Entry into a Material Definitive Agreement
See
Items 1.02, 2.01 and 5.02 below.
Item 1.02 Termination of a Material Definitive
Agreement
On
April 26, 2019, True Drinks Holdings, Inc. (the “
Company
”) entered into a Debt
Conversion Agreement with Red Beard Holdings, LLC
(“
Red Beard
”),
a significant holder of the Company’s securities, pursuant to
which Red Beard converted certain outstanding indebtedness of the
Company, in the aggregate amount of $4,227,250, into 1,070,741,474
shares of the Company’s common stock, par value $0.001 per
share (“
Common
Stock
”) (the “
Debt Conversion
”).
As a result of the Debt Conversion, all
indebtedness, liabilities and other obligations of the Company held
by and owed to Red Beard were cancelled and deemed satisfied in
full. A copy of the Debt Conversion Agreement is attached to this
Current Report as Exhibit 10.1.
The issuance of the shares of Common Stock in
connection with the Debt Conversion was exempt from the
registration requirements of the Securities Act of 1933, as amended
(the “
Securities
Act
”), in reliance
on the exemption provided by Section 4(a)(2) and/or Section 3(a)(9)
of the Securities Act. Such shares of Common Stock have not been
registered under the Securities Act or any other applicable
securities laws, and unless so registered, may not be offered or
sold in the United States except pursuant to an exemption from the
registration requirements of the Securities
Act.
Item 2.01 Completion of Acquisition or Disposition of
Assets
On
April 26, 2019 (the “
Closing
Date
”), the Company entered into a Securities Exchange
Agreement, in the form attached to this Current Report as Exhibit
10.2 (the “
Exchange
Agreement
”), with each of the members
(“
Members
”) of
Charlies Chalk Dust, LLC, a Delaware limited liability company
(“
CCD
”), and
certain direct investors (“
Direct Investors
”), pursuant to
which the Company acquired all outstanding membership interests of
CCD beneficially owned by the Members in exchange for the issuance
by the Company of units (“
Units
”), with such Units
consisting of an aggregate of (i) 15,655,744,597 shares of Common
Stock (which includes the issuance of an aggregate of 1,396,305
shares a newly created class of Series B Convertible Preferred
Stock, par value $0.001 per share (“
New Series B Preferred
”),
convertible into an aggregate of 13,963,047,716 shares of Common
Stock, issued to certain individuals in lieu of Common Stock); (ii)
2,062,490 shares of a newly created class of Series A Convertible
Preferred Stock, par value $0.001 per share (“
Series A Preferred
”); and (iii)
warrants to purchase an aggregate of 4,033,769,340 shares of Common
Stock (the “
Investor
Warrants
,” and together with the Common Stock, Series
A Preferred and New Series B Preferred, the “
Securities
”) (the
“
Exchange
”). As
a result of the Exchange, CCD became a wholly owned subsidiary of
the Company.
The
Investor Warrants, a form of which is attached to this Current
Report as Exhibit 4.1, have a term of five years, and are
exercisable at a price of $0.0044313 per share, subject to certain
adjustments. The Investor Warrants may be exercised at any time at
the option of the holder;
provided,
however
, that the Investor Warrants shall not become
exercisable unless and until such time that the Company has amended
its Amended and Restated Articles of Incorporation, as amended
(“
Charter
”), to
increase the number of shares authorized for issuance thereunder by
a sufficient amount to allow for the conversion and/or exercise of
all Securities issued to the Members and Direct Investors in the
Exchange (the “
Increase in
Authorized
”). In addition, pursuant to the terms of
the Investor Warrants, a holder may not exercise any portion of the
Investor Warrants in the event that such exercise would result in
the holder and its affiliates beneficially owning in excess of
4.99% of the Company’s issued and outstanding Common Stock
immediately thereafter, which limit may be increased to 9.99% at
the election of the holder.
As a
condition to entering into the Exchange, the Company was required
to convert all of its currently issued and outstanding Series B
Convertible Preferred Stock, Series C Convertible Preferred Stock,
and Series D Convertible Preferred Stock (collectively, the
“
Old
Preferred
”), and existing indebtedness, into shares of
Common Stock. See Item 5.03 below. In addition, upon consummation
of the Exchange, CCD was provided with the right to appoint two
directors to the Company’s Board of Directors. See Item 5.02
below.
In connection with the Exchange, the Company also
entered into Registration Rights Agreements (the
“
Registration Rights
Agreements
”), a form of
which is attached to this Current Report as Exhibit 10.3, with each
of the Members and Direct Investors, pursuant to which the Company
agreed to use its best efforts to file a registration statement
with the Securities and Exchange Commission no later than 30 days
after the Closing Date in order to register, on behalf of the
Members and Direct Investors, the shares of Common Stock, shares of
Common Stock issuable upon conversion of the Series A Preferred and
New Series B Preferred, and shares of Common Stock issuable upon
exercise of the Investor Warrants. See Item 5.03
below.
Immediately prior
to, and in connection with, the Exchange, CCD consummated a private
offering of membership interests that resulted in net proceeds to
CCD of approximately $27.5 million (the “
CCD Financing
”). Katalyst
Securities LLC (“
Katalyst
”) acted as the sole
placement agent in connection with the CCD Financing pursuant to an
Engagement Letter entered into by and between Katalyst, CCD and the
Company on February 15, 2019, a copy of which is attached to this
Current Report as Exhibit 10.4, which was amended on April 16,
2019, a copy of which amendment is attached to this Current Report
as Exhibit 10.5 (“
Amended
Engagement Letter
”). As consideration for its services
in connection with the CCD Financing and Exchange, the Company
issued to Katalyst and its designees five-year warrants to purchase
an aggregate of 902,661,671 shares of Common Stock at a price of
$0.0044313 per share (the “
Placement Agent Warrants
”). The
Placement Agent Warrants have substantially the same terms as those
set forth in the Investor Warrants.
As
additional consideration for advisory services provided in
connection with the CCD Financing and Exchange, the Company issued
an aggregate of 902,661,671 shares of Common Stock (the
“
Advisory
Shares
”), including to Scot Cohen, a member of the
Company’s Board of Directors, pursuant to a Subscription
Agreement, a copy of which is attached to this Current Report as
Exhibit 10.6.
The
Exchange resulted in a change of control of the Company, with the
Members and Direct Investors owning approximately 85.7% of the
Company’s outstanding voting securities immediately after the
Exchange, and the Company’s current stockholders beneficially
owning approximately 14.3% of the issued and outstanding voting
securities, which includes the Advisory Shares. Together, Ryan
Stump and Brandon Stump, the founders of CCD and the
Company’s newly appointed Chief Executive Officer and Chief
Operating Officer, respectively, own in excess of 50% of the
Company’s issued and outstanding voting securities as a
result of the Exchange. Upon issuance of the Common Stock,
conversion of the Series A Preferred and New Series B Preferred,
and exercise of the Investor Warrants and Placement Agent Warrants
issued in connection with the Exchange, and assuming that the
Company’s Charter is further amended to effect the Increase
in Authorized, it is anticipated that the Company shall have an
aggregate of approximately 27.7 billion shares of Common Stock
issued and outstanding, of which approximately 24.3 billion shares
issued or issuable in connection with the Exchange are and shall be
restricted until such time as such shares are registered under the
Securities Act or an exemption therefrom is available to permit the
resale of such shares.
The
Common Stock, Series A Preferred, New Series B Preferred, Investor
Warrants, Placement Agent Warrants and Advisory Shares issued in
connection with the Exchange were issued without registration
and are subject to restrictions under the Securities Act, and
the securities laws of certain states, in reliance on the private
offering exemptions contained in Section 4(a)(2) of the Securities
Act and on Regulation D promulgated thereunder, and in reliance on
similar exemptions under applicable state laws as a transaction not
involving a public offering.
The
foregoing descriptions of the Exchange Agreement, Investor
Warrants, Registration Rights Agreement, Engagement Letter, Amended
Engagement Letter and Subscription Agreement do not purport to be
complete, and are qualified in their entirety by reference to the
same, attached to this Current Report as Exhibits 10.2, 4.1,
10.3, 10.4, 10.5 and 10.6, respectively, each of which are
incorporated by reference herein.
On
April 29, 2019, the Company issued a press release announcing the
Exchange, a copy of which is attached to this Current Report as
Exhibit 99.1, and is incorporated by reference herein.
Item 3.02 Unregistered Sales of Equity Securities
See
Item 2.01 above.
Item 3.03 Material Modification to Rights of Security
Holders
See
Item 2.01 above and Item 5.03 below.
Item 5.01 Changes in Control of Registrant
See
Item 2.01 above and Item 5.02 below.
Item 5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers
Resignation of Officers and Directors
On
April 26, 2019, effective upon consummation of the Exchange, Ramona
Capello, Jim Greco and Neil LeVecke each resigned from his or her
position as a member of the Company’s Board of Directors. In
addition, effective upon consummation of the Exchange, Robert Van
Boerum resigned from his position as the Company’s Principal
Executive Officer and Principal Financial Officer. Messrs. Greco,
LeVecke and Van Boerum, as well as Ms. Capello, each separately
indicated that his or her resignation was not due to any dispute or
disagreements with the Company on any matter related to the
Company’s operations, policies or practices.
Appointment of New Officers and Directors
On
April 26, 2019, effective upon consummation of, and in connection
with, the Exchange and immediately after the resignation of the
foregoing directors and officers, Brandon Stump and Ryan Stump were
each appointed as directors on the Company’s Board of
Directors, and Brandon Stump, Ryan Stump and David Allen were
appointed as the Company’s Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer, respectively.
Brandon Stump and Ryan Stump are brothers.
Brandon
Stump, age 33, is a co-founder of CCD, and has served as
CCD’s Chief Executive Officer since its inception in 2014.
Prior to co-founding CCD, Mr. Stump
co-founded his first business, the Ohio House in 2011, with his
brother Ryan Stump. Since then, he has gone on to co-found both The
Chadwick House and Buckeye Recovery Network, both established in
2017, as well as The Mend California, established in 2018. These
programs provide a continuum of care and services to men and women
from the country promoting emotional, physical and spiritual
development
.
As a
co-founder of CCD, the Board of Directors believes that Mr.
Stump’s substantial entrepreneurial, marketing, sales and
industry experience provide the Board with valuable expertise that
will assist the Company in continuing to grow its revenue and to
enter into new markets for its products.
Ryan
Stump, age 30, has served as CCD’s Chief Operating Officer
since 2014, during which time he has been responsible for all
global operations of CCD. Prior to joining CCD, Mr. Stump worked as
an Associate Territory Manager and then a Territory Manager for
ConMed, a medical sales device company, from 2010 to 2013. Mr.
Stump also co-founded and continues to be engaged with multiple
companies, including The Ohio House since 2011, the Buckeye
Recovery Network since 2017, and The Mend California since 2018.
Mr. Stump earned a B.S. and B.A. in Sports Marketing and Marketing
from Duquesne University.
The
Board of Directors believes that Mr. Stump’s experience
operating high growth companies, as well as entrepreneurial
experience, will be valuable to the Board as it manages the
Company’s anticipated continued growth.
David
Allen
brings over 22 years of
experience as the Chief Financial Officer of public companies. In
addition to his service as the Company’s Chief Financial
Officer, Mr. Allen currently serves as Chief Financial Officer of
Iconic Brands, Inc. (OTCQB: ICNB), a position that he has held
since September 2018. From December 2014 to January 2018, Mr. Allen
served as the Chief Financial Officer of WPCS International, Inc.,
a design-build engineering firm focused on the deployment of
wireless networks and related services. WPCS International was
listed on Nasdaq, and Mr. Allen oversaw its financial reporting
obligations and Securities and Exchange Commission
(“
SEC
”) compliance. From June 2006 to June 2013,
Mr. Allen served as the Chief Financial Officer and Executive Vice
President of Administration at Converted Organics, Inc., a company
organized to convert food waste into organic fertilizer. At
Converted Organics, he was responsible for SEC reporting, audit,
insurance and taxes. Mr. Allen is currently an Assistant Professor
of Accounting at Southern Connecticut State University, a position
he has held since 2017, and for the 12 years prior to that he was
an Adjunct Professor of Accounting at SCSU and Western Connecticut
State University. Mr. Allen is a licensed CPA and holds a
Bachelor’s Degree in Accounting and a Master’s Degree
in Taxation from Bentley College.
Employment Agreements
On
April 26, 2019, in connection with the Exchange and his appointment
as Chief Executive Officer, the Company and Brandon Stump entered
into an employment agreement (the “
B. Stump Employment Agreement
”),
a copy of which is attached to this Current Report as Exhibit 10.7,
pursuant to which Brandon Stump shall (i) serve as the
Company’s Chief Executive Officer for a term of three years,
renewable for one-year periods thereafter, during which time he
shall report to the Company’s Board of Directors; (ii) be
subject to a non-competition requirement for three years after his
termination; (iii) be subject to a non-solicitation requirement for
one year after his termination, and be entitled to receive the
following compensation for his services as Chief Executive Officer:
(a) an annual base salary of $500,000, which shall increase on an
annual basis by an amount not less than $25,000 per year, as
determined by the Compensation Committee of the Company’s
Board of Directors, (b) an annual cash bonus of up to $750,000 per
year, which cash bonus will be determined based on the
Company’s achievement of audited gross revenue targets of
$35.0 million per year, as more particularly set forth in the B.
Stump Employment Agreement, (c) certain milestone based bonuses,
(d) an annual award of shares of Common Stock having an aggregate
value equal to one-half of Brandon Stump’s annual base salary
in effect for such year, which shares shall vest quarterly in equal
amounts over a three year period commencing on the issuance date,
(e) participation in the Company’s retirement plan, if any,
(f) reimbursement of all reasonable business-related expenses
incurred by Brandon Stump, (e) full health insurance coverage for
he and his dependents, and at least $5.0 million of life insurance,
(g) 21 paid vacation days per year, and (h) a monthly automobile
allowance of $750 per month.
The
Company may terminate the B. Stump Employment Agreement in the
event of Brandon Stump’s death or disability, or for Cause,
as defined in the B. Stump Employment Agreement;
provided, however
, that at no time may
the Company terminate him without Cause. Brandon Stump may
terminate the B. Stump Employment Agreement at any time for any
reason. In the event that his employment is terminated by him
without Good Reason, as defined in the B. Stump Employment
Agreement, or by the Company for Good Cause as a result of a Change
in Control, he shall be entitled to the following compensation: (i)
any earned but unpaid salary through the termination date, (ii)
unpaid and unreimbursed expenses, (iii) earned but unpaid bonuses,
and (iv) any accrued vacation days;
provided, however
, that in the event
that the B. Stump Employment Agreement is terminated by Brandon
Stump for any reason, he shall also be entitled to one year’s
severance, consisting of one year’s base salary, milestone
bonuses and certain other benefits. In the event his employment is
terminated by the Company without Cause or Brandon Stump terminates
it for Good Reason, as defined in the B. Stump Employment
Agreement, then he shall be entitled to the following compensation:
(i) all amounts due to him through the termination date, (ii) full
vesting of any and all previously granted equity-based incentive
awards, and (iii) health insurance coverage for a period of 18
months after the termination date. In addition, effective upon a
Change in Control, regardless of whether the B. Stump Employment
Agreement is terminated, his base salary for the year in which the
Change in Control occurred and any years thereafter shall
automatically increase by 20% and the milestone bonuses shall
automatically decrease by 30%.
On
April 26, 2019, in connection with the Exchange and his appointment
as Chief Operating Officer, the Company and Ryan Stump entered into
an employment agreement (the “
R. Stump Employment Agreement
”),
a copy of which is attached to this Current Report as Exhibit 10.8,
pursuant to which Ryan Stump shall (i) serve as the Company’s
Chief Operating Officer for a term of three years, renewable for
one-year periods thereafter, during which time he shall report to
the Company’s Chief Executive Officer; (ii) be subject to a
non-competition requirement for three years after his termination;
(iii) be subject to a non-solicitation requirement for one year
after his termination, and be entitled to receive the following
compensation for his services as Chief Operating Officer: (a) an
annual base salary of $500,000, which shall increase on an annual
basis by amount that is not less than $25,000 per year, as
determined by the Compensation Committee of the Company’s
Board of Directors, (b) an annual cash bonus of up to $750,000 per
year, which cash bonus will be determined based on the
Company’s achievement of a gross revenue target of $35.0
million per year, as more particularly set forth in the R. Stump
Employment Agreement, (c) certain milestone based bonuses, (d) an
annual award of shares of Common Stock having an aggregate value
equal to one-half of Ryan’s annual base salary in effect for
such year, which shares shall vest quarterly in equal amounts over
a three year period commencing on the issuance date, (e)
participation in the Company’s retirement plan, if any, (f)
reimbursement of all reasonable business-related expenses incurred
by Ryan Stump, (e) full health insurance coverage for he and his
dependents, and at least $5.0 million of life insurance, (g) 21
paid vacation days per year, and (h) a monthly automobile allowance
of $750 per month.
The
Company may terminate the R. Stump Employment Agreement in the
event of Ryan Stump’s death or disability, or for Cause, as
defined in the R. Stump Employment Agreement;
provided, however
, that at no time may
the Company terminate him without Cause. Ryan Stump may terminate
the R. Stump Employment Agreement at any time for any reason. In
the event that his employment is terminated by him without Good
Reason, as defined in the R. Stump Employment Agreement, or by the
Company for Good Cause as a result of a Change in Control, he shall
be entitled to the following compensation: (i) any earned but
unpaid salary through the termination date, (ii) unpaid and
unreimbursed expenses, (iii) earned but unpaid bonuses, and (iv)
any accrued vacation days;
provided, however
, that in the event
that the R. Stump Employment Agreement is terminated by Ryan Stump
for any reason, he shall also be entitled to one year’s
severance, consisting of one year’s base salary, milestone
bonuses and certain other benefits. In the event that his
employment is terminated by the Company without Cause or he
terminates it for Good Reason, as defined in the R. Stump
Employment Agreement, then Ryan Stump shall be entitled to the
following compensation: (i) all amounts due to him through the
termination date, (ii) full vesting of any and all previously
granted equity-based incentive awards, and (iii) health insurance
coverage for a period of 18 months after the termination date. In
addition, effective upon a Change in Control, regardless of whether
the R. Stump Employment Agreement is terminated, his base salary
for the year in which the Change in Control occurred and any years
thereafter shall automatically increase by 20% and the milestone
bonuses shall automatically decrease by 30%.
Except as disclosed in this Current Report on Form 8-K, Messrs.
Brian Stump, Ryan Stump and David Allen have no direct or indirect
material interest in any transaction required to be disclosed
pursuant to Item 404(a) of Regulation S-K, have no
arrangement or understanding between them and any other person
required to be disclosed pursuant to Item 401(b) of
Regulation S-K, and have no family relationships required
to be disclosed pursuant to Item 401(d) of
Regulation S-K.
The
foregoing descriptions of the B. Stump Employment Agreement and R.
Stump Employment Agreement do not purport to be complete, and are
qualified in their entirety by reference to the same, attached to
this Current Report as Exhibits 10.7 and 10.8, respectively,
each of which are incorporated by reference herein.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change
in Fiscal Year
Restructuring of the Old Series B Preferred, Old Series C Preferred
and Old Series D Preferred
On
April 26, 2019, in connection with the Exchange, the Company filed
Amendments to the Certificate of Designation After Issuance of
Class or Series with the Secretary of State of the State of Nevada
to amend the Certificates of Designation, Preferences, Rights and
Limitations, as amended (each, a “
COD
”), of the Company’s Old
Preferred, consisting of Series B Convertible Preferred Stock
(“
Old Series B
Preferred
”), Series C Convertible Preferred Stock
(“
Old Series C
Preferred
”) and Series D Convertible Preferred Stock
(“
Old Series D
Preferred
”) (the “
Amendments
”). Each of the CODs
were amended to provide the Company with the right, at its
election, to convert all of the issued and outstanding shares of
Old Preferred into Common Stock, at a price of $0.25 per share in
the case of the Old Series B Preferred, and $0.025 per share in the
case of the Old Series C Preferred and Old Series D Preferred. In
addition, the Series B Preferred COD was amended to remove Section
8 in its entirety, which required the Company to redeem all
outstanding shares of Old Series B Preferred under certain
circumstances. Copies of the Second Amended and Restated COD of the
Old Series B Preferred, Fourth Amended and Restated COD of the Old
Series C COD, and First Amended and Restated COD of the Series D
COD are attached to this Current Report as Exhibits 3.1, 3.2 and
3.3, respectively.
Prior
to effecting each of the Amendments, the Company obtained written
consent from the holders of the requisite number of outstanding
shares of Old Series B Preferred, Old Series C Preferred and Old
Series D Preferred, as set forth in their respective CODs, to
effect such Amendments.
Immediately after
effecting the Amendments, the Company provided each holder of the
Old Series B Preferred, Old Series C Preferred and Old Series D
Preferred with a Mandatory Conversion Notice, pursuant to which the
Company converted all outstanding shares of the Old Preferred into
an aggregate of 580,385,360 shares of Common Stock.
Promptly after
distributing the Mandatory Conversion Notices to all holders of the
Old Preferred, the Company filed Certificates of Withdrawal for
each of the Old Series B Preferred, Old Series C Preferred and Old
Series D Preferred, copies of which are attached to this Current
Report as Exhibits 3.4, 3.5 and 3.6, respectively, with the
Secretary of State of the State of Nevada, thereby eliminating the
Old Series B Preferred, Old Series C Preferred and Old Series D
Preferred and returning them to authorized but unissued shares of
the Company’s preferred stock.
The
issuance of the shares of Common Stock in connection with the
conversion of the Old Preferred was exempt from the registration
requirements of the Securities Act, in reliance on the
exemption provided by Section 4(a)(2) and/or Section 3(a)(9) of the
Securities Act. Such shares of Common Stock have not been
registered under the Securities Act or any other applicable
securities laws, and unless so registered, may not be offered or
sold in the United States except pursuant to an exemption from the
registration requirements of the Securities Act.
Creation of Series A Preferred
On
April 25, 2019, in connection with the Exchange, the Company filed
the Certificate of Designation, Preferences and Rights of the
Series A Convertible Preferred Stock (the “
Series A COD
”), a copy of which
is attached to this Current Report as Exhibit 3.7, with the
Secretary of State of the State of Nevada, designating 300,000
shares of its preferred stock as Series A Convertible Preferred
Stock. Each share of Series A Preferred has a stated value of $100
per share (the “
Series A
Stated Value
”).
The
Series A Preferred rank senior to all of the Company’s
outstanding securities, including the Company’s Series B
Convertible Preferred Stock.
The Series A Preferred provides the holders with
the right to receive a one-time dividend payment equal to 8% of the
Series A Stated Value (the “
Series A
Dividend
”), which Series
A Dividend shall be paid by the Company on the earlier to occur of
(i) when declared at the election of the Company, (ii) one year
from the date of issuance, or (iii) when a holder elects to convert
its shares of Series A Preferred into Common
Stock.
Each share of Series A Preferred is convertible,
at the option of the holder, into that number of shares of Common
Stock equal to the Series A Stated Value plus all accrued but
unpaid dividends, divided by $0.044313, which conversion rate is
subject to adjustment in accordance with the terms of the Series A
COD;
provided,
however
, that holders of the
Series A Preferred may not convert any shares of Series A Preferred
into Common Stock unless and until the Company has effected the
Increase in Authorized. In addition, holders of Series A Preferred
are prohibited from converting Series A Preferred into Common Stock
if, as a result of such conversion, the holder, together with its
affiliates, would own more than 4.99% (or 9.99% upon the election
of the holder prior to the issuance ofthe Series A Preferred) of
the total number of shares of Common Stock then issued and
outstanding. Each share of Series A Preferred is convertible at the
option of the Company, at the same conversion rate set forth above,
at such time, if ever, that the Company’s Common Stock is
listed on the Nasdaq Stock Market and the Company has paid the
Series A Dividend. In addition, upon the occurrence of a Bankruptcy
Event (as defined in the Series A COD), the Company shall be
required to redeem, in cash, all outstanding shares of Series A
Preferred at a price equal to the conversion
amount;
provided,
however
, that holders of the
Series A Preferred shall have the right to waive, in whole or in
part, such right to receive payment upon the occurrence of a
Bankruptcy Event.
Holders of the Series A Preferred shall vote on an
as-converted basis along with holders of the Company’s Common
Stock on all matters presented to the Company’s
stockholders;
provided,
however
, that the number of
votes that any holder, together with its affiliates, may exercise
in connection with all of the Company securities held by such
holder shall not exceed 9.99% of the voting power of the Company.
In addition, pursuant to the Series A COD, the Company shall not
take the following actions without obtaining the prior consent of
at least a majority of the holders of the outstanding Series A
Preferred, voting separately as a single class:
(i) amend
the Company’s Charter or bylaws, or file a certificate of
designation or certificate of amendment to any series of preferred
stock if such action would adversely affect the holders of the
Series A Preferred, (ii) increase or decrease the authorized number
of shares of Series A Preferred, (iii) create or authorize any
series of stock that ranks senior to, or on parity with, the Series
A Preferred, (iv) purchase, repurchase or redeem any shares of
junior stock, or (v) pay dividends on any junior or parity
stock
. Furthermore, so long as at
least 25% of the Series A Preferred remain outstanding, holders of
the Series A Preferred (other than the Direct Investors) shall have
a right to appoint two members to the Company’s Board of
Directors
, and the Board shall not consist of more than five
members, unless the holders of a majority of the outstanding Series
A Preferred have consented to an increase in such
number.
Creation of New Series B Preferred
On
April 26, 2019, in connection with the Exchange and subsequent to
filing a Certificate of Withdrawal for the Old Series B Preferred,
the Company filed the Certificate of Designation, Preferences and
Rights of the Series B Convertible Preferred Stock (the
“
New Series B
COD
”), a copy of which is attached to this Current
Report as Exhibit 3.8, with the Secretary of State of the State of
Nevada, designating 1.5 million shares of its preferred stock as
Series B Convertible Preferred Stock.
The New Series B Preferred ranks junior to the
Series A Preferred and senior to all of the Company’s other
outstanding securities.
The
New Series B Preferred is structured to act as a Common Stock
equivalent. Upon the Company amending its Charter to effect the
Increase in Authorized, each share of New Series B Preferred shall
be converted into 10,000 shares of Common Stock, subject to certain
adjustments. Shares of New Series B Preferred may not be converted
into Common Stock until the Increase in Authorized is effective.
Holders of the New Series B Preferred are not entitled to
dividends, unless the Company’s Board of Directors elects to
issue a dividend to holders of Common Stock.
Holders of the New Series A Preferred shall vote
on an as-converted basis along with holders of the Company’s
Common Stock on all matters presented to the Company’s
stockholders. In addition, pursuant to the New Series B COD, the
Company shall not take the following actions without obtaining the
prior consent of at least 50% of the holders of the outstanding New
Series B Preferred, voting separately as a single class:
(i)
amend the provisions of the New Series B COD so as to adversely
affect holders of the New Series B Preferred, (ii) increase the
authorized number of shares of New Series B Preferred, or (iii)
effect any distribution with respect to junior stock, unless the
Company also provides such distribution to holders of the New
Series B Preferred.
The foregoing descriptions of the Amendments,
Certificates of Withdrawal, Series A Preferred and New Series B
Preferred are qualified, in their entirety, by the full text of the
(i)
Second Amended and Restated COD of the Old Series B
Preferred, Fourth Amended and Restated COD of the Old Series C COD,
and First Amended and Restated COD of the Series D COD are attached
to this Current Report as Exhibits 3.1, 3.2 and 3.3 respectively,
(ii) Certificates of Withdrawal
for each of the Old Series B Preferred, Old Series C Preferred and
Old Series D Preferred, copies of which are attached to this
Current Report as Exhibits 3.4, 3.5 and 3.6, respectively, and
(iii) the Series A COD and New Series B COD, copies of which are
attached to this Current Report as Exhibits 3.7 and 3.8
respectively, each of which
is
incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits
The financial statements required by Item 9.01(a) of Form 8-K will
be filed no later than 71 calendar days after the date that this
Current Report on Form 8-K is required to be filed.
See Exhibit Index.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date:
April 30, 2019
|
True Drinks Holdings, Inc.
By:
/s/ Brandon
Stump
|
Name: Brandon Stump
|
Title: Chief Executive Officer
|
EXHIBIT INDEX
Exhibit No.
|
|
Description
|
|
|
|
|
|
Second Amended and Restated Certificate of Designation,
Preferences, Rights and Limitations of the Series B Convertible
Preferred stock, dated April 26, 2019.
|
|
|
Fourth Amended and Restated Certificate of Designation,
Preferences, Rights and Limitations of the Series C Convertible
Preferred stock, dated April 26, 2019.
|
|
|
First Amended and Restated Certificate of Designation, Preferences,
Rights and Limitations of the Series D Convertible Preferred stock,
dated April 26, 2019.
|
|
|
Certificate of Withdrawal of the Series B Convertible Preferred
Stock, dated April 26, 2019.
|
|
|
Certificate of Withdrawal of the Series C Convertible Preferred
Stock, dated April 26, 2019.
|
|
|
Certificate of Withdrawal of the Series D Convertible Preferred
Stock, dated April 26, 2019.
|
|
|
Certificate of Designations, Preferences and Rights of the Series A
Convertible Preferred Stock, dated April 25, 2019.
|
|
|
Certificate of Designations, Preferences and Rights of the Series B
Convertible Preferred Stock, dated April 26, 2019.
|
|
|
Form of Investor Warrant, dated April 26, 2019
|
|
|
Debt Conversion Agreement by and between True Drinks Holdings, Inc.
and Red Beard, LLC, dated April 26, 2019.
|
|
|
Form of Exchange Agreement, dated April 26, 2019
|
|
|
Form of Registration Rights Agreement, dated April 26,
2019
|
|
|
Engagement Letter by and between True Drinks Holdings, Inc.,
Charlie’s Chalk Dust LLC and Katalyst Securities LLC, dated
February 15, 2019.
|
|
|
Amendment to Engagement Letter, dated April 16, 2019.
|
|
|
Subscription Agreement, dated April 26, 2019.
|
|
|
Employment Agreement by and between True Drinks Holdings, Inc. and
Brandon Stump, dated April 26, 2019.
|
|
|
Employment Agreement by and between True Drinks Holdings, Inc. and
Ryan Stump, dated April 26, 2019.
|
|
|
Press Release, dated April 29, 2019.
|
Exhibit 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS
of
SERIES B CONVERTIBLE PREFERRED STOCK
of
TRUE DRINKS HOLDINGS, INC.
Pursuant to Section 78.1955 of the Nevada Revised
Statutes
True
Drinks Holdings, Inc., a Nevada corporation (the
“
Company
”), in
accordance with the provisions of Sections 78.195, 78.1955 and
78.2055 of the Nevada Revised Statutes (“
NRS
”), does hereby certify that,
pursuant to the authority conferred upon the Board of Directors
(the “
Board
”)
of the Company by the Articles of Incorporation of the Company, as
amended, the following resolution amending and restating the
Certificate of Designation, Preferences, Rights and Limitations of
the Series B Convertible Preferred Stock, was duly adopted on April
25, 2019:
WHEREAS
, pursuant to its authority, the
Board of Directors of the Company previously fixed the rights,
preferences, restrictions and other matters relating to a
Series B Convertible Preferred Stock, consisting of up to 2.75
million shares of the preferred stock, par value $0.001 per share
(“
Preferred
Stock
”), which the Company has the authority to issue,
as set forth in a Certificate of Designations of Preferences,
Rights and Limitations dated November 22, 2013 (the
“
Certificate of
Designations
”) and amended on February 18, 2015:
and
WHEREAS
, the Board of Directors wishes
to amend and restate the Certificate of Designations in its
entirety pursuant to Section 78.2055 of the Nevada Revised
Statutes;
NOW, THEREFORE, BE IT RESOLVED
, that the
Board of Directors does hereby amend and restate the Certificate of
Designations and does hereby provide for the issuance of a series
of Preferred Stock for cash or exchange of other securities, rights
or property and does hereby fix and determine the rights,
preferences, restrictions and other matters relating to such series
of Preferred Stock as follows:
1.
Designation and
Amount
.
The
shares of such series shall be designated as “Series B
Convertible Preferred Stock,” $0.001 par value per share (the
“
Preferred
Stock
”), and the number of shares constituting such
series shall be 2,750,000. Each share of Preferred Stock shall have
a stated value equal to $4.00 (the “
Stated Value
”).
(a)
Holders
of Preferred Stock (the “
Holders
”) shall be entitled to receive, and the
Company shall pay, cumulative dividends on the Preferred Stock at
the rate of 5.00% of the Stated Value per annum, payable in arrears
commencing on March 31, 2014 (the “
First Payment
Date
”) and payable
quarterly in arrears on each June 30, September 30, December 31,
and March 31 thereafter, except if such date is not a trading day,
in which case such dividend shall be payable on the next succeeding
trading day (each, a “
Dividend Payment
Date
”);
provided,
howeve
r, in the event the
Company elects to pay the cumulative dividends on the First Payment
Date in the form of shares of the Company’s common stock,
$0.001 par value per share (“
Common
Stock
”), as provided in
Section 2(b) below (“
Dividend
Shares
”), and such
Dividend Shares are not covered by an effective registration
statement under the Securities Act of 1933, as amended (the
“
Securities
Act
”), the First Payment
Date shall be deemed to be June 30, 2014, and the cumulative
dividends required to be paid on the date thereof shall cover the
period beginning on the Original Issue Date through June 30, 2014.
Dividends on the shares of Preferred Stock (i) shall be calculated
on the basis of a 360-day year consisting of twelve 30-day months,
(ii) shall accrue daily commencing on the Original Issue Date of
the applicable shares of Preferred Stock until the date when such
shares are no longer outstanding, and (iii) shall be deemed to
accrue with respect to such shares from such date whether or not
earned or declared and whether or not there are profits, surplus or
other funds of the Company legally available for the payment of
dividends. All dividends payable on each share of Preferred Stock
shall be paid in preference and priority to the payment of any
dividends on any other class or series of capital stock of the
Company, including, without limitation, the Company’s Common
Stock.
(b)
Subject
to the conditions and limitations set forth in this
Section
2
,
the Company may pay dividends required pursuant to
Section
2
(a)
at each Dividend Payment Date to any
Holder (i) in shares of Common Stock, (ii) in cash, or (iii) in
some combination of Common Stock and cash, provided that each
Holder shall receive the same combination of Common Stock and cash
as all other Holders on any Dividend Payment Date. The Company must
deliver written notice (the “
Dividend
Notice
”) to the Holders
indicating the manner in which the Company intends to pay dividends
to the Holders at least 20 trading days prior to each Dividend
Payment Date. Failure to timely provide such written notice shall
be deemed an election by the Company to pay the dividend in cash.
For purposes of determining the dividends payable to each Holder on
each Dividend Payment Date, the Company shall aggregate all shares
of Preferred Stock held by such Holder, in each case with
fractional shares being rounded up to the nearest whole
number.
(c)
With
respect to dividends other than Conversion Dividends (as defined
herein), in the event that the Company elects to pay dividends in
shares of Common Stock, and is permitted to do so pursuant
to
Section
2
(d)
hereunder, the number of shares of
Common Stock to be issued to each applicable Holder as such
dividend shall be (i) determined by dividing the total dividend
then being paid to such Holder in shares of Common Stock by the
Price Per Share (as defined below) as of the applicable Dividend
Payment Date, and rounding up to the nearest whole share, and (ii)
paid to such Holder in accordance with
Section
6(d)
below. As used herein,
“
Price Per
Share
” means, with
respect to a share of Common Stock, (a) if such Common Stock is
listed on a national securities exchange in the United States, the
20 consecutive trading day average of the daily average of the high
and low sale prices per share of the Common Stock on such national
securities exchange in the United States immediately preceding the
relevant date, as published by the
Wall Street Journal
or other reliable publication,
(b) if a public market exists for such shares of Common Stock
but such shares are not listed on a national securities exchange in
the United States, the 20 consecutive trading day average of the
daily mean between the closing bid and asked quotations in the
over-the-counter market for a share of such Common Stock in the
United States immediately preceding the relevant date, or
(c) if such Common Stock is not then listed on a national
securities exchange and not traded in the over-the-counter market,
the price per share of Common Stock determined in good faith by the
Board in consultation with the Holders.
(d)
Notwithstanding
any other provision herein, the Company shall not have the right to
pay any dividends hereunder in Dividend Shares unless at the time
of issuance of such Dividend Shares (i) the Common Stock is
registered pursuant to Section 12(b) or (g) under the Securities
Exchange Act of 1934, as amended (the “
Exchange
Act
”), and (ii) the
Dividend Shares being issued are either (A) covered by an effective
registration statement under the Securities Act of 1933, as amended
(the “
Securities
Act
”), which is then
available for the immediate resale of the Dividend Shares being
issued by the recipients thereof, and the Board of Directors
believes that such effectiveness will continue uninterrupted for
the foreseeable future, or (B) freely tradable without restriction
under Rule 144 of the Securities Act without volume or
manner-of-sale restrictions or current public information
requirements, as determined by the counsel to the Company as set
forth in a written opinion letter to such effect, addressed and
acceptable to the Transfer Agent and the affected
Holders.
(e)
If
the Board declares a dividend on the outstanding shares of Common
Stock (except for a dividend resulting in an adjustment to the
Conversion Price (as defined) under
Section
6(g)
)
payable in cash or Common Stock, or other securities or rights
convertible into or entitling the holders thereof to receive,
directly or indirectly, additional shares of Common Stock, such
dividend will be declared and paid on each outstanding share of
Preferred Stock, prior and in preference to any dividends declared
and paid on the Common Stock, in the form and in an amount equal to
the aggregate amount of the dividend to which such share of
Preferred Stock would have been entitled had such share been
converted into shares of Common Stock (regardless whether a
sufficient number of shares of Common Stock were authorized under
the Company’s Articles of Incorporation, as amended, to
effect such conversion), pursuant to the provisions hereof as of
the record date for the determination of holders of Common Stock
entitled to receive such dividend (or if there is no such record
date, on the date of payment of such dividend). Such dividends
shall be paid in addition to the dividends described in
Section
2
(a)
above and will otherwise be payable
only when, as and if declared by the Board.
3.
Liquidation,
Dissolution or Winding Up
.
Upon
any voluntary or involuntary liquidation, dissolution or winding up
of the Company (a “
Liquidation
”), the Holders of
Preferred Stock then outstanding will be entitled to be paid in
cash out of the assets of the Company available for distribution to
its stockholders, after and subject to the payment in full of all
amounts required to be distributed to the holders of any Senior
Stock (as defined), but before any payment may be made to the
holders of shares of any Junior Stock (as defined), because of
their ownership thereof, an amount equal to the Stated Value of the
Preferred Stock plus any accrued but unpaid dividends (the
“
Preferred Liquidation
Preference
”). Notwithstanding the foregoing, upon a
Liquidation, a Holder will receive the amount, if such amount is
greater than the amount set forth in the preceding sentence, that
such Holder would have received had such Holder converted such
Holder’s shares of Preferred Stock into Common Stock
immediately before a Liquidation (regardless of whether a
sufficient number of shares of Common Stock were authorized under
the Company’s Articles of Incorporation, as amended, to
effect such conversion). If upon a Liquidation, the Company’s
remaining assets available for distribution to its stockholders are
insufficient to pay the Holders the full amount of the Preferred
Liquidation Preference, the Holders and holders of any Parity Stock
will share ratably in any distribution of the Company’s
remaining assets and funds in proportion to the respective amounts
which would otherwise be payable in respect of the shares held by
them upon such distribution if all amounts payable on or with
respect to such shares were paid in full. After the Holders have
been paid the Preferred Liquidation Preference in full in cash, any
remaining assets will be distributed pro rata among each holder of
Junior Stock in accordance with the terms thereof.
“
Senior Stock
” means,
collectively, any class or series of stock of the Company ranking
on Liquidation and with respect to the payment of dividends prior
and in preference to the Preferred Stock.
“
Junior Stock
” means,
collectively, Common Stock or any other shares of capital stock of
the Company ranking on Liquidation and with respect to the payment
of dividends junior and subordinate to the Preferred Stock, Senior
Stock and Parity Stock. Any other class or series of preferred
stock of the Company authorized, designated or issued after this
date, except as expressly set forth and provided in the resolution
or resolutions of the Board providing for authorization,
designation or issuance of shares of any such other class or series
of preferred stock of the Company (subject to
Section
10
), shall be
“
Junior
Stock
.”
“
Parity Stock
” means any class or
series of stock ranking on Liquidation and with respect to payment
of dividends on a parity with the Preferred Stock.
4.
Dividends and
Distributions
.
The
Preferred Stock shall rank (i) prior to the Junior Stock, (ii) on
parity with the Parity Stock, and (iii) junior to the Senior Stock,
with respect to dividends. The Holders shall be entitled to receive
such dividends and other distributions (payable in cash, property
or capital stock of the Company) when, as and if declared thereon
by the Board from time to time out of any assets or funds of the
Company legally available therefor and shall share equally on a per
share basis in such dividends and distributions.
Except to the extent specifically provided herein
or required by applicable law, the Holders and the holders of
Common Stock will vote together on all matters as to which the
approval of the stockholders may be required. The Holders will vote
on an as-converted basis, and with respect to such vote, will have
full voting rights and powers equal to the voting rights and powers
of the holders of Common Stock;
provided,
however
, no Holder of Preferred
Stock shall be entitled to vote on an as-converted basis to the
extent that such Holder (together with such Holder’s
affiliates) would control in excess of 9.99% of the voting power of
the Company (but may vote that number of shares of Preferred Stock
that, together with all other shares of voting securities held by
such Holder, equal less than 9.99% of the voting power of the
Company, excluding all others). Fractional votes will not be
permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares
of Preferred Stock held by each Holder could be converted) will be
rounded up to the nearest whole number.
(a)
Optional
Conversion by the Holder
.
The
Preferred Stock shall be convertible at the option of the Holder at
any time following the earlier of (i) the expiration of the twenty
(20) calendar day period set forth in Rule 14c-2(b) under the
Exchange Act, such period commencing on the distribution to the
Company’s stockholders in accordance with Regulation 14C
promulgated under the Exchange Act of an Information Statement on
Schedule 14C by the Company with the Securities and Exchange
Commission relating to the issuance of Common Stock in connection
with the conversion of the Preferred Stock, and (ii) such time as
there are sufficient authorized but unissued shares (which have not
otherwise been reserved or committed for issuance) to permit the
conversion of all the shares of Preferred Stock into shares of
Common Stock.
(b)
Optional
Conversion by the Company
.
Notwithstanding any provision set forth in this Certificate of
Designation to the contrary, the Preferred Stock shall be
convertible at the option of the Company at any time at a
Conversion Price equal to $0.25 per share of Common Stock, provided
that (i) the Common Stock is registered pursuant to Section 12(b)
or (g) under the Exchange Act; and (ii) there are sufficient
authorized but unissued shares (which have not otherwise been
reserved or committed for issuance) to permit the issuance of
Common Stock upon the conversion of the Preferred Stock (the
“
Conversion
Shares
”).
(c)
Fractional
Shares
. No fractional shares of
Common Stock will be issued upon conversion of the shares of
Preferred Stock. In lieu of fractional shares, the Company will pay
to the Holder an amount in cash equal to such fraction multiplied
by the Price Per Share (as defined) of a share of Common Stock at
the time of such conversion.
(d)
Mechanics
of Conversion
.
(i)
Upon
the conversion of the Preferred Stock pursuant to this
Section
6
, each
share of Preferred Stock shall be converted into such number of
fully paid and nonassessable shares of Common Stock as is
determined by dividing the Stated Value by the Conversion Price (as
defined herein) in effect at the time of conversion. The conversion
price (as adjusted pursuant hereto, the “
Conversion
Price
”) will initially be
$0.25. In addition, subject to the conditions and limitations set
forth in
Section
2(d)
,
the Company shall pay each Holder of Preferred Stock being
converted pursuant to either
Sections
6
(a)
or
6
(b)
above the amount of any accrued but
unpaid dividends on such Preferred Stock (the
“
Conversion
Dividends
”) held by such
Holder and being converted through the Conversion Date (as defined
below), (i) in shares of Common Stock, (ii) in cash, or (iii) in
some combination of Common Stock and cash, provided that each
Holder shall receive the same proportion of Common Stock and cash
as all other Holders on any Conversion Date. The number of shares
of Common Stock paid in satisfaction of any Conversion Dividends
shall be determined by dividing the Conversion Dividends that are
so being paid by the Conversion Price. Upon a conversion, the
Holder shall promptly, after notice of such conversion has been
provided to such Holder or public disclosure thereof has been made
pursuant to a Current Report on Form 8-K or press release, if such
shares are held in certificated form, surrender the certificate or
certificates for such shares of Preferred Stock at the office of
the transfer agent (or at the principal office of the Company if
the Company serves as its own transfer agent). Such surrender may
be made by registered mail with return receipt requested, properly
insured, by hand or overnight courier. If required by the Company,
certificates surrendered for conversion, if applicable, will be
endorsed or accompanied by a written instrument or instruments of
transfer, in form reasonably satisfactory to the Company, duly
executed by the Holder or his or its attorney duly authorized in
writing. The date on which the Company (a) is notified of a
conversion pursuant to
Section 6(a)
or (y) elects to convert pursuant
to
Section
6
(b)
will be the conversion date
(“
Conversion
Date
”).
(A)
Upon
conversion of the Preferred Stock or payment of dividends in shares
of Common Stock, (i) if the DTC Transfer Conditions (as defined
below) are satisfied, the Company shall promptly (and in any event
within three business days) cause its transfer agent to
electronically transmit all Conversion Shares and/or Dividend
Shares by crediting the account of such Holder or its nominee with
the Depository Trust Company (“
DTC
”) through its Deposit Withdrawal Agent
Commission system; or (ii) if the DTC Transfer Conditions are not
satisfied, the Company shall promptly (and in any event within
three business days) issue and deliver, or instruct its transfer
agent to issue and deliver, certificates, registered in the name of
such the Holder or its nominee, physical certificates representing
the Conversion Shares and/or Dividend Shares, as applicable. Even
if the DTC Transfer Conditions are satisfied, any person effecting
a conversion of Preferred Stock or receiving Dividend Shares may
instruct the Company to deliver to such person or its nominee
physical certificates representing the Conversion Shares and/or
Dividend Shares, as applicable, in lieu of delivering such shares
by way of DTC Transfer. “
DTC Transfer
Conditions
” means that
(A) the Company’s transfer agent is participating in the DTC
Fast Automated Securities Transfer program and (B) the certificates
for the Conversion Shares and/or Dividend Shares required to be
delivered do not bear a legend and recipient is not then required
to return such certificate for the placement of a legend
thereon.
(B)
The
Company warrants that no instruction other than such instructions
referred to in this
Section
6
(d)
,
and stop transfer instructions in the case of the transfer of the
Conversion Shares or Dividend Shares prior to registration of the
Conversion Shares or Dividend Shares under the Securities Act or
without an exemption therefrom, shall be given by the Company to
its transfer agent and that the Conversion Shares and Dividend
Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided herein.
Nothing in this Section shall affect in any way the Holders’
obligations to resell the Conversion Shares or the Dividend Shares
pursuant to an effective registration statement or under an
exemption from the registration requirements of applicable
securities law.
(C)
If
any Holder provides the Company and the transfer agent with an
opinion of counsel, which opinion of counsel shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions, to the effect that the Conversion Shares or the
Dividend Shares to be sold or transferred may be sold or
transferred pursuant to an exemption from registration, or any
Holder provides the Company with reasonable assurances that such
Conversion Shares or Dividend Shares may be sold under Rule 144
(which shall not be required to include an opinion of counsel), the
Company shall permit the transfer and, in the case of the
Conversion Shares and the Dividend Shares, promptly (and in any
event within three business days) instruct its transfer agent to
issue one or more certificates in such name and in such
denominations as specified by the Holders.
(D)
If
the Company fails to (i) issue and deliver (or cause to be
delivered) to a Holder by the time periods required in this
Section
6
(each, a “
Required Delivery
Date
”) a certificate
representing the Conversion Shares or the Dividend Shares so
delivered to the Company by such Holder that is free from all
restrictive and other legends or (ii) credit the account of such
Holder’s or such Holder’s nominee with DTC by the
Required Delivery Date for such number of Conversion Shares or
Dividend Shares so delivered to the Company, then, in addition to
all other remedies available to such Holder, the Company shall pay
in cash to such Holder on each day after the Required Delivery Date
that the issuance or credit of such shares is not timely effected
an amount equal to 1% of the product of (A) the number of shares of
Common Stock not so delivered or credited (as the case may be) to
such Holder or such Holder’s nominee multiplied by (B) the
closing price of the Common Stock on the trading day immediately
preceding the Required Delivery Date. In addition to the foregoing,
if the Company fails to so properly deliver such unlegended
certificates or so properly credit the balance account of such
Holder’s or such Holder’s nominee with DTC by the
Required Delivery Date, and if on or after the Required Delivery
Date such Holder (or any other Person in respect, or on behalf, of
such Holder) purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by such
Holder of all or any portion of the number of shares of Common
Stock, or a sale of a number of shares of Common Stock equal to all
or any portion of the number of shares of Common Stock, that such
Holder so anticipated receiving from the Company without any
restrictive legend, then, in addition to all other remedies
available to such Holder, the Company shall, within three (3)
trading days after such Holder’s request and in such
Holder’s sole discretion, either (i) pay cash to such Holder
in an amount equal to such Holder’s total purchase price
(including brokerage commissions and other out-of-pocket expenses,
if any) for the shares of Common Stock so purchased (including
brokerage commissions and other out-of-pocket expenses, if any)
(the “
Buy-In
Price
”), at which point
the Company’s obligation to so deliver such certificate or
credit such Holder’s balance account shall terminate and such
shares shall be cancelled, or (ii) promptly honor its obligation to
so deliver to such Holder a certificate or certificates or credit
such Holder’s DTC account representing such number of shares
of Common Stock that would have been so delivered if the Company
timely complied with its obligations hereunder and pay cash to such
Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Conversion
Shares or Dividend Shares (as the case may be) that the Company was
required to deliver to such Holder by the Required Delivery Date
multiplied by (B) the lowest closing price of the Common Stock on
any trading day during the period commencing on the date of the
delivery by such Holder to the Company of the applicable Conversion
Shares or Dividend Shares (as the case may be) and ending on the
date of such delivery and payment under this clause
(ii).
(e)
The
Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the
purposes of effecting the conversion of the shares of the Preferred
Stock, such number of its shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all outstanding
shares of the Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares
of the Preferred Stock, the Company will take such corporate action
as may be necessary to increase its authorized but unissued shares
of Common Stock to such number of shares as shall be sufficient for
such purposes, including, without limitation, engaging in best
efforts to obtain the requisite stockholder approval. If at any
time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock, until such date as such
shares of Common Stock are available and reserved for issuance upon
such conversion, the Company will not issue, sell, or deliver
(whether through the issuance or granting of Rights (as defined
herein)), any shares of Common Stock or any shares having, among
other characteristics, the economic rights thereof, until it has
reserved sufficient shares of Common Stock for issuance upon such
conversion as otherwise contemplated by this
Section
6
.
As used herein, “
Rights
” means all rights issued by the Company to
acquire Common Stock directly or indirectly by exercise of a
warrant, option or similar call or conversion of any
instruments.
(f)
All
shares of Preferred Stock which have been surrendered for
conversion as herein provided will no longer be deemed to be
outstanding and all rights with respect to such shares will
immediately cease and terminate on the Conversion Date, except only
the right of the Holders thereof to receive the Conversion Shares,
cash in lieu of fractional shares in exchange therefor and accrued,
but unpaid dividends. Any shares of Preferred Stock so converted
will be deemed canceled and will not thereafter be issuable by the
Company as shares of Preferred Stock, but will return to the status
of authorized, but unissued shares of Preferred Stock of no
designated series.
(g)
Adjustment
for Stock Splits, Dividends, Distributions and
Combinations
. If, after the
Original Issue Date, the Company fixes a record date for the
effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in
additional shares of Common Stock or other securities or Rights
without payment of any consideration by such holder for the
additional shares of Common Stock or Rights (including the
additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of
such dividend, distribution, split or subdivision if no record date
is fixed), the Conversion Price of the shares of Preferred Stock
will be appropriately decreased so that the number of shares of
Common Stock issuable on conversion of each share of such series
will be increased in proportion to such increase of the aggregate
number of shares of Common Stock outstanding and those issuable
with respect to such Rights, with the number of shares issuable
with respect to the Rights determined from time to time as such
number may be adjusted. If, after the Original Issue Date, the
Company combines the outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect
immediately before the combination will be proportionately
increased so that the number of shares of Common Stock issuable on
conversion of each share of Preferred Stock will be decreased in
proportion to such decrease in outstanding shares. Any adjustments
under this paragraph will become effective at the close of business
on the date the subdivision or combination becomes
effective.
(h)
Adjustment
for Reorganization, Reclassification or Exchange
. If the Common Stock issuable upon the conversion
of the shares of Preferred Stock is changed into or exchanged for
the same or a different number of shares of any class or classes of
stock of the Company or another entity, whether by capital
reorganization, merger, consolidation, reclassification, or
otherwise (other than a subdivision or combination of shares or
stock dividend provided for in
Section
6
(g)
)
then and in each such event the Holders will have the right
thereafter to convert such shares into the kind and amount of
shares of stock and other securities and property receivable upon
such capital reorganization, merger, consolidation,
reclassification, or other change that holders of the number of
shares of Common Stock into which such shares of Preferred Stock
would have been converted immediately before such capital
reorganization, merger, consolidation, reclassification, or change
would have received, all subject to further adjustment as provided
herein.
(i)
[REMOVED]
(j)
[REMOVED]
(k)
No
Impairment
. The Company will
not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company,
but will at all times in good faith assist in the carrying out of
all the provisions of this
Section
6
and in the taking of all such action
as may be necessary or appropriate to protect the conversion rights
of the Holders against impairment.
(l)
Certificate
as to Adjustments
. Upon the
occurrence of each adjustment or readjustment of the Conversion
Price pursuant to this
Section
6
,
the Company at its expense will promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to
each Holder a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based and will file a copy of such
certificate with its corporate records. The Company will, upon the
written request at any time of any Holder, furnish or cause to be
furnished to such holder a similar certificate setting forth (1)
such adjustments and readjustments, (2) the Conversion Price then
in effect, and (3) the number of shares of Common Stock and the
amount, if any, of other property which then would be received upon
the conversion of Preferred Stock. Despite such adjustment or
readjustment, the form of each or all Preferred Stock certificates,
if the same will reflect the initial or any subsequent Conversion
Price, need not be changed for the adjustments or readjustments to
be valued under the provisions of this Certificate of Designation,
which will control.
7.
Beneficial
Ownership
.
The Company shall not permit the conversion of a
Holder’s Preferred Stock to the extent that after giving
effect to such conversion, such Holder (together with such
Holder’s affiliates) would beneficially own in excess of
9.99% (the “
Maximum
Percentage
”) of the
shares of Common Stock outstanding immediately after giving effect
to such exercise. For purposes of the foregoing sentence, the
aggregate number of shares of Common Stock beneficially owned by
such Holder and its affiliates shall include the number of shares
of Common Stock issuable upon exercise of such Holder’s
Preferred Stock with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock
which would be issuable upon (i) exercise of the remaining,
unconverted portion of the Holder’s Preferred Stock
beneficially owned by such Holder and its affiliates and (ii)
exercise or conversion of the unexercised or unconverted portion of
any other securities of the Company beneficially owned by such
Holder and its affiliates (including, without limitation, any
convertible notes or convertible preferred stock or warrants)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding
sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the
Exchange Act. In determining the number of outstanding shares of
Common Stock, a Holder may rely on the number of outstanding shares
of Common Stock as reflected in the most recent of (1) the
Company’s most recent Form 10-K, Form 10-Q, Current Report on
Form 8-K or other public filing with the Securities and Exchange
Commission, as the case may be, (2) a more recent public
announcement by the Company or (3) any other notice by the Company
or the Transfer Agent setting forth the number of shares of Common
Stock outstanding. For any reason at any time, upon the written or
oral request of the Holder, the Company shall within two (2)
Business Days confirm to the Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including
such Holder’s Preferred Stock, by the Holder and its
affiliates since the date as of which such number of outstanding
shares of Common Stock was reported.
There
will be no sinking fund for the payment of dividends or liquidation
preferences on the shares of Preferred Stock or the redemption of
any shares thereof.
So long
as any shares of Preferred Stock are outstanding, the Company will
not, without obtaining the approval (by vote or written consent) of
the Holders of sixty six percent (66%) of the issued and
outstanding shares of Preferred Stock:
(a)
permit
the amendment, modification or repeal of the Company’s
Articles of Incorporation or Bylaws that would adversely affect the
Holders in any material respect, in either case whether by merger
or otherwise (for the avoidance of doubt, any such amendments or
modifications necessary to increase the number of authorized shares
of Common Stock, or to change the name of the Company, or to
effectuate a reverse stock split shall not be deemed to adversely
affect the Holders in any material respect);
(b)
permit
the amendment, modification, or repeal of this Certificate of
Designation, whether by merger or otherwise;
(c)
[REMOVED];
(d)
declare
or pay any dividend (other than dividends payable solely in Common
Stock) or distribution on, or make any payment on account of, or
set apart assets for a sinking or analogous fund to, or, purchase,
redeem, defease, retire or otherwise acquire, any shares of any
class of capital stock of the Company or any warrants or options to
purchase any such capital stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in
obligations of the Company or any subsidiary of the Company (such
declarations, payments, setting apart, purchases, redemptions,
defeasances, retirements, acquisitions and distributions being
referred to herein as “
Restricted
Payments
”);
provided,
however
, that the Company or
any subsidiary of the Company may make Restricted Payments with
respect to any shares of Senior Stock or Parity Stock the issuance
of which has been approved in accordance
herewith;
(e)
permit
the amendment or modification of the Certificate of Designation for
any other series of preferred stock of the Company;
provided,
however
, the Company may file a
certificate of elimination or otherwise terminate any other series
of preferred stock of the Company; or
(f)
subject
the Company to any transaction that would be a Change of
Control.
With
respect to actions by the Holders upon those matters on which the
Holders may vote as a separate class, such actions may be taken
without a stockholders meeting by the written consent of Holders
who would be entitled to vote at a meeting having voting power to
cast not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which
all the shares of Preferred Stock is entitled to vote were present
and voted. In addition, the Holders may call a special meeting of
the Company’s stockholders upon the occurrence of the events
described above by providing notice of the exercise of such right
to the Company and the Company will take all steps necessary to
hold such meeting as soon as practicable after the receipt of such
notice.
Holders
shall not be entitled to any preemptive, subscription or similar
rights in respect to any securities of the Company under this
Certificate of Designation.
12.
The Company’s
Dealings with Holders of the Preferred Stock
.
No
payments shall be made to Holders, nor shall redemptions of shares
of Preferred Stock be made, unless the right to receive such
payments or participate in such redemptions are made available to
all Holders on a pro rata basis based on the number of shares of
Preferred Stock such Holder holds.
The
Company may deem and treat the record holder of any shares of the
Preferred Stock as the true and lawful owner thereof for all
purposes, and the Company shall not be affected by any notice to
the contrary.
14.
Headings and
Subdivisions
.
The
headings of the various subdivisions hereof are for convenience of
reference only and will not affect the interpretation of any of the
provisions hereof.
Any
notice required by the provisions hereof to be given to the Holders
shall be deemed given if deposited in the United States Mail, first
class postage prepaid, and addressed to each Holder at his or its
address appearing on the Company’s books. Any notice required
by the provisions hereof to be given to the Company shall be deemed
given if deposited in the United States mail, first class postage
prepaid, and addressed to the Company at 2 Park Plaza., Ste. 1200,
Irvine, CA 92614, or such other address as the Company shall
provide in writing to the Holders.
16.
Severability of
Provisions
.
The
rights, preferences and limitations of the shares of Preferred
Stock set forth herein will be deemed severable and the invalidity
or unenforceability of any provision will not affect the validity
or enforceability of the other provisions hereof;
provided
that if any provision of this
statement of resolution, as applied to any Holder or the Company or
to any circumstance, is adjudged by a governmental body or
arbitrator not to be enforceable in accordance with its terms, the
governmental body or arbitrator making such determination may
modify (and shall modify) the provision in a manner consistent with
its objectives such that it is enforceable, and/or to delete
specific words or phrases, and in its reduced form, such provision
will then be enforceable and will be enforced.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, True Drinks Holdings, Inc. has caused this Amended
and Restated Certificate of Designation to be signed by the
undersigned this 26th day of April, 2019.
|
TRUE DRINKS
HOLDINGS, INC.
|
|
|
|
|
|
By:
|
/s/
Robert Van Boerum
|
|
Name:
|
Robert
Van Boerum
|
|
Title:
|
Principal
Executive and Financial Officer
|
|
|
|
|
Exhibit
3.2
FOURTH AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS
of
SERIES C CONVERTIBLE PREFERRED STOCK
of
TRUE DRINKS HOLDINGS, INC.
Pursuant to Section 78.1955 of the Nevada Revised
Statutes
True
Drinks Holdings, Inc., a Nevada corporation (the
“
Company
”), in
accordance with the provisions of Sections 78.195, 78.1955 and
78.2055 of the Nevada Revised Statutes (“
NRS
”), does hereby certify that,
pursuant to the authority conferred upon the Board of Directors
(the “
Board
”)
of the Company by the Articles of Incorporation of the Company, as
amended, the following resolutions amending and restating the
Certificate of Designation, Preferences, Rights and Limitations of
the Series C Convertible Preferred Stock was duly adopted on April
25, 2019:
WHEREAS
, pursuant to its authority, the
Board of Directors of the Company previously fixed the rights,
preferences, restrictions and other matters relating to a
Series C Convertible Preferred Stock, originally consisting of
up to 90,000 shares of the Company’s preferred stock, par
value $0.001 per share (“
Preferred Stock
”), as set forth
in a Certificate of Designations of Preferences, Rights and
Limitations dated February 17, 2015 (the “
Certificate of Designations
”) and
amended on March 26, 2015, August 12, 2015, and November 24, 2015;
and
WHEREAS
, the Board of Directors wishes
to amend and restate the Certificate of Designations in its
entirety pursuant to Section 78.2055 of the Nevada Revised
Statutes;
NOW, THEREFORE, BE IT RESOLVED
, that the
Board of Directors does hereby amend and restate the Certificate of
Designations and does hereby provide for the issuance of a series
of Preferred Stock for cash or exchange of other securities, rights
or property and does hereby fix and determine the rights,
preferences, restrictions and other matters relating to such series
of Preferred Stock as follows:
1.
Designation
and Amount
.
The
shares of such series shall be designated as “Series C
Convertible Preferred Stock,” $0.001 par value per share (the
“
Preferred
Stock
”), and the number of shares constituting such
series shall be 200,000. Each share of Preferred Stock shall have a
stated value equal to $100.00 (the “
Stated Value
”).
2.
Dividends
on Shares of Common Stock
.
If the
Board declares a dividend on the outstanding shares of the
Company’s common stock, $0.001 par value per share (the
“
Common Stock
”)
or any other Junior Stock (as defined below) (except for a dividend
on Common Stock payable in shares of Common Stock), such dividend
will be declared and paid on each outstanding share of Preferred
Stock, prior and in preference to any dividends declared and paid
on the Common Stock or other Junior Stock, in an amount equal to
the aggregate amount of the dividend to which such share of
Preferred Stock would have been entitled had such share been
converted into shares of Common Stock (regardless whether a
sufficient number of shares of Common Stock were authorized under
the Company’s Articles of Incorporation, as amended, to
effect such conversion), pursuant to the provisions hereof as of
the record date for the determination of holders of Common Stock or
other Junior Stock entitled to receive such dividend (or if there
is no such record date, on the date of payment of such dividend).
Such dividends will be payable only when, as and if declared by the
Board and will be noncumulative.
3.
Liquidation,
Dissolution or Winding Up
.
Upon
any voluntary or involuntary liquidation, dissolution or winding up
of the Company (a “
Liquidation
”), the holders of
record of shares of Preferred Stock (the “
Holders
”) then outstanding will
be entitled to be paid in cash out of the assets of the Company
available for distribution to its stockholders, after and subject
to the payment in full of all amounts required to be distributed to
the holders of any Senior Stock (as defined), but before any
payment may be made to the holders of shares of any Junior Stock
(as defined), because of their ownership thereof, an amount equal
to the Stated Value of the Preferred Stock plus any accrued but
unpaid dividends (the “
Preferred Liquidation
Preference
”). Notwithstanding the foregoing, upon a
Liquidation, a Holder will receive the amount, if such amount is
greater than the amount set forth in the preceding sentence, that
such Holder would have received had such Holder converted such
Holder’s shares of Preferred Stock into Common Stock
immediately before a Liquidation (regardless of whether a
sufficient number of shares of Common Stock were authorized under
the Company’s Articles of Incorporation, as amended, to
effect such conversion). If upon a Liquidation, the Company’s
remaining assets available for distribution to its stockholders are
insufficient to pay the Holders the full amount of the Preferred
Liquidation Preference, the Holders and holders of any Parity Stock
will share ratably in any distribution of the Company’s
remaining assets and funds in proportion to the respective amounts
which would otherwise be payable in respect of the shares held by
them upon such distribution if all amounts payable on or with
respect to such shares were paid in full. After the Holders have
been paid the Preferred Liquidation Preference in full in cash, any
remaining assets will be distributed pro rata among each holder of
Junior Stock in accordance with the terms thereof. Unless otherwise
determined by the holders of at least a majority of the then
outstanding shares of Preferred Stock, voting as a separate class,
for the purposes of this Section 3, a Liquidation shall be
deemed to include (i) the acquisition of the Company by
another entity by means of any transaction or series of related
transactions (including, without limitation, any merger, sale of
all or substantially all of the shares of then outstanding capital
stock, consolidation or other form of reorganization in which
outstanding shares of the Company are exchanged for securities or
other consideration issued, or caused to be issued, by the
acquiring entity or its subsidiary, but excluding any transaction
effected primarily for the purpose of changing the Company’s
jurisdiction of incorporation),
unless
the Company’s stockholders
of record as constituted immediately prior to such transaction or
series of related transactions will (by virtue of their
pre-transaction holdings in the Company and any additional
securities received by them as part of the transaction in exchange
of such pre-transaction holdings), immediately after such
transaction or series of related transactions continue to hold at
least a majority of the voting power of the surviving or acquiring
entity or (ii) a sale, lease, transfer, exclusive license or
other disposition of all or substantially all of the assets of the
Company.
“
Senior Stock
” means,
collectively, any class or series of stock of the Company ranking
on Liquidation and with respect to the payment of dividends prior
and in preference to the Preferred Stock.
“
Junior Stock
” means,
collectively, Common Stock or any other shares of capital stock of
the Company ranking on Liquidation and with respect to the payment
of dividends junior and subordinate to the Preferred Stock, Senior
Stock and Parity Stock. Any other class or series of preferred
stock of the Company authorized, designated or issued after this
date, except as expressly set forth and provided in the resolution
or resolutions of the Board providing for authorization,
designation or issuance of shares of any such other class or series
of preferred stock of the Company (subject to Section 8), shall be
“
Junior
Stock
.”
“
Parity Stock
” means,
collectively, the Series B Convertible Preferred Stock of the
Company, par value $0.001 per share (the “
Series B Preferred Stock
”), or
any other class or series of stock ranking on Liquidation and with
respect to payment of dividends on a parity with the Preferred
Stock.
4.
Dividends
and Distributions
.
The
Preferred Stock shall rank (i) prior to the Junior Stock, (ii) on
parity with the Parity Stock, and (iii) junior to the Senior Stock,
with respect to dividends. The Holders shall be entitled to receive
such dividends and other distributions (payable in cash, property
or capital stock of the Company) when, as and if declared thereon
by the Board from time to time out of any assets or funds of the
Company legally available therefor and shall share equally on a per
share basis in such dividends and distributions.
5.
Voting
.
Except to the extent specifically provided herein
or required by applicable law, the Holders and the holders of
Common Stock will vote together on all matters as to which the
approval of the stockholders may be required. The Holders will have
the right to vote the Preferred Stock on an as-converted to Common
Stock basis, and with respect to such vote, will have voting rights
and powers equal to the voting rights and powers of the holders of
Common Stock;
provided
,
however
,
that no Holder shall be entitled to vote such Holder’s shares
of Preferred Stock to the extent such Holder (together with any
“affiliate” of such Holder (as such term is defined in
Rule 144 under the Securities Act of 1933, as amended), or any
person or entity deemed to be part of a “group” with
such Holder (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended (the
“
Exchange
Act
”))) would control in
excess of 50% of the total voting power of the outstanding shares
of capital stock of the Company at the time of such vote (the
“
Voting
Power
”) (but such Holder
shall be entitled to vote that number of shares of Preferred Stock
that, together with all of the other outstanding shares of capital
stock of the Company held by such Holder at the time of such vote,
equal up to exactly 50% of the Voting Power);
provided
further
,
that the voting limitation set forth in the preceding proviso shall
terminate, in whole or in part, upon expiration of 61 days
following the date on which written notice is delivered to the
Company by the holders of a majority of the then-outstanding shares
of Preferred Stock requesting that the voting limitation be so
terminated and authorizing the Company to take such actions as are
necessary to approve an amendment to this Certificate of
Designation for the same purpose. Fractional votes will not be
permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares
of Preferred Stock held by each Holder could be converted) will be
rounded to the nearest whole number (with one-half being rounded
upward);
provided
,
however
,
in no event shall the rounding of fractional votes result in a
violation of the voting limitation imposed by this Section
5.
The
Preferred Stock shall be convertible into Common Stock in
accordance with the following:
(a)
Optional
Conversion by the Holder
. The
Preferred Stock shall be convertible at the option of the Holder at
any time,
provided
there are sufficient authorized but
unissued shares (which have not otherwise been reserved or
committed for issuance) to permit the conversion of all the shares
of Preferred Stock into shares of Common Stock.
(b)
Optional
Conversion by the Company
.
Notwithstanding any provision set forth in this Certificate of
Designation to the contrary, the Preferred Stock shall be
convertible at the option of the Company at any time at a
Conversion Price equal to $0.025 per share of Common Stock,
provided that (i) the Common Stock is registered pursuant to
Section 12(b) or (g) under the Exchange Act; and (ii) there are
sufficient authorized but unissued shares (which have not otherwise
been reserved or committed for issuance) to permit the issuance of
Common Stock upon the conversion of the Preferred Stock (the
“
Conversion
Shares
”).
(c)
Fractional
Shares
. No fractional shares of
Common Stock will be issued upon conversion of the shares of
Preferred Stock. In lieu of fractional shares, the Company will pay
to the Holder an amount in cash equal to such fraction multiplied
by the fair market value (as determined pursuant to Section
6(g)(iv) below) of a share of Common Stock at the time of such
conversion.
(d)
Mechanics
of Conversion
.
(i)
Upon
the conversion of the Preferred Stock pursuant to this
Section
6
, each
share of Preferred Stock shall be converted into such number of
fully paid and nonassessable shares of Common Stock as is
determined by dividing the Stated Value by the Conversion Price (as
defined) in effect at the time of conversion. The conversion price
(as adjusted pursuant hereto, the “
Conversion
Price
”) will initially be
$0.025. Upon such conversion, the Holder shall promptly, after
notice of such conversion has been provided to such Holder or
public disclosure thereof has been made pursuant to a Current
Report on Form 8-K or press release, if such shares are held in
certificated form, surrender the certificate or certificates for
such shares of Preferred Stock at the office of the transfer agent
(or at the principal office of the Company if the Company serves as
its own transfer agent). Such surrender may be made by registered
mail with return receipt requested, properly insured, by hand or
overnight courier. If required by the Company, certificates
surrendered for conversion, if applicable, will be endorsed or
accompanied by a written instrument or instruments of transfer, in
form reasonably satisfactory to the Company, duly executed by the
Holder or his or its attorney duly authorized in writing. The date
on which the conditions to conversion set forth in Section 6(a) or,
if later and to the extent applicable, of receipt of such
certificates by the transfer agent or the Company, as the case may
be, will be the conversion date (“
Conversion
Date
”). The Company will,
as soon as practicable after the Conversion Date, subject to the
book-entry provisions set forth below, issue and deliver to such
Holder, or to such Holder’s nominees, a certificate or
certificates for the number of shares of Common Stock to which such
Holder is entitled, together with cash in lieu of any fraction of a
share. In lieu of delivering physical certificates representing the
shares of Common Stock issuable upon conversion of the shares of
Preferred Stock, provided the transfer agent for the Common Stock
is participating in The Depository Trust Company’s (including
its successors and assigns, the “
Depository
”) Fast Automated Securities Transfer
program, upon request of the Holder, the Company shall, if in
compliance with applicable securities laws and in accordance with
the Company’s policies and procedures with respect to
“restricted securities” as defined in Rule 144(a)(3)
under the Securities Act of 1933, as amended, use its commercially
reasonable efforts to cause the transfer agent to electronically
transmit the shares of Common Stock issuable upon conversion by
crediting the account of the Holder’s prime broker with the
Depository through its Deposit Withdrawal Agent Commission system.
The Company agrees to coordinate with the Depository to accomplish
this objective. Such conversion of the Preferred Stock will be
deemed to have been made immediately before the close of business
on the Conversion Date, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion
will be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date.
(ii)
All
shares of Preferred Stock which have been surrendered for
conversion as herein provided will no longer be deemed to be
outstanding and all rights with respect to such shares will
immediately cease and terminate on the Conversion Date, except only
the right of the Holders thereof to receive shares of Common Stock,
cash in lieu of fractional shares in exchange therefor and accrued,
but unpaid dividends. Any shares of Preferred Stock so converted
will be deemed canceled and will not thereafter be issuable by the
Company as shares of Preferred Stock, but will return to the status
of authorized, but unissued shares of Preferred Stock of no
designated series.
(e)
Adjustment
for Stock Splits, Dividends, Distributions and
Combinations
. If, after the
date on which the first share of the Series C Preferred Stock was
issued (the “
Original Issue
Date
”), the Company fixes
a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders
of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other
securities or rights without payment of any consideration by such
holder for the additional shares of Common Stock or rights
(including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or
the date of such dividend, distribution, split or subdivision if no
record date is fixed), the Conversion Price of the shares of
Preferred Stock will be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of each share of
such series will be increased in proportion to such increase of the
aggregate number of shares of Common Stock outstanding and those
issuable with respect to such rights, with the number of shares
issuable with respect to the rights determined from time to time as
such number may be adjusted. If, after the Original Issue Date, the
Company combines the outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect
immediately before the combination will be proportionately
increased so that the number of shares of Common Stock issuable on
conversion of each share of Preferred Stock will be decreased in
proportion to such decrease in outstanding shares. Any adjustments
under this paragraph will become effective at the close of business
on the date the subdivision or combination becomes
effective.
(f)
Adjustment
for Reorganization, Reclassification or Exchange
. If the Common Stock issuable upon the conversion
of the shares of Preferred Stock is changed into or exchanged for
the same or a different number of shares of any class or classes of
stock of the Company or another entity, whether by capital
reorganization, merger, consolidation, reclassification, or
otherwise (other than a subdivision or combination of shares or
stock dividend provided for in Section
6
(e)
) then and
in each such event the Holders will have the right thereafter to
convert such shares into the kind and amount of shares of stock and
other securities and property receivable upon such capital
reorganization, merger, consolidation, reclassification, or other
change that holders of the number of shares of Common Stock into
which such shares of Preferred Stock would have been converted
immediately before such capital reorganization, merger,
consolidation, reclassification, or change would have received, all
subject to further adjustment as provided
herein.
(g)
Adjustment Upon
Issuance of Shares of Common Stock
. If, at any time after the Original Issue Date,
the Company issues or sells, or in accordance with this Section 6
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, but excluding any
Excluded Securities (as defined in the Securities Purchase
Agreement, by and between the Company and Red Beard Holdings, LLC
(“
Red
Beard
”), dated on or
about April 11, 2016 (the “
April
Purchase
Agreement
”)) issued or
sold or deemed to have been issued or sold without consideration or
for a consideration per share (the “
New Issuance
Price
”) less than a price
equal to the Conversion Price in effect immediately prior to such
issue or sale or deemed issuance or sale (such Conversion Price
then in effect is referred to as the “
Applicable
Price
”) (the foregoing a
“
Dilutive
Issuance
”), then
immediately after such Dilutive Issuance, the Conversion Price then
in effect shall be reduced to an amount equal to the New Issuance
Price;
provided
that if such Dilutive Issuance was
without consideration, then the Company shall be deemed to have
received an aggregate of $0.001 of consideration for all such
additional shares of Common Stock issued or deemed to be issued. No
adjustment pursuant to this Section 6(g) shall be made if such
adjustment would result in an increase of the Conversion Price then
in effect. For all purposes of the foregoing (including, without
limitation, determining the adjusted Conversion Price and
consideration per share under this Section 6(g)), the following
shall be applicable:
(i)
Issuance
of Options
. If the Company in
any manner grants or sells any Options (as defined below) 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 (as defined
below) issuable upon exercise of any such Option is less than the
Applicable Price, but excluding any Excluded Securities, 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 6
(g)
(i)
, 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 the granting or sale of such Option,
upon exercise of such Option and upon 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 Options or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option.
Except as contemplated below, no further adjustment of the
Conversion 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.
(A)
“
Options
”
means any rights, warrants or options to subscribe for or purchase
shares of Common Stock or Convertible
Securities.
(B)
“
Convertible
Securities
” means any
capital stock, convertible debenture or other security of the
Company or any of its subsidiaries (other than Options) 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 shares of
Common Stock.
(ii)
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
thereof is less than the Applicable Price, but excluding any
Excluded Securities, 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 6(g)(ii), the “lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or
exchange thereof” 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 the issuance or sale of the Convertible Security and upon
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, no further adjustment of the Conversion Price shall be made
upon the actual issuance of such shares of Common Stock upon
conversion, exercise or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is
made upon exercise of any Options for which adjustment of the
Conversion Price has been or is to be made pursuant to other
provisions of this Section 6(g)(ii), except as contemplated below,
no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(iii)
Change
in Option Price or Rate of Conversion
. If the purchase or exercise price provided for
in any Options, the additional consideration, if any, payable upon
the issue, conversion, exercise or exchange of any Convertible
Securities, or 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 Conversion
Price in effect at the time of such increase or decrease shall be
adjusted to the Conversion Price which would have been in effect at
such time had such Options or Convertible Securities provided for
such increased or decreased purchase price, additional
consideration or increased or decreased conversion rate, as the
case may be, at the time initially granted, issued or sold. For
purposes of this Section 6(g)(iii), if the terms of any Option or
Convertible Security that was outstanding as of the Original Issue
Date are increased or decreased in the manner described in the
immediately preceding sentence, then such Option or Convertible
Security and the shares of Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such increase or
decrease.
(iv)
Calculation
of Consideration Received
. If
(i) any Option or Convertible Security is 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 an Option or Convertible Security was
the primary security 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 Option or Convertible Security (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 fair market
value of each such Option or Convertible Security (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 price of such
security for each of 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
“
Valuation
Event
”), the fair value
of such consideration will be determined within five (5) trading
days after the tenth (10th) day following such Valuation Event by
an independent, reputable appraiser jointly selected by the Company
and the Holder. The determination of such appraiser shall be final
and binding upon all parties absent manifest error and the fees and
expenses of such appraiser shall be borne by the
Company.
(v)
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 issue 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).
(h)
Certain
Adjustments.
The applicable Conversion Price will not be
reduced if the amount of such reduction would be an amount less
than $0.001, but any such amount will be carried forward and
reduction with respect thereto made at the time of and together
with any subsequent reduction which, together with such amount and
any other amount or amounts so carried forward, will aggregate
$0.001 or more.
(i)
No
Impairment
. The Company will
not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company,
but will at all times in good faith assist in the carrying out of
all the provisions of this Section
6
and in the taking of all such action
as may be necessary or appropriate to protect the conversion rights
of the Holders against impairment.
(j)
Certificate
as to Adjustments
. Upon the
occurrence of each adjustment or readjustment of the Conversion
Price pursuant to this Section
6
, the
Company at its expense will promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to
each Holder a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based and will file a copy of such
certificate with its corporate records. The Company will, upon the
written request at any time of any Holder, furnish or cause to be
furnished to such holder a similar certificate setting forth (1)
such adjustments and readjustments, (2) the Conversion Price then
in effect, and (3) the number of shares of Common Stock and the
amount, if any, of other property which then would be received upon
the conversion of Preferred Stock. Despite such adjustment or
readjustment, the form of each or all Preferred Stock certificates,
if the same will reflect the initial or any subsequent Conversion
Price, need not be changed for the adjustments or readjustments to
be valued under the provisions of this Certificate of Designation,
which will control.
7.
Sinking
Fund
.
There
will be no sinking fund for the payment of any dividends or
liquidation preferences on the shares of Preferred Stock or the
redemption of any shares thereof.
8.
Protective
Provisions
.
So long
as at least 4,000 shares of Preferred Stock are issued and
outstanding, the Company will not, either directly or indirectly by
amendment, merger, consolidation or otherwise, without obtaining
the approval (by vote or written consent) of the Holders of a
majority of the shares of Preferred Stock then issued and
outstanding:
(a)
permit
the amendment, modification or repeal of the Company’s
Articles of Incorporation or Bylaws, except for those amendments or
modifications necessary to adopt an exclusive forum bylaw
provision;
(b)
permit
the amendment, modification, or repeal of this Certificate of
Designation;
(c)
increase
or decrease the authorized number of shares of Common Stock or
Series C Preferred Stock;
(d)
issue,
sell, or deliver (whether through the issuance or granting of
rights or otherwise), or authorize the issuance, sale or delivery
of, (i) any shares of Senior Stock or Parity Stock or reclassify or
modify any Junior Stock or Parity Stock so as to become Senior
Stock or Parity Stock; or (ii) any additional shares of Common
Stock or Convertible Securities;
provided
,
however
, nothing contained in
this Section 8(d) shall prevent the Company from, and the Company
shall be entitled to, issue Common Stock or Convertible Securities
in connection with the April Purchase Agreement (and the shares of
Common Stock issuable upon conversion of such Preferred Stock and
exercise of such warrants), currently outstanding grants and
issuances, and issuances to employees, officers, directors, or
other eligible recipients under the Company’s existing equity
or other incentive plans, and pursuant to equity or other incentive
plans that may be adopted by the Company’s Board of Directors
(including the affirmative vote of the Purchaser Designee (as such
term is defined in that certain Securities Purchase Agreement,
first dated February 20, 2015 (the “
February Purchase
Agreement
”))) after the
date hereof;
(e)
amend
or modify the terms of any outstanding security or debt instrument
of the Company outstanding as of the Original Issue
Date;
(f)
declare
or pay any dividend (other than dividends payable solely in Common
Stock) or distribution on, or make any payment on account of, or
set apart assets for a sinking or analogous fund to, or, purchase,
redeem, defease, retire or otherwise acquire, any shares of any
class of capital stock of the Company or any warrants or options to
purchase any such capital stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in
obligations of the Company or any subsidiary of the Company (such
declarations, payments, setting apart, purchases, redemptions,
defeasances, retirements, acquisitions and distributions being
referred to herein as “
Restricted
Payments
”);
provided
,
however
,
that the Company or any subsidiary of the Company may make
Restricted Payments with respect to any shares of Senior Stock or
Parity Stock the issuance of which has been approved in accordance
herewith, including with respect to any shares of Series B
Preferred Stock;
(g)
adopt
or effect any modification to any employee stock option plan, stock
bonus plan, stock purchase plan or other management equity plan
without the prior approval of the Board of Directors, including the
affirmative approval of the Purchaser Designee (as defined in the
February Purchase Agreement), if any;
(h)
permit
the amendment or modification of the Certificate of Designation for
any other series of preferred stock of the Company;
(i)
increase
or decrease the authorized number of directors constituting the
Board of Directors; or
(j)
liquidate,
dissolve or wind-up the business and affairs of the Company, or
effect or subject the Company to any transaction, or series of
related transactions, that constitutes a Change of Control, or
consent to any of the foregoing.
For
purposes of this Section 8, “
Change of Control
” means the
occurrence of any of the following events occurring after the
Original Issue Date: (i) any “person” or
“group” (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the “beneficial
owner” (as defined in Rule l3d-3 under the Exchange Act),
directly or indirectly, of more than 50% of the total voting power
of the outstanding capital stock of the Company having the right to
vote ordinarily on the election of directors (“
Voting Stock
”); (ii) the Company
is merged with or into or consolidated with another person or
entity and, immediately after giving effect to the merger or
consolidation, (a) less than 50% of the total voting power of the
outstanding Voting Stock of the surviving or resulting person or
entity is then “beneficially owned” (within the meaning
of Rule 13d-3 under the Exchange Act) in the aggregate by the
stockholders of the Company immediately before such merger or
consolidation or (b) any “person” or
“group” (as defined in Section 13(d)(3) or 14(d)(2) of
the Exchange Act), has become the direct or indirect
“beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act) of more than 50% of the total voting power of the
Voting Stock of the surviving or resulting person or entity; or
(iii) the Company, either individually or in conjunction with one
or more of its subsidiaries, sells, assigns, conveys, transfers,
leases, or otherwise disposes of, or one or more of its
subsidiaries sells, assigns, conveys, transfers, leases or
otherwise disposes of, all or substantially all of the assets of
the Company and its subsidiaries, taken as a whole (either in one
transaction or a series of related transactions), including capital
stock of the Company’s subsidiaries, to any person or entity
(other than the Company or a wholly owned subsidiary).
With
respect to actions by the Holders upon those matters on which the
Holders may vote as a separate class, such actions may be taken
without a stockholders meeting by the written consent of Holders
who would be entitled to vote at a meeting having voting power to
cast not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which
all the shares of Preferred Stock is entitled to vote were present
and voted. In addition, the Holders may call a special meeting of
the Company’s stockholders upon the occurrence of the events
described above by providing notice of the exercise of such right
to the Company and the Company will take all steps necessary to
hold such meeting as soon as practicable after the receipt of such
notice.
9.
Preemptive
Rights
.
Other
than as specifically set forth in the April Purchase Agreement,
February Purchase Agreement, and that certain Securities Purchase
Agreement, dated November 25, 2015, by and between the Company and
investors named therein, Holders shall not be entitled to any
preemptive, subscription or similar rights in respect to any
securities of the Company under this Certificate of
Designation.
10.
The
Company’s Dealings with Holders of the Preferred
Stock
.
No
payments shall be made to Holders, nor shall redemptions of shares
of Preferred Stock be made, unless the right to receive such
payments or participate in such redemptions are made available to
all Holders on a pro rata basis based on the number of shares of
Preferred Stock such holder holds.
11.
Record
Holders
.
The
Company may deem and treat the record holder of any shares of the
Preferred Stock as the true and lawful owner thereof for all
purposes, and the Company shall not be affected by any notice to
the contrary.
12.
Headings
and Subdivisions
.
The
headings of the various subdivisions hereof are for convenience of
reference only and will not affect the interpretation of any of the
provisions hereof.
13.
Notices
.
Any
notice required by the provisions hereof to be given to the Holders
shall be deemed given if deposited in the United States Mail, first
class postage prepaid, and addressed to each Holder at his or its
address appearing on the Company’s books. Any notice required
by the provisions hereof to be given to the Company shall be deemed
given if deposited in the United States mail, first class postage
prepaid, and addressed to the Company at 18662 MacArthur Blvd.,
Ste. 110, Irvine, CA 92612, or such other address as the Company
shall provide in writing to the Holders.
14.
Severability
of Provisions
.
The
rights, preferences and limitations of the shares of Preferred
Stock set forth herein will be deemed severable and the invalidity
or unenforceability of any provision will not affect the validity
or enforceability of the other provisions hereof;
provided
that if any provision
of this statement of resolution, as applied to any Holder or the
Company or to any circumstance, is adjudged by a governmental body
or arbitrator not to be enforceable in accordance with its terms,
the governmental body or arbitrator making such determination may
modify (and shall modify) the provision in a manner consistent with
its objectives such that it is enforceable, and/or to delete
specific words or phrases, and in its reduced form, such provision
will then be enforceable and will be enforced.
[Remainder of Page Intentionally Left Blank]
IN
WITNESS WHEREOF, True Drinks Holdings, Inc. has caused this Amended
and Restated Certificate of Designation to be signed by the
undersigned this 26
th
day of April,
2019.
TRUE
DRINKS HOLDINGS, INC.
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By:
|
/s/ Robert
Van Boerum
|
Name:
|
Robert
Van Boerum
|
Title:
|
Principal
Executive and Principal Financial
Officer
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Exhibit
3.3
FIRST AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS
of
SERIES D CONVERTIBLE PREFERRED STOCK
of
TRUE DRINKS HOLDINGS, INC.
Pursuant to Section 78.1955 of the Nevada Revised
Statutes
True
Drinks Holdings, Inc., a Nevada corporation (the
“
Company
”), in
accordance with the provisions of Sections 78.195 and 78.1955 of
the Nevada Revised Statutes (“
NRS
”), does hereby certify that,
pursuant to the authority conferred upon the Board of Directors
(the “
Board
”)
of the Company by the Articles of Incorporation of the Company, as
amended, the following resolutions amending and restating the
Certificate of Designation, Preferences, Rights and Limitations of
the Series D Convertible Preferred Stock was duly adopted on April
25, 2019:
WHEREAS
, pursuant to its authority, the
Board of Directors of the Company previously fixed the rights,
preferences, restrictions and other matters relating to a
Series D Convertible Preferred Stock, originally consisting of
up to 50,000 shares of the Company’s preferred stock, par
value $0.001 per share (“
Preferred Stock
”), as set forth
in a Certificate of Designations of Preferences, Rights and
Limitations dated January 24, 2017 (the “
Certificate of Designations
”);
and
WHEREAS
, the Board of Directors wishes
to amend and restate the Certificate of Designations in its
entirety pursuant to Section 78.2055 of the Nevada Revised
Statutes;
NOW, THEREFORE, BE IT RESOLVED
, that the
Board of Directors does hereby amend and restate the Certificate of
Designations and does hereby provide for the issuance of a series
of Preferred Stock for cash or exchange of other securities, rights
or property and does hereby fix and determine the rights,
preferences, restrictions and other matters relating to such series
of Preferred Stock as follows:
1.
Designation and
Amount
.
The
shares of such series shall be designated as “Series D
Convertible Preferred Stock,” $0.001 par value per share (the
“
Preferred
Stock
”), and the number of shares constituting such
series shall be 50,000. Each share of Preferred Stock shall have a
stated value equal to $100.00 (the “
Stated Value
”).
2.
Dividends on Shares of
Common Stock
.
If the
Board declares a dividend on the outstanding shares of the
Company’s common stock, $0.001 par value per share (the
“
Common Stock
”)
or any other Junior Stock (as defined below) (except for a dividend
on Common Stock payable in shares of Common Stock), such dividend
will be declared and paid on each outstanding share of Preferred
Stock, prior and in preference to any dividends declared and paid
on the Common Stock or other Junior Stock, in an amount equal to
the aggregate amount of the dividend to which such share of
Preferred Stock would have been entitled had such share been
converted into shares of Common Stock (regardless whether a
sufficient number of shares of Common Stock were authorized under
the Company’s Articles of Incorporation, as amended, to
effect such conversion), pursuant to the provisions hereof as of
the record date for the determination of holders of Common Stock or
other Junior Stock entitled to receive such dividend (or if there
is no such record date, on the date of payment of such dividend).
Such dividends will be payable only when, as and if declared by the
Board and will be noncumulative.
3.
Liquidation,
Dissolution or Winding Up
.
Upon
any voluntary or involuntary liquidation, dissolution or winding up
of the Company (a “
Liquidation
”), the holders of
record of shares of Preferred Stock (the “
Holders
”) then outstanding will
be entitled to be paid in cash out of the assets of the Company
available for distribution to its stockholders, after and subject
to the payment in full of all amounts required to be distributed to
the holders of any Senior Stock (as defined), but before any
payment may be made to the holders of shares of any Junior Stock
(as defined), because of their ownership thereof, an amount equal
to the Stated Value of the Preferred Stock plus any accrued but
unpaid dividends (the “
Preferred Liquidation
Preference
”). Notwithstanding the foregoing, upon a
Liquidation, a Holder will receive the amount, if such amount is
greater than the amount set forth in the preceding sentence, that
such Holder would have received had such Holder converted such
Holder’s shares of Preferred Stock into Common Stock
immediately before a Liquidation (regardless of whether a
sufficient number of shares of Common Stock were authorized under
the Company’s Articles of Incorporation, as amended, to
effect such conversion). If upon a Liquidation, the Company’s
remaining assets available for distribution to its stockholders are
insufficient to pay the Holders the full amount of the Preferred
Liquidation Preference, the Holders and holders of any Parity Stock
will share ratably in any distribution of the Company’s
remaining assets and funds in proportion to the respective amounts
which would otherwise be payable in respect of the shares held by
them upon such distribution if all amounts payable on or with
respect to such shares were paid in full. After the Holders have
been paid the Preferred Liquidation Preference in full in cash, any
remaining assets will be distributed pro rata among each holder of
Junior Stock in accordance with the terms thereof. Unless otherwise
determined by the holders of at least two-thirds of the then
outstanding shares of Preferred Stock, voting as a separate class,
for the purposes of this Section 3, a Liquidation shall be
deemed to include (i) the acquisition of the Company by
another entity by means of any transaction or series of related
transactions (including, without limitation, any merger, sale of
all or substantially all of the shares of then outstanding capital
stock, consolidation or other form of reorganization in which
outstanding shares of the Company are exchanged for securities or
other consideration issued, or caused to be issued, by the
acquiring entity or its subsidiary, but excluding any transaction
effected primarily for the purpose of changing the Company’s
jurisdiction of incorporation),
unless
the Company’s stockholders
of record as constituted immediately prior to such transaction or
series of related transactions will (by virtue of their
pre-transaction holdings in the Company and any additional
securities received by them as part of the transaction in exchange
of such pre-transaction holdings), immediately after such
transaction or series of related transactions continue to hold at
least a majority of the voting power of the surviving or acquiring
entity or (ii) a sale, lease, transfer, exclusive license or
other disposition of all or substantially all of the assets of the
Company.
“
Senior Stock
” means,
collectively, any class or series of stock of the Company ranking
on Liquidation and with respect to the payment of dividends prior
and in preference to the Preferred Stock.
“
Junior Stock
” means,
collectively, Common Stock or any other shares of capital stock of
the Company ranking on Liquidation and with respect to the payment
of dividends junior and subordinate to the Preferred Stock, Senior
Stock and Parity Stock. Any other class or series of preferred
stock of the Company authorized, designated or issued after this
date, except as expressly set forth and provided in the resolution
or resolutions of the Board providing for authorization,
designation or issuance of shares of any such other class or series
of preferred stock of the Company (subject to Section
9
), shall be “
Junior Stock
.”
“
Parity Stock
” means,
collectively, the Series B Convertible Preferred Stock of the
Company, par value $0.001 per share (the “
Series B Preferred Stock
”),
Series C Convertible Preferred Stock, par value $0.001 per share
(the “
Series C Preferred
Stock
”) or any other class or series of stock ranking
on Liquidation and with respect to payment of dividends on a parity
with the Preferred Stock.
4.
Dividends and
Distributions
.
The
Preferred Stock shall rank (i) prior to the Junior Stock, (ii) on
parity with the Parity Stock, and (iii) junior to the Senior Stock,
with respect to dividends. The Holders shall be entitled to receive
such dividends and other distributions (payable in cash, property
or capital stock of the Company) when, as and if declared thereon
by the Board from time to time out of any assets or funds of the
Company legally available therefor and shall share equally on a per
share basis in such dividends and distributions.
Except
to the extent specifically provided herein or required by
applicable law, the Holders and the holders of Common Stock will
vote together on all matters as to which the approval of the
stockholders may be required. The Holders will vote on an
as-converted basis, and with respect to such vote, will have full
voting rights and powers equal to the voting rights and powers of
the holders of Common Stock. Fractional votes will not, however, be
permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares
of Preferred Stock held by each Holder could be converted) will be
rounded to the nearest whole number (with one-half being rounded
upward).
The
Preferred Stock shall be convertible into Common Stock in
accordance with the following:
(a)
Optional
Conversion by the Holder
. The
Preferred Stock shall be convertible at the option of the Holder at
any time following the earlier of (i) the expiration of the twenty
(20) calendar day period set forth in Rule 14c-2(b) under the
Securities Exchange Act of 1934, as amended
(“
Exchange
Act
”), such period
commencing on the distribution to the Company’s stockholders
in accordance with Regulation 14C promulgated under the Exchange
Act of an Information Statement on Schedule 14C by the Company with
the Securities and Exchange Commission relating to the issuance of
Common Stock in connection with the conversion of the Preferred
Stock, and (ii) such time as there are sufficient authorized but
unissued shares (which have not otherwise been reserved or
committed for issuance) to permit the conversion of all the shares
of Preferred Stock into shares of Common Stock.
(b)
Optional
Conversion by the Company
.
Notwithstanding any provision set
forth in this Certificate of Designation to the contrary, the
Preferred Stock shall be convertible at the option of the Company
at any time at a Conversion Price equal to $0.025 per share of
Common Stock, provided that (i) the Common Stock is registered
pursuant to Section 12(b) or (g) under the Exchange Act; and (ii)
there are sufficient authorized but unissued shares (which have not
otherwise been reserved or committed for issuance) to permit the
issuance of Common Stock upon the conversion of the Preferred Stock
(the “
Conversion
Shares
”).
(c)
Fractional
Shares
. No fractional shares of
Common Stock will be issued upon conversion of the shares of
Preferred Stock. In lieu of fractional shares, the Company will pay
to the Holder an amount in cash equal to such fraction multiplied
by the fair market value (as determined pursuant to Section
6(g)(iv) below) of a share of Common Stock at the time of such
conversion.
(d)
Mechanics
of Conversion
.
(i)
Upon
the conversion of the Preferred Stock pursuant to this
Section
6
, each
share of Preferred Stock shall be converted into such number of
fully paid and nonassessable shares of Common Stock as is
determined by dividing the Stated Value by the Conversion Price (as
defined) in effect at the time of conversion. The conversion price
(as adjusted pursuant hereto, the “
Conversion
Price
”) will initially be
$0.025. Upon such conversion, the Holder shall promptly, after
notice of such conversion has been provided to such Holder or
public disclosure thereof has been made pursuant to a Current
Report on Form 8-K or press release, if such shares are held in
certificated form, surrender the certificate or certificates for
such shares of Preferred Stock at the office of the transfer agent
(or at the principal office of the Company if the Company serves as
its own transfer agent). Such surrender may be made by registered
mail with return receipt requested, properly insured, by hand or
overnight courier. If required by the Company, certificates
surrendered for conversion, if applicable, will be endorsed or
accompanied by a written instrument or instruments of transfer, in
form reasonably satisfactory to the Company, duly executed by the
Holder or his or its attorney duly authorized in writing. The date
on which the conditions to conversion set forth in Section 6(a) or,
if later and to the extent applicable, of receipt of such
certificates by the transfer agent or the Company, as the case may
be, will be the conversion date (“
Conversion
Date
”). The Company will,
as soon as practicable after the Conversion Date, subject to the
book-entry provisions set forth below, issue and deliver to such
Holder, or to such Holder’s nominees, a certificate or
certificates for the number of shares of Common Stock to which such
Holder is entitled, together with cash in lieu of any fraction of a
share. In lieu of delivering physical certificates representing the
shares of Common Stock issuable upon conversion of the shares of
Preferred Stock, provided the transfer agent for the Common Stock
is participating in The Depository Trust Company’s (including
its successors and assigns, the “
Depository
”) Fast Automated Securities Transfer
program, upon request of the Holder, the Company shall, if in
compliance with applicable securities laws and in accordance with
the Company’s policies and procedures with respect to
“restricted securities” as defined in Rule 144(a)(3)
under the Securities Act of 1933, as amended, use its commercially
reasonable efforts to cause the transfer agent to electronically
transmit the shares of Common Stock issuable upon conversion by
crediting the account of the Holder’s prime broker with the
Depository through its Deposit Withdrawal Agent Commission system.
The Company agrees to coordinate with the Depository to accomplish
this objective. Such conversion of the Preferred Stock will be
deemed to have been made immediately before the close of business
on the Conversion Date, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion
will be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date.
(ii)
All
shares of Preferred Stock which have been surrendered for
conversion as herein provided will no longer be deemed to be
outstanding and all rights with respect to such shares will
immediately cease and terminate on the Conversion Date, except only
the right of the Holders thereof to receive shares of Common Stock,
cash in lieu of fractional shares in exchange therefor and accrued,
but unpaid dividends. Any shares of Preferred Stock so converted
will be deemed canceled and will not thereafter be issuable by the
Company as shares of Preferred Stock, but will return to the status
of authorized, but unissued shares of Preferred Stock of no
designated series.
(e)
Adjustment
for Stock Splits, Dividends, Distributions and
Combinations
. If, after the
date on which the first share of Preferred Stock is issued (the
“
Original Issue
Date
”), the Company fixes
a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders
of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other
securities or rights without payment of any consideration by such
holder for the additional shares of Common Stock or rights
(including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or
the date of such dividend, distribution, split or subdivision if no
record date is fixed), the Conversion Price of the shares of
Preferred Stock will be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of each share of
such series will be increased in proportion to such increase of the
aggregate number of shares of Common Stock outstanding and those
issuable with respect to such rights, with the number of shares
issuable with respect to the rights determined from time to time as
such number may be adjusted. If, after the Original Issue Date, the
Company combines the outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect
immediately before the combination will be proportionately
increased so that the number of shares of Common Stock issuable on
conversion of each share of Preferred Stock will be decreased in
proportion to such decrease in outstanding shares. Any adjustments
under this paragraph will become effective at the close of business
on the date the subdivision or combination becomes
effective.
(f)
Adjustment
for Reorganization, Reclassification or Exchange
. If the Common Stock issuable upon the conversion
of the shares of Preferred Stock is changed into or exchanged for
the same or a different number of shares of any class or classes of
stock of the Company or another entity, whether by capital
reorganization, merger, consolidation, reclassification, or
otherwise (other than a subdivision or combination of shares or
stock dividend provided for in Section
6
(e)
, or
resulting in a Mandatory Redemption under Section
7
) then
and in each such event the Holders will have the right thereafter
to convert such shares into the kind and amount of shares of stock
and other securities and property receivable upon such capital
reorganization, merger, consolidation, reclassification, or other
change that holders of the number of shares of Common Stock into
which such shares of Preferred Stock would have been converted
immediately before such capital reorganization, merger,
consolidation, reclassification, or change would have received, all
subject to further adjustment as provided
herein.
(g)
Adjustment
Upon Issuance of Shares of Common Stock
. If the Company issues or sells, or in accordance
with this Section 6 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, but
excluding any Excluded Securities (as defined in the Securities
Purchase Agreement, dated on or about January __, 2017, by and
between the Company and the Purchasers party thereto (the
“
Purchase
Agreement
”)) issued or
sold or deemed to have been issued or sold without consideration or
for a consideration per share (the “
New Issuance
Price
”) less than a price
equal to the Conversion Price in effect immediately prior to such
issue or sale or deemed issuance or sale (such Conversion Price
then in effect is referred to as the “
Applicable
Price
”) (the foregoing a
“
Dilutive
Issuance
”), then
immediately after such Dilutive Issuance, the Conversion Price then
in effect shall be reduced to an amount equal to the New Issuance
Price;
provided
that if such Dilutive Issuance was
without consideration, then the Company shall be deemed to have
received an aggregate of $0.001 of consideration for all such
additional shares of Common Stock issued or deemed to be issued. No
adjustment pursuant to this Section 6(g) shall be made if such
adjustment would result in an increase of the Conversion Price then
in effect. For all purposes of the foregoing (including, without
limitation, determining the adjusted Conversion Price and
consideration per share under this Section 6(g)), the following
shall be applicable:
(i)
Issuance
of Options
. If the Company in
any manner grants or sells any Options (as defined below) 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 (as defined
below) issuable upon exercise of any such Option is less than the
Applicable Price, but excluding any Excluded Securities, 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 6
(g)
(i)
,
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 the granting or sale of such Option,
upon exercise of such Option and upon 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 Options or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option.
Except as contemplated below, no further adjustment of the
Conversion 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.
(A)
“
Options
”
means any rights, warrants or options to subscribe for or purchase
shares of Common Stock or Convertible
Securities.
(B)
“
Convertible
Securities
” means any
capital stock, convertible debenture or other security of the
Company or any of its subsidiaries (other than Options) 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 shares of
Common Stock.
(ii)
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
thereof is less than the Applicable Price, but excluding any
Excluded Securities, 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 6(g)(ii), the “lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or
exchange thereof” 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 the issuance or sale of the Convertible Security and upon
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, no further adjustment of the Conversion Price shall be made
upon the actual issuance of such shares of Common Stock upon
conversion, exercise or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is
made upon exercise of any Options for which adjustment of the
Conversion Price has been or is to be made pursuant to other
provisions of this Section 6(g)(ii), except as contemplated below,
no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(iii)
Change
in Option Price or Rate of Conversion
. If the purchase or exercise price provided for
in any Options, the additional consideration, if any, payable upon
the issue, conversion, exercise or exchange of any Convertible
Securities, or 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 Conversion
Price in effect at the time of such increase or decrease shall be
adjusted to the Conversion Price which would have been in effect at
such time had such Options or Convertible Securities provided for
such increased or decreased purchase price, additional
consideration or increased or decreased conversion rate, as the
case may be, at the time initially granted, issued or sold. For
purposes of this Section 6(g)(iii), if the terms of any Option or
Convertible Security that was outstanding as of the Original Issue
Date are increased or decreased in the manner described in the
immediately preceding sentence, then such Option or Convertible
Security and the shares of Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such increase or
decrease.
(iv)
Calculation
of Consideration Received
. If
(i) any Option or Convertible Security is 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 an Option or Convertible Security was
the primary security 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 Option or Convertible Security (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 fair market
value of each such Option or Convertible Security (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 price of such
security for each of 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
“
Valuation
Event
”), the fair value
of such consideration will be determined within five (5) trading
days after the tenth (10th) day following such Valuation Event by
an independent, reputable appraiser jointly selected by the Company
and the Holder. The determination of such appraiser shall be final
and binding upon all parties absent manifest error and the fees and
expenses of such appraiser shall be borne by the
Company.
(v)
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 issue 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).
(h)
Certain
Adjustments.
The applicable Conversion Price will not be
reduced if the amount of such reduction would be an amount less
than $0.001, but any such amount will be carried forward and
reduction with respect thereto made at the time of and together
with any subsequent reduction which, together with such amount and
any other amount or amounts so carried forward, will aggregate
$0.001 or more.
(i)
No
Impairment
. The Company will
not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company,
but will at all times in good faith assist in the carrying out of
all the provisions of this Section
6
and in the taking of all such action
as may be necessary or appropriate to protect the conversion rights
of the Holders against impairment.
(j)
Certificate as to
Adjustments
. Upon the
occurrence of each adjustment or readjustment of the Conversion
Price pursuant to this Section
6
, the
Company at its expense will promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to
each Holder a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
adjustment or readjustment is based and will file a copy of such
certificate with its corporate records. The Company will, upon the
written request at any time of any Holder, furnish or cause to be
furnished to such holder a similar certificate setting forth (1)
such adjustments and readjustments, (2) the Conversion Price then
in effect, and (3) the number of shares of Common Stock and the
amount, if any, of other property which then would be received upon
the conversion of Preferred Stock. Despite such adjustment or
readjustment, the form of each or all Preferred Stock certificates,
if the same will reflect the initial or any subsequent Conversion
Price, need not be changed for the adjustments or readjustments to
be valued under the provisions of this Certificate of Designation,
which will control.
Notwithstanding anything to the contrary set forth
in Section 6 of this Certificate of Designation, at no time may any
Holder convert shares of Preferred Stock into Conversion Shares if
the number of Conversion Shares to be issued would, when aggregated
with all other shares of Common Stock owned by such Holder at such
time, result in such Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act) more than 4.99%
of all of the Common Stock outstanding at such time;
provided
,
however
,
that a Holder may waive this restriction by providing the Company
with sixty-one (61) days written notice (pursuant to Section 14
hereof) of such Holder’s intent to waive Section 7 of this
Certificate of Designation with regard to any or all Conversion
Shares issuable upon conversion of their shares of Preferred Stock
(a “
Waiver
Notice
”). In the event
the Company receives a Waiver Notice from a Holder, this Section 7
shall be of no force or effect with regard to those shares of
Preferred Stock referenced in the Waiver
Notice.
There
will be no sinking fund for the payment of any dividends or
liquidation preferences on the shares of Preferred Stock or the
redemption of any shares thereof.
The
Company will not, either directly or indirectly by amendment,
merger, consolidation or otherwise, without obtaining the approval
(by vote or written consent) of the Holders of at least two-thirds
of the shares of Preferred Stock then issued and
outstanding:
(a)
permit
the amendment, modification or repeal of the Company’s
Articles of Incorporation or Bylaws, except for those amendments or
modifications required to comply with, or otherwise contemplated
by, the Purchase Agreement, or necessary to adopt an exclusive
forum bylaw provision;
(b)
permit
the amendment, modification, or repeal of this Certificate of
Designation;
(c)
increase
or decrease the authorized number of shares of Common Stock or
Preferred Stock, except for those increases of authorized number of
shares of Common Stock required to comply with, or otherwise
contemplated by, the Purchase Agreement;
(d)
issue,
sell, or deliver (whether through the issuance or granting of
rights or otherwise), or authorize the issuance, sale or delivery
of, (i) any shares of Senior Stock or Parity Stock or reclassify or
modify any Junior Stock or Parity Stock so as to become Senior
Stock or Parity Stock; or (ii) any additional shares of Common
Stock or Convertible Securities;
provided,
however
, nothing contained in
this Section 9(d) shall prevent the Company from, and the Company
shall be entitled to, issue Common Stock or Convertible Securities
in connection with currently outstanding grants and issuances, and
issuances to employees, officers, directors, or other eligible
recipients under the Company’s existing equity or other
incentive plans, and pursuant to equity or other incentive plans
that may be adopted by the Company’s Board of Directors after
the date hereof;
(e)
amend
or modify the terms of any outstanding security or debt instrument
of the Company outstanding as of the Original Issue
Date;
(f)
declare
or pay any dividend (other than dividends payable solely in Common
Stock) or distribution on, or make any payment on account of, or
set apart assets for a sinking or analogous fund to, or, purchase,
redeem, defease, retire or otherwise acquire, any shares of any
class of capital stock of the Company or any warrants or options to
purchase any such capital stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in
obligations of the Company or any subsidiary of the Company (such
declarations, payments, setting apart, purchases, redemptions,
defeasances, retirements, acquisitions and distributions being
referred to herein as “
Restricted
Payments
”);
provided,
however
, that the Company or
any subsidiary of the Company may make Restricted Payments with
respect to any shares of Senior Stock or Parity Stock the issuance
of which has been approved in accordance herewith, including with
respect to any shares of Series B Preferred Stock and/or Series C
Preferred;
(g)
adopt
or effect any modification to any employee stock option plan, stock
bonus plan, stock purchase plan or other management equity plan
without the prior approval of the Board of
Directors;
(h)
permit
the amendment or modification of the Certificate of Designation for
any other series of preferred stock of the Company;
provided,
however
, the Company may file a
certificate of elimination or otherwise terminate any other series
of preferred stock of the Company;
(i)
increase
or decrease the authorized number of directors constituting the
Board of Directors; or
(j)
liquidate,
dissolve or wind-up the business and affairs of the Company,
subject the Company to any transaction, or series of related
transactions following the Original Issuance Date, that constitutes
a Change of Control, or consent to any of the
foregoing.
For
purposes of this Section 9, “
Change of Control
” means the
occurrence of any of the following events occurring after the
Original Issue Date: (i) any “person” or
“group” (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the “beneficial
owner” (as defined in Rule l3d-3 under the Exchange Act),
directly or indirectly, of more than 50% of the total voting power
of the outstanding capital stock of the Company having the right to
vote ordinarily on the election of directors (“
Voting Stock
”); (ii) the Company
is merged with or into or consolidated with another person or
entity and, immediately after giving effect to the merger or
consolidation, (a) less than 50% of the total voting power of the
outstanding Voting Stock of the surviving or resulting person or
entity is then “beneficially owned” (within the meaning
of Rule 13d-3 under the Exchange Act) in the aggregate by the
stockholders of the Company immediately before such merger or
consolidation or (b) any “person” or
“group” (as defined in Section 13(d)(3) or 14(d)(2) of
the Exchange Act), has become the direct or indirect
“beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act) of more than 50% of the total voting power of the
Voting Stock of the surviving or resulting person or entity; or
(iii) the Company, either individually or in conjunction with one
or more of its subsidiaries, sells, assigns, conveys, transfers,
leases, or otherwise disposes of, or one or more of its
subsidiaries sells, assigns, conveys, transfers, leases or
otherwise disposes of, all or substantially all of the assets of
the Company and its subsidiaries, taken as a whole (either in one
transaction or a series of related transactions), including capital
stock of the Company’s subsidiaries, to any person or entity
(other than the Company or a wholly owned subsidiary).
With
respect to actions by the Holders upon those matters on which the
Holders may vote as a separate class, such actions may be taken
without a stockholders meeting by the written consent of Holders
who would be entitled to vote at a meeting having voting power to
cast not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which
all the shares of Preferred Stock is entitled to vote were present
and voted. In addition, the Holders may call a special meeting of
the Company’s stockholders upon the occurrence of the events
described above by providing notice of the exercise of such right
to the Company and the Company will take all steps necessary to
hold such meeting as soon as practicable after the receipt of such
notice.
Other
than as specifically set forth in the Purchase Agreement, Holders
shall not be entitled to any preemptive, subscription or similar
rights in respect to any securities of the Company under this
Certificate of Designation.
11.
The Company’s
Dealings with Holders of the Preferred Stock
.
No
payments shall be made to Holders, nor shall redemptions of shares
of Preferred Stock be made, unless the right to receive such
payments or participate in such redemptions are made available to
all Holders on a pro rata basis based on the number of shares of
Preferred Stock such holder holds.
The
Company may deem and treat the record holder of any shares of the
Preferred Stock as the true and lawful owner thereof for all
purposes, and the Company shall not be affected by any notice to
the contrary.
13.
Headings and
Subdivisions
.
The
headings of the various subdivisions hereof are for convenience of
reference only and will not affect the interpretation of any of the
provisions hereof.
Any
notice required by the provisions hereof to be given to the Holders
shall be deemed given if deposited in the United States Mail, first
class postage prepaid, and addressed to each Holder at his or its
address appearing on the Company’s books. Any notice required
by the provisions hereof to be given to the Company shall be deemed
given if deposited in the United States mail, first class postage
prepaid, and addressed to the Company at 18662 MacArthur Blvd.,
Ste. 110, Irvine, CA 92612, or such other address as the Company
shall provide in writing to the Holders.
15.
Severability of
Provisions
.
The
rights, preferences and limitations of the shares of Preferred
Stock set forth herein will be deemed severable and the invalidity
or unenforceability of any provision will not affect the validity
or enforceability of the other provisions hereof;
provided
that if any provision of this
statement of resolution, as applied to any Holder or the Company or
to any circumstance, is adjudged by a governmental body or
arbitrator not to be enforceable in accordance with its terms, the
governmental body or arbitrator making such determination may
modify (and shall modify) the provision in a manner consistent with
its objectives such that it is enforceable, and/or to delete
specific words or phrases, and in its reduced form, such provision
will then be enforceable and will be enforced.
IN
WITNESS WHEREOF, True Drinks Holdings, Inc. has caused this Amended
and Restated Certificate of Designation to be signed by the
undersigned this 26th day of April, 2019.
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TRUE DRINKS
HOLDINGS, INC.
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By:
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/s/
Robert Van Boerum
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Name:
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Robert
Van Boerum
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Title:
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Principal
Executive and Principal Financial Officer
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Exhibit
3.4
Exhibit 3.6
Exhibit 3.7
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE
SERIES A
CONVERTIBLE PREFERRED STOCK OF
TRUE DRINKS HOLDINGS, INC.
I, Robert Van Boerum, hereby certify that I am the
Chief Executive Officer of True Drinks Holdings, Inc. (the
“
Corporation
”), a corporation incorporated and existing
under the Nevada Revised Statutes (the “
NRS
”) and further do hereby
certify:
That pursuant to the authority expressly conferred
upon the Board of Directors of the Corporation (the
“
Board
”) by the Corporation’s Certificate of
Incorporation, as amended and restated (the
“
Certificate of
Incorporation
”),
and
78.195, 78.1955 and 78.2055
of
the NRS, the Board on April 19, 2019 adopted the following
resolution determining it desirable and in the best interests of
the Corporation and its stockholders for the Corporation to create
a series of shares of preferred stock designated as
“
Series A Convertible Preferred
Stock
”, none of which
shares have been issued:
RESOLVED,
that pursuant to the authority vested in the Board, in accordance
with the provisions of the Certificate of Incorporation, a series
of preferred stock, par value $0.001 per share, of the Corporation
be and hereby is created, and that the designation and number of
shares thereof and the voting and other powers, preferences and
relative, participating, optional or other rights of the shares of
such series and the qualifications, limitations and restrictions
thereof are as follows:
TERMS OF SERIES A CONVERTIBLE PREFERRED STOCK
1.
Designation and Number
of Shares
. There shall hereby
be created and established a series of preferred stock of the
Corporation designated as “Series A Convertible Preferred
Stock” (the “
Preferred
Shares
”). The authorized
number of Preferred Shares shall be Three Hundred Thousand
(300,000) shares. Each Preferred Share shall have a par value of
$0.001. Capitalized terms not defined herein shall have the meaning
as set forth in Section 30 below.
2.
Ranking
.
Except to the extent that the holders of at least a majority of the
outstanding Preferred Shares (the “
Required
Holders
”) expressly
consent to the creation of Parity Stock (as defined below) or
Senior Preferred Stock (as defined below) in accordance with
Section 14, all shares of capital stock of the Corporation,
including the Series B Preferred shall be junior in rank to all
Preferred Shares with respect to the preferences as to dividends,
distributions and payments upon the liquidation, dissolution and
winding up of the Corporation (such junior stock is referred to
herein collectively as “
Junior Stock
”). The rights of all such shares of capital
stock of the Corporation shall be subject to the rights, powers,
preferences and privileges of the Preferred Shares. Without
limiting any other provision of this Certificate of Designations,
without the prior express consent of the Required Holders, voting
separate as a single class, the Corporation shall not hereafter
authorize or issue any additional or other shares of capital stock
that is (i) of senior rank to the Preferred Shares in respect of
the preferences as to dividends, distributions and payments upon
the liquidation, dissolution and winding up of the Corporation
(collectively, the “
Senior Preferred
Stock
”), or (ii) of pari
passu rank to the Preferred Shares in respect of the preferences as
to dividends, distributions and payments upon the liquidation,
dissolution and winding up of the Corporation (collectively, the
“
Parity Stock
”). In the event of the merger or
consolidation of the Corporation with or into another corporation,
the Preferred Shares shall maintain their relative rights, powers,
designations, privileges and preferences provided for herein and no
such merger or consolidation shall result inconsistent
therewith.
3.
Dividends
.
Subject to applicable law, holders of Preferred Shares
(each, a “
Holder
” and collectively, the
“
Holders
”)
shall be entitled to receive, and
the Corporation shall pay a one-time dividend equal to eight
percent (8%) of the Stated Value (the “
Dividend Amount
”), which Dividend
Amount shall be paid upon the earlier of (i) when declared by the
Corporation, (ii) the one-year anniversary of the date hereof (the
“
Anniversary
Date
”), or (iii) when such Preferred Shares are
converted in accordance with the terms hereof (in either event, the
“
Dividend Payment
Date
”).
(a)
The Corporation
will pay such Dividend Amount on the Dividend Payment Date in (i)
cash, or (ii) duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock. Notwithstanding the
foregoing, the Corporation may not elect to pay the Dividend Amount
in shares of Common Stock unless the Equity Conditions, as such
term is defined below, are satisfied (or waived in writing by the
applicable Holder). In the event the Equity Conditions are
satisfied, and the Corporation elects to pay the Dividend Amount in
shares of Common Stock, the number of shares of Common Stock to be
issued to each Holder shall be determined by dividing the Dividend
Amount payable to each Holder on the applicable payment date as set
forth above, and rounding up to the nearest whole share, by the
Dividend Conversion Price. The term Dividend Conversion Price shall
mean 90% of the VWAP of the Corporation’s Common Stock for
the five (5) Trading Days prior to the Dividend Payment Date, as
adjusted for any stock dividend, stock split, stock combination or
other similar transaction during such five (5) Trading Day period.
“Equity Conditions” means that each of the following
conditions is satisfied: (i) the number of authorized but unissued
and otherwise unreserved shares of Common Stock is sufficient for
such issuance; (ii) such shares of Common Stock are registered for
resale by the Holders and may be sold by the Holders pursuant to an
effective registration statement or all such shares may be sold
without volume restrictions pursuant to Rule 144 under the 1933
Act; (iii) the Common Stock is listed or quoted (and is not
suspended from trading) on an Eligible Market; (iv) the average
daily dollar value of shares of Common Stock traded on the Eligible
Market for the ten (10) Trading Days prior to the Dividend Payment
Date is greater than $500,000; and (v) such issuance would be
permitted in full without violation Section 4(e) below or the rules
or regulations of any Eligible Market.
(b) The
Corporation shall give notice to the Holders on or before ten (10)
Business Days prior to paying the Dividend Amount and the form in
which the Dividend Amount will be paid. If the Corporation seeks to
pay the Dividend Amount in cash and there are sufficient shares of
Common Stock available to pay such Dividend Amount in shares,
Holders shall be provided with the option to have the Dividend
Amount paid in shares of Common Stock, with such number of shares
determined in accordance with provisions of Section 3(a) above.
Holders of Preferred Shares shall be entitled to participate on a
pari passu, pro rata, as-converted-to-Common Stock basis in any and
all dividends or other distributions paid by the Corporation on the
Common Stock (other than dividends paid in shares of Common Stock).
The Corporation shall pay no dividends on shares of its Common
Stock unless it simultaneously complies with the requirement set
forth in this Section 3.
The Corporation shall pay no
dividends in Common Stock on shares of the Common Stock prior to
paying the Dividend Amount to the Holders.
4.
Conversion
.
Each Preferred Share shall be convertible into validly issued,
fully paid and non-assessable shares of Common Stock on the terms
and conditions set forth in this Section 4.
(a)
Optional
Conversion
. Subject to the
provisions of Section 4(e), upon the effectiveness of a Capital
Increase, each Holder shall be entitled to convert any portion of
the outstanding Preferred Shares held by such Holder (including any
fractional Preferred Shares) into validly issued, fully paid and
non-assessable shares of Common Stock in accordance with Section
4(c) at the Conversion Rate (as defined below). The Corporation
shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall round
such fraction of a share of Common Stock up to the nearest whole
share. The Corporation shall pay any and all transfer, stamp,
issuance and similar taxes, costs and expenses (including, without
limitation, fees and expenses of the Transfer Agent (as defined
below)) that may be payable with respect to the issuance and
delivery of Common Stock upon conversion of any Preferred
Shares.
(b)
Automatic Conversion
. Subject
to the provisions of Section 4(e), upon the occurrence of (i) the
Corporation’s Common Stock being listed on
the Nasdaq Global Select Market, Nasdaq Global
Market, or the Nasdaq Capital Market,
and (ii) the Dividend
Amount has been paid to each Holder in full, then each of the
issued and outstanding Preferred Shares shall automatically, and
without further action required on behalf of the Holder, convert
into the number of shares of Common Stock at the Conversion Rate
then in effect (“
Automatic
Conversion
”). In the event of an Automatic Conversion,
the Corporation shall provide each Holder with notice of such
Automatic Conversion within five (5) Business Days prior to the
date thereof (“
Automatic
Conversion Notice
”). Following receipt by the Holder
of an Automatic Conversion Notice, the Holder shall
surrender to a nationally recognized overnight
delivery service for delivery to the Corporation the original
certificates, if any, representing the Preferred Share Certificate,
as such term is defined in Section 4(d)(i), so converted as
aforesaid (or an indemnification undertaking with respect to the
Preferred Shares in the case of its loss, theft or destruction as
contemplated by Section 17(b)). On or before the second (2nd)
Trading Day following Share Delivery Deadline, as defined in
Section 4(d)(i), the Corporation shall (1), provided that the
Transfer Agent is participating in The Depository Trust
Company’s (“
DTC
”) Fast Automated Securities Transfer
Program, credit such aggregate number of shares of Common Stock to
which such Holder shall be entitled to such Holder’s or its
designee’s balance account with DTC through its
Deposit/Withdrawal at Custodian system, or (2) if the Transfer
Agent is not participating
in the DTC Fast Automated Securities Transfer Program, issue and
deliver (via reputable overnight courier) to the address as
specified in such Automatic Conversion Notice, a certificate,
registered in the name of such Holder or its designee, for the
number of shares of Common Stock to which such Holder shall be
entitled. The Person or Persons entitled to receive the shares of
Common Stock issuable upon a conversion of Preferred Shares shall
be treated for all purposes as the record holder or holders of such
shares of Common Stock on the Conversion Date. In the event upon an
Automatic Conversion a Holder would be issued shares of Common
Stock in excess of the Maximum Percentage, in lieu of issuing all
of the shares upon such conversion, the Corporation will issue
share up to the Maximum Percentage and subject to the terms and
conditions set forth herein, from time to time, the Corporation
shall be obligated to issue and the Holder shall have the right to
the issuance of up to the balance of the shares that would
automatically have been issued upon such conversion, subject to
adjustment hereunder (the “Reserved Shares” and such
right of the Holder, the “Right”). The exercise of the
Right may be made, in whole or in part, at any time or times on or
after the date hereof by delivery to the Corporation (or such other
office or agency of the Corporation as it may designate by notice
in writing to the registered Holder at the address of the Holder
appearing on the books of the Corporation) of a notice (the
“Notice of Issuance”). The exercise of the Right will
be subject to the Maximum Percentage and delivery of shares of
Common Stock shall be made in accordance with the terms of this
Certificate as if it had been a Conversion of Preferred
Shares.
(c)
Conversion
Rate
. The number of shares of
Common Stock issuable upon conversion of any Preferred Share
pursuant to Section 4(a) shall be determined by dividing (x) the
Conversion Amount of such Preferred Share by (y) the Conversion
Price (the “
Conversion
Rate
”):
(i) “
Conversion
Amount
” means, with
respect to each Preferred Share, as of the applicable date of
determination, the sum of (1) the Stated Value thereof plus (2) any
accrued and unpaid Dividends, if any, with respect to such Stated
Value and any accrued and unpaid Dividends, if any, as of such date
of determination.
(ii) “
Conversion
Price
” means, with
respect to each Preferred Share, as of any Conversion Date or other
date of determination, $0.0044313, subject to adjustment as
provided herein.
(d)
Mechanics of
Conversion
. The conversion of
each Preferred Share shall be conducted in the following
manner:
(i)
Optional
Conversion
. To
convert a Preferred Share into shares of Common Stock on any date
(a “
Conversion
Date
”),
a Holder shall deliver (via facsimile, electronic mail or
otherwise), on or prior to 11:59 p.m., New York time, on such date,
a copy of an executed notice of conversion of the share(s) of
Preferred Shares subject to such conversion in the form attached
hereto as
Exhibit I
(the
“
Conversion
Notice
”)
to the Corporation. If required by Section 4(c)(iii), within five
(5) Trading Days following a conversion of any such Preferred
Shares as aforesaid, such Holder shall surrender to a nationally
recognized overnight delivery service for delivery to the
Corporation the original certificates, if any, representing the
Preferred Shares (the “
Preferred
Share Certificates
”) so converted as
aforesaid (or an indemnification undertaking with respect to the
Preferred Shares in the case of its loss, theft or destruction as
contemplated by Section 17(b)). No ink-original Conversion Notice
shall be required, nor shall any medallion guarantee (or other type
of guarantee or notarization) of any Conversion Notice be required.
On or before the first (1
st
) Trading Day following the date
of delivery of a Conversion Notice, the Corporation shall transmit
by facsimile or electronic mail an acknowledgment of confirmation,
in the form attached hereto as
Exhibit II
, of
receipt of such Conversion Notice to such Holder and the
Corporation’s transfer agent (the “
Transfer
Agent
”),
which confirmation shall constitute an instruction to the Transfer
Agent to process such Conversion Notice in accordance with the
terms herein. On or before the second (2nd) Trading Day following
the date of delivery of a Conversion Notice (or such earlier date
as required pursuant to the 1934 Act or other applicable law, rule
or regulation for the settlement of a trade initiated on the
applicable Conversion Date of such shares of Common Stock issuable
pursuant to such Conversion Notice) (the “
Share Delivery
Deadline
”), the Corporation shall
(1) provided that the Transfer Agent is participating in DTC Fast
Automated Securities Transfer Program, credit such aggregate number
of shares of Common Stock to which such Holder shall be entitled to
such Holder’s or its designee’s balance account with
DTC through its Deposit/Withdrawal at Custodian system, or (2) if
the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and deliver (via reputable
overnight courier) to the address as specified in such Conversion
Notice, a certificate, registered in the name of such Holder or its
designee, for the number of shares of Common Stock to which such
Holder shall be entitled. If the number of Preferred Shares
represented by the Preferred Share Certificate(s) submitted for
conversion pursuant to Section 4(c)(iii) is greater than the number
of Preferred Shares being converted, then the Corporation shall, as
soon as practicable and in no event later than three (3) Trading
Days after receipt of the Preferred Share Certificate(s) and at its
own expense, issue and deliver to such Holder (or its designee) a
new Preferred Share Certificate (in accordance with Section 17(d))
representing the number of Preferred Shares not converted. The
Person or Persons entitled to receive the shares of Common Stock
issuable upon a conversion of Preferred Shares shall be treated for
all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.
(ii)
Corporation’s
Failure to Timely Convert
. If
the Corporation shall fail, for any reason or for no reason, on or
prior to the applicable Share Delivery Deadline, to issue to such
Holder a certificate for the number of shares of Common Stock to
which such Holder is entitled and register such shares of Common
Stock on the Corporation’s share register or to credit such
Holder’s or its designee’s balance account with DTC for
such number of shares of Common Stock to which such Holder is
entitled upon such Holder’s conversion of any Conversion
Amount (as the case may be) (a “
Conversion
Failure
”), and if on or
after such Share Delivery Deadline such Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Holder of all or any
portion of the number of shares of Common Stock, or a sale of a
number of shares of Common Stock equal to all or any portion of the
number of shares of Common Stock, issuable upon such conversion
that such Holder so anticipated receiving from the Corporation,
then, in addition to all other remedies available to such Holder,
the Corporation shall, within three (3) Business Days after
delivery of such Holder’s request and in such Holder’s
discretion, either: (I) pay cash to such Holder in an amount equal
to such Holder’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the
shares of Common Stock so purchased (including, without limitation,
by any other Person in respect, or on behalf, of such Holder) (the
“
Buy-In Price
”), at which point the Corporation’s
obligation to so issue and deliver such certificate or credit such
Holder’s balance account with DTC for the number of shares of
Common Stock to which such Holder is entitled upon such
Holder’s conversion hereunder (as the case may be) (and to
issue such shares of Common Stock) shall terminate, or (II)
promptly honor its obligation to so issue and deliver to such
Holder a certificate or certificates representing such shares of
Common Stock or credit such Holder’s balance account with DTC
for the number of shares of Common Stock to which such Holder is
entitled upon such Holder’s conversion hereunder (as the case
may be) and pay cash to such Holder in an amount equal to the
excess (if any) of the Buy-In Price over the product of (x) such
number of shares of Common Stock multiplied by (y) the lowest
Closing Sale Price of the Common Stock on any Trading Day during
the period commencing on the date of the applicable Conversion
Notice and ending on the date of such issuance and payment under
this clause (II). If the Corporation fails to deliver to a Holder
such shares of Common Stock pursuant to Section 4(c)(i) by the
Share Delivery Deadline applicable to such conversion, the
Corporation shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, for each $5,000 of Stated Value of
Preferred Stock being converted, $10 per Trading Day (increasing to
$25 per Trading Day on the third Trading Day and increasing to $50
per Trading Day on the sixth Trading Day after such damages begin
to accrue) for each Trading Day after the Share Delivery Deadline
until such shares of Common Stock are delivered or Holder rescinds
such conversion. Nothing herein shall limit a Holder’s right
to pursue actual damages for the Corporation’s failure to
deliver shares of Common Stock within the period specified herein
and such Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief. The exercise of any such rights shall not prohibit a Holder
from seeking to enforce damages pursuant to any other Section
hereof or under applicable law.
(iii)
Registration;
Book-Entry
. At the time of
issuance of any Preferred Shares hereunder, the applicable Holder
may, by written request (including by electronic-mail) to the
Corporation, elect to receive such Preferred Shares in the form of
one or more Preferred Share Certificates or in Book-Entry form. The
Corporation (or the Transfer Agent, as custodian for the Preferred
Shares) shall maintain a register (the “
Register
”) for the recordation of the names and
addresses of the Holders of each Preferred Share and the Stated
Value of the Preferred Shares and whether the Preferred Shares are
held by such Holder in Preferred Share Certificates or in
Book-Entry form (the “
Registered Preferred
Shares
”). The entries in
the Register shall be conclusive and binding for all purposes
absent manifest error. The Corporation and each Holder of the
Preferred Shares shall treat each Person whose name is recorded in
the Register as the owner of a Preferred Share for all purposes
(including, without limitation, the right to receive payments and
Dividends hereunder) notwithstanding notice to the contrary. A
Registered Preferred Share may be assigned, transferred or sold
only by registration of such assignment or sale on the Register.
Upon its receipt of a written request to assign, transfer or sell
one or more Registered Preferred Shares by such Holder thereof, the
Corporation shall record the information contained therein in the
Register and issue one or more new Registered Preferred Shares in
the same aggregate Stated Value as the Stated Value of the
surrendered Registered Preferred Shares to the designated assignee
or transferee pursuant to Section 16, provided that if the
Corporation does not so record an assignment, transfer or sale (as
the case may be) of such Registered Preferred Shares within two (2)
Business Days of such a request, then the Register shall be
automatically deemed updated to reflect such assignment, transfer
or sale (as the case may be). Notwithstanding anything to the
contrary set forth in this Section 4, following conversion of any
Preferred Shares in accordance with the terms hereof, the
applicable Holder shall not be required to physically surrender
such Preferred Shares held in the form of a Preferred Share
Certificate to the Corporation unless (A) the
full
or remaining number of Preferred Shares represented by the
applicable Preferred Share Certificate are being converted (in
which event such certificate(s) shall be delivered to the
Corporation as contemplated by this Section 4(c)(iii)) or (B) such
Holder has provided the Corporation with prior written notice
(which notice may be included in a Conversion Notice) requesting
reissuance of Preferred Shares upon physical surrender of the
applicable Preferred Share Certificate. Each Holder and the
Corporation shall maintain records showing the Stated Value and
Dividends converted and/or paid (as the case may be) and the dates
of such conversions and/or payments (as the case may be) or shall
use such other method, reasonably satisfactory to such Holder and
the Corporation, so as not to require physical surrender of a
Preferred Share Certificate upon conversion. If the Corporation
does not update the Register to record such Stated Value and
Dividends converted and/or paid (as the case may be) and the dates
of such conversions and/or payments (as the case may be) within two
(2) Business Days of such occurrence, then the Register shall be
automatically deemed updated to reflect such occurrence. In the
event of any dispute or discrepancy, such records of the
Corporation establishing the number of Preferred Shares to which
the record holder is entitled shall be controlling and
determinative in the absence of manifest error. Notwithstanding the
foregoing, if the number of Preferred Shares set forth on the face
of a Preferred Share Certificate is greater than the number of
Preferred Shares then outstanding under such Preferred Share
Certificate, the applicable Holder may not transfer such Preferred
Share Certificate into the name of any other Person (other than an
Affiliate of such Holder) unless such Holder first physically
surrenders such Preferred Share Certificate to the Corporation
pursuant to Section 17 below (or delivers a lost certificate
affidavit to the Corporation, if applicable, pursuant to Section
17(b) below), whereupon the Corporation will forthwith issue and
deliver to such Holder (or to such other Person as designated by
such Holder to the Corporation in writing) a new Preferred Share
Certificate of like tenor, representing, in the aggregate, the
remaining number of Preferred Shares outstanding under such
Preferred Share Certificate. A Holder and any transferee or
assignee, by acceptance of a certificate, acknowledge and agree
that, by reason of the provisions of this paragraph, following
conversion of any Preferred Shares, the number of Preferred Shares
represented by such certificate may be less than the number of
Preferred Shares stated on the face thereof. Each Preferred Share
Certificate shall bear the following legend:
“[NEITHER] THIS SECURITY [NOR
THE SECURITIES INTO WHICH THIS SECURITY IS [CONVERTIBLE] HAS [NOT]
BEEN REGISTERED WITH THE SECURITIESAND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIESACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND
THE SECURITIES ISSUABLE UPON [CONVERSION] OF THIS SECURITY] MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.”
(iv)
Pro Rata Conversion;
Disputes
. In the event that the
Corporation receives a Conversion Notice from more than one Holder
for the same Conversion Date and the Corporation can convert some,
but not all, of such Preferred Shares submitted for conversion, the
Corporation shall convert from each Holder electing to have
Preferred Shares converted on such date a pro rata amount of such
Holder’s Preferred Shares submitted for conversion on such
date based on the number of Preferred Shares submitted for
conversion on such date by such Holder relative to the aggregate
number of Preferred Shares submitted for conversion on such date.
In the event of a dispute as to the number of shares of Common
Stock issuable to a Holder in connection with a conversion of
Preferred Shares, the Corporation shall issue to such Holder the
number of shares of Common Stock not in dispute and resolve such
dispute in accordance with Section 22.
(e)
Limitation
on Beneficial Ownership
. The
Corporation shall not effect the conversion of any of the Preferred
Shares held by a Holder, and such Holder shall not have the right
to convert any of the Preferred Shares held by such Holder pursuant
to the terms and conditions of this Certificate of Designations and
any such conversion shall be null and void and treated as if never
made, to the extent that after giving effect to such conversion,
such Holder together with the other Attribution Parties
collectively would beneficially own in excess of 4.99% (or upon the
election by a Holder prior to the issuance of any Preferred Shares,
9.99%) (the “
Maximum
Percentage
”) of the
shares of Common Stock outstanding immediately after giving effect
to such conversion. For purposes of the foregoing sentence, the
aggregate number of shares of Common Stock beneficially owned by
such Holder and the other Attribution Parties shall include the
number of shares of Common Stock held by such Holder and all other
Attribution Parties plus the number of shares of Common Stock
issuable upon conversion of the Preferred Shares with respect to
which the determination of such sentence is being made, but shall
exclude shares of Common Stock which would be issuable upon (A)
conversion of the remaining, nonconverted Preferred Shares
beneficially owned by such Holder or any of the other Attribution
Parties and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Corporation
(including, without limitation, any convertible notes, convertible
preferred stock or warrants) beneficially owned by such Holder or
any other Attribution Party subject to a limitation on conversion
or exercise analogous to the limitation contained in this Section
4(d). For purposes of this Section 4(d), beneficial ownership shall
be calculated in accordance with Section 13(d) of the 1934 Act. For
purposes of determining the number of outstanding shares of Common
Stock a Holder may acquire upon the conversion of such Preferred
Shares without exceeding the Maximum Percentage, such Holder may
rely on the number of outstanding shares of Common Stock as
reflected in (x) the Corporation’s most recent Annual Report
on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form
8-K or other public filing with the SEC, as the case may be, (y) a
more recent public announcement by the Corporation or (z) any other
written notice by the Corporation or the Transfer Agent, if any,
setting forth the number of shares of Common Stock outstanding (the
“
Reported Outstanding Share
Number
”). If the
Corporation receives a Conversion Notice from a Holder at a time
when the actual number of outstanding shares of Common Stock is
less than the Reported Outstanding Share Number, the Corporation
shall notify such Holder in writing of the number of shares of
Common Stock then outstanding and, to the extent that such
Conversion Notice would otherwise cause such Holder’s
beneficial ownership, as determined pursuant to this Section 4(d),
to exceed the Maximum Percentage, such Holder must notify the
Corporation of a reduced number of shares of Common Stock to be
purchased pursuant to such Conversion Notice. For any reason at any
time, upon the written or oral request of any Holder, the
Corporation shall within one (1) Business Day confirm orally and in
writing or by electronic mail to such Holder the number of shares
of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the
Corporation, including such Preferred Shares, by such Holder and
any other Attribution Party since the date as of which the Reported
Outstanding Share Number was reported. In the event that the
issuance of shares of Common Stock to a Holder upon conversion of
such Preferred Shares results in such Holder and the other
Attribution Parties being deemed to beneficially own, in the
aggregate, more than the Maximum Percentage of the number of
outstanding shares of Common Stock (as determined under Section
13(d) of the 1934 Act), the number of shares so issued by which
such Holder’s and the other Attribution Parties’
aggregate beneficial ownership exceeds the Maximum Percentage (the
“
Excess
Shares
”) shall be deemed
null and void and shall be cancelled ab initio, and such Holder
shall not have the power to vote or to transfer the Excess Shares.
Upon delivery of a written notice to the Corporation, any Holder
may from time to time increase (with such increase not effective
until the sixty-first (61
st
) day after delivery of such notice) or decrease
the Maximum Percentage of such Holder to any other percentage not
in excess of 9.99% as specified in such notice; provided that (i)
any such increase in the Maximum Percentage will not be effective
until the sixty-first (61
st
) day after such notice is delivered to the
Corporation and (ii) any such increase or decrease will apply only
to such Holder and the other Attribution Parties and not to any
other Holder. For purposes of clarity, the shares of Common Stock
issuable to a Holder pursuant to the terms of this Certificate of
Designations in excess of the Maximum Percentage shall not be
deemed to be beneficially owned by such Holder for any purpose
including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the
1934 Act. No prior inability to convert such Preferred Shares
pursuant to this paragraph shall have any effect on the
applicability of the provisions of this paragraph with respect to
any subsequent determination of convertibility. The provisions of
this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section
4(d) to the extent necessary to correct this paragraph (or any
portion of this paragraph) which may be defective or inconsistent
with the intended beneficial ownership limitation contained in this
Section 4(d) or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The
limitation contained in this paragraph may not be waived and shall
apply to a successor holder of such Preferred
Shares.
5.
Rights Upon
Fundamental Transactions
. The
Corporation shall not enter into or be party to a Fundamental
Transaction unless the Successor Entity assumes in writing all of
the obligations of the Corporation under this Certificate of
Designations in accordance with the provisions of this Section 5
pursuant to written agreements in form and substance reasonably
satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements
to deliver to each holder of Preferred Shares in exchange for such
Preferred Shares a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to
this Certificate of Designations, including, without limitation,
having a stated value and dividend rate equal to the stated value
and dividend rate of the Preferred Shares held by the Holders and
having similar ranking to the Preferred Shares, and satisfactory to
the Required Holders. Upon the occurrence of any Fundamental
Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Certificate of
Designations referring to the “Corporation” shall refer
instead to the Successor Entity), and may exercise every right and
power of the Corporation and shall assume all of the obligations of
the Corporation under this Certificate of Designations with the
same effect as if such Successor Entity had been named as the
Corporation herein and therein. In addition to the foregoing, upon
consummation of a Fundamental Transaction, the Successor Entity
shall deliver to each Holder confirmation that there shall be
issued upon conversion or redemption of the Preferred Shares at any
time after the consummation of such Fundamental Transaction, in
lieu of the shares of Common Stock (or other securities, cash,
assets or other property (except such items still issuable under
Sections 6(a) and 13, which shall continue to be receivable
thereafter)) issuable upon the conversion or redemption of the
Preferred Shares prior to such Fundamental Transaction, such shares
of the publicly traded common stock (or their equivalent) of the
Successor Entity (including its Parent Entity) which each Holder
would have been entitled to receive upon the happening of such
Fundamental Transaction had all the Preferred Shares held by each
Holder been converted immediately prior to such Fundamental
Transaction (without regard to any limitations on the conversion of
the Preferred Shares contained in this Certificate of
Designations), as adjusted in accordance with the provisions of
this Certificate of Designations. Notwithstanding the foregoing,
such Holder may elect, at its sole option, by delivery of written
notice to the Corporation to waive this Section 5 to permit the
Fundamental Transaction without the assumption of the Preferred
Shares. The provisions of this Section 5 shall apply similarly and
equally to successive Fundamental Transactions and shall be applied
without regard to any limitations on the conversion or redemption
of the Preferred Shares.
6.
Rights Upon Issuance
of Purchase Rights and Other Corporate Events
.
(a)
Purchase
Rights
. In addition to any
adjustments pursuant to Section 7 below, if at any time the
Corporation grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or
other property pro rata to all or substantially all of the record
holders of any class of Common Stock (the
“
Purchase
Rights
”), then each
Holder will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such
Holder could have acquired if such Holder had held the number of
shares of Common Stock acquirable upon complete conversion of all
the Preferred Shares (without taking into account any limitations
or restrictions on the convertibility of the Preferred Shares) held
by such Holder immediately prior to the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or,
if no such record is taken, the date as of which the record holders
of shares of Common Stock are to be determined for the grant, issue
or sale of such Purchase Rights (provided, however, to the extent
that such Holder’s right to participate in any such Purchase
Right would result in such Holder and the other Attribution Parties
exceeding the Maximum Percentage, then such Holder shall not be
entitled to participate in such Purchase Right to such extent (and
shall not be entitled to beneficial ownership of such shares of
Common Stock as a result of such Purchase Right (and beneficial
ownership) to such extent) and such Purchase Right to such extent
shall be held in abeyance for such Holder until such time or times,
if ever, as its right thereto would not result in such Holder and
the other Attribution Parties exceeding the Maximum Percentage), at
which time or times such Holder shall be granted such right (and
any Purchase Right granted, issued or sold on such initial Purchase
Right or on any subsequent Purchase Right to be held similarly in
abeyance) to the same extent as if there had been no such
limitation.
(b)
Other Corporate
Events
. In addition to and not
in substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for
shares of Common Stock (a “
Corporate
Event
”), the Corporation
shall make appropriate provision to insure that each Holder will
thereafter have the right to receive upon a conversion of all the
Preferred Shares held by such Holder (i) in addition to the shares
of Common Stock receivable upon such conversion, such securities or
other assets to which such Holder would have been entitled with
respect to such shares of Common Stock had such shares of Common
Stock been held by such Holder upon the consummation of such
Corporate Event (without taking into account any limitations or
restrictions on the convertibility of the Preferred Shares
contained in this Certificate of Designations) or (ii) in lieu of
the shares of Common Stock otherwise receivable upon such
conversion, such securities or other assets received by the holders
of shares of Common Stock in connection with the consummation of
such Corporate Event in such amounts as such Holder would have been
entitled to receive had the Preferred Shares held by such Holder
initially been issued with conversion rights for the form of such
consideration (as opposed to shares of Common Stock) at a
conversion rate for such consideration commensurate with the
Conversion Rate. Provision made pursuant the proceeding sentence
shall be in a form and substance satisfactory to the Holder. The
provisions of this Section 6 shall apply similarly and equally to
successive Corporate Events and shall be applied without regard to
any limitations on the conversion or redemption of the Preferred
Shares contained in this Certificate of
Designations.
7.
Rights Upon Issuance
of Other Securities
.
(a)
Adjustment
of Conversion Price upon Securities Issuances
.
If, at any time while Preferred Shares
are outstanding, the Corporation issues (or is deemed to issue)
additional shares of Common Stock or rights, warrants, options or
other securities or debt convertible, exercisable or exchangeable
for shares of Common Stock or otherwise entitling any person to
acquire shares of Common Stock (collectively, “
Common Stock Equivalents
”) at an
effective net price to the Corporation per share of Common Stock
(the “
Effective
Price
”) less than the Conversion Price (as adjusted
hereunder to such date), then the Conversion Price shall be reduced
to equal the product of (A) the Conversion Price in effect
immediately prior to such issuance of Common Stock or Common Stock
Equivalents times (B) a fraction, the numerator of which is the sum
of (1) the number of shares of Common Stock outstanding immediately
prior to such issuance, plus (2) the number of shares of Common
Stock issued (or deemed to be issued) at the Conversion Price, and
the denominator of which is the aggregate number of shares of
Common Stock outstanding or deemed to be outstanding immediately
after such issuance. For purposes of this paragraph, in connection
with any issuance of any Common Stock Equivalents, (A) the maximum
number of shares of Common Stock potentially issuable at any time
upon conversion, exercise or exchange of such Common Stock
Equivalents (the “
Deemed
Number
”) shall be deemed to be outstanding upon
issuance of such Common Stock Equivalents, (B) the Effective Price
applicable to such Common Stock shall equal the minimum dollar
value of consideration payable to the Corporation to purchase such
Common Stock Equivalents and to convert, exercise or exchange them
into Common Stock (net of any discounts, fees, commissions and
other expenses), divided by the Deemed Number, and (C) no further
adjustment shall be made to the Conversion Price upon the actual
issuance of Common Stock upon conversion, exercise or exchange of
such Common Stock Equivalents.
(b)
Adjustment
of Conversion Price upon Subdivision or Combination of Common
Stock
. Without limiting any
provision of Section 6 or Section 13, if the Corporation at any
time on or after the Issuance Date subdivides (by any stock split,
stock dividend, stock combination, recapitalization or other
similar transaction) one or more classes of its outstanding shares
of Common Stock into a greater number of shares, the Conversion
Price in effect immediately prior to such subdivision will be
proportionately reduced. Without limiting any provision of Section
6 or Section 13, if the Corporation at any time on or after the
Issuance Date combines (by any stock split, stock dividend, stock
combination, recapitalization or other similar transaction) one or
more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately
increased. Any adjustment pursuant to this Section 7(b) shall
become effective immediately after the effective date of such
subdivision or combination. If any event requiring an adjustment
under this Section 7(b) occurs during the period that a Conversion
Price is calculated hereunder, then the calculation of such
Conversion Price shall be adjusted appropriately to reflect such
event.
(c)
Calculations
.
All calculations under this Section 7 shall be made by rounding to
the nearest cent or the nearest 1/100
th
of a share, as applicable. The number
of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the
Corporation, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
8.
Redemption
.
Notwithstanding anything to the
contrary herein, and notwithstanding any conversion that is then
required or in process, upon any Bankruptcy Event (a
“
Bankruptcy Redemption
Date
”), the Corporation
shall immediately redeem, in cash, each of the Preferred Shares
then outstanding at a redemption price equal to the Conversion
Amount of such Preferred Shares (each, a “
Bankruptcy Redemption
Price
”), without the
requirement for any notice or demand or other action by any Holder
or any other person or entity, provided that a Holder may, in its
sole discretion, waive such right to receive payment upon a
Bankruptcy Event, in whole or in part, and any such waiver shall
not affect any other rights of such Holder or any other Holder
hereunder, including any other rights in respect of such Bankruptcy
Event, any right to conversion, and any right to payment of such
Bankruptcy Redemption Price or any other Redemption Price, as
applicable.
9.
Noncircumvention
.
The Corporation hereby covenants and agrees that the Corporation
will not, by amendment of its Certificate of Incorporation, Bylaws
or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue 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
Certificate of Designations, and will at all times in good faith
carry out all the provisions of this Certificate of Designations
and take all action as may be required to protect the rights of the
Holders hereunder. Without limiting the generality of the foregoing
or any other provision of this Certificate of Designations, the
Corporation (a) shall not increase the par value of any shares of
Common Stock receivable upon the conversion of any Preferred Shares
above the Conversion Price then in effect, (b) shall take all such
actions as may be necessary or appropriate in order that the
Corporation may validly and legally issue fully paid and
non-assessable shares of Common Stock upon the conversion of
Preferred Shares and (c) shall, so long as any Preferred Shares are
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 conversion of the
Preferred Shares, the maximum number of shares of Common Stock as
shall from time to time be necessary to effect the conversion of
the Preferred Shares then outstanding (without regard to any
limitations on conversion contained herein).
10.
Authorized
Shares
.
(a)
Reservation
.
After a Capital Increase, so long as any Preferred Shares
remain outstanding, the Corporation
shall at all times reserve at least 108% of the number of shares of
Common Stock as shall from time to time be necessary to effect the
conversion of all of the Preferred Shares then outstanding (without
regard to any limitations on conversions) (the
“
Required Reserve
Amount
”). The Required
Reserve Amount (including, without limitation, each increase in the
number of shares so reserved) shall be allocated pro rata among the
Holders based on the number of the Preferred Shares held by each
Holder on the Issuance Date or increase in the number of reserved
shares, as the case may be (the “
Authorized Share
Allocation
”). In the
event that a Holder shall sell or otherwise transfer any of such
Holder’s Preferred Shares, each transferee shall be allocated
a pro rata portion of such Holder’s Authorized Share
Allocation. Any shares of Common Stock reserved and allocated to
any Person which ceases to hold any Preferred Shares shall be
allocated to the remaining Holders of Preferred Shares, pro rata
based on the number of the Preferred Shares then held by the
Holders.
(b)
Insufficient
Authorized Shares
. If,
notwithstanding Section 10(a) and not in limitation thereof, while
any of the Preferred Shares remain outstanding and after a Capital
Increase, the Corporation does not have a sufficient number of
authorized and unreserved shares of Common Stock to satisfy its
obligation to reserve for issuance upon conversion of the Preferred
Shares at least a number of shares of Common Stock equal to the
Required Reserve Amount (an “
Authorized Share
Failure
”), then the
Corporation shall immediately take all action necessary to increase
the Corporation’s authorized shares of Common Stock to an
amount sufficient to allow the Corporation to reserve the Required
Reserve Amount for the Preferred Shares then outstanding. Without
limiting the generality of the foregoing sentence, as soon as
practicable after the date of the occurrence of an Authorized Share
Failure, but in no event later than ninety (90) days after the
occurrence of such Authorized Share Failure, the Corporation shall
hold a meeting of its stockholders for the approval of an increase
in the number of authorized shares of Common Stock. In connection
with such meeting, the Corporation shall provide each stockholder
with a proxy statement and shall use its best efforts to solicit
its stockholders’ approval of such increase in authorized
shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such proposal. In
the event that the Corporation is prohibited from issuing shares of
Common Stock to a Holder upon any conversion due to the failure by
the Corporation to have sufficient shares of Common Stock available
out of the authorized but unissued shares of Common Stock (such
unavailable number of shares of Common Stock, the
“
Authorized Failure
Shares
”), in lieu of
delivering such Authorized Failure Shares to such Holder, the
Corporation shall pay cash in exchange for the redemption of such
portion of the Conversion Amount convertible into such Authorized
Failure Shares at a price equal to the sum of (i) the product of
(x) such number of Authorized Failure Shares and (y) the greatest
Closing Sale Price
of the Common Stock on any Trading Day during the period commencing
on the date such Holder delivers the applicable Conversion Notice
with respect to such Authorized Failure Shares to the Corporation
and ending on the date of such issuance and payment under this
Section 10(b); and (ii) to the extent such Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Holder of Authorized
Failure Shares, any brokerage commissions and other out-of-pocket
expenses, if any, of such Holder incurred in connection
therewith.
All calculations to be made pursuant to this
Certificate of Designations on an as-converted-to Common Stock,
including those for dividends, distributions, voting and
liquidation, shall be made regardless of whether there are enough
authorized but unissued and unreserved shares of Common Stock to
permit such conversion.
11.
Voting
Rights
.
(a)
Each Holder shall be entitled to the whole number of votes equal to
the number of shares of Common Stock equal to the Conversion Amount
of the Preferred Shares then held by such Holder, divided by the
Conversion Price in effect at the time of such vote, provided
however that the amount of votes held through any voting securities
of the Corporation, including the Series A Preferred Stock, by any
Holder, together with such Holder’s Attribution Parties,
shall not exceed 9.99% of the voting power of the
Corporation.
(b)
Each Holder shall be entitled to receive the same prior notice of
any stockholders’ meeting as is provided to the holders of
Common Stock as well as prior notice of all stockholder actions to
be taken by legally available means in lieu of a meeting (and
copies of proxy materials, consent solicitation statements and
other information sent to stockholders in connection therewith),
all in accordance with the Bylaws and the NRS, and shall be
entitled to vote or, if applicable, provide consent, together with
the holders of Common Stock as if they were a single class of
securities upon any matter submitted to a vote of stockholders,
except as otherwise expressly required by law and except as
required by the terms hereof to be submitted to a series vote of
the applicable Holders, in which case each Holder only shall vote
as a separate series.
(c)
For so long as 25% of the Preferred
Shares remain outstanding: (i) the holders of the Preferred Shares
voting as a class, other than the Direct Investors, shall have the
right to appoint two (2) members to the Corporation’s Board
of Directors; and (ii) the Board of Directors shall consist of no
more than five (5) members which shall not increase without the
prior express consent of the Required
Holders, other than the Direct Investors
.
12.
Liquidation,
Dissolution, Winding-Up
. In the
event of a Liquidation Event, the Holders shall be entitled to
receive in cash out of the assets of the Corporation, whether from
capital or from earnings available for distribution to its
stockholders (the “
Liquidation
Funds
”), before any
amount shall be paid to the holders of any of shares of Junior
Stock, but pari passu with any Parity Stock then outstanding, an
amount per Preferred Share equal to the Conversion Amount thereof
on the date of such payment, provided that if the Liquidation Funds
are insufficient to pay the full amount due to the Holders and
holders of shares of Parity Stock, then each Holder and each holder
of Parity Stock shall receive a percentage of the Liquidation Funds
equal to the full amount of Liquidation Funds payable to such
Holder and such holder of Parity Stock as a liquidation preference,
in accordance with their respective certificate of designations (or
equivalent), as a percentage of the full amount of Liquidation
Funds payable to all holders of Preferred Shares and all holders of
shares of Parity Stock. To the extent necessary, the Corporation
shall cause such actions to be taken by each of its Subsidiaries so
as to enable, to the maximum extent permitted by law, the proceeds
of a Liquidation Event to be distributed to the Holders in
accordance with this Section 12. All the preferential amounts to be
paid to the Holders under this Section 12 shall be paid or set
apart for payment before the payment or setting apart for payment
of any amount for, or the distribution of any Liquidation Funds of
the Corporation to the holders of shares of Junior Stock in
connection with a Liquidation Event as to which this Section 12
applies.
13.
Distribution of
Assets
. In addition to any
adjustments pursuant to Section 7, if the Corporation shall declare
or make any dividend or other distributions of its assets (or
rights to acquire its assets) to any or all holders of shares of
Common Stock, by way of return of capital or otherwise (including
without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (the “
Distributions
”),
then each Holder, as holders of Preferred Shares, will be entitled
to such Distributions as if such Holder had held the number of
shares of Common Stock acquirable upon complete conversion of the
Preferred Shares (without taking into account any limitations or
restrictions on the convertibility of the Preferred Shares)
immediately prior to the date on which a record is taken for such
Distribution or, if no such record is taken, the date as of which
the record holders of Common Stock are to be determined for such
Distributions (
provided
,
however
,
that to the extent that such Holder’s right to participate in
any such Distribution would result in such Holder and the other
Attribution Parties exceeding the Maximum Percentage, then such
Holder shall not be entitled to participate in such Distribution to
the extent of the Maximum Percentage (and shall not be entitled to
beneficial ownership of such shares of Common Stock as a result of
such Distribution (and beneficial ownership) to the extent of any
such excess) and the portion of such Distribution shall be held in
abeyance for such Holder until such time or times as its right
thereto would not result in such Holder and the other Attribution
Parties exceeding the Maximum Percentage, at which time or times,
if any, such Holder shall be granted such rights (and any rights
under this Section 13 on such initial rights or on any subsequent
such rights to be held similarly in abeyance) to the same extent as
if there had been no such limitation).
14.
Vote to Change the
Terms of or Issue Preferred Shares
. In addition to any other rights provided by law,
except where the vote or written consent of the holders of a
greater number of shares is required by law or by another provision
of the Certificate of Incorporation, without first obtaining the
affirmative vote at a meeting duly called for such purpose or the
written consent without a meeting of the Required Holders, voting
together as a single class, the Corporation shall not: (a) amend or
repeal any provision of, or add any provision to, its Certificate
of Incorporation or bylaws, or file any certificate of designations
or articles of amendment of any series of shares of preferred
stock, if such action would adversely alter or change in any
respect the preferences, rights, privileges or powers, or
restrictions provided for the benefit of the Preferred Shares
hereunder, regardless of whether any such action shall be by means
of amendment to the Certificate of Incorporation or by merger,
consolidation or otherwise; (b) increase or decrease (other than by
conversion) the authorized number of Preferred Shares; (c) without
limiting any provision of Section 2, create or authorize (by
reclassification or otherwise) any new class or series of Senior
Preferred Stock or Parity Stock; (d) purchase, repurchase or redeem
any shares of Junior Stock (other than pursuant to the terms of the
Corporation’s equity incentive plans and options and other
equity awards granted under such plans (that have in good faith
been approved by the Board)); (e) without limiting any provision of
Section 2, pay dividends or make any other distribution on any
shares of any Junior Stock or Parity Stock.
15.
Issuance
of Indebtedness, Prohibited Equity Securities and Capital
Increase
.
(a) So
long as Preferred Shares representing at least twenty-five percent
(25%) of the total number of Preferred Shares remain issued and
outstanding, the Corporation shall not, without obtaining the
approval (by vote or written consent) of the Required Holders, (i)
create, or authorize the creation of, or incur, or authorize the
incurrence of, any Indebtedness, other than Permitted Indebtedness,
or permit any subsidiary to take any such action, (ii) issue any
shares of Common Stock, or Convertible Securities, other than
Permitted Issuances, or permit any subsidiary to take any such
action at a price per share less than one and a half (1.5) times
the then in effect Conversion Price, or (iii), issue anyvariable
priced equity, variable priced equity linked securities or
securities with similar floating provisions for the conversion or
exercise of such securities;
provided, however
, the prohibited
issuances set forth in clause (ii) above shall terminate upon the
sooner of (i) 180 days following the effective date of the
registration statement registering all of the shares of Common
Stock (x) issued contemporaneously with the issuance of the
Preferred Shares, (y) issuable upon conversion of the Preferred
Shares under the 1933 Act, and (z) issuable upon exercise of the
warrants issued contemporaneously with the Preferred Shares
(“
Warrants
”); or
(ii) the Anniversary Date.
(b) For
a period ending on the sooner to occur of (i) the Anniversary Date
or (ii) the date on which only twenty percent (20%) of the
originally issued Preferred Shares remain outstanding, the
Corporation shall not issue Options or other securities under any
equity incentive plan of the Corporation, other than Permitted
Issuances, to the extent such issuances would total in excess of
five percent (5%) of the issued and outstanding securities of the
Corporation, which total shall include the shares of Common Stock
issuable upon conversion of the Preferred Shares, shares of Common
Stock issuable upon conversion of the Series B Preferred, and any
shares of Common Stock actually issued upon conversion of the
Warrants.
(c)
As
soon as practicable following the Issuance Date, the Corporation
shall hold a special meeting of stockholders to approve the Capital
Increase, or shall seek the written consent of stockholders to such
Capital Increase in liue of a special meeting to approve the same
(“
Authorized Share
Approval
”). The Corporation shall use its best efforts
to obtain Authorized Share Approval of such Capital Increase and
shall cause the Board of Directors of the Corporation to recommend
to the stockholder that they approve such Capital Increase. If,
despite the Corporation’s best efforts the Authorized Share
Approval is not obtained on or prior to May 31, 2019, the
Corporation shall cause an additional stockholder meeting to be
held every three months thereafter until such Authorized Share
Approval is obtained.
16.
Transfer of Preferred
Shares
. A Holder may transfer
some or all of its Preferred Shares without the consent of the
Corporation.
17.
Reissuance of
Preferred Share Certificates and Book Entries
.
(a)
Transfer
.
If any Preferred Shares are to be transferred, the applicable
Holder shall surrender the applicable Preferred Share Certificate
to the Corporation (or, if the Preferred Shares are held in
Book-Entry form, a written instruction letter to the Corporation),
whereupon the Corporation will forthwith issue and deliver upon the
order of such Holder a new Preferred Share Certificate (in
accordance with Section 17(d)) (or evidence of the transfer of such
Book-Entry), registered as such Holder may request, representing
the outstanding number of Preferred Shares being transferred by
such Holder and, if less than the entire outstanding number of
Preferred Shares is being transferred, a new Preferred Share
Certificate (in accordance with Section 17(d)) to such Holder
representing the outstanding number of Preferred Shares not being
transferred (or evidence of such remaining Preferred Shares in a
Book-Entry for such Holder). Such Holder and any assignee, by
acceptance of the Preferred Share Certificate or evidence of
Book-Entry issuance, as applicable, acknowledge and agree that, by
reason of the provisions of Section 4(c)(i) following conversion or
redemption of any of the Preferred Shares, the outstanding number
of Preferred Shares represented by the Preferred Shares may be less
than the number of Preferred Shares stated on the face of the
Preferred Shares.
(b)
Lost,
Stolen or Mutilated Preferred Share Certificate
. Upon receipt by the Corporation of evidence
reasonably satisfactory to the Corporation of the loss, theft,
destruction or mutilation of a Preferred Share Certificate (as to
which a written certification and the indemnification contemplated
below shall suffice as such evidence), and, in the case of loss,
theft or destruction, of any indemnification undertaking by the
applicable Holder to the Corporation in customary and reasonable
form and, in the case of mutilation, upon surrender and
cancellation of such Preferred Share Certificate, the Corporation
shall execute and deliver to such Holder a new Preferred Share
Certificate (in accordance with Section 17(d)) representing the
applicable outstanding number of Preferred
Shares.
(c)
Preferred
Share Certificate and Book-Entries Exchangeable for Different
Denominations and Forms
. Each
Preferred Share Certificate is exchangeable, upon the surrender
hereof by the applicable Holder at the principal office of the
Corporation, for a new Preferred Share Certificate or Preferred
Share Certificate(s) or new Book-Entry (in accordance with Section
17(d)) representing, in the aggregate, the outstanding number of
the Preferred Shares in the original Preferred Share Certificate,
and each such new Preferred Share Certificate and/or new
Book-Entry, as applicable, will represent such portion of such
outstanding number of Preferred Shares from the original Preferred
Share Certificate as is designated in writing by such Holder at the
time of such surrender. Each Book-Entry may be exchanged into one
or more new Preferred Share Certificates or split by the applicable
Holder by delivery of a written notice to the Corporation into two
or more new Book-Entries (in accordance with Section 17(d))
representing, in the aggregate, the outstanding number of the
Preferred Shares in the original Book-Entry, and each such new
Book-Entry and/or new Preferred Share Certificate, as applicable,
will represent such portion of such outstanding number of Preferred
Shares from the original Book-Entry as is designated in writing by
such Holder at the time of such surrender.
(d)
Issuance of New
Preferred Share Certificate or Book-Entry
. Whenever the Corporation is required to issue a
new Preferred Share Certificate or a new Book-Entry pursuant to the
terms of this Certificate of Designations, such new Preferred Share
Certificate or new Book-Entry (i) shall represent, as indicated on
the face of such Preferred Share Certificate or in such Book-Entry,
as applicable, the number of Preferred Shares remaining outstanding
(or in the case of a new Preferred Share Certificate or new
Book-Entry being issued pursuant to Section 17(a) or Section 17(c),
the number of Preferred Shares designated by such Holder) which,
when added to the number of Preferred Shares represented by the
other new Preferred Share Certificates or other new Book-Entry, as
applicable, issued in connection with such issuance, does not
exceed the number of Preferred Shares remaining outstanding under
the original Preferred Share Certificate or original Book-Entry, as
applicable, immediately prior to such issuance of new Preferred
Share Certificate or new Book-Entry, as applicable, and (ii) shall
have an issuance date, as indicated on the face of such new
Preferred Share Certificate or in such new Book-Entry, as
applicable, which is the same as the issuance date of the original
Preferred Share Certificate or in such original Book-Entry, as
applicable.
18.
Remedies,
Characterizations, Other Obligations, Breaches and Injunctive
Relief
. The remedies provided
in this Certificate of Designations shall be cumulative and in
addition to all other remedies available under this Certificate of
Designations, at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein
shall limit any Holder’s right to pursue actual and
consequential damages for any failure by the Corporation to comply
with the terms of this Certificate of Designations. The Corporation
covenants to each Holder that there shall be no characterization
concerning this instrument other than as expressly provided herein.
Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the
amounts to be received by a Holder and shall not, except as
expressly provided herein, be subject to any other obligation of
the Corporation (or the performance thereof). The Corporation
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Holders and that the remedy at law
for any such breach may be inadequate. The Corporation therefore
agrees that, in the event of any such breach or threatened breach,
each Holder shall be entitled, in addition to all other available
remedies, to specific performance and/or temporary, preliminary and
permanent injunctive or other equitable relief from any court of
competent jurisdiction in any such case without the necessity of
proving actual damages and without posting a bond or other
security. The Corporation shall provide all information and
documentation to a Holder that is requested by such Holder to
enable such Holder to confirm the Corporation’s compliance
with the terms and conditions of this Certificate of
Designations.
18.
Payment of Collection,
Enforcement and Other Costs
. If
(a) any Preferred Shares are placed in the hands of an attorney for
collection or enforcement or are collected or enforced through any
legal proceeding or a Holder otherwise takes action to collect
amounts due under this Certificate of Designations with respect to
the Preferred Shares or to enforce the provisions of this
Certificate of Designations or (b) there occurs any bankruptcy,
reorganization, receivership of the Corporation or other
proceedings affecting Corporation creditors’ rights and
involving a claim under this Certificate of Designations, then the
Corporation shall pay the costs incurred by such Holder for such
collection, enforcement or action or in connection with such
bankruptcy, reorganization, receivership or other proceeding,
including, without limitation, attorneys’ fees and
disbursements.
20.
Construction;
Headings
. This Certificate of
Designations shall be deemed to be jointly drafted by the
Corporation and the Holders and shall not be construed against any
such Person as the drafter hereof. The headings of this Certificate
of Designations are for convenience of reference and shall not form
part of, or affect the interpretation of, this Certificate of
Designations. Unless the context clearly indicates otherwise, each
pronoun herein shall be deemed to include the masculine, feminine,
neuter, singular and plural forms thereof. The terms
“including,” “includes,”
“include” and words of like import shall be construed
broadly as if followed by the words “without
limitation.” The terms “herein,”
“hereunder,” “hereof” and words of like
import refer to this entire Certificate of Designations instead of
just the provision in which they are found. Unless expressly
indicated otherwise, all section references are to sections of this
Certificate of Designations.
21.
Failure or Indulgence
Not Waiver
. No failure or delay
on the part of a Holder in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any
other right, power or privilege. No waiver shall be effective
unless it is in writing and signed by an authorized representative
of the waiving party. This Certificate of Designations shall be
deemed to be jointly drafted by the Corporation and all Holders and
shall not be construed against any Person as the drafter hereof.
Notwithstanding the foregoing, nothing contained in this Section 21
shall permit any waiver of any provision of Section
4(d).
22.
Dispute
Resolution
.
(a)
Submission to Dispute
Resolution
.
(i)
In the case of a dispute relating to a Closing Bid Price, a Closing
Sale Price, a Conversion Price, a VWAP or a fair market value or
the arithmetic calculation of a Conversion Rate, or the applicable
Redemption Price (as the case may be) (including, without
limitation, a dispute relating to the determination of any of the
foregoing), the Corporation or the applicable Holder (as the case
may be) shall submit the dispute to the other party via facsimile
or electronic mail (A) if by the Corporation, within two (2)
Business Days after the occurrence of the circumstances giving rise
to such dispute or (B) if by such Holder at any time after such
Holder learned of the circumstances giving rise to such dispute. If
such Holder and the Corporation are unable to promptly resolve such
dispute relating to such Closing Bid Price, such Closing Sale
Price, such Conversion Price, such VWAP or such fair market value,
or the arithmetic calculation of such Conversion Rate or such
applicable Redemption Price (as the case may be), at any time after
the second (2
nd
) Business Day following such initial notice by
the Corporation or such Holder (as the case may be) of such dispute
to the Corporation or such Holder (as the case may be), then such
Holder and the Corporation may jointly select an independent,
reputable investment bank to resolve such
dispute.
(ii) Such Holder and the Corporation shall each
deliver to such investment bank (A) a copy of the initial dispute
submission so delivered in accordance with the first sentence of
this Section 22 and (B) written documentation supporting its
position with respect to such dispute, in each case, no later than
5:00 p.m. (New York time) by the fifth (5
th
) Business Day immediately following the date on
which such Holder selected such investment bank (the
“Dispute
Submission
Deadline
”) (the documents referred to in the
immediately preceding clauses (A) and (B) are collectively referred
to herein as the “
Required Dispute
Documentation
”) (it being
understood and agreed that if either such Holder or the Corporation
fails to so deliver all of the Required Dispute Documentation by
the Dispute Submission Deadline, then the party who fails to so
submit all of the Required Dispute Documentation shall no longer be
entitled to (and hereby waives its right to) deliver or submit any
written documentation or other support to such investment bank with
respect to such dispute and such investment bank shall resolve such
dispute based solely on the Required Dispute Documentation that was
delivered to such investment bank prior to the Dispute Submission
Deadline). Unless otherwise agreed to in writing by both the
Corporation and such Holder or otherwise requested by such
investment bank, neither the Corporation nor such Holder shall be
entitled to deliver or submit any written documentation or other
support to such investment bank in connection with such dispute
(other than the Required Dispute
Documentation).
(iii)
The Corporation and such Holder shall cause such investment bank to
determine the resolution of such dispute and notify the Corporation
and such Holder of such resolution no later than ten (10) Business
Days immediately following the Dispute Submission Deadline. The
fees and expenses of such investment bank shall be borne solely by
the Corporation, and such investment bank’s resolution of
such dispute shall be final and binding upon all parties absent
manifest error.
(b)
Miscellaneous
.
The Corporation and each Holder each, severally and not jointly,
expressly acknowledges and agrees that (i) this Section 22
constitutes an agreement to arbitrate between the Corporation and
such Holder (and constitutes an arbitration agreement), and that
any Holder is authorized to apply for an order to compel
arbitration in order to compel compliance with this Section 22,
(ii) the terms of this Certificate of Designations and each other
applicable Transaction Document shall serve as the basis for the
selected investment bank’s resolution of the applicable
dispute, such investment bank shall be entitled (and is hereby
expressly authorized) to make all findings, determinations and the
like that such investment bank determines are required to be made
by such investment bank in connection with its resolution of such
dispute and in resolving such dispute such investment bank shall
apply such findings, determinations and the like to the terms of
this Certificate of Designations, (iii) the Corporation and such
applicable Holder (but only such Holder with respect to disputes
solely relating to such Holder) shall each have the right to submit
any dispute described in this Section 22 to any state or federal
court sitting in the New York County, New York in lieu of utilizing
the procedures set forth in this Section 22 and (iv) nothing in
this Section 22 shall limit such Holder from obtaining any
injunctive relief or other equitable remedies (including, without
limitation, with respect to any matters described in this Section
22).
23.
Notices; Currency;
Payments
.
(a)
Notices
.
The Corporation shall provide each Holder of Preferred Shares with
prompt written notice of all actions taken pursuant to the terms of
this Certificate of Designations, including in reasonable detail a
description of such action and the reason therefor. Any notices,
consents, waivers or other communications required or permitted to
be given under the terms hereof must be in writing and will be
deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon delivery, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party) or by electronic
mail (provided that a automatically generated notice indicating a
delivery failure has not been sent to the sending party); (iii)
upon delivery when sent by email so long as an automatically
generated delivery failure is not received by the sender;or (iv)
one Business Day after deposit with an overnight courier service,
in each case properly addressed to the party to receive the same.
Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine or
e-mail containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an
overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above,
respectively. The Corporation shall provide each Holder with prompt
written notice of all actions taken pursuant to this Certificate of
Designations, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of
the foregoing, the Corporation shall give written notice to each
Holder (i) immediately upon any adjustment of the Conversion Price,
setting forth in reasonable detail, and certifying, the calculation
of such adjustment and (ii) at least fifteen (15) days prior to the
date on which the Corporation closes its books or takes a record
(A) with respect to any dividend or distribution upon the Common
Stock, (B) with respect to any grant, issuances or sales of any
Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of shares of
Common Stock, or (C) for determining rights to vote with respect to
any Fundamental Transaction, dissolution or liquidation, provided
in each case that such information shall be made known to the
public prior to or in conjunction with such notice being provided
to such Holder.
(b)
Currency
.
All dollar amounts referred to in this Certificate of Designations
are in United States Dollars (“
U.S. Dollars
”), and all amounts owing under this
Certificate of Designations shall be paid in U.S. Dollars. All
amounts denominated in other currencies (if any) shall be converted
into the U.S. Dollar equivalent amount in accordance with the
Exchange Rate on the date of calculation.
“
Exchange
Rate
” means, in relation
to any amount of currency to be converted into U.S. Dollars
pursuant to this Certificate of Designations, the U.S. Dollar
exchange rate as published in the Wall Street Journal on the
relevant date of calculation (it being understood and agreed that
where an amount is calculated with reference to, or over, a period
of time, the date of calculation shall be the final date of such
period of time).
(c)
Payments
.
Whenever any payment of cash is to be made by the Corporation to
any Person pursuant to this Certificate of Designations, unless
otherwise expressly set forth herein, such payment shall be made in
lawful money of the United States of America by a certified check
drawn on the account of the Corporation, provided that such Holder
may elect to receive a payment of cash via wire transfer of
immediately available funds by providing the Corporation with prior
written notice setting out such request and such Holder’s
wire transfer instructions. Whenever any amount expressed to be due
by the terms of this Certificate of Designations is due on any day
which is not a Business Day, the same shall instead be due on the
next succeeding day which is a Business Day.
24.
Waiver of
Notice
. To the extent permitted
by law, the Corporation hereby irrevocably waives demand, notice,
presentment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Certificate of
Designations.
25.
Governing
Law
. This Certificate of
Designations shall be construed and enforced in accordance with,
and all questions concerning the construction, validity,
interpretation and performance of this Certificate of Designations
shall be governed by, the internal laws of the State of Nevada,
without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Nevada or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Nevada. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Nothing contained herein
shall be deemed to limit in any way any right to serve process in
any manner permitted by law. Nothing contained herein (i) shall be
deemed or operate to preclude any Holder from bringing suit or
taking other legal action against the Corporation in any other
jurisdiction to collect on the Corporation’s obligations to
such Holder, to realize on any collateral or any other security for
such obligations, or to enforce a judgment or other court ruling in
favor of such Holder or (ii) shall limit, or shall be deemed or
construed to limit, any provision of Section 22.
THE CORPORATION
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT
TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS CERTIFICATE
OF DESIGNATIONS OR ANY TRANSACTION CONTEMPLATED
HEREBY.
26.
Judgment
Currency
.
(a) If for the purpose of obtaining or enforcing
judgment against the Corporation in any court in any jurisdiction
it becomes necessary to convert into any other currency (such other
currency being hereinafter in this Section 26 referred to as the
“
Judgment
Currency
”) an amount due
in U.S. dollars under this Certificate of Designations, the
conversion shall be made at the Exchange Rate prevailing on the
Trading Day immediately preceding:
(i)
the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other
jurisdiction that will give effect to such conversion being made on
such date: or
(ii) the date on which the foreign court
determines, in the case of any proceeding in the courts of any
other jurisdiction (the date as of which such conversion is made
pursuant to this Section 26(a)(ii) being hereinafter referred to as
the “
Judgment Conversion
Date
”).
(b)
If in the case of any proceeding in the court of any jurisdiction
referred to in Section 26(a) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and
the date of actual payment of the amount due, the applicable party
shall pay such adjusted amount as may be necessary to ensure that
the amount paid in the Judgment Currency, when converted at the
Exchange Rate prevailing on the date of payment, will produce the
amount of US dollars which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial
order at the Exchange Rate prevailing on the Judgment Conversion
Date.
(c)
Any amount due from the Corporation under this provision shall be
due as a separate debt and shall not be affected by judgment being
obtained for any other amounts due under or in respect of this
Certificate of Designations.
27.
Severability
.
If any provision of this Certificate of Designations is prohibited
by law or otherwise determined to be invalid or unenforceable by a
court of competent jurisdiction, the provision that would otherwise
be prohibited, invalid or unenforceable shall be deemed amended to
apply to the broadest extent that it would be valid and
enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions
of this Certificate of Designations so long as this Certificate of
Designations as so modified continues to express, without material
change, the original intentions of the parties as to the subject
matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The
parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable
provision(s).
28.
Maximum
Payments
. Nothing contained
herein shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall
be credited against amounts owed by the Corporation to the
applicable Holder and thus refunded to the
Corporation.
29.
Stockholder Matters;
Amendment
.
(a)
Stockholder
Matters
. Any stockholder
action, approval or consent required, desired or otherwise sought
by the Corporation pursuant to the NRS, the Certificate of
Incorporation, this Certificate of Designations or otherwise with
respect to the issuance of Preferred Shares may be effected by
written consent of the Corporation’s stockholders or at a
duly called meeting of the Corporation’s stockholders, all in
accordance with the applicable rules and regulations of the NRS.
This provision is intended to comply with the applicable sections
of the NRS permitting stockholder action, approval and consent
affected by written consent in lieu of a
meeting.
(b)
Amendment
.
This Certificate of Designations or any provision hereof may be
amended by obtaining the affirmative vote at a meeting duly called
for such purpose, or written consent without a meeting in
accordance with the NRS, of the Required Holders, voting separate
as a single class, and with such other stockholder approval, if
any, as may then be required pursuant to the NRS and the
Certificate of Incorporation.
30.
Certain Defined
Terms
. For purposes of this
Certificate of Designations, the following terms shall have the
following meanings:
(a)
“
1933 Act
” means the Securities Act of 1933, as
amended, and the rules and regulations
thereunder.
(b)
“
1934 Act
” means the Securities Exchange Act of 1934,
as amended, and the rules and regulations
thereunder.
(c)
“
Affiliate
” or “
Affiliated
” means, with respect to any Person, any
other Person that directly or indirectly controls, is controlled
by, or is under common control with, such Person, it being
understood for purposes of this definition that
“control” of a Person means the power directly or
indirectly either to vote 10% or more of the stock having ordinary
voting power for the election of directors of such Person or direct
or cause the direction of the management and policies of such
Person whether by contract or otherwise.
(d)
“
Attribution
Parties
” means,
collectively, the following Persons and entities: (i) any
investment vehicle, including, any funds, feeder funds or managed
accounts, currently, or from time to time after the Issuance Date,
directly or indirectly managed or advised by a Holder’s
investment manager or any of its Affiliates or principals, (ii) any
direct or indirect Affiliates of such Holder or any of the
foregoing, (iii) any Person acting or who could be deemed to be
acting as a Group together with such Holder or any of the foregoing
and (iv) any other Persons whose beneficial ownership of the
Corporation’s Common Stock would or could be aggregated with
such Holder’s and the other Attribution Parties for purposes
of Section 13(d) of the 1934 Act. For clarity, the purpose of the
foregoing is to subject collectively such Holder and all other
Attribution Parties to the Maximum Percentage.
(e)
“
Bankruptcy Event
” means any of the
following events: (a) the Corporation commences a case or other
proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction relating to the
Corporation, (b) there is commenced against the Corporation any
such case or proceeding that is not dismissed within 60 days after
commencement, (c) the Corporation is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such
case or proceeding is entered, (d) the Corporation suffers any
appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 60
calendar days after such appointment, (e) the Corporation makes a
general assignment for the benefit of creditors, (f) the
Corporation calls a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts,
(g) the Corporation admits in writing that it is generally unable
to pay its debts as they become due, (h) the Corporation, by any
act or failure to act, expressly indicates its consent to, approval
of or acquiescence in any of the foregoing or takes any corporate
or other action for the purpose of effecting any of the
foregoing.
(f)
“
Bloomberg
” means Bloomberg, L.P.
(g)
“
Book-Entry
”
means each entry on the Register evidencing one or more Preferred
Shares held by a Holder in lieu of a Preferred Share Certificate
issuable hereunder.
(h)
“
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.
(i)
“
Capital
Increase
” means an
increase of the number of authorized but unissued shares of Common
Stock, either via reverse split or increase in the number of shares
authorized, in excess of 300% of number of shares of Common Stock
necessary to convert all the Preferred Shares, Series B Preferred
and Warrants issued
contemporaneously
with the Preferred Shares.
(j)
“
Closing Bid
Price
” and
“
Closing Sale
Price
” means, for any
security as of any date, the last closing bid price and last
closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price (as the
case may be) then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if the Principal Market is not
the principal securities exchange or trading market for such
security, 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 in the “pink sheets” by OTC Markets Group Inc.
(formerly Pink Sheets LLC). 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 Corporation
and the Required Holder. If the Corporation and the Required
Holders are unable to agree upon the fair market value of such
security, then such dispute shall be resolved in accordance with
the procedures in Section 22. All such determinations shall be
appropriately adjusted for any stock splits, stock dividends, stock
combinations, recapitalizations or other similar transactions
during such period.
(k)
“
Common Stock
” means (i) the Corporation’s shares
of common stock, $0.001 par value per share, and (ii) any capital
stock into which such common stock shall have been changed or any
share capital resulting from a reclassification of such common
stock.
(l)
“
Convertible
Securities
” means any
stock or other security (other than Options) that is 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 shares of Common
Stock.
(m)
“
Current
Subsidiary
” means any
Person in which the Corporation on the Issuance Date, directly or
indirectly, (i) owns any of the outstanding capital stock or holds
any equity or similar interest of such Person or (ii) controls or
operates all or any part of the business, operations or
administration of such Person, and all of the foregoing,
collectively, “
Current
Subsidiaries
”.
(n)
“Direct
Investors”
means any
Holder acquiring Preferred Shares directly from the Corporation on
the Issuance Date other than pursuant to an exchange of securities
of Charlie's Chalk Dust, LLC.
(o)
“
Eligible
Market
” means The New
York Stock Exchange, the NYSE American, the Nasdaq Global Select
Market, the Nasdaq Global Market or the Principal
Market.
(p)
“
Fundamental
Transaction
” means (A)
that the Corporation shall, directly or indirectly, including
through subsidiaries, Affiliates or otherwise, in one or more
related transactions, (i) consolidate or merge with or into
(whether or not the Corporation is the surviving corporation)
another Subject Entity, or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or
assets of the Corporation or any of its “significant
subsidiaries “ (as defined in Rule 1-02 of Regulation S-X) to
one or more Subject Entities, or (iii) make, or allow one or more
Subject Entities to make, or allow the Corporation to be subject to
or have its Common Stock be subject to or party to one or more
Subject Entities making, a purchase, tender or exchange offer that
is accepted by the holders of at least either (x) 50% of the
outstanding shares of Common Stock, (y) 50% of the outstanding
shares of Common Stock calculated as if any shares of Common Stock
held by all Subject Entities making or party to, or Affiliated with
any Subject Entities making or party to, such purchase, tender or
exchange offer were not outstanding; or (z) such number of shares
of Common Stock such that all Subject Entities making or party to,
or Affiliated with any Subject Entity making or party to, such
purchase, tender or exchange offer, become collectively the
beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of
at least 50% of the outstanding shares of Common Stock, or (iv)
consummate a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with one or
more Subject Entities whereby all such Subject Entities,
individually or in the aggregate, acquire, either (x) at least 50%
of the outstanding shares of Common Stock, (y) at least 50% of the
outstanding shares of Common Stock calculated as if any shares of
Common Stock held by all the Subject Entities making or party to,
or Affiliated with any Subject Entity making or party to, such
stock purchase agreement or other business combination were not
outstanding; or (z) such number of shares of Common Stock such that
the Subject Entities become collectively the beneficial owners (as
defined in Rule 13d-3
under the 1934 Act) of at least 50% of the outstanding shares of
Common Stock, or (v) reorganize, recapitalize or reclassify its
Common Stock, (B) that the Corporation shall, directly or
indirectly, including through subsidiaries, Affiliates or
otherwise, in one or more related transactions, allow any Subject
Entity individually or the Subject Entities in the aggregate to be
or become the “beneficial owner” (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, whether through
acquisition, purchase, assignment, conveyance, tender, tender
offer, exchange, reduction in outstanding shares of Common Stock,
merger, consolidation, business combination, reorganization,
recapitalization, spin-off, scheme of arrangement, reorganization,
recapitalization or reclassification or otherwise in any manner
whatsoever, of either (x) at least 50% of the aggregate ordinary
voting power represented by issued and outstanding Common Stock,
(y) at least 50% of the aggregate ordinary voting power represented
by issued and outstanding Common Stock not held by all such Subject
Entities as of the date of this Certificate of Designations
calculated as if any shares of Common Stock held by all such
Subject Entities were not outstanding, or (z) a percentage of the
aggregate ordinary voting power represented by issued and
outstanding shares of Common Stock or other equity securities of
the Corporation sufficient to allow such Subject Entities to effect
a statutory short form merger or other transaction requiring other
stockholders of the Corporation to surrender their shares of Common
Stock without approval of the stockholders of the Corporation or
(C) directly or indirectly, including through subsidiaries,
Affiliates or otherwise, in one or more related transactions, the
issuance of or the entering into any other instrument or
transaction structured in a manner to circumvent, or that
circumvents, the intent of this definition in which case this
definition shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this definition to the
extent necessary to correct this definition or any portion of this
definition which may be defective or inconsistent with the intended
treatment of such instrument or transaction.
(q)
“
GAAP
” means United States generally accepted
accounting principles, consistently applied.
(r)
“
Group
” means a “group” as that term
is used in Section 13(d) of the 1934 Act and as defined in Rule
13d-5 thereunder.
(s)
“
Holder
” shall have the meaning set forth in
Section 2.
(t)
“
Holder Pro Rata
Amount
” means, with
respect to any Holder, a fraction (i) the numerator of which is the
number of Preferred Shares issued to such Holder on the Issuance
Date and (ii) the denominator of which is the number of Preferred
Shares issued to all Holders on the Issuance
Date.
(u)
“Indebtedness”
means (x) any
liabilities for borrowed money or amounts owed (other than trade
accounts payable incurred in the ordinary course of business) and
(y) all guaranties, endorsements and other contingent obligations
in respect of indebtedness of others, whether or not the same are
or should be reflected in the Corporation’s consolidated
balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of
business.
(v)
“
Issuance
Date
” means the date
Preferred Stock is first issued by the
Corporation.
(w)
“
Liquidation
Event
” means, whether in
a single transaction or series of transactions, the voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation or such Subsidiaries the assets of which constitute all
or substantially all of the assets of the business of the
Corporation and its Subsidiaries, taken as a
whole.
(x)
“
New
Subsidiary
” means, as of
any date of determination, any Person in which the Corporation
after the Issuance Date, directly or indirectly, (i) owns or
acquires any of the outstanding capital stock or holds any equity
or similar interest of such Person or (ii) controls or operates all
or any part of the business, operations or administration of such
Person, and all of the foregoing, collectively,
“
New
Subsidiaries
.”
(y)
“
Options
” means any rights, warrants or options to
subscribe for or purchase shares of Common Stock or Convertible
Securities.
(z)
“
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 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.
(a)
“Permitted Indebtedness”
means (x) all indebtedness of the Corporation outstanding on the
Issuance Date or thereafter that does not constitute Indebtedness,
provided that the terms thereof have not been amended or modified
on or after the Issuance Date. and (y) monies borrowed in an amount
not to exceed $2,500,000.
(
b
)
“Permitted Issuances”
means
(x) any shares of Common Stock, Options or Convertible Securities,
issued or issuable by the Corporation on or before the date hereof,
and (y) any shares of Common Stock, Options or Convertible
Securities issued or issuable under any equity incentive plan of
the Corporation
that has in good faith
been approved by the Board.
(c
)
“
Person
” means an individual, a limited liability
Corporation, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity or a
government or any department or agency thereof.
(d)
“
Principal
Market
” means the OTC
Markets.
(e)
“
SEC
” means the Securities and Exchange
Commission or the successor thereto.
(f)
“
Series B
Preferred
” means the
Series B Convertible Preferred Stock issued together with the
Preferred Stock.
(g)
“
Stated Value
” shall mean $100.00 per share, subject to
adjustment for stock splits, stock dividends, recapitalizations,
reorganizations, reclassifications, combinations, subdivisions or
other similar events occurring after the Issuance Date with respect
to the Preferred Shares.
(h)
“Subject
Entity
” means any Person,
Persons or Group or any Affiliate or associate of any such Person,
Persons or Group.
(i)
“
Subsidiaries
”
means, as of any date of determination, collectively, all Current
Subsidiaries and all New Subsidiaries, and each of the foregoing,
individually, a “
Subsidiary
.”
(j)
“
Successor
Entity
” means the Person
(or, if so elected by the Required Holders, the Parent Entity)
formed by, resulting from or surviving any Fundamental Transaction
or the Person (or, if so elected by the Required Holders, the
Parent Entity) with which such Fundamental Transaction shall have
been entered into.
(k)
“
Trading Day
” means, as applicable, (x) with respect to
all price or trading volume determinations relating to the Common
Stock, 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 4:00:00 p.m.,
New York time) unless such day is otherwise designated as a Trading
Day in writing by the Holder or (y) with respect to all
determinations other than price determinations relating to the
Common Stock, any day on which The New York Stock Exchange (or any
successor thereto) is open for trading of
securities.
(l)
Intentionally
left blank.
(m)
“
VWAP
” means, for any security as of any date,
the dollar volume-weighted average price for such security on the
Principal Market (or, if the Principal Market is not the principal
trading market for such security, then on the principal securities
exchange or securities market on which such security is then
traded) during the period beginning at 9:30:01 a.m., New York time,
and ending at 4:00:00 p.m., New York time, as reported by Bloomberg
through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price
of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at
9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if no dollar volume-weighted
average price is reported for such security by Bloomberg for such
hours, the average of the highest closing bid price and the lowest
closing ask price of any of the market makers for such security as
reported in the “pink sheets” by OTC Markets Group Inc.
(formerly Pink Sheets LLC). If the VWAP cannot be calculated for
such security on such date on any of the foregoing bases, the VWAP
of such security on such date shall be the fair market value as
mutually determined by the Corporation and the Required Holders. If
the Corporation and the Required Holders are unable to agree upon
the fair market value of such security, then such dispute shall be
resolved in accordance with the procedures in Section 22. All such
determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination, recapitalization or other
similar transaction during such period.
30.
Disclosure
.
Upon receipt or delivery by the Corporation of any notice in
accordance with the terms of this Certificate of Designations,
unless the Corporation has in good faith determined that the
matters relating to such notice do not constitute material,
non-public information relating to the Corporation or any of its
Subsidiaries, the Corporation shall within one (1) Business Day
after any such receipt or delivery publicly disclose such material,
non-public information on a Current Report on Form 8-K or
otherwise. In the event that the Corporation believes that a notice
contains material, non-public information relating to the
Corporation or any of its Subsidiaries, the Corporation so shall
indicate to such Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, such Holder
shall be allowed to presume that all matters relating to such
notice do not constitute material, non-public information relating
to the Corporation or any of its Subsidiaries. If the Corporation
or any of its Subsidiaries provides material non-public information
to a Holder that is not simultaneously filed in a Current Report on
Form 8-K and such Holder has not agreed to receive such material
non-public information, the Corporation hereby covenants and agrees
that such Holder shall not have any duty of confidentiality to the
Corporation, any of its Subsidiaries or any of their respective
officers, directors, employees, affiliates or agents with respect
to, or a duty to any of the foregoing not to trade on the basis of,
such material non-public information.
* * * * *
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations of Series A Convertible Preferred Stock to be signed
by its Chief Executive Officer on this 25 day of April,
2019.
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TRUE DRINKS HOLDINGS, INC.
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By:
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/s/ Robert Van
Boerum
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Name:
Robert Van Boerum
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Title:
Chief Executive Officer
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EXHIBIT I
TRUE DRINKS HOLDINGS, INC.
CONVERSION NOTICE
Reference is made to the Certificate of
Designations, Preferences and Rights of the Series A Convertible
Preferred Stock of True Drinks Holdings, Inc. (the
“
Certificate of
Designations
”). In
accordance with and pursuant to the Certificate of Designations,
the undersigned hereby elects to convert the number of shares of
Series A Convertible Preferred Stock, $0.001 par value per share
(the “
Preferred
Shares
”), of True Drinks
Holdings, Inc., a Nevada corporation (the
“
Corporation
”),
indicated below into shares of common stock, $0.001 value per share
(the “
Common Stock
”), of the Corporation, as of the date
specified below.
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Aggregate
number of Preferred Shares to be converted
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Aggregate
Stated Value of such Preferred Shares to be
converted:
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Aggregate
accrued and unpaid Dividends with respect to such Preferred
Sharesand such Aggregate Dividends to be
converted:
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AGGREGATE
CONVERSION AMOUNT TO BE CONVERTED:
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Please
confirm the following information:
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Number
of shares of Common Stock to be issued:
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Please
issue the Common Stock into which the applicable Preferred Shares
are being converted to Holder, or for its benefit, as
follows:
☐
Check here if requesting delivery as a
certificate to the following name and to the following
address:
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☐
Check here if requesting delivery by
Deposit/Withdrawal at Custodian as follows:
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DTC
Participant:
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DTC
Number:
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Account
Number:
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Date:
_________________,
Name of
Registered Holder
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By:
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_______________________
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Name:
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Title:
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Tax
ID:
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Facsimile:
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E-mail
Address:
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EXHIBIT
II
ACKNOWLEDGMENT
The
Corporation hereby acknowledges this Conversion Notice and hereby
directs to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated , 20
from the Corporation and acknowledged and agreed to by
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TRUE DRINKS HOLDINGS, INC.
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By:
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________________________
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Name:
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Title:
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Exhibit
3.8
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
THE
SERIES B CONVERTIBLE PREFERRED STOCK
OF
TRUE DRINKS HOLDINGS, INC.
Pursuant to Section 78.1955 of the Nevada Revised
Statutes
True Drinks Holdings, Inc., a Nevada corporation
(the “
Company
”), in accordance with the provisions of
Sections 78.195 and 78.1955 of the Nevada Revised Statutes
(“
NRS
”), does hereby certify that, pursuant to
the authority conferred upon the Board of Directors (the
“
Board
”) of the Company by the Articles of
Incorporation of the Company, as amended, the following resolution
creating a series of Series B Convertible Preferred Stock, was duly
adopted on April 19, 2019.
RESOLVED,
that pursuant to the authority granted to and vested in the Board
in accordance with the provisions of the Articles of Incorporation
of the Company, as amended, a series of Preferred Stock of the
Company be and it hereby is created, and that the designation and
amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of
such series, and the qualifications, limitations, and restrictions
thereof are as follows:
TERMS OF SERIES B CONVERTIBLE PREFERRED STOCK
1.
Designation and Rank
. The
designation of such series of the Preferred Stock shall be the
Series B Convertible Preferred Stock, par value $.001 per share
(the "
Series B
Preferred
").
The
maximum number of shares of Series B Preferred shall be One
Million, Five Hundred Thousand (1,500,000) shares. The Series B
Preferred shall rank prior to the common stock, par value $0.001
per share (the "
Common
Stock
"),
junior
to the Company’s Series A Convertible Preferred Stock, and
senior to all other classes and series of equity securities of the
Company that by their terms do not rank senior to the Series B
Preferred ("
Junior Stock
").
The Series B Preferred will be held in book entry with Company or
its transfer agent.
2.
Dividends
. Whenever the Board
of Directors declares a dividend on the Common Stock each holder of
record of a share of Series B Preferred, or any fraction of a share
of Series B Preferred, on the date set by the Board of Directors to
determine the owners of the Common Stock of record entitled to
receive such dividend (the "
Record
Date
")
shall be
entitled to receive out of any assets at the time legally available
therefore, an amount equal to such dividend declared on one share
of Common Stock multiplied by the number of shares of Common Stock
into which such share, or such fraction of a share, of Series B
Preferred could be converted on the Record Date.
3.
Voting Rights
.
(a)
Class Voting Rights
. The Series
B Preferred shall have the following class voting rights. So long
as any shares of the Series B Preferred remain outstanding, the
Company shall not, without the affirmative vote or consent of the
holders of at least fifty percent (50%) of the shares of the Series
B Preferred outstanding at the time, given in person or by proxy,
either in writing or at a meeting, in which the holders of the
Series B Preferred vote separately as a class: (i) amend, alter or
repeal the provisions of the Series B Preferred so as to adversely
affect any right, preference, privilege or voting power of the
Series B Preferred; (ii) increase the authorized number of shares
of Series B Preferred; or (iii) effect any distribution with
respect to Junior Stock except that the Company may effect a
distribution on the Common Stock if the Company makes a like kind
distribution on each share, or fraction of a share, of Series B
Preferred in an amount equal to the distribution on one share of
Common Stock multiplied by the number of shares of Common Stock
into which such one share, or such fraction of a share, of Series B
Preferred can be converted at the time of such
distribution.
(b)
General Voting Rights
. Except
with respect to transactions upon which the Series B Preferred
shall be entitled to vote separately as a class pursuant to Section
3(a) above, the Series B Preferred shall vote on an as converted
basis.
4.
Liquidation
Preference
.
(a) In
the event of the liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, after
payment or provision for payment of the debts and other liabilities
of the Company, the holders of shares of the Series B Preferred
shall pari passu with the Company's Common Stock.
(b) A
consolidation or merger of the Company with or into any other
corporation or corporations, or a sale of all or substantially all
of the assets of the Company, or other acquisition type transaction
shall be, at the election of a majority of the holders of the
Series B Preferred, deemed to be a liquidation, dissolution, or
winding up within the meaning of this Section 4. In the event of
the merger or consolidation of the Company with or into another
corporation that is not treated as a liquidation pursuant to this
Section 4(b), the Series B Preferred shall maintain its relative
powers, designations and preferences provided for herein and no
merger shall result inconsistent therewith.
(c)
Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a
payment date and the place where the distributable amounts shall be
payable, shall be given by mail, postage prepaid, no less than
forty-five (45) days prior to the payment date stated therein, to
the holders of record of the Series B Preferred at their respective
addresses as the same shall appear on the books of the
Company.
5.
Conversion
.
(a)
Mandatory Conversion
. Upon a
Capital Increase, each share of Series B Preferred shall
automatically be converted into Ten Thousand (10,000) shares of
fully paid and nonassessable shares of Common Stock on the date the
Company delivers a Mandatory Conversion Notice, as defined in
Section 5(c) below (“
Mandatory Conversion
”) (the
“
Conversion
Rate
”). The shares of Common Stock issuable to each
Holder following a Mandatory Conversion are hereinafter referred to
as “
Conversion
Shares
”. A capital increase
(“
Capital
Increase
”) shall be
deemed to have occurred as soon as the Company has sufficient
authorized but unissued shares (which have not otherwise been
reserved or committed for issuance) to permit the issuance of
Conversion Shares.
(b)
Mechanics of
Conversion
.
(i)
Mandatory
Conversion Notice. In the event of a Mandatory Conversion pursuant
to Section 5(a) above, the Company shall give written notice (the
“
Mandatory Conversion
Notice
”) to all holders of the Series B Preferred of
its intention to require the conversion of all shares of Series B
Preferred. The Mandatory Conversion Notice shall set forth the
number of Series B Preferred being converted (which shall be all,
and not less than all, issued and outstanding shares of Series B
Preferred), the date on which such conversion shall be effective
(the “
Mandatory Conversion
Date
”), and shall be given to the holders of the
Series B Preferred not less than fifteen (15) days prior to the
Mandatory Conversion Date. The Mandatory Conversion Notice shall be
delivered to each holder at its address as it appears on the stock
transfer books of the Company. Upon the Mandatory Conversion Date,
such converted Series B Preferred shall no longer be deemed to be
outstanding, and all rights of the holder with respect to such
shares shall immediately terminate, except the right to receive the
Conversion Shares into which the shares of Series B Preferred are
convertible pursuant to Section 5(a).
(ii)
Company's
Response. Upon giving a Mandatory Conversion Notice, the Company or
its designated transfer agent (the “
Transfer Agent
”), as applicable,
shall within five (5) business days following the Mandatory
Conversion Date, issue and deliver to the Depository Trust Company
(“
DTC
”) account
on each applicable holder's behalf via the Deposit Withdrawal Agent
Commission System (“
DWAC
”) as provided to the Company
or the Transfer Agent by (or on behalf of) a holder, registered in
the name of each such holder or its designee, for the number of
Conversion Shares to which such holder shall be entitled.
Notwithstanding the foregoing to the contrary, the Company or its
Transfer Agent shall only be required to issue and deliver the
Conversion Shares to DTC on a holder's behalf via DWAC if (i) the
Conversion Shares may be issued without restrictive legends and
(ii) the Company and the Transfer Agent are participating in DTC
through the DWAC system. If any of the conditions set forth in
clauses (i) and (ii) above are not satisfied, the Company shall
deliver physical certificates to each such holder or its
designee.
(iii)
Record
Holder. The person or persons entitled to receive Conversion Shares
shall be treated for all purposes as the record holder or holders
of such Conversion Shares as of the close of business on the
Mandatory Conversion Date.
(c)
Adjustments of Conversion
Rate
.
(i)
Adjustments for Stock Splits and
Combinations
. If the Company shall at any time or from time
to time after the Issuance Date, effect a stock split of the
outstanding Common Stock, the Conversion Rate shall be
proportionately increased. If the Company shall at any time or from
time to time after the Issuance Date, combine the outstanding
shares of Common Stock, the Conversion Rate shall be
proportionately decreased. Any adjustments under this Section
5(c)(i) shall be effective at the close of business on the date the
stock split or combination occurs.
(ii)
Adjustments
for Certain Dividends and Distributions
. If the Company
shall at any time or from time to time after the Issuance Date,
make or issue or set a record date for the determination of holders
of Common Stock entitled to receive a dividend or other
distribution payable in shares of Common Stock, then, and in each
event, the Conversion Rate shall be increased as of the time of
such issuance or, in the event such record date shall have been
fixed, as of the close of business on such record date, by
multiplying, as applicable, the Conversion Rate then in effect by a
fraction:
(1)
the numerator of
which shall be the total number of shares of Common Stock issued
and outstanding immediately after such issuance on the close of
business on such record date; and
(2)
the denominator of
which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance on
the close of business on such record date.
(iii)
Adjustment
for Other Dividends and Distributions
. If the Company shall,
at any time or from time to time after the Issuance Date, make or
issue or set a record date for the determination of holders of
Common Stock entitled to receive a dividend or other distribution
payable in securities of the Company other than shares of Common
Stock, then, and in each event, an appropriate revision to the
applicable Conversion Rate shall be made and provision shall be
made (by adjustments of the Conversion Rate or otherwise) so that
the holders of Series B Preferred shall receive upon conversions
thereof, in addition to the number of shares of Common Stock
receivable thereon, the number of securities of the Company which
they would have received had their Series B Preferred been
converted into Common Stock on the date of such event and had
thereafter, during the period from the date of such event to and
including the Mandatory Conversion Date, retained such securities
(together with any distributions payable thereon during such
period), giving application to all adjustments called for during
such period under this Section 5(c)(iii) with respect to the rights
of the holders of the Series B Preferred.
(iv)
Adjustments
for Reclassification, Exchange or Substitution
. If the
Common Stock issuable upon conversion of the Series B Preferred at
any time or from time to time after the Issuance Date shall be
changed to the same or different number of shares of any class or
classes of stock, whether by reclassification, exchange,
substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends provided for in Sections
5(c)(i), (ii) and (iii), or a reorganization, merger,
consolidation, or sale of assets provided for in Section 5(c)(v)),
then, and in each event, an appropriate revision to the Conversion
Rate shall be made and provisions shall be made so that the holder
of each share of Series B Preferred shall have the right thereafter
to convert such share of Series B Preferred into the kind and
amount of shares of stock and other securities receivable upon
reclassification, exchange, substitution or other change, by
holders of the number of shares of Common Stock into which such
share of Series B Preferred might have been converted immediately
prior to such reclassification, exchange, substitution or other
change, all subject to further adjustment as provided
herein.
(v)
Adjustments for Reorganization,
Merger, Consolidation or Sales of Assets
. If at any time or
from time to time after the Issuance Date there shall be a capital
reorganization of the Company (other than by way of a stock split
or combination of shares or stock dividends or distributions
provided for in Section 5(c)(i), (ii) and (iii), or a
reclassification, exchange or substitution of shares provided for
in Section 5(c)(iv)), or a merger or consolidation of the Company
with or into another corporation, or the sale of all or
substantially all of the Company's properties or assets to any
other person (an "
Organic
Change
"),
then
as a part of such Organic Change an appropriate revision to the
Conversion Rate shall be made and provision shall be made so that
the holder of each share of Series B Preferred shall have the right
thereafter to convert such share of Series B Preferred into the
kind and amount of shares of stock and other securities or property
of the Company or any successor corporation resulting from the
Organic Change which the holder of such share of Series B Preferred
would have received if such share of Series B Preferred had been
converted prior to such Organic Change.
(vi)
Record
Date
. In case the Company shall take record of the holders
of its Common Stock or any other Preferred Stock for the purpose of
entitling them to subscribe for or purchase Common Stock or
Convertible Securities, then the date of the issue or sale of the
shares of Common Stock shall be deemed to be such record
date.
(f)
No Impairment
. The Company
shall not, by amendment of its Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 5
and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the
holders of the Series B Preferred against impairment. In the event
a holder shall elect to convert any shares of Series B Preferred as
provided herein, the Company cannot refuse conversion based on any
claim that such holder or any one associated or affiliated with
such holder has been engaged in any violation of law, unless an
injunction from a court, on notice, restraining and/or adjoining
conversion of all or of such shares of Series B Preferred shall
have been issued.
(g)
Certificates as to Adjustments
.
Upon occurrence of each adjustment or readjustment of the
Conversion Rate or number of shares of Common Stock issuable upon
conversion of the Series B Preferred pursuant to this Section 5,
the Company at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to
each holder of such Series B Preferred a certificate setting forth
such adjustment and readjustment, showing in detail the facts upon
which such adjustment or readjustment is based. The Company shall,
upon written request of the holder of such affected Series B
Preferred, at any time, furnish or cause to be furnished to such
holder a like certificate setting forth such adjustments and
readjustments, the Conversion Rate in effect at the time, and the
number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon the
conversion of a share of such Series B Preferred. Notwithstanding
the foregoing, the Company shall not be obligated to deliver a
certificate unless such certificate would reflect an increase or
decrease of at least one percent of such adjusted
amount.
(h)
Issue Taxes
. The Company shall
pay any and all issue and other taxes, excluding federal, state or
local income taxes, that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of shares of
Series B Preferred pursuant hereto;
provided, however
, that the Company
shall not be obligated to pay any transfer taxes resulting from any
transfer requested by any holder in connection with any such
conversion.
(i)
Notices
. All notices and other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, by facsimile, electronic mail or
three (3) business days following (A) being mailed by certified or
registered mail, postage prepaid, return-receipt requested, or (B)
delivered to an express mail delivery service such as Federal
Express, with written receipt by the addressee required, in either
case addressed to the holder of record at its address appearing on
the books of the Company. The Company will give written notice to
each holder of Series B Preferred at least twenty (20) days prior
to the date on which the Company closes its books or takes a record
(z) with respect to any dividend or distribution upon the Common
Stock, (y) with respect to any pro rata subscription offer to
holders of Common Stock or (x) for determining rights to vote with
respect to any Organic Change, dissolution, liquidation or
winding-up and in no event shall such notice be provided to such
holder prior to such information being made known to the public.
The Company will also give written notice to each holder of Series
B Preferred at least twenty (20) days prior to the date on which
any Organic Change, dissolution, liquidation or winding-up will
take place and in no event shall such notice be provided to such
holder prior to such information being made known to the
public.
(j)
Fractional
Shares
. No fractional shares of Common Stock shall be issued
upon conversion of the Series B Preferred. In lieu of any
fractional shares to which the holder would otherwise be entitled,
the Company, at its option, shall (A) pay cash equal to the product
of such fraction multiplied by the average of the closing bid
prices of the Common Stock for the five (5) consecutive trading
immediately preceding the Mandatory Conversion Date, or (B) issue
one whole share of Common Stock to the holder.
(k)
Retirement
of Series B Preferred
. Conversion of Series B Preferred
shall be deemed to have been effected on the Mandatory Conversion
Date.
(l)
Regulatory
Compliance
. If any shares of Common Stock to be reserved for
the purpose of conversion of Series B Preferred require
registration or listing with or approval of any governmental
authority, stock exchange or other regulatory body under any
federal or state law or regulation or otherwise before such shares
may be validly issued or delivered upon conversion, the Company
shall, at its sole cost and expense, in good faith and as
expeditiously as possible, endeavor to secure such registration,
listing or approval, as the case may be.
6.
No Preemptive or Redemption
Rights
. No holder of the Series B Preferred shall be
entitled to rights to subscribe for, purchase or receive any part
of any new or additional shares of any class, whether now or
hereafter authorized, or of bonds or debentures, or other evidences
of indebtedness convertible into or exchangeable for shares of any
class, but all such new or additional shares of any class, or any
bond, debentures or other evidences of indebtedness convertible
into or exchangeable for shares, may be issued and disposed of by
the Board of Directors on such terms and for such consideration (to
the extent permitted by law), and to such person or persons as the
Board of Directors in their absolute discretion may deem
advisable.
7.
Vote to Change the Terms of or Issue
Preferred Stock
. The affirmative vote at a meeting duly
called for such purpose, or the written consent without a meeting,
of the holders of not less than fifty percent (50%) of the then
outstanding shares of Series B Preferred, shall be required for any
change to this Certificate of Designation or the Company's
Certificate of Incorporation which would amend, alter, change or
repeal any of the powers, designations, preferences and rights of
the Series B Preferred.
9.
Remedies, Characterizations, Other
Obligations, Breaches and Injunctive Relief
. The remedies
provided in this Certificate of Designation shall be cumulative and
in addition to all other remedies available under this Certificate
of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained
herein shall be deemed a waiver of compliance with the provisions
giving rise to such remedy and nothing herein shall limit a
holder's right to pursue actual damages for any failure by the
Company to comply with the terms of this Certificate of
Designation. Amounts set forth or provided for herein with respect
to conversion and the like (and the computation thereof) shall be
the amounts to be received by the holder thereof and shall not,
except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the holders of the Series B Preferred and
that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or
threatened breach, the holders of the Series B Preferred shall be
entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing
economic loss and without any bond or other security being
required.
10.
Specific Shall Not Limit General;
Construction
. No specific provision contained in this
Certificate of Designation shall limit or modify any more general
provision contained herein.
11.
Failure or Indulgence Not
Waiver
. No failure or delay on the part of a holder of
Series B Preferred in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or
privilege.
[
Remainder
of Page Intentionally Left Blank
]
IN WITNESS WHEREOF,
this Certificate of
Designation is executed on Company this 26 day of April,
2019.
TRUE
DRINKS HOLDINGS, INC.
By:
/s/ Robert Van
Boerum
Name: Robert Van
Boerum
Title: Chief
Executive Officer
Exhibit
4.1
Warrant
Certificate No. ______
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE 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 (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
Issue
Date: April 26, 2019 (the “
Issuance
Date
”)
Expiration Date: __________, 2024
Warrant
No. [ ]
COMMON STOCK PURCHASE WARRANT
TRUE DRINKS HOLDINGS, INC.
THIS
COMMON STOCK PURCHASE WARRANT (the “
Warrant
”) certifies that,
for value received, _____________ or its assigns (the
“
Holder
”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
of the Authorized Share Approval, as defined below in Section
2(e)(i) (the “
Initial Exercise Date
”),
and on or prior to 5:00 p.m. (New York City time) on
______________
1
(the “
Termination Date
”) but
not thereafter, to subscribe for and purchase from True Drinks
Holdings, Inc., a Nevada corporation (the “
Company
”), up to ______
shares (as subject to adjustment hereunder, the “
Warrant Shares
”) of the
Company’s common stock (the “Common Stock”). The
purchase price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section
2(b).
This
Warrant is one of a series of Warrants of like tenor being issued
pursuant to the Securities Exchange Agreement dated April __, 2019
(the “
Securities Exchange
Agreement
”) between the Company and certain
signatories thereto.
Section
1
.
Definitions
.
Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in the Securities Exchange
Agreement.
Section
2
.
Exercise
.
a)
Exercise
of Warrant
. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(the “
Notice of
Exercise
”). Within the earlier of (i) two (2) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined in Section 2(d)(i) herein) following
the date of exercise as aforesaid, the Holder shall deliver the
aggregate Exercise Price for the Warrant Shares specified in the
applicable Notice of Exercise by wire transfer or cashier’s
check drawn on a United States bank unless the cashless exercise
procedure specified in Section 2(c) below is specified in the
applicable Notice of Exercise.
No ink-original Notice of Exercise
shall be required, nor shall any medallion guarantee (or other type
of guarantee or notarization) of any Notice of Exercise be
required. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant
to the Company until the Holder has purchased all of the Warrant
Shares available hereunder and the Warrant has been exercised in
full, in which case, the Holder shall surrender this Warrant to the
Company for cancellation within three (3) Trading Days of the date
on which the final Notice of Exercise is delivered to the Company.
Partial exercises of this Warrant resulting in purchases of a
portion of the total number of Warrant Shares available hereunder
shall have the effect of lowering the outstanding number of Warrant
Shares purchasable hereunder in an amount equal to the applicable
number of Warrant Shares purchased. The Holder and the Company
shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. The Company shall deliver
any objection to any Notice of Exercise within one (1) Trading Day
of receipt of such notice.
The
Holder and any assignee, by acceptance of this Warrant, acknowledge
and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares
hereunder, the number of Warrant Shares available for purchase
hereunder at any given time may be less than the amount stated on
the face hereof.
b)
Exercise Price
. The exercise
price per share of Common Stock under this Warrant shall be
$0.0044313
, subject to
adjustment hereunder (the “
Exercise
Price
”).
c)
Cashless Exercise
. If at any
time after the six-month anniversary of the Closing Date, there is
no effective registration statement registering, or no current
prospectus available for, the resale of the Warrant Shares by the
Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:
(A) =
as applicable: (i) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise if such
Notice of Exercise is (1) both executed and delivered pursuant to
Section 2(a) hereof on a day that is not a Trading Day or (2) both
executed and delivered pursuant to Section 2(a) hereof on a Trading
Day prior to the opening of “regular trading hours” (as
defined in Rule 600(b)(64) of Regulation NMS promulgated under the
federal securities laws) on such Trading Day, (ii) at the option of
the Holder, either (y) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise or (z) the
Bid Price of the Common Stock on the principal Trading Market as
reported by Bloomberg L.P. as of the time of the Holder’s
execution of the applicable Notice of Exercise if such Notice of
Exercise is executed during “regular trading hours” on
a Trading Day and is delivered within two (2) hours thereafter
(including until two (2) hours after the close of “regular
trading hours” on a Trading Day) pursuant to Section 2(a)
hereof or (iii) the VWAP on the date of the applicable Notice of
Exercise if the date of such Notice of Exercise is a Trading Day
and such Notice of Exercise is both executed and delivered pursuant
to Section 2(a) hereof after the close of “regular trading
hours” on such Trading Day;
(B) =
the Exercise Price of this Warrant, as adjusted hereunder;
and
(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.
“Bid Price
” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the bid price of the Common Stock for the time in
question (or the nearest preceding date) on the Trading Market on
which the Common Stock is then listed or quoted as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York
City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or
OTCQX is not a Trading Market, the volume weighted average price of
the Common Stock for such date (or the nearest preceding date) on
OTCQB or OTCQX as applicable, (c) if the Common Stock is not then
listed or quoted for trading on OTCQB or OTCQX and if prices for
the Common Stock are then reported in the “Pink Sheets”
published by OTC Markets Group, Inc. (or a similar organization or
agency succeeding to its functions of reporting prices), the most
recent bid price per share of the Common Stock so reported, or (d)
in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected in good
faith by the Holders of a majority in interest of the Securities
then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the
Company.
“
VWAP
”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading Market,
the volume weighted average price of the Common Stock for such date
(or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on
OTCQB or OTCQX and if prices for the Common Stock are then reported
in the “Pink Sheets” published by OTC Markets Group,
Inc. (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share
of the Common Stock so reported, or (d) in all other cases, the
fair market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Holders of a
majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.
If Warrant Shares are issued in such a cashless exercise, the
parties acknowledge and agree that in accordance with Section
3(a)(9) of the Securities Act, the Warrant Shares shall take on the
characteristics of the Warrants being exercised, and the holding
period of the Warrant Shares being issued may be tacked on to the
holding period of this Warrant. The Company agrees not
to take any position contrary to this Section 2(c).
Notwithstanding
anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).
d)
Mechanics of
Exercise
.
i.
Delivery of Warrant Shares Upon
Exercise
. The Company shall cause the Warrant Shares
purchased hereunder to be transmitted by the Transfer Agent to the
Holder by crediting the account of the Holder’s or its
designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system
(“
DWAC
”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by the Holder or
(B) the Warrant Shares are eligible for resale by the Holder
without volume or manner-of-sale limitations pursuant to Rule 144
(assuming cashless exercise of the Warrants), and otherwise by
physical delivery of a certificate, registered in the
Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the
Holder in the Notice of Exercise by the date that is the earliest
of (i) two (2) Trading Days after the delivery to the Company of
the Notice of Exercise, (ii) one (1) Trading Day after delivery of
the aggregate Exercise Price to the Company and (iii) the number of
Trading Days comprising the Standard Settlement Period after the
delivery to the Company of the Notice of Exercise (such date, the
“
Warrant Share
Delivery Date
”). Upon delivery of the Notice of
Exercise, 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
of delivery of the Warrant Shares, provided that payment of the
aggregate Exercise Price (other than in the case of a cashless
exercise) is received by the Warrant Share Delivery Date. If the
Company fails for any reason to deliver to the Holder the Warrant
Shares subject to a Notice of Exercise by the Warrant Share
Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of Warrant
Shares subject to such exercise (based on the VWAP of the Common
Stock on the date of the applicable Notice of Exercise), $10 per
Trading Day (increasing to $20 per Trading Day on the fifth Trading
Day after such liquidated damages begin to accrue) for each Trading
Day after such Warrant Share Delivery Date until such Warrant
Shares are delivered or Holder rescinds such exercise. The Company
agrees to maintain a transfer agent that is a participant in the
FAST program so long as this Warrant remains outstanding and
exercisable. As used herein, “
Standard Settlement
Period
” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Exercise.
ii.
Delivery of New Warrants Upon
Exercise
. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant, at the time of delivery of the Warrant Shares,
deliver to the Holder a new Warrant evidencing the rights of the
Holder to purchase the unpurchased Warrant Shares called for by
this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii.
Rescission
Rights
. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv.
Compensation for Buy-In on Failure to
Timely Deliver Warrant Shares Upon Exercise
. In addition to
any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder the Warrant
Shares in accordance with the provisions of Section 2(d)(i) above
pursuant to an exercise on or before the Warrant Share Delivery
Date, and if after such date the Holder is required by its broker
to purchase (in an open market transaction or otherwise) or the
Holder’s brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the
Warrant Shares which the Holder anticipated receiving upon such
exercise (a “
Buy-In
”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times (2)
the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of
such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
v.
No Fractional Shares or Scrip
.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
vi.
Charges, Taxes and Expenses
.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder;
provided
,
however
, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto. The Company shall pay all Transfer Agent fees
required for same-day processing of any Notice of Exercise and all
fees to the Depository Trust Company (or another established
clearing corporation performing similar functions) required for
same-day electronic delivery of the Warrant Shares.
vii.
Closing
of Books
. The Company will not close its stockholder books
or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.
e)
Holder’s Exercise
Limitations
.
i.
Stockholder Approval
.
Holder agrees and acknowledges that
the Warrants cannot be exercised for Warrant Shares unless and
until such time as the Company’s stockholders have approved
an amendment to the Company’s articles of incorporation to
increase the number of shares of Common Stock authorized thereunder
to permit the issuance of Warrant Shares upon exercise of the
Warrants (the “
Authorized Share
Approval
”). Holder
further agrees and acknowledges that Holder shall bear the economic
risk of loss associated with holding the Warrants pending the
satisfaction of the conditions set forth in this Section
2(e)(i).
ii.
Beneficial Ownership
Limitation
. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving effect to such issuance after exercise as
set forth on the applicable Notice of Exercise, the Holder
(together with the Holder’s Affiliates, and any other Persons
acting as a group together with the Holder or any of the
Holder’s Affiliates (such Persons, “
Attribution Parties
”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e)(ii), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e)(ii)
applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with
any Affiliates and Attribution Parties) and of which portion of
this Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e)(ii), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one (1) Trading Day
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“
Beneficial
Ownership Limitation
” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon prior notice to the
Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 2(e)(ii), provided that the
Beneficial Ownership Limitation in no event exceeds 9.99% of the
number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock upon
exercise of this Warrant held by the Holder and the provisions of
this Section 2(e)(ii) shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the
61
st
day
after such notice is delivered to the Company. The provisions of
this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section
2(e)(ii) to correct this paragraph (or any portion hereof) which
may be defective or inconsistent with the intended Beneficial
Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply
to a successor holder of this Warrant.
Section
3
.
Certain
Adjustments
.
a)
Stock Dividends and Splits
. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares, or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
b)
Subsequent Rights Offerings
.
In addition to any adjustments
pursuant to Section 3(a) above, if at any time the Company grants,
issues or sells any Common Stock Equivalents or rights to purchase
stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the
“
Purchase
Rights
”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant
(without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (
provided
,
however
,
that to the extent that the Holder’s right to participate in
any such Purchase Right would result in the Holder exceeding the
Beneficial Ownership Limitation, then the Holder shall not be
entitled to participate in such Purchase Right to such extent (or
beneficial ownership of such shares of Common Stock as a result of
such Purchase Right to such extent) and such Purchase Right to such
extent shall be held in abeyance for the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding
the Beneficial Ownership Limitation).
c)
Pro
Rata Distributions
. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement,
scheme of arrangement or other similar transaction) (a
“
Distribution
”), at any
time after the issuance of this Warrant, then, in each such case,
the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (
provided
,
however
, that to the extent
that the Holder's right to participate in any such Distribution
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Distribution to such extent (or in the beneficial ownership of
any shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
d)
Fundamental Transaction
. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 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 or share purchase agreement or other business
combination) (each a “
Fundamental
Transaction
”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “
Alternate Consideration
”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the
survivor (the “
Successor Entity
”) to
assume in writing all of the obligations of the Company under this
Warrant and the other Transaction Documents in accordance with the
provisions of this Section 3(e) pursuant to written agreements in
form and substance reasonably satisfactory to the Holder and
approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the Holder,
deliver to the Holder in exchange for this Warrant a security of
the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant which
is exercisable for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to
the shares of Common Stock acquirable and receivable upon exercise
of this Warrant (without regard to any limitations on the exercise
of this Warrant) prior to such Fundamental Transaction, and with an
exercise price which applies the exercise price hereunder to such
shares of capital stock (but taking into account the relative value
of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such exercise price being for
the purpose of protecting the economic value of this Warrant
immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and
substance to the Holder. Upon the occurrence of any such
Fundamental Transaction, the Successor Entity shall succeed to, and
be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Warrant and the
other Transaction Documents referring to the “Company”
shall refer instead 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 and the other
Transaction Documents with the same effect as if such Successor
Entity had been named as the Company herein.
e)
Subsequent Equity
Sales
.
i.
If, at any time while this Warrant is outstanding,
the Company or any Subsidiary issues additional shares of Common
Stock or rights, warrants, options or other securities or debt
convertible, exercisable or exchangeable for shares of Common Stock
or otherwise entitling any Person to acquire shares of Common Stock
(collectively, “
Common Stock
Equivalents
”) at an
effective net price to the Company per share of Common Stock (the
“
Effective
Price
”) less than the
Exercise Price (as adjusted hereunder to such date), then the
Exercise Price shall be reduced to
equal the product of (A)
the Exercise Price in effect immediately prior to such issuance of
Common Stock or Common Stock Equivalents times (B) a fraction, the
numerator of which is the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issuance, plus (2) the
number of shares of Common Stock issued (or deemed to be issued) at
the Exercise Price, and the denominator of which is the aggregate
number of shares of Common Stock outstanding or deemed to be
outstanding immediately after such issuance. For purposes of this
paragraph, in connection with any issuance of any Common Stock
Equivalents, (A) the maximum number of shares of Common Stock
potentially issuable at any time upon conversion, exercise or
exchange of such Common Stock Equivalents (the “
Deemed Number
”) shall be deemed to
be outstanding upon issuance of such Common Stock Equivalents, (B)
the Effective Price applicable to such Common Stock shall equal the
minimum dollar value of consideration payable to the Company to
purchase such Common Stock Equivalents and to convert, exercise or
exchange them into Common Stock (net of any discounts, fees,
commissions and other expenses), divided by the Deemed Number, and
(C) no further adjustment shall be made to the Exercise Price upon
the actual issuance of Common Stock upon conversion, exercise or
exchange of such Common Stock Equivalents.
ii.
If, at any time while this Warrant is outstanding,
the Company or any Subsidiary issues Common Stock Equivalents with
an Effective Price or a number of underlying shares that floats or
resets or otherwise varies or is subject to adjustment based
(directly or indirectly) on market prices of the Common Stock (a
“
Floating Price
Security
”), then for
purposes of applying the preceding paragraph in connection with any
subsequent exercise, the Effective Price will be determined
separately on each Exercise Date and will be deemed to equal the
lowest Effective Price at which any holder of such Floating Price
Security is entitled to acquire Common Stock on such Exercise Date
(regardless of whether any such holder actually acquires any shares
on such date).
iii.
Notwithstanding the foregoing, no adjustment will
be made under this paragraph (e) in respect of any
issuance
of Common Stock upon exercise or conversion of any options or other
securities issued and outstanding on the date of this Warrant
(provided that such exercise or conversion occurs in accordance
with the terms thereof, without amendment or modification, or
(b) any options granted to directors, officers, employees or
other service providers of the Company pursuant to any Company
option plan then in effect and any shares of Common Stock or other
securities issuable in connection with the exercise of any such
options
.
f)
Calculations
. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
g)
Notice to Holder
.
i.
Adjustment to Exercise Price
.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii.
Notice to Allow Exercise by
Holder
. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) 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, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, 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 (E) 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
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least 20 calendar 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 reclassification,
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 deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided in this Warrant
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission 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.
Section
4
.
Transfer
of Warrant
.
a)
Transferability
. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section 4
of the Subscription Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled.
Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full.
The Warrant, if
properly assigned in accordance herewith, may be exercised by a new
holder for the purchase of Warrant Shares without having a new
Warrant issued.
b)
New Warrants
. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the Issue Date of this Warrant and shall be identical with
this Warrant except as to the number of Warrant Shares issuable
pursuant thereto.
c)
Warrant Register
. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “
Warrant Register
”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d)
Transfer Restrictions
. If, at
the time of the surrender of this Warrant in connection with any
transfer of this Warrant, the transfer of this Warrant shall not be
either (i) registered pursuant to an effective registration
statement under the Securities Act and under applicable state
securities or blue sky laws or (ii) eligible for resale without
volume or manner-of-sale restrictions or current public information
requirements pursuant to Rule 144, the Company may require, as a
condition of allowing such transfer, that the Holder or transferee
of this Warrant, as the case may be, comply with the provisions of
Section 4 of the Subscription Agreement.
e)
Representation by the Holder
.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section
5
.
Miscellaneous
.
a)
No Rights as Stockholder Until
Exercise
;
No
Settlement in Cash
. This Warrant does not entitle the Holder
to any voting rights, dividends or other rights as a stockholder of
the Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3. Without
limiting the rights of a Holder to receive Warrant Shares on a
“cashless exercise,” and to receive the cash payments
contemplated pursuant to Sections 2(d)(i) and 2(d)(iv), in no event
will the Company be required to net cash settle a Warrant
exercise.
b)
Loss, Theft, Destruction or Mutilation
of Warrant
. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c)
Saturdays, Sundays, Holidays,
etc
. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d)
Authorized
Shares
. The Company covenants that, during the period the
Warrant is outstanding, the Company shall take all action necessary
at all times after the date hereof to have authorized, and reserved
for the purpose of issuance, no less than the number of shares of
Common Stock issuable as Warrant Shares upon the exercise of any
purchase rights under this Warrant (the “
Required Reserve Amount
”).
If at any time the number of shares of
Common Stock authorized and reserved for issuance is not sufficient
to meet the Required Reserve Amount, the Company will promptly take
all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling
a special meeting of stockholders to authorize additional shares to
meet the Company’s obligations under this Section 5(d), in
the case of an insufficient number of authorized shares, obtain the
Authorized Share Approval, and voting the management shares of the
Company in favor of the Authorized Share Approval to ensure that
the number of authorized shares is sufficient to meet the Required
Reserved Amount.
The
Company further covenants that, subject to obtaining the Authorized
Share Approval, its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of issuing
the necessary Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such
reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed. The Company
covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant will,
upon exercise of the purchase rights represented by this Warrant
and payment for such Warrant Shares in accordance herewith, be duly
authorized, validly issued, fully paid and nonassessable and free
from all taxes, liens and charges created by the Company in respect
of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue 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, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e)
Jurisdiction
. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Securities Exchange
Agreement.
f)
Restrictions
. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered, and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.
g)
Nonwaiver and Expenses
. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies, notwithstanding the fact that the right to exercise this
Warrant terminates on the Termination Date. Without limiting any
other provision of this Warrant or the Securities Exchange
Agreement, if the Company willfully and knowingly fails to comply
with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to the Holder such
amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies
hereunder.
h)
Notices
. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Securities Exchange
Agreement.
i)
Limitation of Liability
. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j)
Remedies
. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k)
Successors and Assigns
. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l)
Amendment
. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company
and the
Holders of not less than a majority of the outstanding Warrants
issued pursuant to the Securities Exchange
Agreement
.
m)
Severability
. Wherever
possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n)
Headings
. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
TRUE DRINKS HOLDINGS, INC.
|
By:__________________________________________
Name:
Title:
|
NOTICE OF EXERCISE
TO:
TRUE
DRINKS HOLDINGS, INC.
(1)
The undersigned
hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2)
Payment shall take
the form of (check applicable box):
[ ] in
lawful money of the United States; or
[ ] if
permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number
of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3)
Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor
. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE
OF HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity
:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT B
ASSIGNMENT FORM
(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:
|
|
Phone Number:
Email Address:
|
(Please
Print)
______________________________________
______________________________________
|
Dated: _______________ __, ______
|
|
Holder’s
Signature:
|
|
Holder’s
Address:
|
|
Exhibit
10.1
DEBT CONVERSION AGREEMENT
This
Debt Conversion Agreement (the “
Agreement
”) is entered into this
26 day of April, 2019 by and among True Drinks Holdings Inc., a
Nevada corporation (the “
Company
”), and Red Beard
Holdings, LLC, a Delaware limited liability company
(“
Red Beard
”).
Each of the Company, and Red Beard may be referred to herein,
individually, as a “
Party
” and, collectively, as the
“
Parties
”.
WHEREAS
, The Company and Red Beard wish
to restructure $3,935,757 principal amount of debt, together with
all accrued and unpaid interest thereon (“
Outstanding Amount
”) issued to
Red Beard in the form of several promissory notes set forth on
Exhibit A
attached
hereto (the “
Notes
”) into shares of Company
common stock, par value $0.001 per share (“
Common Stock
”); and
NOW, THEREFORE
, for good and valuable
consideration, the sufficiency of which is hereby acknowledged, the
Parties hereby agree as follows:
1.
Conversion
. The
Company and Red Beard hereby agree to convert the Outstanding
Amount and all other payment obligations as of the date hereof into
1,070,741,474 shares of Common Stock (the “
Conversion Shares
”)
(“
Conversion
”),
which Conversion shall only be effective upon closing of the
Exchange, as such term is defined in the Exchange Agreement, a copy
of which is attached hereto as
Exhibit B
. Upon consummation of
the Exchange, the Parties agree and acknowledge that the Notes
shall terminate and be of no further force and effect, and shall
only represent the right to receive the Conversion
Shares.
2.
Representations and
Warranties
. Each Party represents and warrants to each other
Party, as of the date hereof, that with respect to itself, (a) it
has the corporate power to execute and deliver this Agreement and
perform its obligations under this Agreement, (b) this Agreement
has been duly executed and delivered by it and is legally binding
upon it (assuming that each other Party has duly executed and
delivered this Agreement), enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting Red Beards’ rights and
to general principles of equity, and (c) the execution, delivery
and performance of this Agreement by the Parties, and the
consummation of the transactions contemplated by this Agreement,
will not (i) violate any provision of any governing instruments of
the Parties, (ii) result in a material default (with due notice or
lapse of time or both) or the creation of any lien or encumbrance
or give rise to any right of termination, cancellation or
acceleration under any material note, bond, mortgage, indenture, or
other financing instrument to which the Parties are parties or by
which they are bound, (iii) violate any judgment, order, ruling or
regulation applicable to the Parties as parties in interest, or
(iv) violate any law applicable to the Parties, except any matters
described in clauses (ii) or (iii) above which would not have a
material adverse effect on the Parties or their
properties.
3.
Notices
.
(a)
Subject to clause
(b) below, all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by
facsimile or e-mail to the address of such Party set forth on the
signature page hereto.
(b)
Any Party
hereto may change its address or facsimile number for notices and
other communications hereunder by notice to the other in the manner
set forth above.
4.
Governing Law;
Jurisdiction
.
(a)
THIS AGREEMENT AND ANY CLAIMS,
CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR
TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW
WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
(b)
THE PARTIES HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS
OF THE STATE OF CALIFORNIA SITTING IN SAN DIEGO COUNTY AND OF THE
UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF
CALIFORNIA, AND ANY APPROPRIATE APPELLATE COURTS THEREFROM, AND
EACH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF, OR IN CONNECTION
WITH, THIS AGREEMENT MAY BE HEARD AND DETERMINED IN SUCH COURTS.
THE PARTIES HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAWS, ANY OBJECTION WHICH THEY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH DISPUTE,
CONTROVERSY OR CLAIM BROUGHT IN ANY SUCH COURT OR ANY DEFENSE OF
INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH DISPUTE, CONTROVERSY
OR CLAIM IN ANY SUCH COURT.
EACH OF THE PARTIES HERETO
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION, LITIGATION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY APPLICABLE LAW.
5.
WAIVER OF JURY
TRIAL
. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY DISPUTE, CONTROVERSY
OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
6.
Waivers;
Amendments
.
(a)
No failure or delay
by the Parties in exercising any right or power hereunder shall
operate as a waiver hereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude
any other or further exercise hereof or the exercise of any other
right or power. The rights and remedies of the Parties hereunder
are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provision of this
Agreement or consent to any departure by any Party therefrom shall
in any event be effective unless the same shall be permitted by
clause (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the
purpose for which given.
(b)
Neither this
Agreement nor any other provision hereof may be waived, amended or
modified except pursuant to an agreement in writing entered into by
the Parties and expressly identified as a waiver, amendment or
modification.
7.
Assignment
. The
provisions of this Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective successors and
assigns.
8.
No Third-Party
Beneficiaries
. Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any person (other than
the Parties hereto, their respective successors and assigns
permitted hereby) any legal or equitable right, cause of action,
remedy or claim under or by reason of this Agreement.
9.
Severability
. Any
provision of the Agreement held to be invalid, illegal or
unenforceable in any respect in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions thereof;
and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other
jurisdiction.
10.
Counterparts
. This
Agreement may be executed in counterparts, each of which shall be
deemed an original instrument, but all such counterparts together
shall constitute but one agreement.
11.
Headings
. Section
headings used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or
be taken into consideration in interpreting, this
Agreement.
12.
Interpretation.
The
Parties acknowledge and agree that (i) each Party has had the
opportunity to exercise business discretion in relation to the
negotiation of the details of the transaction contemplated hereby,
(ii) this Agreement is the result of arms-length negotiations from
equal bargaining positions and (iii) each Party and its counsel
participated in the preparation and negotiation of this Agreement.
Any rule of construction that a contract be construed against the
drafter shall not apply to the interpretation or construction of
this Agreement.
13.
Entire Agreement
.
This Agreement constitute the entire agreement among the Parties
pertaining to the subject matter hereof, and supersede all prior
agreements, understandings, negotiations and discussions, whether
oral or written, of the Parties pertaining to the subject matter
hereof.
[Remainder of Page Intentionally Left Blank]
IN
WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the
day and year first above written.
TRUE
DRINKS HOLDINGS, INC.
By:
/s Robert Van
Boerum
Name:
Robert Van Boerum
Title:
Chief Executive Officer
RED
BEARD HOLDINGS, LLC
By:
/s/ Vincent
Smith
Name:
Vincent Smith
Title:
Manager
EXHIBIT A
Red Beard Holdings, LLC
List of
Notes Subject to Conversion:
Red
Beard Holdings 07/25/2017 note
Red
Beard Holdings 08/28/2017 note
Red
Beard Holdings 09/25/2017 note
Red
Beard Holdings 10/27/2017 note
Red
Beard Holdings 11/14/2017 note
Red
Beard Holdings 01/11/2018 note
Red
Beard Holdings 01/29/2018 note
Red
Beard Holdings 02/14/2018 note
Red
Beard Holdings 02/27/2018 note
Juliann
M Perrigo 07/31/2017 note
Baker
Court, LLC 07/28/2017 note
Donald
G McCoy Trust 11/15/2017 note
Elke M
McCoy Trust 11/15/2017 note
Aggregate Principal
Amount of Notes:
$
2,465,000
Aggregate Accrued
Interest through 4-22-19:
$
291,493
Aggregate Per Diem
Interest:
$
-
Total Shares Issued
upon Conversion (through April 22, 2019):
403,443,450
Additional Shares
Issuable Per Diem:
-
_
List of
Additional Debt Subject to Conversion:
Short-term
Debt
Aggregate Principal
Amount of Short-term Debt:
$
656,870
Total Shares Issued
upon Conversion (through April 22, 2019):
437,535,224
Trade
Debt
Aggregate Principal
Amount of Short-term Debt:
$
813,887
Total Shares Issued
upon Conversion (through April 22, 2019):
229,762,800
Exhibit
10.2
SECURITIES EXCHANGE AGREEMENT
This
Securities Exchange Agreement, dated as of April 26, 2019 (this
“
Agreement
”), is
made and entered into by and among Charlie’s Chalk Dust, LLC,
a Delaware limited liability company (“
CCD
” or the “
Company
”), the Class A Members,
Class B Members, and holders of existing warrants of CCD executing
this Agreement (each a “
Member
” and collectively,
“
Members
”), and
the Direct Investor signatories to this Agreement, on the one hand;
and True Drink Holdings, Inc., a Nevada corporation
(“
Pubco
”), on
the other hand.
RECITALS
WHEREAS, on April
19, 2019, the Board of Directors of Pubco adopted resolutions
approving Pubco’s acquisition of the equity interests of CCD
held by the Members by means of a share exchange with the Members
(the “
Exchange
”), and the direct offer,
sale and issuance of Pubco securities to the purchasers set forth
on the signature page hereto (
“Direct Investors”
), each
upon the terms and conditions hereinafter set forth in this
Agreement;
WHEREAS, the
Members own all of the outstanding equity interests of CCD as set
forth on Schedule A, consisting of Class A Membership Interests
(the “
CAMI
”),
Class B Membership Interests (the “
CBMI
”) and warrants to purchase
membership interests (the “
CCD Warrants
”; together with the
CAMI and CBMI, the “
CCD
Equity Interests
”);
WHEREAS, upon
consummation of the transactions contemplated by this Agreement and
subject to the terms hereof, (i) CCD will become a 100%
wholly-owned subsidiary of Pubco, (ii) the CCD Equity Interests
will be exchanged for Series A Preferred Stock, Series B Preferred
Stock, (iii) the CCD Warrants will be exchanged for Issuable
Warrants, as defined in
Section 1.1(d)
below, and (iv)
Pubco will sell, and the Direct Investors will purchase, shares of
Pubco Common Stock, Series A Preferred Stock and Issuable Warrants,
as set forth on Schedule B (the
“Private Issuance”
);
and
WHEREAS,
it is intended that the
terms and conditions of this Agreement as it relates to the
Exchange comply in all respects with Section 368(a)(1)(B) and/or
Section 351 of the Internal Revenue Code of 1986, as amended (the
“
Code
”) and the
regulations corresponding thereto, so that the Exchange shall
qualify as a tax free reorganization under the Code, and it is
intended that this share exchange transaction and Private Issuance
shall qualify as a transaction in securities exempt from
registration or qualification under the Securities Act of 1933, as
amended and in effect on the date of this Agreement.
AGREEMENT
NOW,
THEREFORE, the parties hereto, intending to be legally bound, agree
as follows:
ARTICLE 1
THE EXCHANGE AND PRIVATE ISSUANCE
1.1
The
Exchange
. Upon the terms and subject to the conditions
hereof, at the Closing (as hereinafter defined) the parties shall
do the following:
(a)
The Members will
sell, convey, assign, transfer to Pubco certificates representing
the CCD Equity Interests held by the Members, which in the
aggregate shall constitute 100% of the issued and outstanding
equity interests of CCD.
(b)
In exchange for the
CAMI, Pubco shall issue to the Members holding the CAMI shares of
Pubco Series A Preferred Stock, Pubco Common Stock and/or Series B
Preferred Stock, each as more particularly set forth on Schedule B
(the “
CAMI
Shares
”).
(c)
In exchange for the
CBMI, Pubco shall issue to the Members holding the CBMI shares of
Pubco Series B Preferred Stock as set forth on Schedule B (the
“
CBMI Shares
”
and together with the CAMI Shares and, as applicable and unless the
context otherwise requires, the shares of Pubco Common Stock and
Series A Preferred Stock issuable to the Direct Investors as set
forth in
Section
1.2
below, the “
Issuable Shares
”).
(d)
The Members owning
CCD Warrants (the “
Warrantholders
”) will sell,
convey, assign and transfer to Pubco their respective CCD Warrants.
In exchange for the CCD Warrants, Pubco shall issue to the
Warrantholders on a pro rata basis warrants, substantially in the
form of
Exhibit C
annexed hereto (the “
Issuable
Warrants
”), to purchase an aggregate number of shares
of Pubco Common Stock as set forth on Schedule B.
1.2
The
Private Issuance.
(a) Upon
the terms and subject to the conditions hereof, at the Closing,
Pubco shall sell and issue, as set forth in
Section 1.3
below, and the
Direct Investors shall purchase, that number of shares of Pubco
Common Stock, Issuable Warrants and Series A Preferred as set forth
on Schedule B, for and in consideration for the payment to the
Escrow Agent, as defined in
Section 1.2
below, by wire
transfer of immediately available funds, the amount set forth in
Schedule B (the
“Direct
Funds”
).
(b) The
Direct Funds shall be deposited with
Delaware Trust Company, a Delaware
corporation, as escrow agent in connection with the investment
by the Members in the Company (the
“Escrow
Agent”
),
pursuant to an Escrow Agreement dated as of February 15, 2019, as
amended dated April __, 2019 (the
“Escrow
Agreement”
).
Pubco and the Direct Investors acknowledge and agree that the
Direct Funds shall be released by the Escrow Agent to Pubco
according to the terms of the Escrow Agreement, which release is
conditioned on the satisfaction of the conditions to Closing set
forth in
Section
7.1
of this
Agreement.
1.2
Closing
Date
. The closing of the Exchange and Private Issuance (the
“
Closing
”) shall
take place on April __, 2019 or as soon as practicable after the
satisfaction or waiver of the conditions to Closing set forth in
Article 7, or on such other date as may be mutually agreed upon by
the parties. Such date is referred to herein as the
“Closing Date.”
1.3
Surrender,
Exchange and Issuance of Securities.
(a) At
the Closing, (i) Pubco shall deliver irrevocable instructions to
Corporate Stock Transfer, Pubco’s transfer agent (the
“
Exchange
Agent”)
, or such other person as the parties shall
jointly designate in writing, to issue to each Member and Direct
Investor, as the case may be, certificates representing the
Issuable Shares and Issuable Warrants (collectively,
“
Issuable
Securities
”) registered in the names of the Members or
Direct Investors, as the case may be, and for the number and kind
of Issuable Securities set forth on
Schedule B
hereto and (ii) the
CCD Equity Interests owned by such Member as set forth on
Schedule A
shall
terminate and be of no further force and effect.
(b) Within
two weeks after the Closing, the Exchange Agent shall deliver (i)
the Issuable Securities to the Members, or Direct Investors, as the
case may be (or their transferees, if any), and (ii) the CCD Equity
Interests to Pubco.
(c) Pending
release by the Exchange Agent of the Issuable Securities and CCD
Equity Interests in accordance with the terms of this Agreement,
(i) the registered owners of the Issuable Securities shall be
entitled to exercise all voting and other rights of ownership with
respect to the Issuable Securities and Pubco shall be entitled to
exercise all voting and other rights of ownership with respect to
the CCD Equity Interests, and (ii) the registered owners of the CCD
Warrants shall not be permitted to exercise, convert or enforce the
same.
1.4
Taking
of Necessary Action; Further Action
. If, at any time after
the Closing, any further action is necessary or desirable to carry
out the purposes of this Agreement, the Members, CCD, Direct
Investors and/or Pubco (as applicable) shall take all such lawful
and necessary action.
1.5
Certain
Definitions
. The following capitalized terms as used in this
Agreement shall have the respective definitions:
“
Affiliate
” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“
Best Knowledge
” means the
actual knowledge, after due investigation and inquiry, of the
officers, directors or advisors of the referenced
party.
“
Common Stock Equivalents
”
means any securities of Pubco or of any subsidiary of Pubco which
would entitle the holder thereof to acquire at any time Pubco
Common Stock, including, without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any
time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive Pubco Common
Stock.
“
Contract
” means
any contract, lease, license,
indenture, note, bond, agreement, permit, concession, franchise or
other instrument.
“
ERISA
” means the Employee
Retirement Income Security Act of 1974 or any successor law and the
regulations and rules issued pursuant to that act or any successor
law.
“
Exchange Act
” means the
Securities Exchange Act of 1934, as amended.
“
FINRA
” means the
Financial Industry Regulatory Authority.
“
GAAP
” means generally
accepted accounting principles in the United States
.
“
Governmental
Authority
” means: (a) the
government of the United States: (b) the government of any foreign
country; (c) the government of any state or political subdivision
of the government of the United States or the government of any
foreign country; or (d) any entity, body or authority exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government which shall include,
without limitation, the SEC and FINRA.
“
Knowledge
” means the
actual knowledge of the officers, directors or advisors of the
referenced party.
“
Liabilities
” means any
direct or indirect indebtedness, guaranty, endorsement, claim,
loss, damage, deficiency, cost, expense, obligation or
responsibility, fixed or unfixed, known or unknown, asserted choate
or inchoate, liquidated or unliquidated, secured or
unsecured.
“
Liens
” means a lien,
charge, security interest, encumbrance, right of first refusal,
preemptive right or other restriction.
“
Material Adverse Effect
”
means an adverse effect on either referenced party or the combined
entity resulting from the consummation of the transaction
contemplated by this Agreement, or on the financial condition,
results of operations or business, before or after the consummation
of the transaction contemplated in this Agreement, which as a whole
is or would be considered material to either referenced
party.
“
Person
” means any
individual, corporation, partnership, joint venture, trust,
business association, organization, governmental authority or other
entity.
“
Preferred Stock
” shall
mean all classes of preferred stock for which the Pubco has filed a
certificate of designation with the State of Nevada.
"
Pubco Common Stock
" shall mean
common stock, par value $0.001 of Pubco.
“
Registrable Securities
”
shall mean Underlying Shares.
“
Securities Act
” means the
Securities Act of 1933, as amended.
“
SEC
” means the United
States Securities & Exchange Commission.
“
Series A Certificate of
Designation
” shall mean Pubco’s Certificate of
Designation of Series A Convertible Preferred Stock, par value
$0.001, annexed as
Exhibit
A
hereto.
“
Series A Preferred Stock
”
shall mean Pubco’s Series A Convertible Preferred Stock
issued pursuant to the Series A Certificate of
Designation.
“
Series B Certificate of
Designation
” shall mean Pubco’s Certificate of
Designation of Series B Convertible Preferred Stock, par value
$0.001, annexed as
Exhibit
B
hereto.
“
Series B Preferred Stock
”
shall mean Pubco’s Series B Convertible Preferred Stock
issued pursuant to the Series B Certificate of
Designation.
“
Tax Returns
” means all
federal, state, local and foreign returns, estimates, information
statements and reports relating to Taxes.
“
Tax
” or
“
Taxes
”
means any and all applicable central, federal, provincial, state,
local, municipal and foreign taxes, including, without limitation,
gross receipts, income, profits, sales, use, occupation, value
added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, assessments,
governmental charges and duties together with all interest,
penalties and additions imposed with respect to any such amounts
and any obligations under any agreements or arrangements with any
other person with respect to any such amounts and including any
liability of a predecessor entity for any such
amounts.
“
Trading Day
” means a day
on which the principal Trading Market is open for
trading.
“
Trading Market
” means the
following markets or exchanges on which Pubco Common Stock is
listed or quoted for trading on the date in question: the NYSE
American LLC, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, the New York Stock Exchange, the
OTCQB, OTCQX or OTC Pink Marketplace operated or maintained by the
OTC Markets Group, Inc. or the OTC Bulletin Board.
“
Transaction
” means the
transactions contemplated by this Agreement, including the Exchange
and Private Issuance.
“
Underlying Shares
” means
the Pubco Common Stock or other securities of Pubco issuable upon
conversion of the Series A Preferred and Series B Preferred, and
exercise of the Issuable Warrants.
“
United States
” means and
includes the United States of America, its territories and
possessions, any State of the United States, and the District of
Columbia.
1.6
Tax
Consequences
. It is intended that the terms and conditions
of this Agreement as the same relate to the Exchange comply in all
respects with Section 368(a)(1)(B) and/or Section 351 of the Code
and the regulations corresponding thereto, so that the Exchange
shall qualify as a tax-free reorganization under the Code. Each
party hereto is required to obtain his or its own tax advice with
respect to the tax nature of the Transaction.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF CCD
Except
as otherwise disclosed herein or in the CCD disclosure schedule
attached hereto, CCD hereby represents and warrants to Pubco as of
the date hereof and as of the Closing Date (unless otherwise
indicated), as follows:
2.1
Organization
.
CCD has been duly formed, validly exists as a limited liability
company, and is in good standing under the laws of its jurisdiction
of formation and has the requisite power to carry on its business
as now conducted.
2.2
Capitalization
.
The authorized equity interests of CCD are as set forth on
Schedule A
. All of
the issued and outstanding shares of equity interests of CCD, as of
the Closing, are duly authorized, validly issued, fully paid,
non-assessable and were issued free of preemptive rights. There are
no voting trusts or any other agreements or understandings with
respect to the voting of CCD’s equity interests.
Except for the CCD Warrants, there are no
authorized or outstanding options, warrants, calls, rights,
convertible securities, commitments or agreements of any character
by which CCD is obligated to issue, deliver or sell, or cause to be
issued, delivered or sold, any
equity interests
or other securities of CCD. There are no
outstanding contractual obligations (contingent or otherwise) of
CCD to retire, repurchase, redeem or otherwise acquire any
outstanding shares of capital stock of, or other ownership
interests in, CCD.
2.3
Certain
Matters
. CCD is duly qualified to do business in each
jurisdiction in which the ownership of its property or the conduct
of its business requires it to be so qualified, except where the
failure to be so qualified would not have a Material Adverse Effect
on CCD’s financial condition, results of operations or
business. CCD has full power and authority and all authorizations,
licenses and permits necessary to carry on the business in which it
is engaged and to own and use the properties owned and used by
it.
2.4
Authority
.
CCD has the requisite power and authority to enter into this
Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by CCD have
been duly authorized by CCD’s Manager and no other actions on
the part of CCD are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by CCD and constitutes a valid and
binding agreement, enforceable against CCD in accordance with its
terms, except as such enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of
creditors’ rights generally or by general principles of
equity.
2.5
Consents
and Approvals; No Violations
. Except for applicable
requirements, if any, of federal securities laws and state
securities or blue-sky laws, no filing with, and no permit,
authorization, consent or approval of, any third party, public body
or authority is necessary for the consummation by CCD of the
transactions contemplated by this Agreement. Neither the execution
and delivery of this Agreement by CCD nor the consummation by CCD
of the transactions contemplated hereby, nor compliance by CCD with
any of the provisions hereof, will (a) conflict with or result in
any breach of any provisions of the charter or bylaws of CCD, (b)
result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, Contract, agreement or other instrument or
obligation to which CCD is a party or by which any of CCD’s
properties or assets may be bound, or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to CCD
or any of its properties or assets, except in the case of clauses
(b) and (c) for violations, breaches or defaults which are not in
the aggregate material to CCD taken as a whole.
2.6
Financial
Statements
. CCD has delivered to Pubco audited balance sheet
of CCD, as of December 31, 2017 and 2018 (the “
CCD Accounting Date
”), and the
related audited statements of income or operations and cash flows
of CCD for the two years ending as of the CCD Accounting Date
(collectively, the “
CCD
Financial Statements
”). Except as set forth on
Schedule 2.6
, the
CCD Financial Statements fairly present in all material respects
the financial condition and operating results of CCD as of the
dates, and for the periods, indicated therein, subject to normal
year-end audit adjustments. Except as set forth in the CCD
Financial Statements or in
Schedule 2.6
, CCD has no
material liabilities or obligations, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business
subsequent to the CCD Accounting Date; (ii) obligations under
contracts and commitments incurred in the ordinary course of
business; which, in all such cases, individually and in the
aggregate would not reasonably be expected to have a Material
Adverse Effect.
2.7
Intellectual
Property
. CCD owns, is licensed or otherwise possesses
legally enforceable rights to use, license and exploit all issued
patents, copyrights, trademarks, service marks, trade names, trade
secrets, and registered domain names and all applications for
registration therefor (collectively, the “
Intellectual Property Rights
”) and
all computer programs and other computer software, databases,
know-how, proprietary technology, formulae, and development tools,
together with all goodwill related to any of the foregoing
(collectively, the “
Intellectual Property
”), in each
case as is necessary to conduct its business as presently
conducted, the absence of which would be considered reasonably
likely to result in a Material Adverse Effect.
2.8
Litigation
.
There are no actions, suits, arbitrations, regulatory proceedings
or other litigation, proceedings or governmental investigations
pending or, to the Knowledge of CCD, threatened against CCD or any
of its officers or directors in their capacity as such, or any of
its properties or businesses, and CCD has no Knowledge of any facts
or circumstances which may reasonably be likely to give rise to any
of the foregoing. CCD is not subject to any order, judgment,
decree, injunction, stipulation or consent order of or with any
court or other Governmental Authority. CCD has not entered into any
agreement to settle or compromise any proceeding pending or
threatened in writing against it which has involved any obligation
for which CCD has any continuing obligation. There are no claims,
actions, suits, proceedings, or investigations pending or, to the
Knowledge of CCD, threatened by or against CCD with respect to this
Agreement, or in connection with the transactions contemplated
hereby, and CCD has no reason to believe there is a valid basis for
any such claim, action, suit, proceeding or
investigation.
2.9
Legal
Compliance
. To the Best Knowledge of CCD, no claim has been
filed against CCD alleging a violation of any applicable laws and
regulations of foreign, federal, state and local governments and
all agencies thereof. CCD holds all of the material permits,
licenses, certificates or other authorizations of foreign, federal,
state or local governmental agencies required for the conduct of
CCD’s business as presently conducted.
2.10
Material
Changes
. Except as disclosed on
Schedule 2.10
, since the CCD
Accounting Date: (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) CCD has not incurred any
Liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business
consistent with past practice, and (B) Liabilities not required to
be reflected in the CCD Financial Statements, (iii) CCD has not
altered its method of accounting, (iv) CCD has not declared or made
any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) CCD has
not issued any equity securities to any officer, director or
Affiliate.
2.11
Labor
Relations
. No labor dispute exists or, to the Knowledge of
CCD, is imminent with respect to any of the employees of CCD which
could reasonably be expected to result in a Material Adverse
Effect. None of CCD’s employees is a member of a union that
relates to such employee’s relationship with CCD, and CCD is
not a party to a collective bargaining agreement, and CCD believes
that its relationships with its employees is good. No executive
officer, to the Knowledge of CCD, is, or is now expected to be, in
violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or
any restrictive covenant in favor of any third party, and the
continued employment of each such executive officer does not
subject CCD to any liability with respect to any of the foregoing
matters. CCD is in compliance with all U.S. federal, state, local
and foreign laws and regulations relating to employment and
employment practices, terms and conditions of employment and wages
and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
2.12
Title
to Assets
. CCD has good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of CCD, in each case free and clear of all Liens, except
for Liens that do not materially affect the value of such property
and do not materially interfere with the use made and proposed to
be made of such property by CCD and Liens for the payment of Taxes,
the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by CCD
is held by CCD under valid, subsisting and enforceable leases with
which CCD is in compliance.
2.13
Certain
Fees
. No brokerage or finder’s fees or commissions are
or will be payable by CCD to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by this
Agreement.
2.14
Registration
Rights
. No Person has any right to cause CCD (or any
successor) to effect the registration under the Securities Act of
any securities of CCD (or any successor).
2.15
Tax
Status
. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, CCD has timely filed all necessary Tax
Returns and has paid or accrued all Taxes shown as due thereon, and
CCD has no Knowledge of a tax deficiency which has been asserted or
threatened against CCD.
2.16
No
General Solicitation
. Neither CCD nor any person acting on
behalf of CCD has offered or sold securities in connection herewith
by any form of general solicitation or general
advertising.
2.17
Foreign
Corrupt Practices
. Neither CCD, nor to the Knowledge of CCD,
any agent or other person acting on behalf of CCD, has: (i)
directly or indirectly, used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign
or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by CCD
(or made by any person acting on its behalf of which CCD is aware)
which is in violation of law or (iv) violated in any material
respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended (“
FCPA
”).
2.18
Minute
Books
. The minute books of CCD have, to the extent and for
the periods requested by Pubco, been made available to Pubco and
contain a complete summary of all meetings and written consents in
lieu of meetings of directors and stockholders of CCD for the
periods requested.
2.19
Employee
Benefits
. CCD has no (and for the two years preceding the
date hereof has had no) plans which are subject to
ERISA.
2.20
Money
Laundering Laws
. The operations of CCD are and have been
conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the money laundering
statutes of all U.S. and non-U.S. jurisdictions, the rules and
regulations thereunder and any related or similar rules,
regulations or guidelines, issued, administered or enforced by any
governmental body (collectively, the “
Money Laundering Laws
”) and no
action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving CCD with
respect to the Money Laundering Laws is pending or, to the
Knowledge of CCD, threatened.
2.21
Disclosure
.
The representations and warranties and statements of fact made by
CCD in this Agreement, and all statements set forth in the
certificates delivered by CCD at the Closing pursuant to this
Agreement, are, as applicable, accurate, correct and complete and
do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
and information contained herein not false or misleading. The
copies of all documents furnished by CCD pursuant to the terms of
this Agreement are complete and accurate copies of the original
documents. The schedules, certificates, and any and all other
statements and information, whether furnished in written or
electronic form, to Pubco or its representatives by or on behalf of
CCD in connection with this Agreement and the transactions
contemplated hereby do not contain any material misstatement of
fact or omit to state a material fact or any fact necessary to make
the statements contained therein not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE MEMBERS AND DIRECT
INVESTORS
Except
as otherwise disclosed herein or in the Member and Direct Investor
disclosure schedules attached hereto, each Member and Direct
Investor, as the case may be as set forth below, severally
represents and warrants to Pubco as of the date hereof and as of
the Closing Date (unless otherwise indicated), as
follows:
3.1
Ownership
of the CCD Equity Interests
. The Member owns, beneficially
and of record, good and marketable title to the CCD Equity
Interests set forth opposite such Member’s name in
Schedule 3.1
hereto, free and clear of all security interests, liens, adverse
claims, encumbrances, equities, proxies, options or voting
agreements. The Member represents that, except for such CCD Equity
Interests, he has no right or claim whatsoever to any equity
interests of CCD and owns no options, warrants or other instruments
entitling him to exercise or purchase or convert into equity
interests of CCD. At the Closing, the Member will convey to Pubco
good and marketable title to the CCD Equity Interests, free and
clear of any and all security interests, liens, adverse claims,
encumbrances, equities, proxies, options, members’ agreements
or restrictions. Other than the CCD Equity Interests set forth in
Schedule 3.1 hereto, no other equity interests in CCD are issued
and outstanding, and there are no additional members of
CCD.
3.2
Authority
Relative to this Agreement
. This Agreement has been duly and
validly executed and delivered by such Member or Direct Investor
and constitutes a valid and binding agreement of such person,
enforceable against such Member or Direct Investor in accordance
with its terms, except as such enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors’ rights generally or by general
principles of equity.
3.3
Acquisition
of Restricted Securities for Investment
. Such Member or
Direct Investor acknowledges that the Issuable Securities and
Underlying Shares will not be registered pursuant to the Securities
Act or any applicable state securities laws, that the Issuable
Securities and Underlying Shares will be characterized as
“restricted securities” under federal securities laws,
and that under such laws and applicable regulations the Issuable
Securities and Underlying Shares cannot be sold or otherwise
disposed of without registration under the Securities Act or an
exemption therefrom. In this regard, such Member or Direct Investor
is familiar with Rule 144 promulgated under the Securities Act, as
currently in effect, and understands the resale limitations imposed
thereby and by the Securities Act. Further, such Member or Direct
Investor acknowledges and agrees that:
(a) Such
Member or Direct Investor will be acquiring the Issuable Securities
and Underlying Shares for investment, for such person’s own
account and not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and such person has no
present intention of selling, granting any participation in, or
otherwise distributing the same. The foregoing shall not be deemed
to preclude an intention to transfer Issuable Securities or
Underlying Shares to family members for no consideration. Such
Member or Direct Investor further represents that he, she or it
does not have any Contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participation to such
person or to any third person, with respect to any of the Issuable
Securities or Underlying Shares.
(b) Such
Member or Direct Investor understands that the Issuable Securities
and Underlying Shares are not registered under the Securities Act
on the ground that the sale and the issuance of securities
hereunder is exempt from registration under the Securities Act
pursuant to Section 4(a)(2) thereof and or Regulation D promulgated
under the Securities Act, and that Pubco’s reliance on such
exemption is predicated on such Member’s or Direct
Investor’s representations set forth herein.
3.4
Status
of Member and Direct Investor
. Such Member or Direct
Investor is an “Accredited Investor” as that term is
defined in Rule 501 of Regulation D promulgated under the
Securities Act, an excerpt of which is included in the attached
Annex A
, and such
person is not acquiring the Issuable Securities or Underlying
Shares as a result of any advertisement, article, notice or other
communication regarding the Issuable Securities and Underlying
Shares published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or
any other general advertisement or, to such Member's or Direct
Investor's knowledge, general solicitation.
3.5
Investment
Risk
. Such Member or Direct Investor is able to bear the
economic risk of acquiring the Issuable Securities and Underlying
Shares pursuant to the terms of this Agreement, including a
complete loss of such person’s investment in the Issuable
Securities and Underlying Shares.
3.6
Restrictive
Legends
.
(a) Such
Member or Direct Investor acknowledges that the certificate(s)
representing the Issuable Securities and Underlying Shares shall
each conspicuously set forth on the face or back thereof a legend
in substantially the following form:
“[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[EXERCISABLE] [CONVERTIBLE]] HAS [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 (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES
ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.”
(b) Notwithstanding
Section 3.6(a)
,
upon the written request of a Direct Investor, any legend
(including the legend set forth in
Section 3.6(a)
hereof) on the
Issuable Shares held by such Direct Investor may be removed (i)
while a registration statement (including the Registration
Statement) covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Issuable Shares
pursuant to Rule 144, (iii) if such Issuable Shares are eligible
for sale under Rule 144 without the requirement to be in compliance
with Rule 144(c)(1), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission), subject in the case of clauses (ii), (iii) and (iv) to
receipt from the Direct Investor by Pubco of customary
representations reasonably acceptable to Pubco in connection with
such request. Upon such request, the Pubco shall (A) deliver to its
transfer agent irrevocable instructions to remove the legend, and
(B) cause its counsel to deliver to is transfer agent one or more
legal opinions to the effect that the removal of such legend in
such circumstances may be effected under the Securities Act if
required by its transfer agent, or requested by a Direct Investor,
to effect the removal of the legend in accordance with the
provisions of this Agreement. Pubco agrees that following the
effective date of a registration statement covering the resale of
the Issuable Shares or at such time as such legend is no longer
required under this
Section 3.6(b)
, it will, no
later than two Trading Days following the delivery by a Direct
Investor to Pubco or its transfer agent of a request for legend
removal and in the case of Issuable Shares evidenced by a physical
certificate, the delivery of the physical certificate, and if
relying on Rule 144, receipt from the Direct Investor of customary
representations reasonably acceptable to the Pubco in connection
therewith (such second Trading Day, the “
Legend Removal Date
”), deliver or
cause to be delivered to such Investor, as may be requested by the
Direct Investor, a certificate or book-entry position evidencing
such Issuable Shares that is free from all restrictive and other
legends or by crediting the account of the Direct Investor’s
or its designee’s account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system if Pubco or
Pubco's transfer agent is then a participant in such system. Pubco
may not make any notation on its records or give instructions to
the Transfer Agent that enlarge the restrictions on transfer set
forth in
Section
3.6(a)
.
(c) If
Pubco fails to deliver any such Issuable Shares free from all
restrictive legends on or before the applicable Legend Removal Date
and if after the Legend Removal Date, due to Pubco's continuing
failure to deliver such Issuable Shares, such Direct Investor
purchases (in an open market transaction or otherwise) shares of
Pubco Common Stock to deliver in satisfaction of a sale by such
Investor of all or any portion of the Issuable Shares anticipated
receiving from Pubco without any restrictive legend, then Pubco
shall pay in cash to the Direct Investor in an amount equal to the
excess of such Direct Investor’s total purchase price
(including brokerage commissions, if any) for the shares of Pubco
Common Stock so purchased (the “
Buy-In Price
”) over the product of
(A) such number of shares of Pubco Common Stock that Pubco was
required to deliver to such Direct Investor by the Legend Removal
Date multiplied by (B) any closing sale price of the Pubco Common
Stock selected by the Direct Investor on any Trading Day during the
period commencing on the date of the delivery by such Direct
Investor to Pubco such shares of Pubco Common Stock and ending on
the date of such delivery and payment under this
Section 3.6(c)
.
(d) Each
Direct Investor, severally and not jointly with the other Direct
Investors, agrees with Pubco (i) that such Direct Investor will
sell any Issuable Shares pursuant to either the registration
requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom, (ii)
that if Issuable Shares are sold pursuant to a registration
statement, they will be sold in compliance with the plan of
distribution set forth therein, (iii) that if, after the effective
date of the registration statement covering the resale of the
Issuable Shares, such registration statement ceases to be effective
and Pubco has provided notice to such Direct Investor to that
effect, such Direct Investor will sell Issuable Shares only in
compliance with an exemption from the registration requirements of
the Securities Act; and acknowledges that the removal of the
restrictive legend from the Issuable Shares due to the
effectiveness of a registration statement as set forth in
Section 3.6(b)
is
predicated upon Pubco's reliance upon this Agreement.
(e) At
any time during the period commencing on the six (6) month
anniversary of the Closing Date and ending at such time that all of
the Issuable Shares and Underlying Shares, if a registration
statement is not available for the resale of all of the Underlying
Shares, may be sold without restriction or limitation pursuant to
Rule 144 and without the requirement to be in compliance with Rule
144(c)(1), if Pubco shall (i) fail for any reason to satisfy the
requirements of Rule 144(c)(1), including, without limitation, the
failure to satisfy the current public information requirements
under Rule 144(c) or (ii) if Pubco has ever been an issuer
described in Rule 144(i)(1)(i) or becomes such an issuer in the
future, and Pubco shall fail to satisfy any condition set forth in
Rule 144(i)(2) (each, a "
Public
Information Failure
"), then, as partial relief for the
damages to any Direct Investor by reason of any such delay in or
reduction of its ability to sell the Issuable Shares and Underlying
Shares (which remedy shall not be exclusive of any other remedies
available at law or in equity), Pubco shall pay to each such Direct
Investor an amount in cash equal to two percent (2.0%) of the
aggregate Direct Funds of such Direct Investor on the day of a
Public Information Failure and on every thirtieth day (pro-rated
for periods totaling less than thirty days) thereafter until the
earlier of (i) the date such Public Information Failure is cured
and (ii) such time that such Public Information Failure no longer
prevents a Direct Investor from selling such Issuable Securities
and Underlying Shares pursuant to Rule 144 without any restrictions
or limitations. The payments to which a holder shall be entitled
pursuant to this
Section
3.6(e)
are referred to herein as "
Public Information Failure Payments.
"
Public Information Failure Payments shall be paid on the earlier of
(I) the last day of the calendar month during which such Public
Information Failure Payments are incurred and (II) the third
Business Day after the event or failure giving rise to the Public
Information Failure Payments is cured. In the event Pubco fails to
make Public Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at the rate
of 1.5% per month (prorated for partial months) until paid in
full.
3.7
Disclosure
.
The representations and warranties and statements of fact made by
such Member or Direct Investor in this Agreement, and all
statements set forth in the certificates delivered by such person
at the Closing pursuant to this Agreement, are, as applicable,
accurate, correct and complete and do not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements and information contained
herein not false or misleading. The copies of all documents, if
any, furnished by such Member or Direct Investor pursuant to the
terms of this Agreement are complete and accurate copies of the
original documents. The schedules, certificates, and any and all
other statements and information, whether furnished in written or
electronic form in connection with this Agreement and the
transactions contemplated hereby do not contain any material
misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained therein not
misleading.
3.8
No
Disqualification Events
. Such Member or Direct Investor is
not subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “
Disqualification
Event
”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). CCD has exercised reasonable care to
determine whether such person is subject to a Disqualification
Event.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PUBCO
Pubco
hereby represents and warrants to CCD and each Member and Direct
Investor as of the date hereof and as of the Closing Date (unless
otherwise indicated, or in the Pubco disclosure schedule attached
hereto), as follows:
4.1
Organization
and Qualification
. Pubco is an entity duly incorporated or
otherwise organized, validly existing and in good standing under
the laws of State of Nevada, with the requisite power and authority
to own and use its properties and assets and to carry on its
business as currently conducted. Pubco is not in violation or
default of any of the provisions of its articles of incorporation,
bylaws or other organizational or charter documents (collectively
the “
Charter
Documents
”). Pubco is duly qualified to conduct
business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be
expected to result in a Material Adverse Effect, and no proceeding
has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and
authority or qualification.
4.2
Authorization;
Enforcement
. Pubco has the requisite corporate power and
authority to enter into and to consummate this Agreement and the
transactions contemplated hereby and otherwise to carry out its
obligations hereunder. The execution and delivery of this Agreement
and each of the other Transaction Documents by Pubco and the
consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the
part of Pubco and no further action is required by Pubco, the Board
of Directors or Pubco’s stockholders in connection therewith
other than in connection with the Required Approvals, as defined in
Section 4.4
. The
Transaction Documents have been (or upon delivery will have been)
duly executed by Pubco and, when delivered in accordance with the
terms thereof, will constitute the valid and binding obligation of
Pubco enforceable against Pubco in accordance with their respective
terms, except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law (the
exceptions referenced in the preceding clauses “(i)”
through “(iii)”, the “
Enforceability
Exceptions
”).
4.3
No
Conflicts
. The execution, delivery and performance by Pubco
of the Transaction Documents and the consummation by Pubco of the
transactions contemplated thereby do not and will not: (i) conflict
with or violate any provision of Pubco’s certificate or
articles of incorporation, bylaws or other organizational or
charter documents (including the certificates of designation for
the Preferred Stock), (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become
a default) under, result in the creation of any Lien upon any of
the properties or assets of Pubco, or give to others any rights of
termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Pubco debt or
otherwise) or other understanding to which Pubco is a party or by
which any property or asset of Pubco is bound or affected, or (iii)
subject to the Required Approvals, as defined by
Section 4.4
, conflict with or
result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or
governmental authority to which Pubco is subject (including federal
and state securities laws and regulations), or by which any
property or asset of Pubco is bound or affected; except in the case
of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse
Effect.
4.4
Filings,
Consents and Approvals
. Pubco is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by Pubco of
this Agreement and the other Transaction Documents, other than the
filing of Current Report(s) on Form 8-K with the SEC and such
filings as are required to be made under applicable federal and
state securities laws relating to the offer and sale of securities
(collectively, the “
Required
Approvals
”).
4.5
The Issuable Securities
and Underlying Shares
. The Issuable Shares are duly
authorized and, when issued and acquired in accordance with this
Agreement, will be duly and validly issued, fully paid and
non-assessable, free and clear of all Liens imposed on or by Pubco
other than restrictions on transfer provided for in this Agreement.
The Issuable Warrants are duly authorized and, when issued and
acquired in accordance with this Agreement, will constitute the
valid and binding obligations of Pubco enforceable against Pubco in
accordance with their respective terms subject, in the case of
enforceability, to the Enforceability Exceptions. Except as set
forth on
Schedule
4.5
, the Underlying Shares are duly authorized and reserved
and, when issued and acquired in accordance with the terms of the
Issuable Securities, will be duly and validly issued, fully paid
and non-assessable, free and clear of all Liens imposed on or by
Pubco other than restrictions on transfer provided for in this
Agreement or the Issuable Securities.
4.6
Capitalization
.
The capitalization of Pubco is as set forth on
Schedule 4.6
, which
Schedule 4.6
shall
also include the number of shares of Pubco Common Stock owned
beneficially, and of record, by Affiliates of Pubco as of the date
hereof, if any. Other than as set forth in
Schedule 4.6
, Pubco has no
authorized or issued shares of any class of capital
stock
.
No Person has any right
of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by
this Agreement. Except as set forth on
Schedule 4.6
, there are no
outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable
or exchangeable for, or giving any Person any right to subscribe
for or acquire any shares of Pubco Common Stock, or Contracts,
commitments, understandings or arrangements by which Pubco or any
subsidiary of Pubco is or may become bound to issue additional
shares of Pubco Common Stock or Common Stock Equivalents.
Schedule 4.6
contains the terms of any Common Stock Equivalents, including
conversion and exercise prices, maturity or termination dates,
anti-dilution and reset provisions. The issuance of the Issuable
Securities will not obligate Pubco to issue shares of Pubco Common
Stock or other securities to any Person and will not result in a
right of any holder of Pubco securities to adjust the exercise,
conversion, exchange or reset price under any of such securities.
Except as set forth on
Schedule 4.6
, all of the
outstanding shares of capital stock of Pubco are validly issued,
fully paid and nonassessable, have been issued in compliance with
all federal and state securities laws, and none of such outstanding
shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder or Pubco’s board of
directors is required for the issuance of the Issuable Securities
or Underlying Shares. There are no stockholders agreements, voting
agreements or other similar agreements with respect to
Pubco’s capital stock to which Pubco is a party or, to the
Knowledge of Pubco, between or among any of Pubco’s
stockholders.
4.7
SEC
Reports; Financial Statements; No Shell
.
(a)
Except as set forth
on
Schedule 4.7
hereto, Pubco has filed all reports, schedules, forms, statements
and other documents required to be filed by Pubco under the
Securities Act and the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, since December 31, 2017 (the foregoing
materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to
herein as the “
SEC
Reports
”, and the SEC Reports set forth on Schedule
4.7 hereto being collectively referred to herein as the
“
Delinquent SEC
Reports
”). As of their respective dates, the SEC
Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable, and none of
the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of Pubco included in
the SEC Reports (“
SEC
Financial Statements
”)
comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with GAAP, except as
may be otherwise specified in such financial statements or the
notes thereto and except that unaudited financial statements may
not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of Pubco as of and for
the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit
adjustments.
(b)
The SEC Financial
Statements fairly present in all material respects the financial
condition and operating results of Pubco as of the dates, and for
the periods, indicated therein, subject to normal year-end audit
adjustments.
(c)
Pubco is not, and
at all times since June 2003, Pubco has not been, a
“shell” company within the meaning of applicable SEC
rules. Pubco makes no representations as to its “shell
company” status prior to such date.
(d)
To Pubco’s
knowledge, it will be able to comply with the registration
requirements of a registration rights agreement to be entered into
as of the Closing among Pubco and the Members and Direct Investors
(the “
Registration Rights
Agreement
”).
4.8
Material
Changes
. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically
disclosed in a subsequent SEC Report filed five days prior to the
date hereof: (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a
Material Adverse Effect, (ii) Pubco has not incurred any
Liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to
be reflected in Pubco’s financial statements pursuant to GAAP
or disclosed in filings made with the SEC, (iii) Pubco has not
altered its method of accounting, (iv) Pubco has not declared or
made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) Pubco
has not issued any equity securities to any officer, director or
Affiliate. Pubco does not have pending before the SEC any request
for confidential treatment of information. Except for the issuance
of the Issuable Securities contemplated by this Agreement or as set
forth on
Schedule
4.8
, no event, liability or development has occurred or
exists with respect to Pubco or any subsidiary of Pubco or their
respective business, properties, operations or financial condition,
that would be required to be disclosed by Pubco under applicable
securities laws at the time this representation is made or deemed
made that has not been publicly disclosed at least one (1) Trading
Day prior to the date that this representation is
made.
4.9
Litigation
.
There are no actions, suits, arbitrations, regulatory proceedings
or other litigation, proceedings or governmental investigations
pending or, to the Best Knowledge of Pubco, threatened against
Pubco or any of its officers or directors in their capacity as
such, or any of its properties or businesses, and Pubco has no
Knowledge of any facts or circumstances which may reasonably be
likely to give rise to any of the foregoing. Pubco is not subject
to any order, judgment, decree, injunction, stipulation or consent
order of or with any court or other Governmental Authority. Pubco
has not entered into any agreement to settle or compromise any
proceeding pending or threatened in writing against it which has
involved any obligation for which Pubco has any continuing
obligation. There are no claims, actions, suits, proceedings, or
investigations pending or, to the Best Knowledge of Pubco,
threatened by or against Pubco with respect to this Agreement, or
in connection with the transactions contemplated hereby, and Pubco
has no reason to believe there is a valid basis for any such claim,
action, suit, proceeding or investigation.
4.10
Labor
Relations
. No labor dispute exists or, to the Knowledge of
Pubco, is imminent with respect to any of the employees of Pubco
which could reasonably be expected to result in a Material Adverse
Effect. None of Pubco’s employees is a member of a union that
relates to such employee’s relationship with Pubco, and Pubco
is not a party to a collective bargaining agreement, and Pubco
believes that its relationships with their employees are good. No
executive officer, to the Knowledge of Pubco, is, or is now
expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information
agreement or non-competition agreement, or any other Contract or
agreement or any restrictive covenant in favor of any third party,
and the continued employment of each such executive officer does
not subject Pubco to any liability with respect to any of the
foregoing matters. Pubco is in compliance with all U.S. federal,
state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
4.11
Compliance
.
To the Knowledge of Pubco, Pubco: (i) is not in default under or in
violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by Pubco under), nor has Pubco received notice of a claim
that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has
been waived), (ii) is not in violation of any order of any court,
arbitrator or governmental body, or (iii) except for the failure to
file the Delinquent SEC Reports, is not and has not been in
violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state
and local laws applicable to its business and all such laws that
affect the environment, except in each case as could not have or
reasonably be expected to result in a Material Adverse
Effect.
4.12
Regulatory
Permits
. Pubco possesses all certificates, authorizations
and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct its business,
except where the failure to possess such permits could not
reasonably be expected to result in a Material Adverse Effect
(“
Material
Permits
”), and Pubco has not received any notice of
proceedings relating to the revocation or modification of any
Material Permit.
4.13
Title
to Assets
. Pubco has good and marketable title in all
personal property owned by it that is material to the business of
Pubco, free and clear of all Liens, except for Liens disclosed on
Schedule 4.13
or
that do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of
such property by Pubco and Liens for the payment of Taxes, the
payment of which is neither delinquent nor subject to penalties.
Pubco does not own any real property. Any real property and
facilities held under lease by Pubco are held by Pubco under valid,
subsisting and enforceable leases with which Pubco is in
compliance.
4.14
Patents
and Trademarks
. Pubco has, or has rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights
described on
Schedule
4.14
(collectively, the “
Pubco Intellectual Property
Rights
”). Other than the Pubco Intellectual Property
Rights, there are no intellectual property or similar rights
necessary or material for use in connection with Pubco’s
business and which the failure to so have could have a Material
Adverse Effect. Pubco has not received a notice (written or
otherwise) that any of the Pubco Intellectual Property Rights used
by Pubco violates or infringes upon the rights of any Person. To
the Knowledge of Pubco, all such Pubco Intellectual Property Rights
are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights. Pubco has taken
reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
4.15
Transactions
with Affiliates and Employees
. Except as set forth on
Schedule 4.15
, none
of the officers or directors of Pubco and, to the Knowledge of
Pubco, none of the employees of Pubco is presently a party to any
transaction with Pubco (other than for services as employees,
officers and directors), including any Contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or
such employee or, to the Knowledge of Pubco, any entity in which
any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each
case in excess of $10,000 individually or $25,000 in the aggregate,
other than for: (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on
behalf of Pubco and (iii) other employee benefits.
4.16
Sarbanes-Oxley;
Internal Accounting Controls
. Pubco is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002
which are applicable to it as of the Closing Date.
Pubco maintains a system of internal accounting
controls sufficient to provide reasonable assurance that: (i)
transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. Pubco has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for Pubco and designed such disclosure controls and
procedures to ensure that information required to be disclosed by
Pubco in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time
periods specified in the SEC’s rules and forms. Pubco’s
certifying officers have evaluated the effectiveness of
Pubco’s disclosure controls and procedures as of the end of
the period covered by Pubco’s most recently filed periodic
report under the Exchange Act (such date, the
“
Evaluation
Date
”). Pubco presented
in its most recently filed periodic report under the Exchange Act
the conclusions of the certifying officer about the effectiveness
of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date,
there have been no changes in Pubco’s internal control over
financial reporting (as such term is defined in the Exchange Act)
that has materially affected, or is reasonably likely to materially
affect, Pubco’s internal control over financial
reporting.
4.17
Certain
Fees
. No brokerage or finder’s fees or commissions are
or will be payable by Pubco to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by this
Agreement.
4.18
Issuance
of Issuable Securities and Underlying Shares
. Assuming the
accuracy of the Members’ and Direct Investors’
representations and warranties set forth in
Article 3
, no registration
under the Securities Act is required for the offer and issuance of
the Issuable Securities and Underlying Shares by Pubco as
contemplated hereby. The issuance of the Issuable Securities and
Underlying Shares hereunder does not contravene the rules and
regulations of the applicable Trading Market.
4.19
Investment
Company
. Pubco is not, and is not an Affiliate of, an
“investment company” within the meaning of the
Investment Company Act of 1940, as amended.
4.20
Listing
and Maintenance Requirements
. Pubco Common Stock is
currently quoted on the OTC Pink Marketplace under the symbol
“TRUU”. Except as set forth on
Schedule 4.20
, Pubco is
presently in compliance with all such quoting, listing and
maintenance requirements of the OTC Pink Marketplace.
4.21
Application
of Takeover Protections
. Pubco has taken all necessary
action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar
anti-takeover provision under Pubco’s articles of
incorporation or the laws of Nevada that is or could become
applicable to a Member as a result of a Member and Pubco fulfilling
their obligations or exercising their rights under this Agreement,
including without limitation as a result of Pubco’s issuance
of the Issuable Securities and Underlying Shares and the
Members’ and Direct Investors’ ownership of the
Issuable Securities and Underlying Shares.
4.22
No
Integrated Offering
. To the Knowledge of Pubco, and assuming
the accuracy of the Members’ and Direct Investors’
representations and warranties set forth in
Article 3
, neither Pubco, nor
any of its Affiliates, nor any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Issuable
Securities or Underlying Shares to be integrated with prior
offerings by Pubco for purposes of (i) the Securities Act which
would require the registration of any such securities under the
Securities Act, or (ii) any applicable member approval provisions
of any Trading Market on which any of the securities of Pubco are
listed or designated.
4.23
Tax
Status
. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, Pubco has filed all necessary Tax Returns
and has paid or accrued all Taxes shown as due thereon, and Pubco
has no knowledge of a tax deficiency which has been asserted or
threatened against Pubco.
4.24
No
General Solicitation
. Neither Pubco nor any person acting on
behalf of Pubco has offered or sold any of the Issuable Securities
by any form of general solicitation or general
advertising.
4.25
Foreign
Corrupt Practices
. Neither Pubco, nor to the Knowledge of
Pubco, any agent or other person acting on behalf of Pubco, has:
(i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by Pubco (or made by any person acting on its
behalf of which Pubco is aware) which is in violation of law or
(iv) violated in any material respect any provision of the
FCPA.
4.26
Transfer
Agent
. Pubco’s transfer agent is Corporate Stock
Transfer. Such transfer agent is eligible to transfer securities
via Depository Trust Company (“
DTC
”) and Deposit Withdrawal Agent
Commission (“
DWAC
”).
4.27
No
Disagreements with Accountants and Lawyers
. To the Knowledge
of Pubco, there are no disagreements of any kind, including but not
limited to any disagreements regarding fees owed for services
rendered, presently existing, or reasonably anticipated by Pubco to
arise, between Pubco and the accountants and lawyers formerly or
presently employed by Pubco which could affect Pubco’s
ability to perform any of its obligations under this Agreement, and
Pubco is current with respect to any fees owed to its accountants
and lawyers.
4.28
Regulation
M Compliance
. Pubco has not, and to the Knowledge of Pubco,
no one acting on behalf of Pubco has, (i) taken, directly or
indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of Pubco
to facilitate the sale or resale of any of the Issuable Shares,
(ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the securities of Pubco, or (iii)
paid or agreed to pay to any Person any compensation for soliciting
another to purchase any other securities of Pubco.
4.29
Money
Laundering Laws
. The operations of Pubco are and have been
conducted at all times in compliance with the Money Laundering Laws
and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
Pubco with respect to the Money Laundering Laws is pending or, to
the Best Knowledge of Pubco, threatened.
4.30
Minute
Books
. The minute books of Pubco have, to the extent and for
the periods requested by CCD, the Members and Direct Investors,
been made available to CCD, the Members and Direct Investors
contain a complete summary of all meetings and written consents in
lieu of meetings of directors and stockholders for the periods
requested.
4.31
Employee
Benefits
. Pubco has not (nor for the two years preceding the
date hereof has) had any plans which are subject to ERISA. All
existing Employment Agreements of Pubco will be terminated at the
Closing Date.
4.32
Business
Records and Due Diligence
. Prior to the Closing, Pubco shall
have delivered to CCD all records and documents relating to Pubco,
which Pubco possesses, including, without limitation, books,
records, government filings, Tax Returns, Charter Documents,
corporate records, stock records, consent decrees, orders, and
correspondence, director and stockholder minutes, resolutions and
written consents, stock ownership records, financial information
and records, and other documents used in or associated with Pubco
which have been requested in writing by CCD.
4.33
Contracts
.
Except as set forth in
Schedule 4.33
, there are no
Contracts (i) that are material to the business, properties,
assets, condition (financial or otherwise), results of operations
or prospects of Pubco taken as a whole or (ii) that involve the
payment to or by Pubco of money in excess of $10,000 for any
individual Contract or $25,000 in the aggregate. Except as set
forth in
Schedule
4.33
, Pubco is not in violation of or in default under (nor
does there exist any condition which upon the passage of time or
the giving of notice would cause such a violation of or default
under) any Contract to which it is a party or by which it or any of
its properties or assets is bound, except for violations or
defaults that would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse
Effect.
4.34
No
Undisclosed Liabilities
. Except as disclosed in
Schedule 4.34
or the latest
balance sheet included in the Pubco Financial Statements, Pubco has
no Liabilities whatsoever, either direct or indirect, matured or
unmatured, accrued, absolute, contingent or otherwise. Pubco
represents that at the date of Closing, Pubco shall have no
Liabilities or obligations whatsoever, either direct or indirect,
matured or un-matured, accrued, absolute, contingent or
otherwise.
4.35
No
SEC or FINRA Inquiries
. To the Knowledge of Pubco, neither
Pubco nor any of its present officers or directors is, or has ever
been, the subject of any formal or informal inquiry or
investigation by the SEC or FINRA.
4.36
Disclosure
.
The representations and warranties and statements of fact made by
Pubco in this Agreement, and all statements set forth in the
certificates delivered by Pubco at the Closing pursuant to this
Agreement, are, as applicable, accurate, correct and complete and
do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
and information contained herein not false or misleading. The
copies of all documents furnished by Pubco pursuant to the terms of
this Agreement are complete and accurate copies of the original
documents. The schedules, certificates, and any and all other
statements and information, whether furnished in written or
electronic form, to CCD or its representatives by or on behalf of
Pubco in connection with this Agreement and the transactions
contemplated hereby do not contain any material misstatement of
fact or omit to state a material fact or any fact necessary to make
the statements contained therein not misleading.
ARTICLE 5
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS
5.1
Indemnification
.
(a) Subject
to the provisions of this
Article 5
,
and irrespective of any due diligence
investigation conducted by CCD, the Members or Direct Investors
with regard to the transactions contemplated hereby,
Pubco
agrees to indemnify fully in respect of, hold harmless and defend
CCD, the Members and Direct Investors, and each of the officers,
agents and directors of CCD and/or the Members and Direct Investors
against any damages, liabilities, costs, claims, proceedings,
investigations, penalties, judgments, deficiencies, including
taxes, expenses (including, but not limited to, any and all
interest, penalties and expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever) and losses (each,
a “
Claim
” and
collectively “
Claims
”) to which it or they may
become subject arising out of or based on any breach of or
inaccuracy in any of the representations and warranties or
covenants or conditions made by Pubco in this
Agreement.
(b) Subject
to the provisions of this
Article 5
, CCD and each Member
agrees to indemnify fully in respect of, hold harmless and defend
Pubco and each of its officers, agents and directors against any
Claims to which they may become subject arising out of or based on
any breach of or inaccuracy in any of the representations and
warranties or covenants or conditions made by CCD and/or any Member
and in this Agreement; provided that CCD shall have no
responsibility hereunder except for representations, warranties,
covenants or conditions made by it and no Member have any
responsibility hereunder except for representations, warranties,
covenants or conditions made by it; and further provided that the
liability of any Member shall not exceed the value on the Closing
Date of the consideration received by it hereunder.
5.2
Survival
of Representations and Warranties
. Notwithstanding any
provision in this Agreement to the contrary, the representations
and warranties given or made by Pubco, CCD and the Members and
Direct Investors under this Agreement shall survive the date hereof
for a period of forty-eight (48) months from and after the Closing
Date (the last day of such period is herein referred to as the
“
Expiration
Date
”), except that any written claim for breach
thereof made and delivered prior to the Expiration Date to the
party against whom such indemnification is sought shall survive
thereafter and, as to any such claim, such applicable expiration
will not effect the rights to indemnification of the party making
such claim; provided, however, that any representations and
warranties that were fraudulently made shall not expire on the
Expiration Date and shall survive indefinitely and claims with
respect to fraud by Pubco, CCD, the Members or Direct Investors
must be made at any time, as long as such claim is made within a
reasonable period of time after discovery by the claiming
party.
5.3
Method
of Asserting Claims, Etc
. The party claiming indemnification
is hereinafter referred to as the “
Indemnified Party
” and the party
against whom such claims are asserted hereunder is hereinafter
referred to as the “
Indemnifying Party
.” All Claims
for indemnification by any Indemnified Party under this
Article 5
shall be
asserted as follows:
(a) In
the event that any Claim or demand for which an Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted
against or sought to be collected from such Indemnified Party by a
third party, said Indemnified Party shall, within ten (10) business
days from the date upon which the Indemnified Party has Knowledge
of such Claim, notify the Indemnifying Party of such claim or
demand, specifying the nature of and specific basis for such claim
or demand and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not be conclusive of the
final amount of such Claim or demand) (the “
Claim Notice
”). The Indemnified
Party’s failure to so notify the Indemnifying Party in
accordance with the provisions of this Agreement shall not relieve
the Indemnifying Party of liability hereunder unless such failure
materially prejudices the Indemnifying Party’s ability to
defend against the claim or demand. The Indemnifying Party shall
have 30 days from the giving of the Claim Notice (the
“
Notice Period
”)
to notify the Indemnified Party: (i) whether or not the
Indemnifying Party disputes the liability of the Indemnifying Party
to the Indemnified Party hereunder with respect to such Claim or
demand, and (ii) whether or not the Indemnifying Party desires, at
the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Claims or demand; provided, however,
that any Indemnified Party is hereby authorized prior to and during
the Notice Period to file any motion, answer or other pleading
which he shall deem necessary or appropriate to protect his
interests or those of the Indemnifying Party and not prejudicial to
the Indemnifying Party. In the event that the Indemnifying Party
notifies the Indemnified Party within the Notice Period that he,
she or it does not dispute liability for indemnification under this
Article 5
and that
such person desires to defend the Indemnified Party against such
claim or demand and except as hereinafter provided, the
Indemnifying Party shall have the right to defend by all
appropriate proceedings, which proceedings shall be promptly
settled or prosecuted by him to a final conclusion. The Indemnified
Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such
Indemnified Party except to the extent that the employment thereof
has been specifically authorized by the Indemnifying Party in
writing, the Indemnifying Party has failed after a reasonable
period of time to assume such defense and to employ counsel or in
such action there is, in the reasonable opinion of such separate
counsel, a material conflict on any material issue between the
position of the Indemnifying Party and the position of such
Indemnified Party (a “
Material Conflict
”). If requested
by the Indemnifying Party and there is no Material Conflict, the
Indemnified Party agrees to cooperate with the Indemnifying Party
and his, her or its counsel in contesting any Claim or demand which
the Indemnifying Party elects to contest or, if appropriate and
related to the Claim in question, in making any Counterclaim
against the person asserting the third party Claim or demand, or
any cross-complaint against any person. No Claim for which
indemnity is sought hereunder and for which the Indemnifying Party
has acknowledged liability for indemnification under this
Article 5
may be
settled without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed.
(b) In
the event any Indemnified Party should have a Claim against any
Indemnifying Party hereunder which does not involve a Claim or
demand being asserted against or sought to be collected from him by
a third party, the Indemnified Party shall give a Claim Notice with
respect to such Claim to the Indemnifying Party. If, after receipt
of a Claim Notice, the Indemnifying Party does not notify the
Indemnified Party within the Notice Period that he, she or it
disputes such Claim, then the Indemnifying Party shall be deemed to
have admitted liability for such Claim in the amount set forth in
the Claim Notice.
(c) The
Indemnifying Party shall be given the opportunity to defend the
respective Claim.
ARTICLE 6
COVENANTS OF THE PARTIES
6.1
Corporate
Examinations and Investigations
. Prior to the Closing, each
party shall be entitled, through its employees and representatives,
to make such investigations and examinations of the books, records
and financial condition of CCD and Pubco as each party may request.
In order that each party may have the full opportunity to do so,
the Member and/or Direct Investor shall furnish each party and its
representatives during such period with all such information
concerning the affairs of CCD or Pubco as each party or its
representatives may reasonably request and cause CCD or Pubco and
their respective officers, employees, consultants, agents,
accountants and attorneys to cooperate fully with each
party’s representatives in connection with such review and
examination and to make full disclosure of all information and
documents requested by each party and/or its representatives. Any
such investigations and examinations shall be conducted at
reasonable times and under reasonable circumstances, it being
agreed that any examination of original documents will be at each
party’s premises, with copies thereof to be provided to each
party and/or its representatives upon request.
6.2
Cooperation;
Consents
. Prior to the Closing, each party shall cooperate
with the other parties to the end that the parties shall (i) in a
timely manner make all necessary filings with, and conduct
negotiations with, all authorities and other persons the consent or
approval of which, or the license or permit from which is required
for the consummation of the Exchange and Private Issuance, and (ii)
provide to each other party such information as the other party may
reasonably request in order to enable it to prepare such filings
and to conduct such negotiations.
6.3
Conduct
of Business
. Subject to the provisions hereof, from the date
hereof through the Closing, each party hereto shall (i) conduct its
business in the ordinary course and in such a manner so that the
representations and warranties contained herein shall continue to
be true and correct in all material respects as of the Closing as
if made at and as of the Closing and (ii) not enter into any
material transactions or incur any material liability not required
or specifically contemplated hereby, without first obtaining the
written consent of CCD and the Members or Direct Investors on the
one hand and Pubco on the other hand. Without the prior written
consent of CCD, the Members, Direct Investors or Pubco, except as
required or specifically contemplated hereby, each party shall not
undertake or fail to undertake any action if such action or failure
would render any of said warranties and representations untrue in
any material respect as of the Closing.
6.4
Litigation
.
From the date hereof through the Closing, each party hereto shall
promptly notify the representative of the other parties of any
lawsuits, claims, proceedings or investigations which after the
date hereof are threatened or commenced against such party or any
of its affiliates or any officer, director, employee, consultant,
agent or member thereof, in their capacities as such, which, if
decided adversely, could reasonably be expected to have a Material
Adverse Effect.
6.5
Notice
of Default
. From the date hereof through the Closing, each
party hereto shall give to the representative of the other parties
prompt written notice of the occurrence or existence of any event,
condition or circumstance occurring which would constitute a
violation or breach of this Agreement by such party or which would
render inaccurate in any material respect any of such party’s
representations or warranties herein.
6.6
Officers
and Directors
. Effective on the Closing, Pubco shall cause
(i) the Board of Directors of Pubco and the officers of Pubco to be
the individuals identified on
Schedule 6.6
hereto.
6.7
Confidentiality;
Access to Information
.
(a)
Confidentiality
.
Any confidentiality agreement or letter of intent previously
executed by the parties shall be superseded in its entirety by the
provisions of this Agreement. Each party agrees to maintain in
confidence any non-public information received from the other
party, and to use such non-public information only for purposes of
consummating the transactions contemplated by this Agreement. Such
confidentiality obligations will not apply to (i) information which
was known to the one party or their respective agents prior to
receipt from the other party; (ii) information which is or becomes
generally known; (iii) information acquired by a party or their
respective agents from a third party who was not bound to an
obligation of confidentiality; and (iv) disclosure required by law.
In the event this Agreement is terminated as provided in
Article 8
hereof,
each party will return or cause to be returned to the other all
documents and other material obtained from the other in connection
with the Transaction contemplated hereby.
(b)
Access
to Information
.
(i)
CCD will afford
Pubco and its financial advisors, accountants, counsel and other
representatives reasonable access during normal business hours,
upon reasonable notice, to the properties, books, records and
personnel of CCD during the period prior to the Closing to obtain
all information concerning the business, including the status of
product development efforts, properties, results of operations and
personnel of CCD, as Pubco may reasonably request. No information
or Knowledge obtained by Pubco in any investigation pursuant to
this
Section 6.7(b)
will affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the
parties to consummate the Transaction.
(ii)
Pubco
will afford CCD and its financial advisors, underwriters,
accountants, counsel and other representatives reasonable access
during normal business hours, upon reasonable notice, to the
properties, books, records and personnel of Pubco during the period
prior to the Closing to obtain all information concerning the
business, including the status of product development efforts,
properties, results of operations and personnel of Pubco, as CCD
may reasonably request. No information or knowledge obtained by CCD
in any investigation pursuant to this
Section 6.7(b)
will affect or
be deemed to modify any representation or warranty contained herein
or the conditions to the obligations of the parties to consummate
the Transaction.
6.8
Public
Disclosure
. Except to the extent previously disclosed or to
the extent the parties believe that they are required by applicable
law or regulation to make disclosure, prior to Closing, no party
shall issue any statement or communication to the public regarding
the transaction contemplated herein without the consent of the
other party, which consent shall not be unreasonably withheld. To
the extent a party hereto believes it is required by law or
regulation to make disclosure regarding the Transaction, it shall,
if possible, immediately notify the other party prior to such
disclosure. Notwithstanding the foregoing, the parties hereto agree
that Pubco will prepare and file a Current Report or Reports on
Form 8-K pursuant to the Exchange Act to report the execution and
consummation of this Agreement, which shall be reviewed and subject
to reasonable input by CCD or its counsel prior to the filing
thereof.
6.9
Concerning
the Exchange Agent
.
(a) The
Exchange Agent may act in reliance upon any signature believed by
it to be genuine, and may assume that any person who purports to
have been authorized on behalf of a party to give any written
instructions, notice or receipt, or make any statements in
connection with the provisions hereof has been duly authorized to
do so. The Exchange Agent shall have no duty to make inquiry as to
the genuineness, accuracy or validity of any statements or
instructions or any signatures on statements or
instructions.
(b) The
Exchange Agent may act relative hereto in reliance upon advice of
counsel in reference to any matter connected herewith. The Exchange
Agent shall not be liable for any mistake of fact or error of
judgment or law, or for any acts or omissions of any kind, unless
caused by its willful misconduct or gross negligence.
(c) Each
of the other parties hereto, jointly and severally, agree to
indemnify, release, and hold the Exchange Agent harmless from and
against any and all claims, losses, costs, liabilities, damages,
suits, demands, judgments or expenses, including, but not limited
to, attorney's fees, costs and disbursements, (collectively
“
Claims
”)
claimed against or incurred by Exchange Agent arising out of or
related, directly or indirectly, to this Agreement and the Exchange
Agent’s performance hereunder or in connection herewith,
except to the extent such Claims arise from Exchange Agent’s
willful misconduct or gross negligence as adjudicated by a court of
competent jurisdiction.
(d) In
the event of any disagreement between or among the other parties
hereto, or between any of them and any other person, resulting in
adverse claims or demands being made to Exchange Agent in
connection with the instruments or property held by the Exchange
Agent hereunder (the “
Deposited Property
”), or in the
event that the Exchange Agent, in good faith, be in doubt as to
what action it should take hereunder, the Exchange Agent may, at
its option, refuse to comply with any claims or demands on it, or
refuse to take any other action hereunder, so long as such
disagreement continues or such doubt exists, and in any such event,
the Exchange Agent shall not become liable in any way or to any
person for its failure or refusal to act, and the Exchange Agent
shall be entitled to continue so to refrain from acting until (i)
the rights of all parties shall have been fully and finally
adjudicated by a court of competent jurisdiction, or (ii) all
differences shall have been adjusted and all doubt resolved by
agreement among all of the interested persons, and the Exchange
Agent shall have been notified thereof in writing signed by all
such persons. The Exchange Agent shall have the option, after
thirty (30) days’ notice to the Members, CCD and Pubco of its
intention to do so, to file an action in interpleader requiring the
parties to answer and litigate any claims and rights among
themselves. The rights of the Exchange Agent under this Section are
cumulative of all other rights which it may have by law or
otherwise.
(e) In
the event that the Exchange Agent shall be uncertain as to its
duties or rights hereunder, the Exchange Agent shall be entitled to
(i) refrain from taking any action other than to keep safely the
Deposited Property until it shall be directed otherwise by a court
of competent jurisdiction, or (ii) deliver the Deposited Property
to a court of competent jurisdiction.
(f) The
Exchange Agent shall have no duty, responsibility or obligation to
interpret or enforce the terms of any agreement other than Exchange
Agent's obligations hereunder.
(g) The
Exchange Agent may resign at any time by giving thirty (30) days'
prior written notice of such resignation to the other parties
hereto. Upon providing such notice, the Exchange Agent shall have
no further obligation hereunder except to hold the Deposited
Property that it has received as of the date on which it provided
the notice of resignation. In such event, the Exchange Agent shall
not take any action until CCD and Pubco jointly designate an
attorney or other person as successor escrow agent. Upon receipt of
such written instructions signed by CCD and Pubco, the Exchange
Agent shall promptly deliver the Deposited Property, to such
successor escrow agent and shall thereafter have no further
obligations hereunder. If such instructions are not received within
thirty (30) days following the effective date of such resignation,
then the Exchange Agent may deposit the Deposited Property and any
other amounts held by it pursuant to this Agreement with a clerk of
a court of competent jurisdiction pending the appointment of a
successor escrow agent. In either case provided for in this
Section, the Exchange Agent shall be relieved of all further
obligations and released from all liability thereafter arising with
respect to the Deposited Property.
ARTICLE 7
CONDITIONS TO CLOSING
7.1
Conditions
to Obligations of CCD, the Members and Direct Investors
. The
obligations of CCD, the Members and Direct Investors under this
Agreement shall be subject to each of the following
conditions:
(a)
Closing Deliveries
. At the
Closing, Pubco shall have delivered or caused to be delivered to
CCD, the Members and Direct Investors (or, counsel to CCD, the
Members and Direct Investors, as applicable), as more particularly
set forth below, the following:
(i)
this Agreement duly
executed by Pubco;
(ii)
a
certificate of good standing for Pubco from the State of Nevada,
dated not earlier than five (5) days prior to the Closing
Date;
(iii)
A
true and complete list, prepared as of the most recent practicable
date by Pubco’s transfer agent and registrar of the names and
addresses of the record owners of all of the outstanding shares of
Pubco Common Stock, together with the number of shares of Pubco
Common Stock held by each record owner
;
(iv)
a
certificate of the Secretary of Pubco, dated as of the Closing
Date, certifying as to (i) the incumbency of officers of Pubco
executing this Agreement and all exhibits and schedules hereto and
all other documents, instruments and writings required pursuant to
this Agreement (the “
Transaction Documents
”), (ii) a
copy of the Articles of Incorporation (including all certificates
of designation, as amended) and By-Laws of Pubco, as in effect on
and as of the Closing Date, (iii) a copy of the resolutions of the
Board of Directors of Pubco authorizing and approving Pubco’s
execution, delivery and performance of the Transaction Documents,
all matters in connection with the Transaction Documents, and the
transactions contemplated thereby and (iv)
confirmation that Pubco has no outstanding shares
of Preferred Stock
;
(v)
a
ll corporate records, board minutes and
resolutions, tax and financial records, agreements, seals and any
other information or documents reasonably requested by CCD’s
representatives with respect to Pubco;
(vi)
the
Company Counsel shall deliver an opinion to CCD, dated as of the
Closing, in form and substance reasonably acceptable to
CCD;
(vii)
lock
up agreements with those individuals set forth in
Schedule C
to this Agreement,
which lock-up agreements shall prohibit the sale of Pubco
securities for a period of six months from the Closing
Date;
(viii)
a
Registration Rights Agreement to be entered into among Pubco, the
Members and Direct Investors;
(ix)
such
other documents as CCD and/or the Members or Direct Investors may
reasonably request in connection with the transactions contemplated
hereby; and
(x)
a certificate,
dated the Closing Date, of an officer of Pubco, certifying as to
the compliance by Pubco with the conditions of
Section 7.1(b)
below.
(b)
Representations
and Warranties to be True
. The representations and
warranties of Pubco herein contained shall be true in all material
respects at the Closing with the same effect as though made at such
time. Pubco shall have performed in all material respects all
obligations and complied in all material respects with all
covenants and conditions required by this Agreement to be performed
or complied with by it at or prior to the Closing.
(c)
No
Liabilities
. At the Closing, Pubco shall have no liabilities
(contingent or otherwise) other than as set forth on
Schedule 7.1(c)
.
(e)
Outstanding Capital Stock
.
Effective at Closing, Pubco’s issued and outstanding capital
shall be as set forth on Schedule 7.1(e), it being understood that
the conversion of certain issued and outstanding shares of
preferred stock into Pubco Common Stock, and the resulting
elimination of such preferred stock as authorized capital of Pubco,
shall be effective contemporaneous with, and is contingent upon,
Closing.
(f)
Employment Agreements
. Pubco
shall have entered into employment agreements with the individuals
set forth on Schedule 7.1(e), which employment agreements shall be
effective immediately following Closing.
(g)
No Adverse Effect
. The business
and operations of Pubco will not have suffered any Material Adverse
Effect.
7.2
Conditions
to Obligations of Pubco
. The obligations of Pubco under this
Agreement shall be subject to each of the following
conditions:
(a)
Closing
Deliveries
. On the Closing Date, CCD and/or the Members or
Direct Investors shall have delivered to Pubco the
following:
(i) this
Agreement duly executed by CCD, the Member and the Direct
Investor;
(ii) resolutions
duly adopted by the Managers of CCD authorizing and approving the
execution, delivery and performance of this Agreement;
(iii) a
certificate of the Manager of CCD, dated as of the Closing Date,
certifying as to (i) the incumbency of officers of CCD the
Transaction Documents, (ii) a copy of the formation documents and
operating agreement of CCD, as in effect on and as of the Closing
Date, and (iii) a copy of the resolutions of the Managers of CCD
authorizing and approving CCD’s execution, delivery and
performance of the Transaction Documents to which it is a party,
all matters in connection with the Transaction Documents, and the
Transaction contemplated thereby;
(iv) a
certificate, dated the Closing Date, of a Manager of CCD,
certifying as to the compliance by CCD with the conditions of
Section 7.2(b)
below applicable to it; and
(v) all
corporate records, board minutes and resolutions, tax and financial
records, agreements, seals and such other documents as Pubco may
reasonably request in connection with the transactions contemplated
hereby.
(b)
Representations
and Warranties True and Correct
. The representations and
warranties of CCD, the Members and Direct Investors herein
contained shall be true in all material respects at the Closing
with the same effect as though made at such time. CCD, the Members
and Direct Investors shall have performed in all material respects
all obligations and complied in all material respects with all
covenants and conditions required by this Agreement to be performed
or complied with by them at or prior to the Closing.
(c)
No
Adverse Effect
. The business, financial condition and
operations of CCD will not have suffered any Material Adverse
Effect.
ARTICLE 8
TERMINATION; SEC FILING
8.1 This
Agreement may be terminated at any time prior to the
Closing:
(a) by
mutual written agreement of Pubco and CCD;
(b) by
either Pubco or CCD if the Transaction shall not have been
consummated for any reason by April 30, 2019;
provided, however
, that the right to
terminate this Agreement under this
Section 8.1(b)
shall not be
available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Transaction to
occur on or before such date and such action or failure to act
constitutes a breach of this Agreement;
(c) by
Pubco if a Governmental Entity shall have issued an order, decree
or ruling or taken any other action, in any case having the effect
of permanently restraining, enjoining or otherwise prohibiting the
Transaction, which order, decree, ruling or other action is final
and non-appealable; or
(d) by
CCD, upon a material breach of any representation, warranty,
covenant or agreement on the part of Pubco set forth in this
Agreement, or if any representation or warranty of Pubco shall have
become materially untrue, in either case such that the conditions
set forth in
Section
7.1
would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become
untrue.
8.2
Notice
of Termination; Effect of Termination
. Any termination of
this Agreement under
Section 8.1
above will be
effective immediately upon (or, if the termination is pursuant to
Section 8.1(d)
or
Section 8.1(e)
and
the proviso therein is applicable, thirty (30) days after) the
delivery of written notice of the terminating party to the other
parties hereto. In the event of the termination of this Agreement
as provided in
Section
8.1
, this Agreement shall be of no further force or effect
and the Transaction shall be abandoned, except as set forth in
Section 8.1
,
Section 8.2
and
Article 9
(General
Provisions), each of which shall survive the termination of this
Agreement.
8.3
Filing
of Form 8-K
. Pubco shall, in a timely and expeditious
manner, but in no event later than four Business Days following
Closing, prepare, with the cooperation of CCD, and file with the
SEC a current report on Form 8-K (which shall be in a form
satisfactory to CCD and Pubco, acting reasonably), together with
any other documents required by applicable Laws in accordance with
all applicable Laws on the date of filing thereof, in the form and
containing the information required by all applicable Laws and not
containing any misrepresentation (as defined under applicable
securities Laws and requirements) with respect thereto, and Pubco
shall, with the cooperation of CCD, promptly prepare and file with
the SEC such amendments or supplements to the Form 8-K, if any, as
may be required by the SEC or under applicable Laws. The parties
acknowledge that from and after the filing of the Form 8-K, no
Direct Investor shall be in possession of any material, nonpublic
information received from Pubco, CCD or any of their respective
officers, directors, employees or agents, with respect to the
transactions contemplated hereby that is not disclosed in the Form
8-K. Neither Pubco nor CCD shall, and shall cause each of its
officers, directors, employees and agents, not to, provide any
Direct Investor with any such material, nonpublic information
regarding Pubco, CCD or any of their direct or indirect
subsidiaries from and after the filing of the Form 8-K without the
express prior written consent of such Direct Investor.
ARTICLE 9
GENERAL PROVISIONS
9.1
Notices
.
All notices, demands, requests,
consents, approvals, and other communications required or permitted
hereunder shall be in writing and, unless otherwise specified
herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, email or
facsimile, addressed as set forth below or to such other address as
such party shall have specified most recently by written notice.
Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or
delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received),
(b) upon delivery by email so long as an automated notice of
delivery failure is not receive by the sender, or (c) on the second
business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses
for such communications shall be:
(a)
if
to CCD,
to:
Charlie’s Chalk Dust LLC
1007
Brioso Drive
Costa
Mesa, CA 92627
Attention:
Brandon Stump
Email:
brandon@charlieschalkdust.com
With a
copy by email only
to:
Grushko & Mittman, P.C.
515
Rockaway Avenue
Valley
Stream, NY 11581
Attention: Eliezer
Drew, Esq.
Facsimile: (212)
697-3575
Email:
eli@grushkomittman.com
(b)
if to
Members or Direct
Investors,
to: to the address set forth on Schedule A or Schedule B, as
the case may be.
(c)
if
to Pubco,
to:
True Drink Holdings,
Inc.
2 Park
Plaza, Suite 1200
Irvine,
CA 92614
Attention: Robert
Van Boerum
Email:
robert.vanboerum@truedrinks.com
With a copy by email only
to:
Disclosure Law Group,
APC
655
West Broadway, Suite 870
San
Diego, CA, 92101
Attention:
Daniel W. Rumsey, Esq.
Email:
drumsey@disclosurelawgroup.com
9.2
Interpretation
.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation
of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise
stated.
9.3
Entire
Agreement
. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and thereof
and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
9.4
Amendments;
Waivers
. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument
signed, in the case of an amendment, by all parties. No waiver of
any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in
any manner impair the exercise of any such right.
9.5
Successors
and Assigns
. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted
assigns. The parties may not assign this Agreement or any rights or
obligations hereunder.
9.6
No
Third-Party Beneficiaries
. This Agreement is intended for
the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as
provided for the Exchange Agent as set out in this
Agreement.
9.7
Governing
Law
. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto
or its respective affiliates, directors, officers, members,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any action, suit or
proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If any party shall
commence an action or proceeding to enforce any provisions of the
Transaction Documents, the prevailing party in such action, suit or
proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of
such action or proceeding.
9.8
Execution;
Manner of Delivery
. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to
each other party, it being understood that the parties need not
sign the same counterpart. In the event that any signature to this
Agreement or other Transaction Document is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original
thereof.
9.9
Severability
.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
9.10
Saturdays,
Sundays, Holidays, etc
. If the last or appointed day for the
taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be
taken or such right may be exercised on the next succeeding
Business Day.
9.11
Construction
.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto.
9.12
WAIVER
OF JURY TRIAL
. IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY
PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY
WAIVES FOREVER TRIAL BY JURY.
9.13
Further
Assurances
. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PUBCO:
TRUE
DRINK HOLDINGS, INC.
a
Nevada corporation
By:
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Name:
Robert Van Boerum
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Title:
Chief Executive Officer
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CCD:
CHARLIE’S
CHALK DUST, LLC,
a
Delaware limited liability company
By:
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Name:
Brandon Stump
Title:
CEO
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CLASS B MEMBERS:
By
executing this Agreement below, each of the Class B Members, in
addition to each of the agreements of such Class B Members as set
forth in this Agreement, jointly and severally, make, to the Best
Knowledge of the undersigned, each of the representations and
warranties of CCD as set forth in Article 2 of this Agreement as if
the same were set forth hereunder. The representations of each of
the Class B Members as set forth herein shall terminate and be of
no further force and effect one year from the Closing
Date.
Buckeye Tree
Collective
LLC
Spire Consulting LLC
By:
_________________________
By: ______________________
Name: Brandon
Stump
Name: Ryan
Stump
Title:
Manager
Title: Manager
[Signature Pages Continue]
In Witness
Whereof
,
the
undersigned Class A Member of the Company has executed this
Agreement on the date first written above.
___________________________
Signature
___________________________
Print
Name
___________________________
Print
Title
In Witness
Whereof
,
each
Direct Investor have caused their respective signature page to this
Agreement to be duly executed as of the date first written
above.
Name of
Direct Investor:
Signature of Authorized Signatory of
Purchaser
:
Joint Signature of Authorized Signatory of
Direct Investor, if applicable
:
Name(s)
of Authorized Signatory:
Title of Authorized
Signatory: _____________________________________
Email
Address of Authorized Signatory:
Address
for Notice to Direct Investor:
Social
Security/EIN Number(s):
Election for
book-entry Issuable Securities: ______ [check for book-entry
shares]
Election for
physical delivery of a Issuable Securities certificates: ______
[check for physical stock certificate]
Subscription
Amount: $ ______________________
No. of
Shares of Common Stock:
______________________
No. of
Shares Series A Preferred:
______________________
No. of Warrant
Shares: ______________________
ANNEX A
Definition of Accredited Investor
The
securities will only be sold to investors who represent in writing
in the Securities Purchase Agreement that they are accredited
investors, as defined in Regulation D, Rule 501 under the Act which
definition is set forth below:
1.
A natural person
whose net worth, or joint net worth with spouse, at the time of
purchase exceeds $1 million (excluding principal residence);
or
2.
A natural person
whose individual gross income exceeded $200,000 or whose joint
income with that person’s spouse exceeded $300,000 in each of
the last two years, and who reasonably expects to exceed such
income level in the current year; or
3.
A trust with total
assets in excess of $5 million, not formed for the specific purpose
of acquiring the securities offered, whose purchase is directed by
a sophisticated person described in Regulation D; or
4.
A director or
executive officer of the Company; or
5.
The investor is an
entity, all of the owners of which are accredited investors;
or
6.
(a) bank as defined
in Section 3(a)(2) of the Act, or any savings and loan association
or other institution as defined in Section 3(a)(5)(A) of the Act,
(b) any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, (c) an insurance Company as
defined in Section 2(13) of the Act, (d) an investment Company
registered under the Investment Company Act of 1940 or a business
development Company as defined in Section 2(a)(48) of such Act, (e)
a Small Business Investment Company licensed by the United States
Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958, (f) an employee benefit plan
established and maintained by a state, its political subdivisions,
or any agency or instrumentality of a state or its political
subdivisions, if such plan has total assets in excess of $5
million, (g) an employee benefit plan within the meaning of Title I
of the Employee Retirement Income Securities Act of 1974, and the
employee benefit plan has assets in excess of $5 million, or the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such act, that is either a bank, savings and loan
institution, insurance Company, or registered investment advisor,
or, if a self-directed plan, with an investment decisions made
solely by persons that are accredited investors, (h) a private
business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940, or (i) an organization
described in Section 501(c)(3) of the Internal Revenue code,
corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with assets in excess of $5
million.
Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the
“
Agreement
”) is made and entered into as of this 26th
day of April,
2019 by and
among True Drinks Holdings, Inc., a Nevada corporation (the
“
Company
”), and the Members and Direct Investors
receiving securities in connection with the Securities Exchange
Agreement by and among the Company, Charlie’s Chalk Dust,
LLC, and the Members and Direct Investors (the
“
Exchange
Agreement
”). Capitalized
terms used herein have the respective meanings ascribed thereto in
the Exchange Agreement unless otherwise defined herein. Unless
stated otherwise herein, or the context otherwise requires, the
term “Members” as set forth in this Agreement shall
include Direct Investors.
The
parties hereby agree as follows:
1.
Certain
Definitions
.
As used
in this Agreement, the following terms shall have the following
meanings:
“
Affiliate
”
means, with respect to any Person, any other Person that (either
directly or indirectly) controls, is controlled by, or is under
common control with the specified Person, and shall also include
any Related Fund of such Person. The term “
control
” includes the
possession, directly or indirectly, of the power to direct the
management or policies of a Person, whether through the ownership
of securities, by contract or otherwise.
“
Common
Stock
” means the Company’s common stock, par
value $0.001 per share, and any securities into which such Common
Stock may hereinafter be reclassified.
“
Conversion
Shares
” means the shares of Common Stock issuable upon
conversion of the Preferred Stock issued pursuant to the Exchange
Agreement.
“
Direct
Investors
”
means the investors identified in the Exchange Agreement and any
Affiliate or permitted transferee of any Direct Investor who is a
subsequent holder of any Registrable Securities.
“
Person
”
means an individual, partnership, corporation, unincorporated
organization, joint stock company, limited liability company,
association, trust, joint venture or any other entity, or a
governmental authority.
“
Preferred
Stock
” means those shares of the Company’s
preferred stock, par value $0.001 per share, issued to the Members
or Direct Investors pursuant to the Exchange
Agreement.
“
Prospectus
”
means (i) the prospectus included in any Registration Statement, as
amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including
post-effective amendments and all material incorporated by
reference in such prospectus, and (ii) any “
free writing prospectus
” as
defined in Rule 405 under the 1933 Act.
“
Members
”
means individuals identified in the Exchange Agreement and any
Affiliate or permitted transferee of any Member who is a subsequent
holder of any Registrable Securities.
“
Register
,”
“
registered
”
and “
registration
”
refer to a registration made by preparing and filing a Registration
Statement or similar document in compliance with the 1933 Act (as
defined below), and the declaration or ordering of effectiveness of
such Registration Statement or document.
“
Registrable
Securities
” means the shares of Common Stock issued to
the Members and Direct Investors pursuant to the Exchange
Agreement, including the Warrant Shares and Conversion Shares, as
well as any shares
of Common Stock
issued or issuable with respect to such shares upon any stock
split, dividend or other distribution, recapitalization or similar
event with respect to the foregoing;
provided
,
however
, that, a security shall cease
to be a Registrable Security upon sale pursuant to a Registration
Statement or Rule 144 under the 1933 Act.
“
Registration
Statement
” means any registration statement of the
Company filed under the 1933 Act that covers the resale of any of
the Registrable Securities pursuant to the provisions of this
Agreement, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration
Statement.
“
Related
Fund
” means, with respect to any Person, any fund,
account or investment vehicle that is controlled or managed by (i)
such Person, (ii) an Affiliate of such Person or (iii) the same
investment manager, advisor or subadvisor as such Person or an
Affiliate of such investment manager, advisor or
subadvisor.
“
Required
Members
” means, as of any date of determination, the
Members and Direct Investors holding a majority of the Registrable
Securities as of such date.
“
SEC
”
means the U.S. Securities and Exchange Commission.
“
1933
Act
” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
“
1934
Act
” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated
thereunder.
(a)
Registration
Statements
.
(i)
The
Company shall use its best efforts to prepare and file with the SEC
one Registration Statement (the “
Initial Registration Statement
”)
covering the resale of all of the Registrable Securities on a
continuous basis pursuant to Rule 415 of the Securities Act or
before 30 days from the date of this Agreement (the
“
Filing
Deadline
”). The Initial Registration Statement filed
hereunder shall be on Form S-1, or any other form for which the
Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the resale by the
Members of all the Registerable Securities,
provided
, that the Company shall
maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form S-3
covering the Registrable Securities has been declared effective by
the staff of the SEC. No Member shall be named as an
“underwriter” in the Initial Registration Statement
without such Member’s prior written consent. Such Initial
Registration Statement also shall cover, to the extent allowable
under the 1933 Act and the rules promulgated thereunder (including
Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar
transactions with respect to the Registrable Securities. Such
Initial Registration Statement shall not include any shares of
Common Stock or other securities for the account of any other
Person (including the Company) without the prior written consent of
the Required Members. The Initial Registration Statement (and each
amendment or supplement thereto, and each request for acceleration
of effectiveness thereof) shall be provided in accordance with
Section 3(c) to the Members and their counsel prior to its filing
or other submission.
(b)
Expenses
.
The Company will pay all expenses associated with each Registration
Statement (whether or not such Registration Statement becomes
effective), including filing and printing fees, the Company’s
counsel and accounting fees and expenses, costs associated with
clearing the Registrable Securities for sale under applicable state
securities laws, listing fees, and the reasonable fees and expenses
of counsel to, (i) with respect to the Initial Registration
Statement, the Required Members, (ii) with respect to a Demand
Registration, the Requesting
Holders and (iii)
with respect to any Piggyback Registration, Members that at the
relevant time hold at least a majority of the Registrable
Securities held by all Members to be included in such Piggyback
Registration.
(c)
Effectiveness
of Registration Statements
. The Company shall use its best
efforts to have the Initial Registration Statement declared
effective by the 120th calendar day following the date of this
Agreement. The Company shall notify the Members by facsimile or
e-mail as promptly as practicable, and in any event, within
twenty-four (24) hours, after any Registration Statement is
declared effective and shall simultaneously provide the Members
with copies of any related Prospectus to be used in connection with
the sale or other disposition of the securities covered
thereby.
(d)
Rule
415; Cutback.
If at any time the SEC takes the position that
the offering of some or all of the Registrable Securities in any
Registration Statement filed pursuant to the terms and conditions
of this Agreement is not eligible to be made on a delayed or
continuous basis under the provisions of Rule 415 under the 1933
Act or requires any Member to be named as an
“underwriter”, the Company shall use its best efforts
to persuade the SEC that the offering contemplated by such
Registration Statement is a valid secondary offering and not an
offering “by or on behalf of the issuer” as defined in
Rule 415 and that none of the Members is an
“underwriter”. In the event that, despite the
Company’s best efforts and compliance with the terms of this
Section 2(d), the SEC refuses to alter its position, the Company
shall (i) remove from such Registration Statement such portion of
the Registrable Securities that the SEC requires to be removed from
such Registration Statement, while still including the maximum
number of Registrable Securities permitted to be registered by the
SEC under such Registration Statement at such time (such removed
Registrable Securities, the “
Cut Back Shares
”), and/or (ii)
agree to such restrictions and limitations on the registration and
resale of the Registrable Securities as the SEC may require to
assure the Company’s compliance with the requirements of Rule
415 (collectively, the “
SEC
Restrictions
”);
provided, however
, that the Company
shall not agree to name any Member as an “underwriter”
in any Registration Statement without the prior written consent of
such Member. Any cut-back imposed on the Members pursuant to this
Section 2(d) shall be allocated, first, among all securities that
are not Registrable Securities (to the extent previously permitted
by the Required Members, or, in the case of a Demand Registration,
by the Requesting Members), second, among the Series B Members,
third, among Katalyst Securities LLC and its affiliates, and
fourth, among the Members on a pro rata basis, unless the SEC
Restrictions otherwise require or provide or the Members otherwise
agree. In the event of any cut-back imposed on the Members pursuant
to this Section 2(d), the Company will use its best efforts to file
with the SEC, as promptly as allowed by the SEC, one or more
Registration Statements on Form S-1 covering the resale of the Cut
Back Shares or such other form available to register for resale the
Cut Back Shares.
(e)
Right to Piggyback
Registration
.
(i)
If
at any time following the date of this Agreement that any
Registrable Securities remain outstanding the Company proposes for
any reason to register any shares of Common Stock under the 1933
Act (other than pursuant to a registration statement on Form S-4 or
Form S-8 (or a similar or successor form)) with respect to an
offering of Common Stock by the Company for its own account or for
the account of any of its stockholders, it shall, unless a holder
of Registrable Securities has provided written notice to the
Company that it does not want to receive such information, at each
such time promptly give written notice to the holders of the
Registrable Securities of its intention to do so (but in no event
less than thirty (30) days before the anticipated filing date) and,
to the extent permitted under the provisions of Rule 415 under the
1933 Act, include in such registration all Registrable Securities
with respect to which the Company has received written requests for
inclusion therein within fifteen (15) days after receipt of the
Company’s notice (a “
Piggyback Registration
”). Such
notice shall offer the holders of the Registrable Securities the
opportunity to register such number of shares of Registrable
Securities as each such holder may request and shall indicate the
intended method of distribution of such Registrable
Securities.
\
(ii)
Notwithstanding
the foregoing, (A) if such registration involves an underwritten
public offering, the Members must sell their Registrable Securities
to, if applicable, the underwriter(s) at the same price and subject
to the same underwriting discounts and commissions that apply to
the other securities sold in such offering (it being acknowledged
that the Company shall be responsible for other expenses as set
forth in Section 2(b)) and subject to the Members entering into
customary underwriting documentation for selling stockholders in an
underwritten public offering, and (B) if, at any time after giving
written notice of its intention to register any Registrable
Securities pursuant to Section 2(e)(i) and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
cause such registration statement to become effective under the
1933 Act, the Company shall deliver written notice to the Members
and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration. Any
Member may elect to withdraw such Member’s request for
inclusion of Registrable Securities in any Piggyback Registration
by giving written notice to the Company of such request to withdraw
prior to the effectiveness of the Registration Statement or the
pricing of an underwritten offering, as applicable.
(f)
Demand
Registration
.
(i)
At
any time and from time to time after the Initial Registration
Statement has been declared effective, any Member or group of
Members (acting together) that own or control Registrable
Securities representing at least fifty percent (50%) of the
then-issued and outstanding Registrable Securities (collectively,
the “
Requesting
Members
”), may deliver to the Company a written notice
(a “
Demand Registration
Notice
”) informing the Company that such Requesting
Members require the Company to register for resale some or all of
such Requesting Members’ Registrable Securities not otherwise
then registered for resale by the Initial Registration Statement (a
“
Demand
Registration
”);
provided, however,
that the Company
will not be required to effect more than two (2) Demand
Registrations in accordance with this Agreement. Upon receipt of
the Demand Registration Notice, the Company will use best efforts
to file with the SEC as promptly as practicable after receiving the
Demand Registration Notice, but in no event more than sixty (60)
days following receipt of the Demand Registration Notice, a
Registration Statement covering all requested Registrable
Securities (the “
Demand
Registration Statement
”), and agrees to use best
efforts to cause the Demand Registration Statement to be declared
effective by the SEC as soon as practicable following the filing
thereof, but in no event later than ninety (90) days after the
filing of such Demand Registration Statement. The Company agrees to
use best efforts to keep any Demand Registration Statement
continuously effective (including the preparation and filing of any
amendments and supplements necessary for that purpose) until such
time as all of the Registrable Securities covered thereby have been
sold or the date on which all Registrable Securities may be sold
without restriction and without the need for current public
information pursuant to Rule 144 unless such restriction is the
result of a Member being an Affiliate of the Company
(“
Minimum Effective
Period
”).
(ii)
Notice
to Members
. The Company shall give written notice of the
proposed filing of any Demand Registration Statement to all Members
(other than the Requesting Members) as soon as practicable, and
each such Member who wishes to participate in such Demand
Registration Statement shall notify the Company in writing within
five (5) Business Days after the receipt by such Member of the
notice from the Company, and shall specify in such notice the
number of Registrable Securities held by such Member to be included
in the Demand Registration Statement. Upon the written request of
any Member, delivered to the Company no later than five (5)
Business Days after the Company’s notice is delivered to such
Member (each such Member, a “
Joining Member
”), to register, on
the same terms and conditions as the Registrable Securities
otherwise being sold pursuant to such Demand Registration, any of
its Registrable Securities, the Company will use its best efforts
to cause such Registrable Securities to be included in the Demand
Registration Statement proposed to be filed by the Company on the
same terms and conditions as any Registrable Securities included
therein.
3.
Company
Obligations
. The Company will use best efforts to effect the
registration of the Registrable Securities in accordance with the
terms hereof, and pursuant thereto the Company will, as
expeditiously as possible:
(a)
use
best efforts to cause the Initial Registration Statement to become
effective and to remain continuously effective for a period that
will terminate upon the earlier of (i) the date on which all
Registrable Securities covered by such Initial Registration
Statement as amended from time to time, have been sold, and (ii)
the date on which all Registrable Securities covered by such
Initial Registration Statement may be sold without restriction and
without the need for current public information pursuant to Rule
144 unless such restriction is the result of a Member being an
Affiliate of the Company (the “
Effectiveness Period
”) and advise
the Members in writing when the Effectiveness Period has
expired;
(b)
prepare
and file with the SEC such amendments and post-effective amendments
to any Registration Statement and Prospectus as may be necessary to
keep such Registration Statement effective for, with respect to the
Initial Registration Statement, the Effectiveness Period and with
respect to any Demand Registration Statement, the Minimum Effective
Period, and in any case to comply with the provisions of the 1933
Act and the 1934 Act with respect to the distribution of all of the
Registrable Securities covered in any Registration
Statement;
(c)
provide
copies to and permit counsel designated by the Members to review
each Registration Statement and all amendments and supplements
thereto no fewer than seven (7) days prior to their filing with the
SEC and not file any Registration Statement or other document to
which such counsel reasonably objects;
(d)
furnish
to the Members and their legal counsel (i) promptly after the same
is prepared and publicly distributed, filed with the SEC, or
received by the Company (but not later than two (2) Business Days
after the filing date, receipt date or sending date, as the case
may be) one (1) copy of any Registration Statement and any
amendment thereto, each preliminary prospectus and Prospectus and
each amendment or supplement thereto, and each letter written by or
on behalf of the Company to the SEC or the staff of the SEC, and
each item of correspondence from the SEC or the staff of the SEC,
in each case relating to such Registration Statement (other than
any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of
copies of a Prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as each
Member may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Member that
are covered by the related Registration Statement;
(e)
use
best efforts to (i) prevent the issuance of any stop order or other
suspension of effectiveness and, (ii) if such order is issued,
obtain the withdrawal of any such order at the earliest possible
moment;
(f)
prior
to any public offering of Registrable Securities, use best efforts
to register or qualify or cooperate with the Members and their
counsel in connection with the registration or qualification of
such Registrable Securities for offer and sale under the securities
or blue sky laws of such jurisdictions requested by the Members and
do any and all other acts or things necessary or advisable to
enable the distribution in such jurisdictions of the Registrable
Securities covered by any Registration Statement;
provided, however
, that the Company
shall not be required in connection therewith or as a condition
thereto to (i) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section
3(f), (ii) subject itself to general taxation in any jurisdiction
where it would not otherwise be so subject but for this Section
3(f), or (iii) file a general consent to service of process in any
such jurisdiction;
(g)
use
best efforts to cause all Registrable Securities covered by a
Registration Statement to be listed on each securities exchange,
interdealer quotation system or other market on which similar
securities issued by the Company are then listed or
quoted;
(h)
immediately
notify the Members, at any time prior to the end of the
Effectiveness Period or the Minimum Effective Period, as
applicable, upon discovery that, or upon the happening of any event
as a result
of which, any
Prospectus includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances then existing, and promptly prepare, file with
the SEC and furnish to such holder a supplement to or an amendment
of such Prospectus as may be necessary so that such Prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing;
(i)
otherwise
use best efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act,
including, without limitation, Rule 172 under the 1933 Act, file
any final Prospectus, including any supplement or amendment
thereof, with the SEC pursuant to Rule 424 under the 1933 Act,
promptly inform the Members in writing if, at any time during the
Effectiveness Period or Minimum Effective Period, as applicable,
the Company does not satisfy the conditions specified in Rule 172
and, as a result thereof, the Members are required to deliver a
Prospectus in connection with any disposition of Registrable
Securities and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable
Securities hereunder; and make available to its security holders,
as soon as reasonably practicable, but not later than the
Availability Date (as defined below), an earnings statement
covering a period of at least twelve (12) months, beginning after
the effective date of each Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the 1933
Act, including Rule 158 promulgated thereunder (for the purpose of
this subsection 3(i), “
Availability Date
” means the 45th
day following the end of the fourth fiscal quarter that includes
the effective date of such Registration Statement, except that, if
such fourth fiscal quarter is the last quarter of the
Company’s fiscal year, “
Availability Date
” means the 90th
day after the end of such fourth fiscal quarter);
(j)
if
during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 100% of the number of shares of
Common Stock then registered in the Initial Registration Statement,
the Company shall file as soon as reasonably practicable an
additional Registration Statement covering the resale by the
Members of not less than the number of such Registrable Securities;
and
(k)
with
a view to making available to the Members the benefits of Rule 144
(or its successor rule) and any other rule or regulation of the SEC
that may at any time permit the Members to sell shares of Common
Stock to the public without registration, the Company covenants and
agrees to: (i) make and keep public information available, as those
terms are understood and defined in Rule 144, until the earlier of
(A) six months after such date as all of the Registrable Securities
may be sold without restriction (including without volume or
manner-of-sale restrictions) and without the need for current
public information by the holders thereof pursuant to Rule 144 or
any other rule of similar effect and (B) such date as all of the
Registrable Securities shall have been resold; (ii) file with the
SEC in a timely manner all reports and other documents required of
the Company under the 1934 Act; and (iii) furnish to each Member
upon request, as long as such Member owns any Registrable
Securities,
(A) a
written statement by the Company that it has complied with the
reporting requirements of the 1934 Act, (B) a copy of the
Company’s most recent Annual Report on Form 10-K or Quarterly
Report on Form 10-Q, and (C) such other information as may be
reasonably requested in order to avail such Member of any rule or
regulation of the SEC that permits the selling of any such
Registrable Securities without registration. The parties agree that
nothing contained herein shall limit the Company’s
obligations under the Exchange Agreement.
4.
Due
Diligence Review; Information
. The Company shall make
available, upon reasonable advance written notice, during normal
business hours, for inspection and review by the Members, advisors
to and representatives of the Members (who may or may not be
affiliated with the Members and who are reasonably acceptable to
the Company), all financial and other records, all SEC Documents
(as defined in the Exchange Agreement) and other filings with the
SEC, and all other corporate documents and properties of the
Company as may be reasonably necessary for the purpose of such
review, and cause the Company’s officers, directors and
employees, within a reasonable time period, to supply all such
information reasonably requested by the Members or any such
representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response
to all questions and other inquiries reasonably made or submitted
by any of them),
prior to and from
time to time after the filing and effectiveness of the Registration
Statement for the sole purpose of enabling the Members and such
representatives, advisors and underwriters and their respective
accountants and attorneys to conduct initial and ongoing due
diligence with respect to the accuracy of such Registration
Statement.
The
Company shall not disclose material nonpublic information to the
Members, or to advisors to or representatives of the Members,
unless prior to disclosure of such information the Company
identifies such information as being material nonpublic information
and provides the Members, such advisors and representatives with
the opportunity to accept or refuse to accept such material
nonpublic information for review and any Member wishing to obtain
such information enters into an appropriate confidentiality
agreement with the Company with respect thereto.
5.
Obligations of the
Members
.
(a)
Each
Member shall furnish in writing to the Company such information
regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held
by it, as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably
request, including a completed questionnaire in the form attached
to this Agreement as Annex A (a “
Selling Securityholder
Questionnaire
”) or any update thereto not later than
three (3) Business Days following a request therefore from the
Company.
(b)
Each
Member, by its acceptance of the Registrable Securities agrees to
cooperate with the Company as reasonably requested by the Company
in connection with the preparation and filing of a Registration
Statement hereunder, unless such Member has notified the Company in
writing of its election to exclude all of its Registrable
Securities from such Registration Statement.
(c)
Each
Member agrees that, upon receipt of any notice from the Company of
the happening of an event pursuant to Section 3(h) hereof, such
Member will immediately discontinue disposition of Registrable
Securities pursuant to the applicable Registration Statement
covering such Registrable Securities, until the Member is advised
by the Company that such dispositions may again be
made.
(a)
Indemnification
by the Company
. The Company will indemnify and hold harmless
each Member and its officers, directors, members, employees and
agents, successors and assigns, and each other person, if any, who
controls such Member within the meaning of the 1933 Act
(collectively, the “
Member
Indemnitees
”), against any losses, claims, damages or
liabilities, joint or several, to which such Member Indemnitee may
become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon: (i) any untrue statement
or alleged untrue statement or omission or alleged omission of any
material fact contained in any Registration Statement, any
preliminary Prospectus or final Prospectus, or any amendment or
supplement thereof; (ii) any blue sky application or other document
executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or
other jurisdiction in order to qualify any or all of the
Registrable Securities under the securities laws thereof (any such
application, document or information herein called a
“
Blue Sky
Application
”); (iii) the omission or alleged omission
to state in a Blue Sky Application a material fact required to be
stated therein or necessary to make the statements therein not
misleading; (iv) any violation by the Company or its agents of any
rule or regulation promulgated under the 1933 Act or 1934 Act or
any state securities laws in connection with the performance of its
obligations under this Agreement; or (v) any failure to register or
qualify the Registrable Securities included in any such
Registration Statement in any state where the Company or its agents
has affirmatively undertaken or agreed in writing that the Company
will undertake such registration or qualification on an
Member’s behalf and will promptly reimburse such Member
Indemnitee for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are
incurred;
provided, however
, that the
Company will not be liable in any such case if and to the extent
that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information
furnished by such Member or any such controlling person in writing
specifically for use in such Registration Statement or Prospectus.
The indemnity provided in this Section 6(a) shall survive the
transfer of the Registrable Securities by any Member to any other
Person.
(b)
Indemnification
by the Members
. Each Member agrees, severally but not
jointly, to indemnify and hold harmless, to the fullest extent
permitted by law, the Company, its directors, officers, employees,
stockholders and each person who controls the Company (within the
meaning of the 1933 Act) (collectively, the “
Company Indemnitees
”) against any
losses, claims, damages, liabilities and expense (including
reasonable attorney fees) resulting from any untrue statement of a
material fact or any omission of a material fact required to be
stated in the Registration Statement or Prospectus or preliminary
Prospectus or amendment or supplement thereto or necessary to make
the statements therein not misleading, to the extent, but only to
the extent that such untrue statement or omission is contained in
any information furnished in writing by such Member to the Company
specifically for inclusion in such Registration Statement or
Prospectus or amendment or supplement thereto, including in the
Selling Securityholder Questionnaire attached hereto as Annex A. In
no event shall the liability of a Member be greater in amount than
the dollar amount of the proceeds (net of all underwriter’s
discounts and expenses paid by such Member in connection with any
claim relating to this Section 6 and the amount of any damages such
Member has otherwise been required to pay by reason of such untrue
statement or omission) received by such Member upon the sale of the
Registrable Securities included in the Registration Statement
giving rise to such indemnification obligation.
(c)
Conduct
of Indemnification Proceedings
. Any person entitled to
indemnification under Section 6(a) or Section 6(b) (an
“
Indemnitee
”)
shall (i) give prompt notice to the indemnifying party of any claim
with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the Indemnitee;
provided
that any Indemnitee shall have
the right to employ separate counsel and to participate in the
defense of such claim, but the fees and expenses of such counsel
shall be at the expense of such Indemnitee unless (a) the
indemnifying party has agreed to pay such fees or expenses, or (b)
the indemnifying party shall have failed to assume the defense of
such claim and employ counsel reasonably satisfactory to such
Indemnitee or (c) in the reasonable judgment of any such
Indemnitee, based upon written advice of its counsel, a conflict of
interest exists between such Indemnitee and the indemnifying party
with respect to such claims (in which case, if such Indemnitee
notifies the indemnifying party in writing that such Indemnitee
elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right
to assume the defense of such claim on behalf of such Indemnitee);
and
provided, further
, that
the failure of any Indemnitee to give notice as provided herein
shall not relieve the indemnifying party of its obligations
hereunder, except to the extent that such failure to give notice
shall materially adversely affect the indemnifying party in the
defense of any such claim or litigation. It is understood that the
indemnifying party shall not, in connection with any proceeding in
the same jurisdiction, be liable for fees or expenses of more than
one separate firm of attorneys (together with appropriate local
counsel) at any time for all such Indemnitees. No indemnifying
party will, except with the consent of the Indemnitee, consent to
entry of any judgment or enter into any settlement that (i) does
not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnitee of a release from all
liability in respect of such claim or litigation or (ii) includes a
statement as to, or an admission of, fault, culpability or a
failure to act, by or on behalf of the Indemnitee.
(d)
Contribution
.
If for any reason the indemnification provided for in the preceding
paragraphs (a) and (b) is unavailable to an Indemnitee or
insufficient to hold it harmless, other than as expressly specified
therein, then the indemnifying party shall contribute to the amount
paid or payable by the Indemnitee as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect
the relative fault of the Indemnitee and the indemnifying party, as
well as any other relevant equitable considerations. No person
guilty of fraudulent misrepresentation within the meaning of
Section 11(f) of the 1933 Act shall be entitled to
contribution
from any person not
guilty of such fraudulent misrepresentation. In no event shall the
contribution obligation of a holder of Registrable Securities be
greater in amount than the dollar amount of the proceeds (net of
all expenses paid by such holder in connection with any claim
relating to this Section 6 and the amount of any damages such
holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission)
received by it upon the sale of the Registrable Securities giving
rise to such contribution obligation.
(a)
Amendments
and Waivers
. This Agreement may be amended only by a writing
signed by the Company and the Required Members. 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 shall
have obtained the written consent to such amendment, action or
omission to act, of the Required Members.
(b)
Notices
.
All notices and other communications provided for or permitted
hereunder shall be made as set forth in the Exchange
Agreement.
(c)
Assignments
and Transfers by Members
. The provisions of this Agreement
shall be binding upon and inure to the benefit of the Members and
their respective successors and assigns. A Member may transfer or
assign, in whole or from time to time in part, to one or more
persons its rights and obligations hereunder in connection with the
transfer of Registrable Securities by such Member to such person,
provided that such Member complies with all laws applicable thereto
and provides written notice of assignment to the Company promptly
after such assignment is effected (such transferee, a "
permitted transferee
").
(d)
Assignments
and Transfers by the Company
. This Agreement may not be
assigned by the Company (whether by operation of law or otherwise)
without the prior written consent of the Required Members,
provided, however, that in the event that the Company is a party to
a merger, consolidation, share exchange or similar business
combination transaction in which the Common Stock is converted into
the equity securities of another Person, from and after the
effective time of such transaction, such Person shall, by virtue of
such transaction, be deemed to have assumed the obligations of the
Company hereunder (and shall have acknowledged such assumption in
writing), the term “
Company
” shall be deemed to refer
to such Person and the term “
Registrable Securities
” shall be
deemed to include the securities received by the Members in
connection with such transaction unless such securities are
otherwise freely tradable by the Members after giving effect to
such transaction.
(e)
Benefits
of the Agreement
. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement and
except for any Indemnitee not a party hereto (solely with respect
to Section 6).
(f)
Counterparts;
Faxes
. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This
Agreement may also be executed via facsimile or other electronic
means, which shall be deemed an original.
(g)
Titles
and Subtitles
. The titles and subtitles used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this
Agreement.
(h)
Severability
.
Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be
interpreted as if it were written so as to be enforceable to the
maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by
applicable law, the
parties hereby waive any provision of law which renders any
provisions hereof prohibited or unenforceable in any
respect.
(i)
Further
Assurances
. The parties shall execute and deliver all such
further instruments and documents and take all such other actions
as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
(j)
Entire
Agreement
. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein.
This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject
matter.
(k)
Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial
. This
Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York without regard to the
choice of law principles thereof. Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of the courts of
the State of New York located in New York County and the United
States District Court for the Southern District of New York for the
purpose of any suit, action, proceeding or judgment relating to or
arising out of this Agreement 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 Agreement. Each of the parties hereto
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. Each party hereto 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
PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT
COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
WAIVER.
(l)
Injunctive
Relief
. It is hereby agreed and acknowledged that it will be
impossible to measure in money the damages that would be suffered
if the parties to this Agreement fail to comply with any of the
obligations imposed on them by this Agreement and that in the event
of any such failure, a non-breaching party hereto will be
irreparably damaged and will not have an adequate remedy at law.
Any such Person shall, therefore, be entitled to injunctive relief,
specific performance or other equitable remedies to enforce such
obligations, this being in addition to any other remedy to which
such Person is entitled at law or in equity. Each of the parties
hereto hereby waives any defense that a remedy at law is adequate
and any requirement to post bond or other security in connection
with actions instituted for injunctive relief, specific performance
or other equitable remedies. Each of the parties hereto hereby
agrees not to assert that specific performance, injunctive relief
and other equitable remedies are unenforceable, violate public
policy, invalid, contrary to law or inequitable for any reason. The
right of specific performance, injunctive relief and other
equitable remedies is an integral part of the transactions
contemplated by this Agreement.
(m)
Recapitalizations,
Exchanges, Etc
. The provisions of this Agreement shall
apply, to the full extent set forth herein with respect to the
Registrable Securities, to any and all shares of capital stock of
the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for or in substitution of, the
Registrable Securities and shall be appropriately adjusted for any
stock dividends, splits, reverse splits, combinations,
recapitalizations and the like occurring after the date
hereof
(n)
Independent
Nature of Members’ Obligations and Rights
. The
obligations of each Member hereunder are several and not joint with
the obligations of any other Member hereunder, and no Member shall
be responsible in any way for the performance of the obligations of
any other Member hereunder. Nothing contained herein or in any
other agreement or document delivered at any closing, and no action
taken by any Member pursuant
hereto or thereto,
shall be deemed to constitute the Members as a partnership, an
association, a joint venture or any other kind of group or entity,
or create a presumption that the Members are in any way acting in
concert or as a group or entity with respect to such obligations or
the transactions contemplated by this Agreement or any other
matters, and the Company acknowledges that the Members are not
acting in concert or as a group, and the Company shall not assert
any such claim, with respect to such obligations or transactions.
Without limiting the foregoing, no Member has agreed with any other
Member, and no term, provision, obligation or agreement of any
Member set forth herein shall be deemed to constitute an agreement
with any other Member, to act together for the purposes of
acquiring, holding, voting or disposing of equity securities of the
Company. Each Member shall be entitled to protect and enforce its
rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Member to be
joined as an additional party in any proceeding for such purpose.
The use of a single agreement with respect to the obligations of
the Company contained herein was solely in the control of the
Company, not the action or decision of any Member, and was done
solely for the convenience of the Company and not because it was
required or requested to do so by any Member. It is expressly
understood and agreed that each provision contained in this
Agreement is between the Company and an Member, solely, and not
between the Company and the Members collectively and not between
and among Members.
(o)
No
Inconsistent Agreements
. Neither the Company nor any of its
Subsidiaries has entered, as of the date hereof, nor shall the
Company or any of its Subsidiaries, on or after the date of this
Agreement, enter into any agreement with respect to its securities,
that would have the effect of impairing the rights granted to the
Members in this Agreement or otherwise conflicts with the
provisions hereof. Neither the Company nor any of its Subsidiaries
has previously entered into any agreement granting any registration
rights with respect to any of its securities to any Person that
have not been satisfied in full.
(p)
Prohibition
on Filing Other Registration Statements
. The Company shall
not file any other registration statements until all Registrable
Securities are registered pursuant to the Initial Registration
Statement that is declared effective by the staff of the
Commission,
provided
that
this Section 7(p) shall not prohibit the Company from filing
amendments to registration statements filed prior to the date of
this Agreement.
(
Signature
Pages Follow
)
IN
WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the
date first above written.
The
Company:
TRUE DRINKS
HOLDINGS, INC.
By:
Name:
Robert VanBoerum
Title:
Chief Executive Officer
[Member and Direct Investor Signature Page Attached]
The Members and
Direct Invesors:
By:
Name:
Title:
ANNEX
A
SELLING
SECURITYHOLDERS QUESTIONNAIRE
Exhibit
10.4
KATALYST SECURITIES LLC
630 THIRD AVENUE, 5
TH
FLOOR
NEW YORK, NY 10017
TEL: 212-400-6993 FAX: 212-247-1059
Member: FINRA & SIPC
February 15, 2019
STRICTLY CONFIDENTIAL
Mr.
Brandon Stump
CEO
Charlie’s Chalk Dust LLC
1007 Brioso Drive
Dear Mr. Stump:
This letter (the “
Agreement
”) constitutes our understanding with
respect to the engagement of Katalyst Securities LLC
(“
Katalyst
”), registered broker dealer and member of
the Financial Industry Regulatory Authority
(“
FINRA
”)
and SIPC, as an exclusive placement agent
(hereinafter referred to as “
Placement
Agent
”), by
Charlie’s Chalk Dust LLC, a Delaware limited liability
company (the “
Company
”) to assist the Company with (i) a minimum
Sixteen Million Five Hundred Thousand Dollars ($16,500,000) private
placement financing of the Company (the “
Offering
”) of equity securities by the Company
immediately preceding the proposed merger (the
“
Merger
”) with a wholly owned subsidiary
(“Acquisition Sub”) of True Drinks Holdings, Inc., a
Nevada corporation (“
TRUE
”) or simultaneously with or immediately
after the Merger, and (iii) to assist the Company with other
filings required by FINRA, United States Securities and Exchange
Commission (the “
SEC
”) and as required under the Securities
Exchange Act of 1934, as amended (the “
Exchange
Act
”). The terms and
conditions of the Merger will be negotiated between and mutually
agreed upon between the Company and TRUE and nothing herein implies
that the Placement Agent would have the power or authority to bind
the Company or TRUE or an obligation of the Company or TRUE to
accept a proposed Merger, issue any Securities (as defined herein),
or complete an Offering. The Offering will be made pursuant to the
exemptions afforded by Section 4(a)(2) of the Securities Act of
1933, as amended (the “
Act
”), and Regulation D promulgated thereunder
and applicable state securities laws. Following the Merger, the
“Company” shall be deemed to include TRUE and
Acquisition Sub. The proposed capitalization table of TRUE, post
reorganization, private placement offering is set forth in Exhibit
A, attached herewith, is not final and subject to
changes.
A.
A
PPOINTMENT
OF
K
ATALYST
.
During
the Term (as defined below), the Company hereby engages the
Placement Agent to serve as its exclusive placement agent in
connection with the Offering.
The
Placement Agent hereby accepts such engagement on a
“reasonable best efforts” basis upon the terms and
conditions set forth herein. The Company acknowledges and agrees
that the Placement Agent will be entitled to provide services, in
whole or in part, through any current or future affiliate or
sub-agent(s) selected by the Placement Agent and references to the
Placement Agent shall, where the context so requires, include
reference to any such affiliate or sub-agent(s).
The Company acknowledges and agrees that Katalyst’s
engagement hereunder is not an agreement or commitment, express or
implied, by Katalyst or any of its affiliates to underwrite or
purchase any securities or otherwise provide financing. The
proposed private placement is to be made directly by the Company to
the purchasers pursuant to agreements entered into between the
purchasers and the Company. Purchases of Securities may be made by
the Placement Agent and any selected sub-dealers and their
respective officers, directors, employees and affiliates and by the
officers, directors, employees and affiliates of the Company
(collectively, the “
Affiliates
”) for the Offering and such purchases will
be made by the Affiliates based solely upon the same information
that is provided to the investors in the
Offering.
The proposed Offering will seek to raise a minimum
of gross proceeds of Sixteen Million Five Hundred Thousand Dollars
($16,500,000) through the sale of units (such units, together with
the Class A Units, the Warrants and the Brokers Warrants (each as
defined herein) ,the “
Securities
”) consisting of (i) one Class A Unit of the
Company’s (the “Class A Unit”), and (ii) warrants
to purchase 0.50 Class A Units (the “Warrants”)
immediately preceding the Merger or TRUE common stock
simultaneously with or immediately after the Merger (in either
case, the “
Common
Stock
”), (the
“
Minimum
Offering
”), and a maximum
of gross proceeds of Twenty Million Dollars ($20,000,000) (the
“
Maximum
Offering
”). The Warrants
shall have a five (5) year life and an exercise price equal to
$2.50. The Warrants shall convert into similar warrants of TRUE
following consummation of the Merger. The Minimum Offering will
include the participation of to be identified strategic investor(s)
(the “Strategic Investor”) in the amount of at least
Five Million Dollars ($5,000,000). The offering price for each Unit
is $2.50 (the “
Purchase
Price
”). The minimum
subscription is Twenty Five Thousand Dollars ($25,000) provided,
however, subscriptions in lesser amounts may be accepted by the
Company in its sole discretion.
The Closing, as defined below, of the Offering is
anticipated on or before March 31, 2019, or at such time and place
as mutually agreed to by the Company and the Placement Agent. (the
“
Offering
Period”)
.
B.
F
EES
AND
E
XPENSES
.
1.
F
INANCING
F
EE
.
(a)
C
ASH
P
ORTION
.
Subject to the Closing of the Offering
and the Merger, the Company hereby agrees to pay (or cause TRUE to
pay) the Placement Agent (or the designees authorized by such
Placement Agent), at the Closing of the Offering, as compensation
for their services hereunder, a cash fee (the
“
Financing
Fee
”) in the amount of
Ten Percent (10.0%) of the gross proceeds from any sale of
Securities in the Offering to Investors. The Financing Fee shall be
paid to the Placement Agent in cash by wire transfer from the
escrow account in which the Offering proceeds are deposited,
concurrently with the delivery of the net proceeds to the Company
at the Closing of the Offering.
(b)
W
ARRANT
P
ORTION
.
At
the Closing of the Merger, the Company
will issue to the Placement Agent (or the designees authorized by
such Placement Agent), as compensation for its services hereunder,
warrants to purchase shares of TRUE’s common stock equal to
Ten Percent (10%) of the Class A Units sold in the Offering (as
adjusted pursuant to the terms of the Merger) to Investors plus Ten
Percent (10%) of the Warrants sold in the Offering (as adjusted
pursuant to the terms of the Merger) to Investors (the
“
Broker
Warrants
”), with a term
of five (5) years from the final closing of the Offering and an
exercise price of $2.50 per share. The Broker Warrants shall be the
same as the warrants issued to the Investors upon the Merger. The
Financing Fee and the Broker Warrants are sometimes referred to
collectively as the
“Broker
Fees”).
The Broker
Warrants may be issued directly to the Placement Agent’s
employees and affiliates at the Placement Agent’s written
request.
(c)
T
AIL
P
ROVISIONS
.
The Company shall also pay to the
Placement Agent the Financing Fee and the Broker Warrants
calculated in the manner provided in Sections B.1(a) and 1(b) above
with respect to any subsequent public or private offering or other
financing or capital-raising transaction of any kind
(“
Subsequent
Financing
”) to the extent
that such financing or capital is provided the Company, or to any
Affiliate of the Company, by investors whom the Placement Agent had
“introduced” (as defined below), directly or
indirectly, to the Company during the Offering Period if such
Subsequent Financing is consummated at any time within the twelve
(12) month period following the earlier of the expiration or
termination of this Agreement or the closing of the Offering (the
“
Tail
Period
”). A party
“introduced” by the Placement Agent shall mean an
investor who either (i) participated in the Offering, (ii) met with
the Company and/or had a conversation with the Company either in
person or via telephone regarding the Offering, (iii) was provided
by the Placement Agent with a copy of the Company’s offering
memorandum (or other materials prepared and/or approved by the
Company in connection with the Offering), or (iv) contacted by the
Placement Agent during the Offering Period, in each case based upon
such investor expressing an interest, directly or indirectly, to
the Placement Agent in investing in the Offering. An
“Affiliate” of an entity shall mean any individual or
entity controlling, controlled by or under common control with such
entity and any officer, director, employee, stockholder, partner,
member or agent of such entity.
2.
E
XPENSES
.
In addition to the compensation
payable pursuant to Section B(1), the Company hereby agrees to pay
Katalyst a non-accountable expense allowance in the amount of One
Hundred Twenty Five Thousand Dollars ($125,000) (the
“
Katalyst Expense
Fee
”) paid directly from
the escrow account at the time of the Closing from the gross
proceeds. The Katalyst Expense Fee is separate and apart from the
Broker Fees. Regardless whether the Offering is consummated and if
there is no Closing, the Katalyst Expense Fee will be due and
payable within five (5) days of written request to the Company by
wire transfer. The Katalyst Expense Fee is in addition to the
reimbursement of fees and expenses relating to attendance by the
Placement Agent at proceedings or to indemnification and
contribution as contemplated elsewhere in this
agreement.
C.
T
ERM AND
T
ERMINATION
OF
E
NGAGEMENT
.
Except as set forth below, the term of this Agreement begins on the
date of this Agreement and shall end automatically upon the earlier
to occur of (i) after final Closing of the Offering or (ii) the
date of termination of the Offering (the “
Term
”). Notwithstanding the Term of this
Agreement, this Agreement may be earlier terminated (a) immediately
by Company in the event of the Placement Agent’s failure to
perform any of its material obligations hereunder or fraud, illegal
or willful misconduct or gross negligence or (b) without cause by
either the Company or the Placement Agent, on written notice of no
less than ten (10) business days, provided that no such notice may
be given by the Company for a period of 30 days from the date of
this Agreement. Notwithstanding any such expiration or termination,
the terms of this Agreement other than Paragraphs A and B shall all
remain in full force and effect and be binding on the parties
hereto, including the exculpation, indemnification and contribution
obligations of the Company, the confidentiality obligations, and
provided the Agreement is not terminated by the Company pursuant to
subclause (a) of this paragraph C, the right of the Placement Agent
to receive any earned but unpaid Broker Fee hereunder and the right
of the Placement Agent to receive reimbursement for its expenses in
accordance with paragraph B(2) above.
D.
S
UBSCRIPTION
AND
C
LOSING
P
ROCEDURES
.
(a)
The
Company shall cause to be delivered to the Placement Agent copies
of the Subscription Documents and has consented, and hereby
consents, to the use of such copies for the purposes permitted by
the Act and applicable securities laws and in accordance with the
terms and conditions of this Agreement, and hereby authorizes the
Placement Agent and its agents and employees to use the
Subscription Documents in connection with the sale of the
Securities until the earlier of (i) the Termination Date or (ii)
the final Closing, and no person or entity is or will be authorized
to give any information or make any representations other than
those contained in the Subscription Documents or to use any
offering materials other than the Subscription Documents in
connection with the sale of the Securities, unless the Company
first provides the Placement Agent with notification of such
information, representations or offering materials.
(b)
The
Company shall make available to the Placement Agent and its
representatives such information, including, but
not limited to, financial information, and other information
regarding the Company (the “
Information
”), as may be reasonably requested in making
a reasonable investigation of the Company and its affairs. The
Company shall provide access to the officers, directors, employees,
independent accountants, legal counsel and other advisors and
consultants of the Company as shall be reasonably requested by the
Placement Agent. The Company recognizes and agrees that the
Placement Agent (i) will use and rely primarily on the Information
and generally available information from recognized public sources
in performing the services contemplated by this Agreement without
independently verifying the Information or such other information,
(ii) does not assume responsibility for the accuracy of the
Information or such other information, and (iii) will not make an
appraisal of any assets or liabilities owned or controlled by the
Company or its market competitors.
(c)
Each
prospective purchaser will be required to complete and execute the
Subscription Documents, Anti-Money Laundering Form, Accredited
Investor Certification and other documents which will be forwarded
or delivered to the address identified in the Subscription
Documents.
(d)
Simultaneously with the delivery to the Placement
Agent of the Subscription Documents, the subscriber’s check
or other good funds will be forwarded directly by the subscriber to
the escrow agent and deposited into a non interest bearing escrow
account (the “
Escrow
Account
”) established for
such purpose with Delaware Trust Company (the
“
Escrow
Agent
”). All such funds
for subscriptions will be held in the Escrow Account pursuant to
the terms of the escrow agreement among the Company, the Placement
Agent and Delaware Trust Company (the “
Escrow
Agreement
”).
The Company shall (or shall cause TRUE to) pay all
fees related to the establishment and maintenance of the Escrow
Account. Subject to the receipt of subscriptions for the amount for
Closing, the Company will either accept or reject, for any or no
reason, the Subscription Documents in a timely fashion and at the
Closing will countersign the Subscription Documents and provide
duplicate copies of such documents to the Placement Agent. The
Company will forward directly to the subscribers the documents
countersigned by the Company. The Company will give notice to the
Placement Agent of its acceptance of each subscription. The
Company, or the Placement Agent on the Company’s behalf, will
promptly return to subscribers incomplete, improperly completed,
improperly executed and rejected subscriptions and give written
notice thereof to the Placement Agent upon such
return.
(e)
If
subscriptions for at least the Minimum Amount for closing have
been
accepted prior to the Termination Date, the funds
therefor have been collected by the Escrow Agent and all of the
conditions set forth elsewhere in this Agreement are fulfilled, a
closing shall be held promptly with respect to the Securities sold
(the “
Closing
”). Delivery of payment for the accepted
subscriptions for the Securities from the funds held in the Escrow
Account will be made at the Closing at the Placement Agent’s
office against delivery of the Securities by the Company at the
address set forth in Section 12 hereof (or at such other place as
may be mutually agreed upon between the Company and the Placement
Agent), net of amounts agreed upon by the parties herein,
including, the Blue Sky counsel as of the Closing. Executed
certificates for the post-merger shares of TRUE will be in such
authorized denominations and registered in such names as the
Placement Agent may request on or before the date of the Closing
(“
Closing
Date
”). The certificates
will be forwarded to the subscriber directly by either the Company
or the stock transfer agent within ten (10) business days following
the Closing. At the Closing, the Company will cause TRUE to deliver
irrevocable issuance instruction to its stock transfer agent, if
applicable, for the issuance of certificates representing the
Shares being sold and will deliver the warrants for the purchase of
TRUE common stock in exchange for the Warrants.
(f)
If
Subscription Documents for the Minimum Offering Amount for
Closing
have
not been received and accepted by the Company on or before the
Termination Date for any reason, the Offering will be terminated,
no Securities will be sold, and the Escrow Agent will, at the
request of the Placement Agent, cause all monies received from
subscribers for the Securities to be promptly returned to such
subscribers without interest, penalty, expense or deduction. The
Company will be responsible for all the fees charged by the Escrow
Agent.
E.
R
EPRESENTATIONS
,
W
ARRANTIES
AND
C
OVENANTS
.
The Company represents and warrants to, and agrees with, the
Placement Agent that:
1.
The
Company represents and warrants that it has all requisite power
and
authority
to enter into and carry out the terms and provisions of this
Agreement. The execution, delivery and performance of this
Agreement and the Offering of Securities will not violate or
conflict with any provision of the charter or bylaws of the Company
or, except as would not have a material adverse effect, any
agreement or other instrument to which the Company is a party or by
which it or any of its properties is bound. Any necessary
approvals, governmental and private, will be obtained by the
Company prior to any Closing, except as may be waived or obtained
or filed following any Closing and except where the failure to
obtain any such approval would not have a material adverse
effect.
2.
The
Securities will be offered and sold by the Company and TRUE
in
compliance
with the requirements for the exemption from registration pursuant
to Section 5 of the Securities Act of 1933, as amended (including
any applicable exemption therefrom), and with all other securities
laws and regulations. The Company or TRUE will file appropriate
notices with the Securities and Exchange Commission and with other
applicable securities authorities.
3.
The
information in any presentation materials, memorandum or
other
offering
documents furnished to investors in the Offering by the Company is
true and correct in all material respects and does not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated or necessary to make the statements
therein not misleading.
4.
The
Company hereby permits the Placement Agent to rely on the
representations and warranties made or given by the Company, TRUE
or Acquisition Sub to any acquirer of Securities in any agreement,
certificate or otherwise in connection with the
Offering.
F.
I
NDEMNIFICATION
AND
C
ONTRIBUTION
.
The Company agrees to (and will cause TRUE and Acquisition Sub,
upon consummation of the Merger, to undertake to) indemnify
Katalyst and its controlling persons, representatives and agents in
accordance with the indemnification provisions set forth in
Appendix
I
. These provisions will apply
regardless of whether any Offering is
consummated.
G.
L
IMITATION
OF
E
NGAGEMENT TO
THE
C
OMPANY
.
The Company acknowledges that Katalyst has been retained only by
the Company, that Katalyst is providing services hereunder as an
independent contractor (and not in any fiduciary or agency
capacity) and that the Company’s engagement of Katalyst is
not deemed to be on behalf of, and is not intended to confer rights
upon, any shareholder, owner or partner of the Company or any other
person not a party hereto as against Katalyst or any of its
respective affiliates, or any of their respective officers,
directors, controlling persons (within the meaning of Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act of
1934, as amended (the “
Exchange
Act
”), employees or
agents. Unless otherwise expressly agreed in writing by Katalyst,
no one other than the Company is authorized to rely upon this
Agreement or any other statements or conduct of Katalyst, and
except for TRUE following the Merger, no one other than the Company
is intended to be a beneficiary of this Agreement. The Company
acknowledges that any recommendation or advice, written or oral,
given by Katalyst to the Company in connection with
Katalyst’s engagement is intended solely for the benefit and
use of the Company’s management and directors in considering
a possible Offering, and any such recommendation or advice is not
on behalf of, and shall not confer any rights or remedies upon, any
other person or be used or relied upon for any other purpose.
Katalyst shall not have the authority to make any commitment
binding on the Company. The Company, in its sole discretion, shall
have the right to reject any investor introduced to it by Katalyst,
or its respective designees, affiliates or
sub-dealers.
H.
L
IMITATION
OF
P
LACEMENT
A
GENT
’
S
L
IABILITY
TO THE
C
OMPANY
.
Katalyst shall not have any liability to the Company, TRUE or
Acquisition Sub for any Losses attributable to the gross
negligence, intentional misrepresentation or willful misconduct of
another Placement Agent or Investment Banker.
I.
G
OVERNING
L
AW
.
This Agreement shall be deemed to have been made and delivered in
New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws
of the State of New York applicable to contracts to be wholly
performed in said state.
J.
I
NFORMATION
;
R
ELIANCE
.
The Company shall furnish, or cause to be furnished, to the
Placement Agent all information reasonably requested by the
Placement Agent for the purpose of rendering services hereunder and
shall further make available to the Placement Agent all such
information to the same extent and on the same terms as such
information is available to the Company and potential lenders and
investors (all such information being the
“
Information
”).
The Company shall notify the Placement Agent of any material
adverse change, or development that may lead to a material adverse
change, in the business, properties, operations or financial
condition or prospects of the Company or any other material
Information. In addition, the Company agrees to make available to
the Placement Agent upon request from time to time the officers,
directors, accountants, counsel and other advisors of the Company.
The Company recognizes and confirms that the Placement Agent (a)
will use and rely on the Information, including any documents
provided to investors in each Offering(the
“
Offering
Documents
,” which shall
include any Purchase Agreement) and if any prepared by the Company,
a private placement memorandum, and on information available from
generally recognized public sources in performing the services
contemplated by this Agreement without having independently
verified the same; (b) do not assume responsibility for the
accuracy or completeness of the Offering Documents or the
Information and such other information, except for any written
information furnished to the Company by the Placement Agent
specifically for inclusion in the Offering Documents; and (c) will
not make an appraisal of any of the assets or liabilities of the
Company. Upon reasonable request, the Company will meet with the
Placement Agent or its representatives to discuss all information
relevant for disclosure in the Offering Documents and will
cooperate in any investigation undertaken by the Placement Agent
thereof, including any document included therein. At each Offering
and the closing of the Merger, at the request of the Placement
Agent, the Company shall deliver copies of such officer’s
certificates, in form and substance reasonably satisfactory to the
Placement Agent and its counsel as is customary for such
Offering.
K.
U
SE OF
I
NFORMATION
.
The Company authorizes the Placement Agent to transmit to the
prospective purchasers of Securities the Company’s power
point presentation prepared by the Company and private placement
memorandum (if any, and if prepared by the Company) (the
“
Presentation
Materials
”). The Company
represents and warrants that the Presentation Materials (i) will be
prepared by the management of the Company; and (ii) will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading. The Company will advise the
Placement Agent promptly if it becomes aware of the occurrence of
any event or any other change known to the Company which results in
the Presentation Materials containing an untrue statement of a
material fact or omitting to state a material fact required to be
stated therein or necessary to make the statements therein or
previously made, in light of the circumstances under which they
were made, not misleading. Notwithstanding the foregoing, if any
Placement Agent elects to not transmit Presentation Materials to
prospective purchasers, such Placement Agent shall direct qualified
prospective purchasers to an electronic data room in which the
Company makes available the Presentation Materials for review by
qualified prospective purchasers.
L.
A
NNOUNCEMENT
OF
T
RANSACTION
.
The Company and the Placement Agent
acknowledge and agree that Katalyst may, subsequent to the Closing
of the Offering and to the extent Katalyst receives a Broker Fee
for Securities sold in the Offering, make public its involvement
with the Company and TRUE; provided that any such public
announcement or other public disclosure (other than customary
tombstone presentations or other investment banking presentation
materials containing only publicly available information) shall be
approved by the Company and TRUE, which approval shall not be
unreasonably withheld.
M.
A
DVICE TO
THE
B
OARD
.
The Company acknowledges that any advice given by the Placement
Agent to the Company is solely for the benefit and use of the
Company’s board of directors and officers, who will make all
decisions regarding whether and how to pursue any opportunity or
transaction, including a potential Merger or Offering. The
Company’s board of directors and senior management may
consider the Placement Agent’s advice, but will base their
decisions on the advice of legal, tax and other business advisors
and other factors which they consider appropriate. Accordingly, as
an independent contractor, Katalyst will not assume the
responsibilities of a fiduciary to the Company or its stockholders
in connection with the performance of its services. Any advice
provided may not be used, reproduced, disseminated, quoted or
referred to without the Placement Agent’s prior written
consent. Katalyst does not provide accounting, tax, or legal
advice. Katalyst is not responsible for the success of any
Offering.
N.
E
NTIRE
A
GREEMENT
.
This Agreement was drafted by the Company and the Placement
Agent’s respective counsels and constitutes the entire
Agreement between the parties and supersedes and cancels any and
all prior or contemporaneous arrangements, understandings and
agreements, written or oral, between them relating to the subject
matter hereof.
O.
A
MENDMENT
.
This Agreement may not be modified except in writing signed by each
of the parties hereto.
P.
NO
P
ARTNERSHIP
.
The Company is a sophisticated business enterprise that has
retained the Placement Agent for the limited purposes set forth in
this Agreement. The parties acknowledge and agree that their
respective rights and obligations are contractual in nature. Each
party disclaims an intention to impose fiduciary obligations on the
other by virtue of the engagement contemplated by this
Agreement.
Q.
N
OTICE
.
All notices and other communications required hereunder shall be in
writing and shall be deemed effectively given to a party by (a)
personal delivery; (b) upon deposit with the United States Post
Office, by certified mail, return receipt requested, firstclass
mail, postage prepaid; (c) delivered by hand or by messenger or
overnight courier, addressee signature required, to the addresses
below or at such other address and/or to such other persons as
shall have been furnished by the parties;
If to the Company:
Charlie’s
Chalk Dust LLC
Mr.
Brandon Stump, CEO
1007
Brioso Drive
Email:
brandon@charlieschalkdust.com
With a copy
to:
(which
shall not constitute notice)
Eliezer
Drew, Esq.
Grushko
& Mittman, P.C.515
Rockaway
Avenue
Valley
Stream, NY 11581
(212)
697-9500
(212)
697-3575 (f) eli@grushkomittman.com
If
to Katalyst Securities LLC.
Katalyst
Securities, LLC
630 Third Avenue, 5
th
Floor
New
York, NY 10017
Attention: Michael Silverman
Managing Director
With a copy
to:
(which
shall not constitute notice)
Barbara
J. Glenns, Esq.
Law
Office of Barbara J. Glenns, Esq.
30 Waterside Plaza, Suite 7
New York, NY 10010
R.
S
EVERABILITY
.
If
any term, provision, covenant or restriction herein is held by a
court of competent jurisdiction to be invalid, void or
unenforceable or against public policy, the remainder of the terms,
provisions and restrictions contained herein will remain in full
force and effect and will in no way be affected, impaired or
invalidated.
S.
G
OVERNING
L
AW
AND
J
URISDICTION
.
This Agreement shall be deemed to have been made and delivered in
New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws
of the State of New York without regard to principles of conflicts
of law thereof.
THE PARTIES HERETO AGREE TO SUBMIT ALL CONTROVERSIES TO THE
EXCLUSIVE JURISDICTION OF FINRA ARBITRATION IN ACCORDANCE WITH THE
PROVISIONS SET FORTH BELOW AND UNDERSTAND THAT (A)
ARBITRATION IS FINAL AND BINDING ON THE PARTIES, (B) THE PARTIES
ARE WAIVING THEIR RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING THE
RIGHT TO A JURY TRIAL, (C) PRE-ARBITRATION DISCOVERY IS GENERALLY
MORE LIMITED AND DIFFERENT FROM COURT PROCEEDINGS, (D) THE
ARBITRATOR’S AWARD IS NOT REQUIRED TO INCLUDE FACTUAL
FINDINGS OR LEGAL REASONING AND ANY PARTY’S RIGHT TO APPEAL
OR TO SEEK MODIFICATION OF RULES BY ARBITRATORS IS STRICTLY
LIMITED, (E) THE PANEL OF FINRA ARBITRATORS WILL TYPICALLY INCLUDE
A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE
SECURITIES INDUSTRY, AND (F) ALL CONTROVERSIES WHICH MAY ARISE
BETWEEN THE PARTIES CONCERNING THIS AGREEMENT SHALL BE DETERMINED
BY ARBITRATION PURSUANT TO THE RULES THEN PERTAINING TO FINRA. ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
JUDGMENT ON ANY AWARD OF ANY SUCH ARBITRATION MAY BE ENTERED IN THE
SUPREME COURT OF THE STATE OF NEW YORK OR IN ANY OTHER COURT HAVING
JURISDICTION OVER THE PERSON OR PERSONS AGAINST WHOM SUCH AWARD IS
RENDERED. THE PARTIES AGREE THAT THE DETERMINATION OF THE
ARBITRATORS SHALL BE BINDING AND CONCLUSIVE UPON THEM. THE
PREVAILING PARTY, AS DETERMINED BY SUCH ARBITRATORS, IN A LEGAL
PROCEEDING SHALL BE ENTITLED TO COLLECT ANY COSTS, DISBURSEMENTS
AND REASONABLE ATTORNEY’S FEES FROM THE OTHER PARTY. PRIOR TO
FILING AN ARBITRATION, THE PARTIES HEREBY AGREE THAT THEY WILL
ATTEMPT TO RESOLVE THEIR DIFFERENCES FIRST BY SUBMITTING THE MATTER
FOR RESOLUTION TO A MEDIATOR, ACCEPTABLE TO ALL PARTIES, AND WHOSE
EXPENSES WILL BE
BORNE
EQUALLY BY ALL PARTIES. THE MEDIATION WILL BE HELD IN THE
COUNTY
OF NEW YORK, STATE OF NEW YORK, ON AN EXPEDITED BASIS. IF THE
PARTIES CANNOT SUCCESSFULLY RESOLVE THEIR DIFFERENCES THROUGH
MEDIATION, THE MATTER WILL BE RESOLVED BY ARBITRATION. THE
ARBITRATION SHALL TAKE PLACE IN THE COUNTY OF NEW YORK, THE STATE
OF NEW YORK, ON AN EXPEDITED BASIS.
T.
O
THER
I
NVESTMENT
B
ANKING
S
ERVICES
.
The Company acknowledges that
Katalyst and its affiliates are securities firms engaged in
securities trading and brokerage activities and providing
investment banking and financial advisory services. In the ordinary
course of business, the Placement Agent and its affiliates,
registered representatives and employees may at any time hold long
or short positions, and may trade or otherwise effect transactions,
for their own account or the accounts of customers, in the
Company’s or TRUE’s debt or equity securities, the
Company’s affiliates or other entities that may be involved
in the transactions contemplated by this Agreement. In addition,
the Placement Agent and its affiliates may from time to time
perform various investment banking and financial advisory services
for other clients and customers who may have conflicting interests
with respect to the Company, TRUE, the Merger, or an Offering. The
Company also acknowledges that the Placement Agent and its
affiliates have no obligation to use in connection with this
engagement or to furnish to the Company, confidential information
obtained from other companies. Furthermore, the Company
acknowledges the Placement Agent may have fiduciary or other
relationships whereby the Placement Agent or its affiliates may
exercise voting power over securities of various persons, which
securities may from time to time include securities of the Company
or TRUE or others with interests in respect of any Merger or
Offering. The Company acknowledges that the Placement Agent or such
affiliates may exercise such powers and otherwise perform their
functions in connection with such fiduciary or other relationships
without regard to the defined relationship to the Company
hereunder.
(1)
This
Agreement shall be binding upon and inure to the benefit of the
Placement Agent and the Company and their respective assigns,
successors, and legal representatives.
(2)
This
Agreement may be executed in counterparts (including facsimile or
in pdf format counterparts), each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument.
(3)
Notwithstanding
anything herein to the contrary, in the event that the Placement
Agent determines that any of the terms provided for hereunder shall
not comply with a FINRA rule, including but not limited to FINRA
Rule 5110, then the Company shall agree to amend this Agreement in
writing upon the request of the Placement Agent to comply with any
such rules; provided that any such amendments shall not provide for
terms that are less favorable to the Company.
V.
C
ONFIDENTIALITY
.
(a)
The
Placement Agent will maintain the confidentiality of the
Information and, unless and until such Information shall have been
made publicly available by the Company or by others without breach
of a confidentiality agreement, shall disclose the Information only
as provided for herein, authorized by the Company or as required by
law or by request of a governmental authority, FINRA or court of
competent jurisdiction. In the event the Placement Agent is legally
required to make disclosure of any of the Information, the
Placement Agent will give prompt notice to the Company prior to
such disclosure, to the extent the Placement Agent can practically
do so.
(b)
The
foregoing paragraph shall not apply to information
that:
(i)
at
the time of disclosure by the Company, is or thereafter becomes,
generally available to the public or within the industries in which
the Company conducts business, other than as a result of a breach
by the Placement Agent of its obligations under this Agreement;
or
(ii)
prior
to or at the time of disclosure by the Company, was already in the
possession of, the Placement Agent or any of its affiliates, or
could have been developed by them from information then lawfully in
their possession, by the application of other information or
techniques in their possession, generally available to the public;
at the time of disclosure by the Company thereafter, is obtained by
the Placement Agent or any of its affiliates from a third party who
the Placement Agent reasonably believes to be in possession of the
information not in violation of any contractual, legal or fiduciary
obligation to the Company with respect to that information; or is
independently developed by the Placement Agent or its
affiliates.
The
exclusions set forth in sub-section (b) above shall not apply to
pro forma financial information of the Company, which pro forma
Information shall in all events be subject to sub- section (a)
above.
(c)
Nothing
in this Agreement shall be construed to limit the ability of the
Placement Agent or its affiliates to pursue, investigate, analyze,
invest in, or engage in investment banking, financial advisory or
any other business relationship with entities other than the
Company, notwithstanding that such entities may be engaged in a
business which is similar to or competitive with the business of
the Company, and notwithstanding that such entities may have actual
or potential operations, products, services, plans, ideas,
customers or supplies similar or identical to the Company’s,
or may have been identified by the Company as potential merger or
acquisition targets or potential candidates for some other business
combination, cooperation or relationship. The Company expressly
acknowledges and agrees that it does not claim any proprietary
interest in the identity of any other entity in its industry or
otherwise, and that the identity of any such entity is not
confidential information.
W.
D
ISCLOSURE
.
The Company acknowledges that some of
the shareholders of TRUE may be registered representatives, agents
or employees affiliated with the Placement Agent and may receive
selling commissions or payment as per the terms of this executed
Agreement.
X.
N
O
D
ISQUALIFICATION
E
VENTS
.
(a)
The
Company represents and warrants the following:
(i)
None of Company, any director, executive officer,
other officer of the Company participating in the Offering, any
beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power,
nor any promoter (as that term is defined in Rule 405 under the
Securities Act) connected with the Company in any capacity at the
time of sale (each, an “
Issuer Covered
Person
” and, together,
“
Issuer Covered
Persons
”) is subject to
any Disqualification Event (as defined below), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3) or has
been involved in any matter which would be a Disqualification Event
except for the fact that it occurred before September 23, 2013. The
Company has exercised reasonable care to determine whether any
Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and
has furnished to the Placement Agent a copy of any disclosures
provided thereunder.
(ii)
The
Company will promptly notify Katalyst in writing of (A) any
Disqualification Event relating to any Issuer Covered Person and
(B) any event that would, with the passage of time, become a
Disqualification Event relating to any Issuer Covered
Person.
(iii)
The Company is aware that other persons (other
that any Issuer Covered Persons and the Placement Agent Covered
Person (as defined below) will be paid (directly or indirectly)
remuneration for solicitation of purchasers in connection with the
sale of any Securities. (b)
The
Placement Agent represents and warrants the
following:
(i)
No
Disqualification Events. Neither it nor TRUE, nor to its
knowledge
any of their respective directors, executive officers, general
partners, managing members or other officers participating in the
Offering (each, a “
Placement Agent Covered
Person
” and, together,
“
Placement Agent Covered
Persons
”), is subject to
any of the “Bad Actor” disqualifications currently
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “
Disqualification
Event
”) or has been
involved in any matter which would be a Disqualification Event
except for the fact that it occurred before September 23,
2013.
(ii)
Other
Covered Persons. The Placement Agent is aware that other persons
(other than any Issuer Covered Person or Placement Agent Covered
Person) will be paid (directly or indirectly) remuneration for
solicitation of purchasers in connection with the sale of any
Securities.
(iii)
Notice
of Disqualification Events. The Placement Agent will notify the
Company promptly in writing of (A) any Disqualification Event
relating to any Placement Agent Covered Person not previously
disclosed to the Company in accordance with the provisions of this
Section and (B) any event that would, with the passage of time,
become a Disqualification Event relating to any Placement Agent
Covered Person.
[Signature
Page Follows]
In
acknowledgment that the foregoing correctly sets forth the
understanding reached by the Placement Agent and the Company,
please sign in the space provided below, whereupon this letter
shall constitute a binding Agreement as of the date first indicated
above.
Charlie’s Chalk Dust LLC.
By:
/s/ Brandon
Stump
Brandon Stump
CEO
KATALYST SECURITIES LLC
By:
/s/
Michael A. Silverman
Michael A. Silverman
Managing Director
True Drinks Holdings, Inc. agrees that upon completion of the
Merger, and only following the Merger, (i) the term
“Company” as used in this Agreement shall also apply to
True Drinks Holdings, Inc., (ii) it becomes a party to this
Agreement as if signed by True Drinks Holdings, Inc. as of the date
hereof and (iii) it will guarantee the obligations of Acquisition
Sub, including the indemnification and tail provisions of this
Agreement.
TRUE DRINKS HOLDINGS, INC.
By:
/s/ Robert Van
Boerum
Name: Robert Van Boerum
Title:
Principal Executive Officer and Principal Financial
Officer
APPENDIX I
INDEMNIFICATION AND CONTRIBUTION
The Company agrees to indemnify and hold harmless the
Placement Agent, its affiliates, officers, directors, employees,
agents and controlling persons (each an “
Indemnified
Person
”) from and against
any and all losses, claims, damages, liabilities and expenses, to
which any such Indemnified Person may become subject arising out of
or in connection with the transactions contemplated in the
Agreement to which this
Appendix I
is attached (the
“
Agreement
”), insofar as such loss, claim, damage,
liability or expense arises out of or is based upon any untrue
statement of a material fact or omission to state a material fact
in Offering Documents required to be stated therein or necessary to
make the statements therein not misleading in any litigation,
investigation or proceeding (collectively, the
“
Proceedings
”), regardless of whether any of such
Indemnified Person is a party to the Agreement, and to reimburse
such Indemnified Persons for any reasonable and documented legal or
other expenses as they are incurred in connection with
investigating, responding to or defending against in any
Proceeding, provided that the foregoing indemnification will not,
as to any Indemnified Person, apply to losses, claims, damages,
liabilities or expenses to the extent that they are finally
judicially determined to have resulted primarily and directly from
the fraud, gross negligence or willful misconduct of an Indemnified
Person; and provided, further, that the foregoing indemnification
will not apply to any loss, claim, damage, liability or expense
arising out of or based upon any written information furnished to
the Company by the Placement Agent specifically for inclusion in
the Offering Documents; provided further that the Company shall
only have the obligation to reimburse an Indemnified Person if such
Indemnified Person provides to the Company a written undertaking of
such Indemnified Person to repay to the Company the amount so
advanced to the extent that any such reimbursement is so held to
have been improper in a final judgment by a court of competent
jurisdiction, and if the court of competent jurisdiction holds that
such reimbursement was improper, such Indemnified Person shall
promptly return any amount advanced to it by the Company. The
Company also agrees that no Indemnified Person shall have any
liability (whether direct or indirect, in contract, tort or
otherwise) to the Company its affiliates, officers, directors
employees, agents, creditors or stockholders, directly or
indirectly, for or in connection with the Agreement, any
transactions contemplated in the Agreement, or the Placement
Agent’s role or services in connection with the Agreement,
except to the extent that any liability for losses, claims,
demands, damages, liabilities or expenses incurred by the Company
are finally judicially determined to have resulted primarily from
the fraud, gross negligence or willful misconduct of such
Indemnified Person or have resulted from any written information
furnished to the Company by the Placements Agent specifically for
inclusion in the Offering Documents. The Company will be liable to
pay the legal fees, expenses and costs incurred by Katalyst’s
legal team related to any lawsuit but will not be obligated to pay
the legal fees of a sub dealer brought in by Katalyst if named in
the lawsuit, unless agree to by the Company. If the Company engages
additional Placement Agents in addition to Katalyst, then the
Company will be liable for those Placement Agents’ legal
fees, expenses and costs separate and apart to the legal fees,
expenses and costs incurred by and due Katalyst’s legal
team.
If for any reason the foregoing indemnification is
unavailable to any Indemnified Person or insufficient to hold it
harmless, then the Company and the Placement Agent in accordance
with the contributions provisions herein, shall contribute to the
amount paid or payable by such Indemnified Person as a result of
such loss, claim, damage, liability or expense in such proportion
as is appropriate to reflect not only the relative benefits
received by the Company on the one hand and Katalyst on the other
hand, but also the relative fault of the Company and Katalyst, as
well as any relevant equitable considerations; provided that, in no
event, will the aggregate contribution of Katalyst hereunder exceed
the amount of fees actually received by Katalyst pursuant to this
Agreement and in no event will the aggregate contribution of the
Company hereunder exceed the amount of proceeds received by the
Company (or TRUE) through the sale of Securities in the Offering to
investors first contacted by Katalyst. The indemnity, reimbursement
and contribution obligations of the Company under this Agreement
will bind and inure to the benefit of any successors, assigns,
heirs and personal representatives of the Company and any
Indemnified Person.
Promptly
after receipt by an Indemnified Person of notice of the
commencement of any Proceedings, that Indemnified Person will, if a
claim is to be made under this indemnity agreement against the
Company in respect of the Proceedings, notify the Company in
writing of the commencement of the Proceedings; provided that (i)
the omission so to notify the Company will not relieve the Company
from any liability that the Company may have under this indemnity
agreement except to the extent the Company has been materially
prejudiced by such omission, and (ii) the omission to so notify the
Company will not relieve the Company from any liability that the
Company may have to an Indemnified Person otherwise than on account
of this indemnity agreement. In case any Proceedings are brought
against any Indemnified Person and it notifies the Company of the
commencement of the Proceedings, the Company will be entitled to
participate in the Proceedings and, to the extent that it may elect
by written notice delivered to the Indemnified Person, to assume
the defense of the Proceedings with counsel reasonably satisfactory
to the Indemnified Person; provided that, if the defendants in any
Proceedings include both the Indemnified Person and the Company and
the Indemnified Person concludes that there may be legal defenses
available to the Indemnified Person that are different from or in
addition to those available to the Company, the Indemnified Person
has the right to select separate counsel to assert those legal
defenses and to otherwise participate in the defense of the
Proceedings on its behalf at its sole expense. Upon receipt of
notice from the Company to the Indemnified Person of its election
to assume the defense of the Proceedings, the Company will not be
liable to the Indemnified Person for expenses incurred by the
Indemnified Person in connection with the defense of the
Proceedings (other than reasonable costs of investigation) unless
the Company authorizes, in writing, the employment of counsel for
the Indemnified Person and expressly agrees in writing to be liable
for the reasonable expenses of such legal counsel.
The
Company will not be liable for any settlement of any Proceedings
effected without its written consent (which consent must not be
unreasonably withheld), but if settled with the Company’s
written consent or if a final judgment for the plaintiff in any
such Proceedings is delivered, the Company agrees to indemnify and
hold harmless each Indemnified Person from and against any and all
losses, claims, damages, liabilities and expenses by reason of such
settlement or judgment. The Company may not, without the prior
written consent of an Indemnified Person (which consent shall not
be unreasonably withheld), effect any settlement of any pending or
threatened Proceedings in respect of which indemnity could have
been sought under this indemnity agreement by such Indemnified
Person unless the settlement includes an unconditional release of
the Indemnified Person, in form and substance reasonably
satisfactory to the Indemnified Person, from all liability on
claims that are the subject matter of such
Proceedings.
The
Company’s reimbursement, indemnity and contribution
obligations hereunder will be in addition to any liability that it
may otherwise have.
Capitalized terms used but not defined in
this
Appendix I
have the meanings assigned to such
terms in the Agreement.
KATALYST
SECURITIES LLC
630
THIRD AVENUE, 5
TH
FLOOR
NEW
YORK, NY 10017
TEL:
212-400-6993 FAX: 212-247-1059
Member:
FINRA & SIPC
Exhibit 10.5
As of
April 16, 2019
STRICTLY CONFIDENTIAL
Mr. Brandon Stump
CEO
Charlie’s Chalk Dust LLC
1007 Brioso Drive
Costa
Mesa, CA 92627
Dear
Mr. Stump:
Reference is made
to that certain engagement letter agreement, dated as of February
15, 2019, (the “
Engagement
Letter
”), with respect to the engagement of Katalyst
Securities LLC (“
Katalyst
”), registered broker
dealer and member of the Financial Industry Regulatory Authority
(“
FINRA
”)
and SIPC, as the placement agent
(hereinafter referred to as “
Placement Agent
”), by
Charlie’s Chalk Dust LLC, a Delaware limited liability
company (the “
Company
”). The parties wish to
amend the Engagement Letter to increase the minimum and maximum
amount of the Offering, change the date for initial close and fees
due Katalyst by entering into this letter (this “
Amendment
”). Capitalized terms
not defined in this First Amendment have the meanings set forth in
the Engagement Letter.
The
parties agree that the terms of the Offering as set forth in the
first paragraph of the Engagement Letter is hereby amended and
restated in its entirety as follows:
This
letter (the “
Agreement
”) constitutes our
understanding with respect to the engagement of Katalyst Securities
LLC (“
Katalyst
”), registered broker
dealer and member of the Financial Industry Regulatory Authority
(“
FINRA
”)
and SIPC, as an exclusive
placement agent (hereinafter referred to as “
Placement Agent
”), by
Charlie’s Chalk Dust LLC, a Delaware limited liability
company (the “
Company
”) to assist the Company
with (i) a minimum Twenty Three Million Seven Hundred Fifty
Thousand Dollars ($23,750,000.00) private placement financing of
the Company (the “
Offering
”) of equity securities
by the Company immediately preceding the proposed merger (the
“
Merger
”) with
a wholly owned subsidiary (“
Acquisition Sub
”) of True Drinks
Holdings, Inc., a Nevada corporation (“
TRUE
”) or simultaneously with or
immediately after the Merger, and (ii) to assist the Company with
other filings required by FINRA, United States Securities and
Exchange Commission (the “
SEC
”) and as required under the
Securities Exchange Act of 1934, as amended (the
“
Exchange
Act
”). The terms and conditions of the Merger will be
negotiated between and mutually agreed upon between the Company and
TRUE and nothing herein implies that the Placement Agent would have
the power or authority to bind the Company or TRUE or an obligation
of the Company or TRUE to accept a proposed Merger, issue any
Securities (as defined herein), or complete an Offering. The
Offering will be made pursuant to the exemptions afforded by
Section 4(a)(2) of the Securities Act of 1933, as amended (the
“
Act
”), and
Regulation D promulgated thereunder and applicable state securities
laws. Following the Merger, the “
Company
” shall be deemed to
include TRUE and Acquisition Sub. The proposed capitalization table
of TRUE, post reorganization, private placement offering is set
forth in Exhibit A, attached herewith, is not final and subject to
changes.
The
parties agree that the terms of the Offering as set forth in
Paragraph A, third and fourth paragraphs, are hereby amended and
restated in their entirety as follows:
The
proposed Offering will seek to raise a minimum of gross proceeds of
Twenty Three Million Seven Hundred Fifty Thousand Dollars
($23,750,000.00) through the sale of units (such units, together
with the Class A Units, the Warrants and the Brokers Warrants (each
as defined herein, the “
Securities
”) consisting of (i)
one Class A Unit of the Company’s (the “Class A
Unit”), and (ii) warrants to purchase 0.50 Class A Units (the
“Warrants”) immediately preceding the Merger or TRUE
common stock simultaneously with or immediately after the Merger
(in either case, the “
Common
Stock
”), (the “
Minimum Offering
”), and a maximum
of gross proceeds of Twenty Seven Million Five Hundred Thousand
Dollars ($27,500,000.00) (the “
Maximum Offering
”). The Warrants
shall have a five (5) year life and an exercise price equal to
$2.50. The Warrants shall convert into similar warrants of TRUE
following consummation of the Merger. The Minimum Offering will
include the participation of to be identified strategic investor(s)
(the “
Strategic
Investor
”) in the amount of at least Five Million
Dollars ($5,000,000). The offering price for each Unit is $2.50
(the “
Purchase
Price
”). The minimum subscription is Twenty Five
Thousand Dollars ($25,000) provided, however, subscriptions in
lesser amounts may be accepted by the Company in its sole
discretion. In connection with the Offering, funds from certain
investors identified as direct investors in the Offering Documents
(“Direct Investors”) will be included in reaching the
Minimum Offering.
The
Closing, as defined below, of the Offering is anticipated on or
before May 31, 2019, or at such time and place as mutually agreed
to by the Company and the Placement Agent. (the “
Offering Period”)
.
The
parties agree that the terms of Section B.1. Financing Fee are
hereby amended and restated in their entirety as
follows:
B.
Fees
and Expenses
.
1.
Financing
Fee
.
(a)
Cash
Portion
.
Subject to
the Closing of the Offering and the Merger, the Company hereby
agrees to pay (or cause TRUE to pay) the Placement Agent (or the
designees authorized by such Placement Agent), at the Closing of
the Offering, as compensation for their services hereunder, a cash
fee (the “
Financing
Fee
”) in the amount of Ten Percent (10.0%) of the
gross proceeds from any sale of Securities in the Offering to
Investors also referred to as the Purchasers and Direct Investors
as defined in the Offering documents. The Financing Fee shall be
paid to the Placement Agent in cash by wire transfer from the
escrow account in which the Offering proceeds are deposited,
concurrently with the delivery of the net proceeds to the Company
at the Closing of the Offering.
(b)
Warrant
Portion
.
At the Closing of the
Merger, the Company will issue to the Placement Agent (or the
designees authorized by such Placement Agent), as compensation for
its services hereunder, warrants to purchase shares of TRUE’s
common stock equal to Ten Percent (10%) of the Class A Units sold
in the Offering (as adjusted pursuant to the terms of the Merger)
to Investors plus Ten Percent (10%) of the Warrants sold in the
Offering (as adjusted pursuant to the terms of the Merger) to
Investors and Direct Investors (the “
Broker Warrants
”), with a term of
five (5) years from the final closing of the Offering and an
exercise price of $2.50 per share. The Broker Warrants shall be the
same as the warrants issued to the Investors upon the Merger. The
Financing Fee and the Broker Warrants are sometimes referred to
collectively as the
“Broker
Fees”).
The Broker Warrants may be issued directly to
the Placement Agent’s employees and affiliates at the
Placement Agent’s written request.
(c)
Tail
Provisions.
The Company
shall also pay to the Placement Agent the Financing Fee and the
Broker Warrants calculated in the manner provided in Sections
B.1(a) and 1(b) above with respect to any subsequent public or
private offering or other financing or capital-raising transaction
of any kind (“
Subsequent
Financing
”) to the extent that such financing or
capital is provided the Company, or to any Affiliate of the
Company, by investors whom the Placement Agent had
“introduced” (as defined below), directly or
indirectly, to the Company during the Offering Period and the
Direct Investors if such Subsequent Financing is consummated at any
time within the twelve (12) month period following the earlier of
the expiration or termination of this Agreement or the closing of
the Offering (the “
Tail
Period
”). A party “introduced” by the
Placement Agent shall mean an investor who either (i) participated
in the Offering, (ii) met with the Company and/or had a
conversation with the Company either in person or via telephone
regarding the Offering, (iii) was provided by the Placement Agent
with a copy of the Company’s offering memorandum (or other
materials prepared and/or approved by the Company in connection
with the Offering), or (iv) contacted by the Placement Agent during
the Offering Period, in each case based upon such investor
expressing an interest, directly or indirectly, to the Placement
Agent in investing in the Offering. An “Affiliate” of
an entity shall mean any individual or entity controlling,
controlled by or under common control with such entity and any
officer, director, employee, stockholder, partner, member or agent
of such entity.
Except
as amended by this First Amendment, the Engagement Letter remains
unmodified and in full force and effect.
This
First Amendment shall be deemed to have been made and delivered in
New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws
of the State of New York without regard to principles of conflicts
of law thereof.
This
First Amendment may be executed in counterparts (including
facsimile or in pdf format counterparts), each of which shall be
deemed an original but all of which together shall constitute one
and the same instrument.
SIGNATURE
PAGE TO FOLLOW
In
acknowledgment that the foregoing correctly sets forth the
understanding reached by the Placement Agent and the Company,
please sign in the space provided below, whereupon this First
Amendment to the Engagement Letter shall constitute a binding
Agreement as of the date first indicated above.
CHARLIE’S
CHALK DUST LLC.
Brandon
Stump
CEO
KATALYST
SECURITIES LLC
By:
/s/ Michael A.
Silverman
Name: Michael
A. Silverman
Title:
Managing
Director
True
Drinks Holdings, Inc. agrees that upon completion of the Merger,
and only following the Merger, (i) the term “Company”
as used in this Agreement shall also apply to True Drinks Holdings,
Inc., (ii) it becomes a party to this First Amendment as if signed
by True Drinks Holdings, Inc. as of the date hereof and (iii) it
will guarantee the obligations of Acquisition Sub, including the
indemnification and tail provisions of the Agreement.
TRUE DRINKS HOLDINGS, INC.
By: /s/
Robert Van Boerum
Name:
Robert Van Boerum
Title:
Principal Executive Officer and Principal Financial
Officer
Exhibit
10.6
SUBSCRIPTION AGREEMENT
This
Subscription Agreement, dated April 26, 2019 (this
“
Agreement
”),
has been executed by the advisors set forth on the signature page
hereof (each an “
Advisor
” and collectively the
“
Advisors
”) in
connection with the placement (the “
Offering
”) by True Drink Holdings,
Inc, a Nevada corporation (the “
Company
” or “
Pubco
”) of the securities
discussed herein.
R E C I T A L S
A.
Simultaneous with
or immediately after the entry into this Agreement, the Company
will enter into a Securities Exchange Agreement (the
“
Exchange
Agreement
”) with Charlie’s Chalk Dust, LLC, a
Delaware limited liability company (“
CCD
”), the Class A Members of CCD,
the Class B Members of CCD and holders of existing warrants of CCD
pursuant to which such security holders of CCD will exchange all of
such securities of CCD for equity securities of the Company (the
“
Exchange
”).
B.
The Advisors have
provided advisory services on behalf of the Company in connection
with the Exchange (the “
Advisory Services
”).
C.
As compensation for
the Advisory Services, the Company has agreed and hereby agrees to
issue to the Advisors and their designees (each a
“Subscirber”) those securities set forth opposite such
Subscriber’s names on Exhibit A hereto (the
“
Securities
”).
AGREEMENT
In
consideration of the premises and
the mutual covenants contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and each Advisor hereby agree as
follows:
1.
ISSUANCE
OF SECURITIES.
(a)
Issuance of the Securities
.
Subject to the satisfaction (or waiver) of the conditions set forth
in this Agreement, the Company shall issue to each Subscriber in
exchange for the Advisory Services previously provided by the
Advisors the Securities set forth opposite each Subscriber’s
name on Exhibit A hereto.
(b)
Issuance
Time
. The issue of the Securities shall occur simultaneous
with (or immediately before) the Exchange (the “
Issuance Time
”).
(c)
Delivery
.
At the Issuance Time, (i) the Company shall deliver irrevocable
instructions to Corporate Stock Transfer, the Company’s
transfer agent, or such other person as the parties shall jointly
designate in writing, to issue to each Subscriber certificates
representing the Securities (collectively, “
Issuable Securities
”) registered
in the name of such Subscriber, and for the number and kind of
Issuable Securities set forth on Exhibit A hereto. Within two weeks
after the Issuance Date, Corporate Stock Transfer shall deliver the
Securities to the Subscribers.
2.
ADVISORS’
REPRESENTATIONS AND WARRANTIES.
Each
Advisor, severally and not jointly, represents and warrants to the
Company with respect to only itself that (except where expressly
stated otherwise), as of the date hereof and as of the Issuance
Time:
(a)
Investment Purpose
. The
Subscriber is acquiring the Securities for its own account for
investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the Securities Act;
provided, however, that by making the representations herein, such
Subscriber reserves the right to dispose of the Securities at any
time in accordance with or pursuant to an effective registration
statement covering such Securities or an available exemption under
the Securities Act. Such Subscriber does not presently have any
agreement or understanding, directly or indirectly, with any Person
to distribute any of the Securities.
(b)
Accredited
Investor Status
. Each Subscriber is an “Accredited
Investor” as that term is defined in Rule 501(a)(3) of
Regulation D.
(c)
Reliance
on Exemptions
. The Advisor understands that the Securities
are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and
state securities laws and that the Company is relying in part upon
the truth and accuracy of, and such Advisor’s compliance
with, the representations, warranties, agreements, acknowledgments
and understandings of each Subscriber set forth herein in order to
determine the availability of such exemptions and the eligibility
of such Subscriber to acquire the Securities.
(d)
Information
.
Each Subscriber has been furnished with all materials relating to
the business, finances and operations of the Company and
information he deemed material to making an informed investment
decision regarding his purchase of the Securities, which have been
requested by such Subscriber. Each Subscriber has been afforded the
opportunity to ask questions of the Company and its management.
Neither such inquiries nor any other due diligence investigations
conducted by a Subscriber or its representatives shall modify,
amend or affect such Subscriber’s right to rely on the
Company’s representations and warranties contained in Article
3 below. Each Subscriber understands that its investment in the
Securities involves a high degree of risk. Each Subscriber has
sought such accounting, legal and tax advice, as it has considered
necessary to make an informed investment decision with respect to
its acquisition of the Securities.
(e)
Transfer
or Resale
. Each Subscriber understands that: (i) the
Securities have not been registered under the Securities Act or any
state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered
thereunder, (B) each Subscriber shall have delivered to the Company
an opinion of counsel, in a generally acceptable form, to the
effect that such Securities to be sold, assigned or transferred may
be sold, assigned or transferred pursuant to an exemption from such
registration requirements, or (C) each Subscriber provides the
Company with reasonable assurances (in the form of seller and
broker representation letters) that such Securities can be sold,
assigned or transferred pursuant to Rule 144 promulgated under the
Securities Act, as amended (or a successor rule thereto)
(collectively, “
Rule
144
”), in each case following the applicable holding
period set forth therein; and (ii) any sale of the Securities made
in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of the Securities under circumstances in which the
seller (or the person through whom the sale is made) may be
deemed to be an underwriter (as that term is defined in the
Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the SEC
thereunder.
(f)
Legends
.
The Advisor agrees to the imprinting, so long as its required by
this Article 2(f), of a restrictive legend on the Securities (and
any securities into which the Securities may be converted) in
substantially the following form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE [AND INTO WHICH THIS
SECURITY MAY BE CONVERTED] HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS.
Certificates
evidencing the Securities (and any securities into which the
Securities may be converted) shall not contain any legend
(including the legend set forth above), (i) while a registration
statement covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Securities (or
any securities into which the Securities are converted) pursuant to
Rule 144, (iii) if such Securities (or any securities into which
the Securities are converted) are eligible for sale under Rule 144,
or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the SEC).
The Advisor agrees that the removal of restrictive legend from
certificates representing Securities as set forth in this Article
3(f) is predicated upon the Company’s reliance that each
Subscriber will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a
registration statement, they will be sold in compliance with the
plan of distribution set forth therein.
(g)
Organization. Authority
. Such
Advisor, if an entity, is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its organization with the requisite power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations hereunder and
thereunder.
(h)
Authorization,
Enforcement
. If the Advisor is an entity, this Agreement has
been duly and validly authorized, executed and delivered on behalf
of such Advisor and shall constitute the legal, valid and binding
obligations of such Advisor enforceable against such Advisor in
accordance with its terms, except as such enforceability may be
limited by general principles of equity or to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and
remedies.
(i)
No
Conflicts
. The execution, delivery and performance by such
Advisor of this Agreement and the consummation by such Advisor of
the transactions contemplated hereby will not (i) result in a
violation of the organizational documents of such Advisor, (ii)
conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which
such Advisor is a party or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and
state securities laws) applicable to such Advisor, except, in the
case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect
on the ability of such Advisor to perform its obligations
hereunder.
3.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company makes the representations and warranties set out in Article
4.6 to and through Article 4.36 of the Exchange Agreement to the
Subscribers (substituting the term “Subscriber/s” for
“Member/s and Direct Investor/s” where applicable) and
agrees that the Subscribers may rely on such representations and
warranties as if such representations and warranties were set forth
below. Additionally, the Company hereby makes the representations
and warranties set forth below to the Subscribers:
(a)
Authorization. Enforcement.
Validity
. The Company has the requisite power and authority
to enter into and perform its obligations under this Agreement and
to issue the Securities in accordance with the terms hereof and
thereof. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby (including, without limitation, the issuance of
the Securities and the securities into which the Securities may be
converted) have been duly authorized by the Company's board of
directors and no further filing, consent or authorization is
required by the Company, its board of directors or its stockholders
or other governmental body. This Agreement has been duly executed
and delivered by the Company, and each constitutes the legal, valid
and binding obligations of the Company, enforceable against the
Company in accordance with its respective terms, except as such
enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally,
the enforcement of applicable creditors' rights and remedies and
except as rights to indemnification and to contribution may be
limited by federal or state securities law.
(b)
Issuance
of Securities
. The issuance of the Securities are duly
authorized and shall be validly issued, fully paid and
nonassessable and free from all preemptive or similar rights,
mortgages, defects, claims, liens, pledges, charges, taxes, rights
of first refusal, encumbrances, security interests and other
encumbrances (collectively “
Liens
”) with respect to
the issuance thereof. Upon issuance or conversion in accordance
with the Securities, the securities into which the Securities are
converted, when issued, will be validly issued, fully paid and
nonassessable and free from all preemptive or similar rights or
Liens with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of Common
Stock.
(c)
No
Conflicts
. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby (including, without limitation,
the issuance of the Securities and the issuance of securities into
which the Securities may be converted) will not (i) result in a
violation of the Company’s Articles of Incorporation (as
amended), Bylaws (as amended), certificate of formation, memorandum
of association, articles of association, bylaws or other
organizational documents of the Company, or any capital stock or
other securities of the Company, (ii) conflict with, or constitute
a default under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including, without limitation, U.S. federal and state securities
laws and regulations, the securities laws of the jurisdictions of
the Company's incorporation or in which it or its subsidiaries
operate) and including all applicable laws, rules and regulations
of the State of Nevada) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company is
bound or affected, except in the case of (ii) and (iii) for any
conflict, default, right or violation that would not reasonably be
expected to result in a Material Adverse Effect.
(d)
Consents
.
The Company is not required to obtain any material consent from,
authorization or order of, or make any filing or registration with
(other than any filings as may be required by any state securities
agencies), any Governmental Entity (as defined below) or any
regulatory or selfregulatory agency or any other Person in
order for it to execute, deliver or perform any of its obligations
under or contemplated by this Agreement, in each case, in
accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company
is required to obtain pursuant to the preceding sentence have been
or will be obtained or effected on or prior to the Issuance Time,
and the Company is not aware of any facts or circumstances which
might prevent the Company from obtaining or effecting any of the
registration, application or filings contemplated by this
Agreement. “
Governmental Entity
”
means any nation, state, county, city, town, village, district, or
other political jurisdiction of any nature, federal, state, local,
municipal, foreign, or other government, governmental or
quasigovernmental authority of any nature (including any
governmental agency, branch, department, official, or entity and
any court or other tribunal), multinational organization or
body. or body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature or
instrumentality of any of the foregoing, including any entity or
enterprise owned or controlled by a government or a public
international organization or any of the foregoing.
(e)
The
Company acknowledges that the Advisors may sign the Registration
Rights Agreement to be entered on the date hereof among the Company
and certain shareholders of the Company on the date hereof on
behalf of the other Subscribers set out in Exhibit and that the
Subscribers shall be deemed to be parties to such Registration
Rights Agreement.
4.
CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the
Securities to each Subscriber is subject to the satisfaction, at or
before the Issuance Time, of each of the following conditions,
provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion
by providing each Subscriber with prior written notice
thereof:
(a)
the Advisors shall
have executed each of this Agreement and a Registration Rights
Agreement, the form of which is attached hereto as Exhibit B, and
delivered the same to the Company.
(b)
The representations
and warranties of such Advisor shall be true and correct in all
material respects, and such Advisor shall have performed, satisfied
and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Advisor.
5.
CONDITIONS
TO EACH SUBCRIBER'S OBLIGATION TO PURCHASE.
The
obligation of each Advisor hereunder to acquire its Securities is
subject to the satisfaction of each of the following conditions,
provided that these conditions are for each Advisor's sole benefit
and may be waived by such Advisor at any time in its sole
discretion by providing the Company with prior written notice
thereof:
(a)
The
Company shall have duly executed and delivered to such Advisor each
of this Agreement and a Registration Rights Agreement, the form of
which is attached hereto as Exhibit B, and delivered the same to
such Advisor.
(b)
Each
and every representation and warranty of the Company shall be true
and correct in all material respects (other than representations
and warranties qualified by materiality, which shall be true and
correct in all respects), and the Company shall have performed,
satisfied and complied in all respects with the covenants,
agreements and conditions required to be performed, satisfied or
complied with by the Company.
(c)
The
Company shall have obtained all governmental, regulatory or
third-party consents and approvals, if any, necessary for the sale
of the Securities, if any.
(d)
No
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by any court or Governmental Entity of competent
jurisdiction that prohibits the consummation of any of the
transactions contemplated by the Transaction
Documents.
(e)
The
Company and its Subsidiaries shall have delivered to such Advisor
such other documents, instruments or certificates relating to the
transactions contemplated by this Agreement as such Advisor or its
counsel may reasonably request.
6.1
Indemnification
.
(a) Subject
to the provisions of this
Article 6
,
and irrespective of any due diligence
investigation conducted by a Subscriber with regard to the
transactions contemplated hereby,
Pubco agrees to indemnify
fully in respect of, hold harmless and defend each Subscriber, and
each of the officers, agents and directors of such Subscriber
against any damages, liabilities, costs, claims, proceedings,
investigations, penalties, judgments, deficiencies, including
taxes, expenses (including, but not limited to, any and all
interest, penalties and expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever) and losses (each,
a “
Claim
” and
collectively “
Claims
”) to which it or they may
become subject arising out of or based on any breach of or
inaccuracy in any of the representations and warranties or
covenants or conditions made by Pubco in this
Agreement.
(b) Subject
to the provisions of this
Article 6
, each Subscriber
agrees to indemnify fully in respect of, hold harmless and defend
Pubco and each of its officers, agents and directors against any
Claims to which they may become subject arising out of or based on
any breach of or inaccuracy in any of the representations and
warranties or covenants or conditions made by such Subscriber and
in this Agreement; provided no Subscriber shall have any
responsibility hereunder except for representations, warranties,
covenants or conditions made by it; and further provided that the
liability of any Subscriber shall not exceed the value at the
Issuance Time of the Securities received by it
hereunder.
6.2
Survival
of Representations and Warranties
. Notwithstanding any
provision in this Agreement to the contrary, the representations
and warranties given or made by Pubco, and the Subscribers under
this Agreement shall survive the date hereof for a period of
forty-eight (48) months from and after the Issuance Date (the last
day of such period is herein referred to as the “
Expiration Date
”), except that any
written claim for breach thereof made and delivered prior to the
Expiration Date to the party against whom such indemnification is
sought shall survive thereafter and, as to any such claim, such
applicable expiration will not effect the rights to indemnification
of the party making such claim; provided, however, that any
representations and warranties that were fraudulently made shall
not expire on the Expiration Date and shall survive indefinitely
and claims with respect to fraud by Pubco or the Subscribers must
be made at any time, as long as such claim is made within a
reasonable period of time after discovery by the claiming
party.
6.3
Method
of Asserting Claims, Etc
. The party claiming indemnification
is hereinafter referred to as the “
Indemnified Party
” and the party
against whom such claims are asserted hereunder is hereinafter
referred to as the “
Indemnifying Party
.” All Claims
for indemnification by any Indemnified Party under this
Article 6
shall be
asserted as follows:
(a) In
the event that any Claim or demand for which an Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted
against or sought to be collected from such Indemnified Party by a
third party, said Indemnified Party shall, within ten (10) business
days from the date upon which the Indemnified Party has Knowledge
of such Claim, notify the Indemnifying Party of such claim or
demand, specifying the nature of and specific basis for such claim
or demand and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not be conclusive of the
final amount of such Claim or demand) (the “
Claim Notice
”). The Indemnified
Party’s failure to so notify the Indemnifying Party in
accordance with the provisions of this Agreement shall not relieve
the Indemnifying Party of liability hereunder unless such failure
materially prejudices the Indemnifying Party’s ability to
defend against the claim or demand. The Indemnifying Party shall
have 30 days from the giving of the Claim Notice (the
“
Notice Period
”)
to notify the Indemnified Party: (i) whether or not the
Indemnifying Party disputes the liability of the Indemnifying Party
to the Indemnified Party hereunder with respect to such Claim or
demand, and (ii) whether or not the Indemnifying Party desires, at
the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Claims or demand; provided, however,
that any Indemnified Party is hereby authorized prior to and during
the Notice Period to file any motion, answer or other pleading
which he shall deem necessary or appropriate to protect his
interests or those of the Indemnifying Party and not prejudicial to
the Indemnifying Party. In the event that the Indemnifying Party
notifies the Indemnified Party within the Notice Period that he,
she or it does not dispute liability for indemnification under this
Article 6
and that
such person desires to defend the Indemnified Party against such
claim or demand and except as hereinafter provided, the
Indemnifying Party shall have the right to defend by all
appropriate proceedings, which proceedings shall be promptly
settled or prosecuted by him to a final conclusion. The Indemnified
Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such
Indemnified Party except to the extent that the employment thereof
has been specifically authorized by the Indemnifying Party in
writing, the Indemnifying Party has failed after a reasonable
period of time to assume such defense and to employ counsel or in
such action there is, in the reasonable opinion of such separate
counsel, a material conflict on any material issue between the
position of the Indemnifying Party and the position of such
Indemnified Party (a “
Material Conflict
”). If requested
by the Indemnifying Party and there is no Material Conflict, the
Indemnified Party agrees to cooperate with the Indemnifying Party
and his, her or its counsel in contesting any Claim or demand which
the Indemnifying Party elects to contest or, if appropriate and
related to the Claim in question, in making any Counterclaim
against the person asserting the third party Claim or demand, or
any cross-complaint against any person. No Claim for which
indemnity is sought hereunder and for which the Indemnifying Party
has acknowledged liability for indemnification under this
Article 6
may be
settled without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed.
(b) In
the event any Indemnified Party should have a Claim against any
Indemnifying Party hereunder which does not involve a Claim or
demand being asserted against or sought to be collected from him by
a third party, the Indemnified Party shall give a Claim Notice with
respect to such Claim to the Indemnifying Party. If, after receipt
of a Claim Notice, the Indemnifying Party does not notify the
Indemnified Party within the Notice Period that he, she or it
disputes such Claim, then the Indemnifying Party shall be deemed to
have admitted liability for such Claim in the amount set forth in
the Claim Notice.
(c) The
Indemnifying Party shall be given the opportunity to defend the
respective Claim.
(a)
Governing Law. Jurisdiction. Jury
Trial
. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed
by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other
than the State of New York. The Company hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts
sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or
under any of the other Transaction Documents or with any
transaction contemplated hereby or thereby, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in
an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Nothing contained herein
shall be deemed or operate to preclude any Subscriber from bringing
suit or taking other legal action against the Company in any other
jurisdiction to collect on the Company's obligations to such
Subscriber or to enforce a judgment or other court ruling in favor
of such Subscriber.
EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT
TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION
WITH OR ARISING OUT OF THIS AGREEMENT, ANY OTHER TRANSACTION
DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY.
(b)
Counterparts
. This Agreement
may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and
delivered to the other party. In the event that any signature is
delivered by facsimile transmission or by an email which
contains a portable document format (.pdf) file of an executed
signature page, such signature page shall create a valid and
binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such
signature page were an original thereof.
(c)
Headings. Gender
. The headings
of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.
Unless the context clearly indicates otherwise, each pronoun herein
shall be deemed to include the masculine, feminine, neuter,
singular and plural forms thereof. The terms "including,"
"includes," "include" and words of like import shall be construed
broadly as if followed by the words "without limitation." The terms
"herein," "hereunder," "hereof" and words of like import refer to
this entire Agreement instead of just the provision in which they
are found.
(d)
Entire Agreement, Amendments
.
This Agreement supersedes all other prior oral or written
agreements between the Subscriber, the Company, their affiliates
and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor
any Subscriber makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with
enforcement.
(e)
Successors and Assigns
. This
Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns. The Company
shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Subscribers. In
connection with any transfer of any or all of its Securities, a
Subscriber may assign all, or a portion, of its rights and
obligations hereunder in connection with such Securities without
the consent of the Company, in which event such assignee shall be
deemed to be a Subscriber hereunder with respect to such
transferred Securities.
(f)
No Strict Construction
. The
language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any
party.
[REMAINDER
PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF
,
each Subscriber and the Company have
caused their respective signature page to this Subscription
Agreement to be duly executed as of the date first written
above.
|
COMPANY:
|
|
TRUE DRINKS HOLDINGS, INC.
|
|
|
|
By:
|
|
Name:
|
|
Title:
|
|
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IN WITNESS WHEREOF
,
each Subscriber and the Company have
caused their respective signature page to this Subscription
Agreement to be duly executed as of the date first written
above.
EXHIBIT B
Form of Registration Rights Agreement
Exhibit 10.7
Employment Agreement
This
EMPLOYMENT AGREEMENT (the “
Agreement
”), is entered
into as of April 26, 2019, by and between True Drink Holdings,
Inc., a Nevada corporation (the “
Company
”), and Brandon
Stump(“
Executive
”).
WHEREAS, the
Company recognizes that the Executive has had and is expected to
continue to have a critical and essential role in guiding the
Company and in developing the Company’s
business;
WHEREAS, the
Executive is expected to make major contributions to the stability,
growth and financial strength of the Company;
WHEREAS, the
Company has determined that appropriate arrangements should be
taken to encourage the continued attention and dedication of the
Executive to his assigned duties without distraction;
WHEREAS, in
consideration of the Executive’s employment with the Company,
the Company desires to provide the Executive with certain
compensation and benefits as set forth in this Agreement;
and
WHEREAS, the
Executive desires to be employed by the Company on the terms
contained in this Agreement which shall supersede all previous
employment agreements regarding the Executive’s service as an
officer, director and employment by the Company.
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements herein
contained and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree
as follows:
1.
Position and
Duties
.
(a)
The Executive shall
serve as the Chief Executive Officer (“CEO”) of the
Company reporting to the Company’s Board of Directors (the
“
Board
”). The Executive
shall primarily work out of any office he deems
appropriate.
(b)
The Company agrees
to propose to the shareholders of the Company at each appropriate
meeting of such shareholders during the Term and any Renewal Term
(as such terms are defined below), the election and reelection of
the Executive as a member of the Board. In addition, in his
capacity as the Company’s Chief Executive Officer, the
Executive shall either serve as a director, manager, member and
senior executive officer of each of the Company’s
subsidiaries or affiliates, or shall alone act on the
Company’s behalf in the Company’s capacity as member,
manager, shareholder, partner, or otherwise as interest holder in
respect of any and all of the Company’s subsidiaries and
affiliates, except that the Executive himself may delegate such
function or appoint another in his stead.
(c)
The Executive shall
have such duties, authority and responsibilities as are consistent
with the role of CEO and as may be set forth in the Bylaws of the
Company on the date hereof. Executive shall only have duties as
arise from this Agreement and any duties or obligations to the
Company under any previous employment agreement are hereby
cancelled. For purposes of the applicability of the Company’s
compensation plans to the Executive, Executive shall be considered
an “employee.” Nothing herein shall require the
Executive to devote more than a substantial amount of his business
time to the performance of his duties hereunder. Accordingly, the
Executive shall be entitled to (i) serve as an advisor or member of
the board of directors of unaffiliated companies, (ii) serve on
civic, charitable, educational, religious, public interest or
public service boards, (iii) manage the Executive’s personal
and family investments, and (iv) engage in and/or have an ownership
interest in other businesses. In addition, the Executive has
disclosed to the Company his involvement in entities and
investments other than the Company (collectively, the
“
Outside
Activities
”). The Executive is permitted to continue
to engage in the Outside Activities. The Company shall also permit
the Executive to engage in other business related activities
provided that the Executive agrees to disclose to the Board any
actual or potential conflict of interest arising out of any such
activities.
2.
Term
.
This Agreement and Executive’s
employment hereunder shall be for an initial term of
three
(
3
) years (“
Initial
Term
”) commencing on the
date hereof (the “
Effective
Date
”) and ending on the
third anniversary of the Effective Date, unless terminated earlier
by the Company or the Executive pursuant to Section 4 of this
Agreement (the “
Term
”).
Thereafter, at the election of the Executive or the Company, this
Agreement may be extended for an additional one (1) year
(the “
First
Extension
”). Thereafter, the Term shall continue for
an additional one-year periods unless, at least one hundred and
eighty (180) days before the expiration of the First Extension, the
Company provides notice in writing to the Executive that the Term
shall not be further extended.
Each
such extension shall be referred to as a Renewal Term. The date
upon which this Agreement would terminate if both extensions are
elected shall be referred to as the Expiration
Date.
3.
Compensation and Related
Matters
.
(a)
Base Salary
. The
Executive’s initial annual base salary shall be $500,000.00
subject to applicable withholdings (the “
Base Salary
”). The Base
Salary shall be payable in accordance with the Company’s
normal payroll procedures in effect from time to time. On each
calendar year the base salary will increase no less than $25,000.00
(“minimum”). The Compensation Committee of the Board
(“
Compensation
Committee
”) shall review the Base Salary annually and
may increase the Base Salary more than the minimum, and the term
“Base Salary” shall refer to such increased
amount.
(b)
Annual Bonus
. During the Term,
the Executive may receive an annual cash bonus, in respect of each
full or partial fiscal year of the Company occurring during the
Term a target bonus of $750,000 (the “Target Bonus”).
The bonus for the first year will be based on gross revenue of at
least $35,000,000 (the “GR Target”). If the
Company’s gross revenue is less than 50% of the GR Target,
then the Executive shall not receive any Target Bonus; if the
Company’s gross revenue is above 50% of the GR Target then
the Executive shall receive a percentage of the Target Bonus equal
to the percentage of the GR Target that the Company has achieved;
if the Company’s gross revenue is 105% of the GR Target, the
Executive shall receive an amount equal to 110% of the Target
Bonus; and if the Company’s Gross Revenue is 110% or more of
of the GR target, then Executive shall receive 120% of the Target
Bonus. The Annual Bonus shall be capped at 120% of the target
bonus.
(c)
Milestone Bonuses
. In addition
to any other compensation to which the Executive is entitled, upon
the Company obtaining any of the milestones set forth on
Exhibit A
hereof,
Executive will be entitled to awards of common stock calculated in
accordance with
Exhibit
A
hereof.
(d)
Long Term Incentive Plan
. The
Executive shall be entitled to participate in all bonus plans,
policies, practices, policies and programs adopted by the Company
and applicable generally to senior executives and employees of the
Company. At Executive’s request, the Company shall, at the
Company’s expense, set up a retirement plan for executives
and senior officers of the Company.
(e)
Equity Incentive Plan
. The
Executive shall be granted the equity rights set forth on
Exhibit B
.
Additionally, the Executive shall be entitled to participate in any
and all plans providing for awards of equity or instruments
convertible into equity adopted by the Company and applicable
generally to other senior executives and employees of the Company.
When used in this Agreement “Fair Market Value” shall
mean: (1) If the Company’s common stock (the
“
common
stock
”) is listed on a national securities exchange or
traded in the over-the-counter market and sales prices are
regularly reported for the common stock, the closing or, if not
applicable, the last price of the common stock on the composite
tape or other comparable reporting system for the last trading day
prior to the applicable date; (2) If the common stock is not traded
on a national securities exchange but is traded on the
over-the-counter market, if sales prices are not regularly reported
for the common stock for the trading day referred to in clause (1),
and if bid and asked prices for the Common Stock are regularly
reported, the mean between the bid and the asked price for the
common stock at the close of trading in the over-the-counter market
for the trading day on which common stock was traded on the
applicable date and if such applicable date is not a trading day,
the last market trading day prior to such date; and (3) If the
common stock is neither listed on a national securities exchange
nor traded in the over-the-counter market, such value as the
Compensation Committee and the Executive, in good faith, shall
determine.
(f)
Business Expenses
. The Company
shall promptly reimburse the executive for all reasonable
business-related expenses incurred in connection with the
performance of the Executive’s duties hereunder in accordance
with the policies and procedures then in effect and established by
the Company for its senior executive officers.
(g)
Insurance
. The Company shall
provide the Executive with health insurance for the Executive and
his dependents. The insurance coverage provided shall be not less
than what the Executive has prior to this agreement and in any
event not less than 100% coverage at the highest available family
plan available from the company’s current benefits provider
for California State Residents. At a minimum Health will include
100% coverage of medical, dental, vision, and 100% coverage of
long-term disability for Executive’s entire Base Salary and
accidental death and/or dismemberment. Company will also provide
Executive with $5,000,000.00 of life insurance
with an insurance company rated “A” or
higher.
Should the Executive elect to not utilize any of the
benefits described in this paragraph or any benefits described
elsewhere in this Agreement, then the Company will pay to the
Executive the equivalent value of such insurance plan or
benefit.
(h)
Other Benefits
. The Executive
shall be entitled to participate in all pension, savings and
retirement plans, welfare and insurance plans, practices, policies,
programs and perquisites of employment applicable generally to
other senior executives of the Company and any benefits or covered
expenses included in all previous employment agreements between the
Company and the Executive. Executive shall also receive the same
compensation as other members of the Company’s Board for his
service on the Board. Should the Executive defer such benefits for
one year it shall not be deemed deferred for any other
year.
(i)
Vacation
. The Executive shall
be entitled to accrue up to 21 paid vacation days in each year,
which shall be accrued ratably. The Executive shall also be
entitled to all paid holidays given by the Company to its
executives and employees. Any unused vacation days shall be rolled
forward to be used in future years.
(j)
Sick Days
. The Executive shall
be entitled to accrue up to 10 paid sick days in each year, which
shall be accrued ratably. Any unused sick days shall be rolled
forward to be used in future years.
(k)
Withholding
. All amounts
payable to the Executive under this Section 3 shall be subject to
all required federal, state and local withholding, payroll and
insurance taxes and requirements.
(l)
Direct Payment
. To the extant
practical, at the request of the Executive, all benefits granted
hereunder will be paid directly by the Company to the
vendor.
(m)
Shares in lieu
. In lieu of cash
for any payments due to the Executive including all payments due
upon termination of this Agreement, the Executive may elect to
receive shares of the Company’s common stock valued at the
Fair Market Value based upon the date such cash should have been
paid to the Executive. The election can be made from 30 days before
and 60 days after the date such cash should have been paid to the
Executive.
(n)
Automobile Allowance
. During
the Term, Executive shall receive a monthly automobile allowance in
the amount of $750.00 per month for automobile-related
expenses.
4.
Termination
. The
Executive’s employment may be terminated under the following
circumstances:
(a)
Death
. The Executive’s
employment hereunder shall terminate upon his death.
(b)
Disability
. The Company may
terminate the Executive’s employment if the Executive becomes
subject to a Disability. For purposes of this Agreement,
“
Disability
” means the
Executive is unable to perform the essential functions of his
position as CEO, with or without a reasonable accommodation, for a
period of 120 consecutive days or 180 days during any rolling
consecutive 12-month period. Notice of termination for Disability
shall not take effect unless notice of at least 90 days is provided
to the Executive. Such notice may not be given (and the Disability
not deemed to have occurred) until the Disability is first
confirmed in writing by a medical professional mutually acceptable
to both the Executive and the Compensation Committee.
(c)
Termination by Company for
Cause
. The Company may terminate the Executive’s
employment for Cause. For purposes of this Agreement,
“
Cause
”
means the Executive’s: (i) willful misconduct or gross
negligence which causes material harm to the Company; (ii) fraud,
embezzlement or willful other material dishonesty with respect to
the affairs of the Company or any of its affiliates; (iii)
conviction, plea of
nolo
contendere
, guilty plea, or confession to either a felony or
any lesser crime relating to the affairs of the Company or any of
its affiliates or of which fraud, embezzlement, or moral turpitude
is a material element; or (iv) a willful material breach of this
Agreement or a willful breach of a fiduciary duty owed to the
Company. Provided that any such Cause, except for Cause pursuant to
subsection 4(c)(iii), shall not constitute Cause unless the Company
has provided the Executive with (x) written notice of the acts or
omissions giving rise to a termination of his employment for Cause;
(y) the opportunity to correct the act or omission within 30 days
after receiving the Company’s notice (the “
Cure Period
”); and (z) a
meaningful opportunity to be heard before the Board with the
Executive’s counsel present at least two business days prior
to the Board’s decision to provide a Termination for Cause
notice the Executive.
(d)
Termination by the Company without
Cause
. The Company may not terminate the Executive’s
employment during any Term or Renewal Term without
Cause.
(e)
Termination by the Executive for Any
Reason
. The Executive may terminate his employment at any
time for any reason.
(f)
Termination by the Executive for Good
Reason
. The Executive may terminate his employment for Good
Reason. For purposes of this Agreement, “
Good Reason
” means: (i) a
material reduction in the Executive’s Base Salary; (ii) a
material diminution in the Executive’s responsibilities as
CEO; (iii) the assignment of duties to the Executive materially
inconsistent with his position as CEO; (iv) the requirement that
the Executive relocate his primary place of employment from
Executive’s current location (v) the Company shall have had a
Change in Control (as defined below); (vi) Executive receipt of a
termination notice from the Company seeking to terminate the
Executive’s employment in violation of Section 4(d); or (vii)
the Company’s material breach of this Agreement. For the
purposes of this Agreement a “
Change in Control
” shall
mean any of the following to occur: (1) an acquisition after the
date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange
Act) of effective control (whether through legal or beneficial
ownership of capital stock of Company, by contract or otherwise) in
excess of 15% of the voting securities of Company, (2) Company
merges into or consolidates with any other person, or any person
merges into or consolidates with Company and, after giving effect
to such transaction, the stockholders of Company immediately prior
to such transaction own less than 50% of the aggregate voting power
of Company or the successor entity of such transaction, (3) if the
Executive ceases or be a director of the Company for any reason
except a voluntary resignation by the Executive, (4) Company sells
or transfers all or substantially all of its assets to a
non-affiliated person or entity (5)
During the term of this
Agreement, individuals who at the time of the signing of this
Agreement, who constitute the Board, cease for any reason to
constitute a majority of the Board,
(6) replacement at one
time or within a five year period of one-half or more of the
members of the Board, (7) An actual or threatened contested proxy
)
including but not limited to, the
actual or threatened
election contest or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board,
(8) a person or group of people acting in concert to
acquire, manage, vote or otherwise exercise control over 15% or
more of the outstanding common stock of the Company, (9) the
Company not nominating the Executive for reelection as a director,
or (10) the execution by Company of an agreement to which Company
is a party or by which it is bound, providing for any of the events
set forth in clauses (1) through (9) above. A Change in Control
shall be deemed to have occurred after any action taken in
furtherance of such event or if the Change in Control occurs as a
result of a change in circumstances without any specific action
taken.
(g)
Expiration
. Executive’s
employment shall terminate on the final day of the Term if there is
no election to renew the Term or renew the Renewal
Term.
(h)
Termination Date
. The
“
Termination
Date
” means: (i) if the Executive’s employment
is terminated by his death under Section 4(a), the date of his
death; (ii) if the Executive’s employment is terminated on
account of his Disability under Section 4(b), the date on which the
Company provides the Executive a written termination notice; (iii)
if the Company terminates the Executive’s employment for
Cause under Section 4(c), 10 business days after which the Company
provides the Executive a written termination following the end of
any Cure Period; (iv) if, despite the restriction against doing so
under Section 4(d), the Company terminates the Executive’s
employment without Cause, 30 days after the date on which the
Company provides the Executive a written termination notice; (v) if
the Executive terminates or resigns his employment without Good
Reason under Section 4(e), immediately upon notice to the Company
from the Executive, or such later date as set forth in the notice,
regardless of any termination notice given at any time by the
Company to the Executive; (vi) if the Executive terminates or
resigns his employment with Good Reason under Section 4(f), the
date on which the Executive provides the Company a written
termination notice regardless of any termination notice given at
any time by the Company to the Executive, except the Termination
Date shall be the last day of any relevant Cure Period, if
applicable. Provided further, the Executive must terminate within
one (1) year of the event, act, or omission giving rise to such
termination with each such event, act, or omission having its own
one-year time period; and (vii) the Expiration Date if the
Executive’s employment terminates under Section 4(g).
If an
occurrence of any event or any change in circumstances described in
Section 4(f) occurs at any time prior to the Termination
Date,
the Executive may exercise his rights under Section
4(f) regardless of any exercise by the Company of its rights
under this Agreement or any other agreement, whether any such
exercise by the Company of any of its rights occurs before or
after Executive's exercise of his rights under Section 4(f). If
more than one Termination Date is applicable hereunder, Executive
shall select the Termination Date.
5.
Compensation upon a Good Reason,
Change in Control or Termination
.
(a)
Termination by the Company for Cause;
by the Executive without Good Reason; or upon the Expiration
Date
. If the Executive’s employment with the Company
is terminated pursuant to Sections 4(c), 4(e), or 4(g) following
the Executive’s election not to renew the Term or Renewal
Term, the Company shall pay or provide to the Executive the
following amounts through the Termination Date: any earned but
unpaid Base Salary, unpaid expense and benefits reimbursements, any
earned but unpaid Annual Bonus, any accrued and unused vacation
days (the “
Accrued
Obligations
”) on or before the time required by law
but in no event more than 30 days after the Executive’s
Termination Date. Provided however, in the event of a termination
under Section 4(e) above, the Executive shall continue to receive,
as if this Agreement had not been terminated the compensation set
forth in Sections 3(a) and 3(h) and 3(c) for one year post
termination, provided however the compensation amount set forth in
Section 3(a) shall be paid as if such year was the final year of
this Agreement prior to the Expiration Date.
(b)
Death; Disability
. If the
Executive’s employment terminates because of his death as
provided in Section 4(a) or because of a Disability as provided in
Section 4(b), then the Executive (or his authorized representative
or estate) shall be entitled to the following:
(i)
the Accrued
Obligations earned through the applicable Termination Date (payable
on or before the time required by law but in no event more than 30
days after the applicable Termination Date);
(ii)
a
pro-rata portion of the Executive’s Annual Bonus, if any, for
the fiscal year in which the Executive’s termination occurs
(determined by multiplying the amount of such bonus which would be
due for the full fiscal year by a fraction, the numerator of which
is the number of days during the fiscal year of termination that
the Executive is employed by the Company and the denominator of
which is 365) payable at the same time bonuses for such year are
paid to other senior executives of the Company;
(iii)
vest
the Executive on the applicable Termination Date for any and all
previously granted outstanding equity-incentive awards subject to
time-based vesting criteria as if the Executive continued to
provide services to the Company for 12 months following the
applicable Termination Date;
(iv)
subject
to the Executive’s or, in the event of his death, his
eligible dependents’ timely election of continuation coverage
under the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended (“
COBRA
”), the Company
shall reimburse the Executive or his eligible dependents the
monthly premium payable to continue his and his eligible
dependents’ participation in the Company’s group health
plan (to the extent permitted under applicable law and the terms of
such plan) which covers the Executive (and the Executive’s
eligible dependents) for a period of eighteen (18) months,
provided
that the
Executive is eligible and remains eligible for COBRA coverage; and
provided
,
further
, that in
the event that the Executive obtains other employment that offers
group health benefits, such continuation of coverage by the Company
shall immediately cease. If the reimbursement of any COBRA premiums
would violate the nondiscrimination rules or cause the
reimbursement of claims to be taxable under the Patient Protection
and Affordable Care Act of 2010, together with the Health Care and
Education Reconciliation Act of 2010 (collectively, the
“
Act
”)
or Section 105(h) of the Internal Revenue Code (the
“Code”), the Company paid premiums shall be treated as
taxable payments and be subject to imputed income tax treatment to
the extent necessary to eliminate any discriminatory treatment or
taxation under the Act or Section 105(h) of the Code;
and
(v)
in the case of a
termination due to Disability, in addition to the aforementioned
awards, continuation of the Base Salary in effect on the
Termination Date until the earlier of (A) the 12-month anniversary
of the Termination Date, and (B) the date Executive is eligible to
commence receiving payments under the Company’s long-term
disability policy. If the net compensation from the Base Salary is
greater than the net compensation from the long-term disability
policy, the Company, through the 12-month anniversary of the
Termination Date will compensate the Executive’s estate the
difference in net compensation.
(c)
Termination by the Company without
Cause, by the Executive with Good Reason
. If the
Executive’s employment is terminated by the Company without
Cause despite the restriction against doing so under Section 4(d),
or the Executive terminates his employment for Good Reason as
provided in Section 4(f), then the Executive shall be entitled to
the following:
(i)
The Accrued
Obligations and all Base Salary
(at the increased rate set forth
in Section 4(d)), Stock Compensation, bonuses, payments,
compensation, benefits, bonuses, milestone payments and any other
payment, including but not limited to everything payable under
Section 3 of this Agreement earnable through the Expiration Date
(“Future Obligations”), payable on or before the time
required by law but in no event more than 30 days after the
applicable Termination.
(ii)
Full
vesting of the Executive of any and all previously granted
outstanding equity-based incentive awards subject to time-based
vesting criteria and any equity grants that would have accrued
through the Expiration Date as set forth on Exhibit B or in any
other agreement. All such grants, entitlements and rights,
including any Compensation Shares and shares pursuant to Section
3(n) above, shall be valued at the lower of the Fair Market Value
on (A) the date of this Agreement; (B) the Termination Date; or (C)
the date of the Change of Control event.
(iii)
Unless
specified elsewhere in this Agreement for the benefit of the
Executive, all rights, benefits, incentives and milestones bonuses
or any other Company obligations, including but not limited to any
items in Exhibit A or Exhibit B, shall be paid in accordance with
the terms of this Agreement as if it was not
terminated.
(iv)
Subject
to the Executive’s timely election of continuation coverage
under COBRA, the Company shall reimburse the Executive the monthly
premium payable to continue his and his eligible dependents’
participation in the Company’s group health plan (to the
extent permitted under applicable law and the terms of such plan)
which covers the Executive (and the Executive’s eligible
dependents) for a period of 18 months,
provided
that the Executive is
eligible and remains eligible for COBRA coverage; and
provided
,
further
, that in the event that
the Executive obtains other employment that offers group health
benefits, such continuation of coverage by the Company shall
immediately cease. If the reimbursement of any COBRA premiums would
violate the nondiscrimination rules or cause the reimbursement of
claims to be taxable under the Act or Section 105(h) of the Code,
the Company paid premiums shall be treated as taxable payments and
be subject to imputed income tax treatment to the extent necessary
to eliminate any discriminatory treatment or taxation under the Act
or Section 105(h) of the Code.
(v)
Executive shall
retain the proxy to vote any shares of common stock for which the
Company has been granted a long-term proxy to vote such shares
through the Expiration Date, unless the Executive is earlier
terminated for Cause. Provided however if the Executive contests
the termination for Cause, Executive shall retain such right until
a final non-appealable court or arbitration decision that there was
Cause.
(d)
Change in Control or Good
Reason
. In addition to the Executive’s other rights
described herein, upon a Change in Control or Good Reason, even if
this Agreement is not terminated, the Base Salary for the calendar
year in which Change in Control or Good Reason occurs and all
subsequent increases through the Expiration Date shall
automatically and immediately increase, until the Expiration Date
by twenty percent (20%) from the Base Salary amounts otherwise set
forth herein. All payments made to the Executive upon a Termination
shall be calculated at the increased Base Salary calculated by this
Section. In addition, the Fair Market Value milestones and the
Total Market Value milestones in Exhibit A shall automatically
decrease by 30% until the Expiration Date. Any Compensation Shares
issued upon a Change in Control or Good Reason shall be valued at
the lower of the Fair Market Value on (A) the date of this
Agreement; or (B) the date of the Change of Control or Good Reason
event.
(e)
No Mitigation or Offset
. In the
event of any termination of Executive’s employment hereunder,
Executive shall be under no obligation to seek other employment or
otherwise mitigate the obligations of the Company under this
Agreement, and there shall be no offset against any amounts due
under this Agreement on account of any remuneration attributable to
any subsequent employment that Executive may obtain.
(f)
Effect of Termination as Officer on
Board Position.
Any termination of the Executive with
respect to the Executive’s standing as an executive officer
must expressly designate which such role is subject to termination.
The termination of the Executive as an Officer will not thereby
terminate the Executive’s Board status.
(g)
Default
. In the event the
Company fails to make any payment or issue any stock owed pursuant
to this Section 5, even if such failure was because of a good faith
belief that such amount were not due or payable, then commencing on
the fifth (5
th
) day after such
payment or stock issuance was due (the “Default Date”)
interest shall accrue in cash at the rate of 24% per annum on such
payment or the Full Market Value of such stock from the Default
Date until such payment is made or stock is issued.
6.
Section 409A
Compliance
.
(a)
All in-kind
benefits provided and expenses eligible for reimbursement under
this Agreement shall be provided by the Company or incurred by the
Executive during the time periods set forth in this Agreement. All
reimbursements shall be paid as soon as administratively
practicable, but in no event shall any reimbursement be paid after
the last day of the taxable year following the taxable year in
which the expense was incurred. The amount of in-kind benefits
provided or reimbursable expenses incurred in one taxable year
shall not affect the in-kind benefits to be provided or the
expenses eligible for reimbursement in any other taxable year. Such
right to reimbursement or in-kind benefits is not subject to
liquidation or exchange for another benefit.
(b)
To the extent that
any of the payments or benefits provided for in Section 5(b), (c)
or (d) are deemed to constitute non-qualified deferred compensation
benefits subject to Section 409A of the United States Internal
Revenue Code (the “
Code
”), the following
interpretations apply to Section 5:
(i)
Any termination of
the Executive’s employment triggering payment of benefits
under Section 5(b), (c) or (d) must constitute a “separation
from service” under Section 409A(a)(2)(A)(i) of the Code and
Treas. Reg. §1.409A-1(h) before distribution of such benefits
can commence. To the extent that the termination of the
Executive’s employment does not constitute a separation of
service under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg.
§1.409A-1(h) (as the result of further services that are
reasonably anticipated to be provided by the Executive to the
Company or any of its parents, subsidiaries or affiliates at the
time the Executive’s employment terminates), any benefits
payable under Section 5(b), (c) or (d) that constitute deferred
compensation under Section 409A of the Code shall be delayed until
after the date of a subsequent event constituting a separation of
service under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg.
§1.409A-1(h). For purposes of clarification, this Section
6(b)(i) shall not cause any forfeiture of benefits on the
Executive’s part, but shall only act as a delay until such
time as a “separation from service”
occurs.
(ii)
If
the Executive is a “specified employee” (as that term
is used in Section 409A of the Code and regulations and other
guidance issued thereunder) on the date his separation from service
becomes effective, any benefits payable under Section 5(b), (c) or
(d) that constitute non-qualified deferred compensation under
Section 409A of the Code shall be delayed until the earlier of (A)
the business day following the six-month anniversary of the date
his separation from service becomes effective, and (B) the date of
the Executive’s death, but only to the extent necessary to
avoid such penalties under Section 409A of the Code. On the earlier
of (A) the business day following the six-month anniversary of the
date his separation from service becomes effective, and (B) the
Executive’s death, the Company shall pay the Executive in a
lump sum the aggregate value of the non-qualified deferred
compensation that the Company otherwise would have paid the
Executive prior to that date under Section 5(b), (c) or (d) of this
Agreement.
(iii)
It
is intended that each installment of the payments and benefits
provided under Section 5(b), (c) or (d) of this Agreement shall be
treated as a separate “payment” for purposes of Section
409A of the Code.
(iv)
Neither
the Company nor the Executive shall have the right to accelerate or
defer the delivery of any such payments or benefits except to the
extent specifically permitted or required by Section 409A of the
Code.
7.
Excess Parachute
Payments
.
(a)
To the extent that
any payment, benefit or distribution of any type to or for the
benefit of the Executive by the Company or any of its affiliates,
whether paid or payable, provided or to be provided, or distributed
or distributable pursuant to the terms of this Agreement or
otherwise (including, without limitation, any accelerated vesting
of stock options or other equity-based awards) (collectively, the
“
Total
Payments
”) would be subject to the excise tax imposed
under Section 4999 of the Internal Revenue Code of 1986, as amended
(the “
Code
”), then the Total
Payments shall be reduced (but not below zero) so that the maximum
amount of the Total Payments (after reduction) shall be one dollar
($1.00) less than the amount which would cause the Total Payments
to be subject to the excise tax imposed by Section 4999 of the
Code, but only if the Total Payments so reduced result in the
Executive receiving a net after tax amount that exceeds the net
after tax amount the Executive would receive if the Total Payments
were not reduced and were instead subject to the excise tax imposed
on excess parachute payments by Section 4999 of the Code. Unless
the Executive shall have given prior written notice to the Company
to effectuate a reduction in the Total Payments if such a reduction
is required, any such notice consistent with the requirements of
Section 409A of the Code to avoid the imputation of any tax,
penalty or interest thereunder, the Company shall reduce or
eliminate the Total Payments by first reducing or eliminating any
cash severance benefits (with the payments to be made furthest in
the future being reduced first), then by reducing or eliminating
any accelerated vesting of stock options or similar awards, then by
reducing or eliminating any accelerated vesting of restricted stock
or similar awards, then by reducing or eliminating any other
remaining Total Payments. The preceding provisions of this Section
7(a) shall take precedence over the provisions of any other plan,
arrangement or agreement governing the Executive’s rights and
entitlements to any benefits or compensation.
(b)
If the Total
Payments to the Executive are reduced in accordance with Section
7(a), as a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial reduction under Section
7(a), it is possible that Total Payments to the Executive which
will not have been made by the Company should have been made
(“
Underpayment
”) or that
Total Payments to the Executive which were made should not have
been made (“
Overpayment
”). If an
Underpayment has occurred, the amount of any such Underpayment
shall be promptly paid by the Company to or for the benefit of the
Executive. In the event of an Overpayment, then the Executive shall
promptly repay to the Company the amount of any such Overpayment
together with interest on such amount (at the same rate as is
applied to determine the present value of payments under Section
280G of the Code or any successor thereto), from the date the
reimbursable payment was received by the Executive to the date the
same is repaid to the Company.
8.
Confidentiality and Restrictive
Covenants
.
(a)
Covenant Against Disclosure
.
All Confidential Information (defined below) relating to the
Business of the Company and its affiliates is, shall be and shall
remain the sole property and confidential business information of
them, free of any rights of the Executive. The Executive shall not
make any use of the Confidential Information except in the
performance of his duties hereunder and, except as he reasonably
believes is necessary or appropriate with respect to the
performance of his duties, shall not disclose any Confidential
Information to third parties, without the prior written consent of
the Company. “Confidential Information”
includes without limitation such documents as
business plans, source code, documentation, financial analysis,
marketing plans, customer names, customer lists, customer data,
contracts and other business information, including the information
of the Company and its affiliates, existing or prospective
customers, clients, investors or other third parties with whom the
Company and its affiliates hereto have relationships or conduct
business that may be disclosed to the Executive as part of the
Executive’s employment.
Notwithstanding anything else
set forth herein, nothing in this Agreement shall be construed to
prohibit Executive from reporting, without first notifying the
Company or otherwise, possible violations of law or regulation to
any governmental agency or entity.
(b)
Return of Company Documents
. On
the Termination Date or on any prior date upon the Company’s
written demand, the Executive will return all Confidential
Information in his possession, directly or indirectly, that is in
written or other tangible form (together with all duplicates
thereof).
(c)
Further Covenants
. During the
Term and through the first anniversary of the Termination Date, the
Executive shall not, directly or indirectly, take any of the
following actions, and, to the extent the Executive owns, manages,
operates, controls, is employed by or participates in the
ownership, management, operation or control of, or is connected in
any manner with, any business, the Executive will use his best
efforts to ensure that such business does not take any of the
following actions:
(i)
persuade or attempt
to persuade any customer of the Company or its affiliates to cease
doing business with the Company or its affiliates, or to reduce the
amount of business any customer does with the Company or its
affiliates;
(ii)
solicit
for himself or any entity the business of a person or entity that
was a customer of the Company or its affiliates within the 12
months prior to the termination of the Executive’s
employment, in competition with the Company or its affiliates;
or
(iii)
persuade
or attempt to persuade any employee of the Company or its
affiliates to leave the employ of the Company or its affiliates, or
hire or engage, directly or indirectly, any individual who was an
employee of the Company or its affiliates within 1 year prior to
the Executive’s Termination Date, unless such employee was
terminated by the Company. It shall not be a breach of this
provision if the Executive hires one non-executive level employee
of the Company within 1 year of the Termination Date.
9.
D&O
Insurance
. At the request of
the Executive, the Company obtain and continue for as long as
Executive is employed by the Company, Directors and Officers
insurance coverage (“D & O Insurance”), at levels
no less than $10,000,000 with an insurance company rated
“A” or higher. In the event that Company elects to
change coverage or carriers for its D & O Insurance, Company
shall notify Executive of such change and purchase, at a minimum, a
three-year tail policy for such former insurance policy at the sole
expense of Company and deliver evidence of such tail policy to
Executive within, five (5) days after termination of
Company’s existing D & O Insurance. Upon the termination
of the Executive’s employment the Company shall purchase, at
a minimum, a three-year tail policy at the sole expense of Company
and deliver evidence of such tail policy to
Executive.
10.
Current Employment Agreement
.
Any shares or share related compensation which have not yet vested
or any bonuses which have not yet been earned pursuant to a prior
employment agreement or otherwise approved by the Board will not be
affected to the detriment of the Executive by this Agreement. Any
bonuses or payments or potential payments previously authorized for
the Executive, including without limitation, those associated with
Food Hatch and Company spinoffs shall remain in effect and be
considered a bonus under this Agreement.
11.
Waiver
.
Except with respect to opportunities in which the
Company would be interested in the ordinary course of its business
and which are presented to the Executive in his capacity as a
director or executive officer of the Company, the Board has
renounced on behalf of the Company and its shareholders all
interest and expectancy to (or being offered any opportunity to
participate in) any opportunity presented to the Executive that may
be considered a corporate opportunity of the Company, and the
Executive shall have no obligation to communicate, offer, or
present any opportunity presented to the Executive that may be
considered a corporate opportunity of the Company, whether centered
on geography, land rights, or otherwise (the
“
Renouncement
”).
The Company acknowledges that the Renouncement is a material term
of this Agreement and the Executive is specifically relying on the
Renouncement in agreeing to enter into this Agreement. Except with
respect to opportunities in which the Company would be interested
in the ordinary course of its business and which are presented to
the Executive in his capacity as a director or executive officer of
the Company, to the fullest extent permitted by law, the Company
hereby prospectively waives any and all claims arising from any
business transacted by the Executive that could be construed as a
corporate opportunity of the Company. A copy of the Board
resolution is attached hereto as
Exhibit
C
.
12.
No Disparagement
. During the
Term and through the second anniversary of the Termination Date,
the Executive will not make public statements or communications
that disparage the Company or any of its businesses, services,
products, affiliates or current, former or future directors and
executive officers in their capacity as such. During the Term and
through the second anniversary of the Termination Date, the Company
will instruct its directors and executives not to make public
statements or communications that disparage the Executive. The
foregoing obligations shall not be violated by truthful statements
to any governmental agency or entity, required governmental
testimony or filings, or administrative or arbitral proceedings
(including, without limitation, depositions in connection with such
proceedings).
13.
Non-Compete
. During the term of
this Agreement and for three year after the termination of this
Agreement the Executive shall not, except as a passive investor
holding 5% or less of the equity securities of a publicly traded
company, have an equity, management, employment, consulting
relationship with any person or entity that directly competes with
the Company. In addition to the limitations contained in the
preceding sentence, during the term of this Agreement and for one
year after the termination of this Agreement, Employee will not
engage in any form of commercial enterprise with any of the
Company’s customers or potential customers the Company is
currently in discussions with, other than for the retail purchase
of food as a normal consumer. If any of the covenants contained in
this section or any part thereof, are held by a court of competent
jurisdiction to be unenforceable because of the duration or
geographic scope of such provision, the activity limited by or the
subject of such provision and/or the geographic area covered
thereby, then the court making such determination shall construe
such restriction so as to thereafter be limited or reduced to be
enforceable to the greatest extent permissible by applicable
law.
14.
Indemnification
. During the
Term and thereafter, the Company shall indemnify and hold the
Executive and the Executive’s heirs and representatives
harmless, to the maximum extent permitted by law, against any and
all damages, costs, liabilities, losses and expenses (including
reasonable attorneys’ fees) as a result of any claim or
proceeding (whether civil, criminal, administrative or
investigative), or any threatened claim or proceeding (whether
civil, criminal, administrative or investigative), against the
Executive that arises out of or relates to the Executive’s
service as an officer, director or employee, as the case may be, of
the Company, or the Executive’s service in any such capacity
or similar capacity with any affiliate of the Company or other
entity at the Company’s request, both prior to and after the
Effective Date, and to promptly advance to the Executive or the
Executive’s heirs or representatives such expenses, including
litigation costs and attorneys’ fees, upon written request
with appropriate documentation of such expense and the Company
shall also indemnify Executive for any claims related to this
Agreement. During the Term and thereafter, the Company also shall
provide the Executive with coverage under its then current
directors’ and officers’ liability policy to the same
extent that it provides such coverage to its other executive
officers. If the Executive has any knowledge of any actual or
threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative, as to which the Executive may
request indemnity under this provision, the Executive will give the
Company prompt written notice thereof; provided that the failure to
give such notice shall not affect the Executive’s right to
indemnification. The Company shall be entitled to assume the
defense of any such proceeding and the Executive will use
reasonable efforts to cooperate with such defense. To the extent
that the Executive in good faith determines that there is an actual
or potential conflict of interest between the Company and the
Executive in connection with the defense of a proceeding, the
Executive shall so notify the Company and shall be entitled to
separate representation at the Company’s expense by counsel
selected by the Executive which counsel shall cooperate, and
coordinate the defense, with the Company’s counsel and
minimize the expense of such separate representation to the extent
consistent with the Executive’s separate defense. This
Section 14 shall continue in effect after the termination of the
Executive’s employment or the termination of this
Agreement.
15.
Disputes
.
(a)
Any dispute or
controversy arising out of or relating to this Agreement or
Executive’s employment shall be brought solely in the state
and federal courts located in the State and County of New York.
Provided however, the Executive shall have the right to submit any
such dispute to binding arbitration to by AAA or JAMS to take place
in New York NY with all such costs to be paid by the
Company.
(b)
BOTH THE COMPANY
AND THE EXECUTIVE HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY TO THE
MAXIMUM EXTENT PERMITTED BY APPLICABLE FEDERAL OR STATE
LAW.
(c)
The Company shall
pay all of Executive’s legal expenses with respect to any
such dispute regardless of who initiates the suit or any claims
being made regarding the conduct of the Executive. Such payments
shall be made on a monthly basis and shall be billed directly to
the Company and will be considered an obligation of the Company.
The Executive shall be entitled to seek preliminary injunctive
relief from a Court or Arbitrator as appropriate to ensure such
payments are made.
16.
Integration
. This Agreement,
together will all other documents or agreement referenced herein,
constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements
between the parties concerning such subject matter.
17.
Successors
. This Agreement
shall inure to the benefit of and be enforceable by the
Executive’s personal representatives, executors,
administrators, heirs, distributees, devisees and legatees. In the
event of the Executive’s death after his termination of
employment but prior to the completion by the Company of all
payments due him under this Agreement, the Company shall continue
such payments to the Executive’s beneficiary designated in
writing to the Company prior to his death (or to his estate, if the
Executive fails to make such designation). The Company shall
require any successor to the Company to expressly assume and agree
to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place.
18.
Enforceability
. If any portion
or provision of this Agreement (including, without limitation, any
portion or provision of any section of this Agreement) shall to any
extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other
than those as to which it is so declared illegal or unenforceable,
shall not be affected thereby, and each portion and provision of
this Agreement shall be valid and enforceable to the fullest extent
permitted by law. The Company and Executive agree that this
agreement is subject to review by tax counsel and in the event any
provision of this Agreement would result in severe negative tax
treatment for the Executive or the Company such provision will be
deleted, and the Company and Executive shall negotiate in good
faith to amend this Agreement to provide the Executive with a
similar benefit without the negative tax treatment. Any ambiguity
in any provision in this Agreement or in any other agreement
between the Executive and the Company will be construed in a manner
most beneficial to the Executive. The limitations and restrictions
contained in Sections 8(c), and 13 shall not apply if the agreement
is terminated by the Executive for Good Reason or by the Company
without Cause.
19.
Survival
. The provisions of
this Agreement shall survive the termination of this Agreement
and/or the termination of the Executive’s employment to the
extent necessary to effectuate the terms contained
herein.
20.
Waiver
. No waiver of any
provision hereof shall be effective unless made in writing and
signed by the waiving party. The failure of any party to require
the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not
prevent any subsequent enforcement of such term or obligation or be
deemed a waiver of any subsequent breach.
21.
Notices
. Any notices, requests,
demands and other communications provided for by this Agreement
shall be sufficient if in writing and delivered in person or sent
by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt
requested, to the Executive at the last address the Executive has
filed in writing with the Company or, in the case of the Company,
at its main offices.
If to
Executive:
If to
Company:
True
Drink Holdings, Inc.
With a
copy to:
22.
Amendment
. This Agreement may
be amended or modified only by a written instrument signed by the
Executive and by a duly authorized representative of the
Company.
23.
Governing Law
. This is a New
York contract and shall be construed under and be governed in all
respects by the laws of New York for contracts to be performed in
that State and without giving effect to the conflict of laws
principles of New York or any other State.
24.
Counterparts
. This Agreement
may be executed in any number of counterparts, each of which when
so executed and delivered shall be taken to be an original; but
such counterparts shall together constitute one and the same
document.
[REMAINDER
OF THIS PAGE LEFT INTENTIONALLY BLANK]
IN
WITNESS WHEREOF, the parties have executed this Agreement effective
on the date and year first above written.
TRUE
DRINK HOLDINGS, INC.
By:
/s/ Robert Van
Boerum
Name:
Robert Van Boerum
Title:
Principal Executive Officer and Principal Financial
Officer
Brandon
Stump
/s/ Brandon
Stump
Exhibit A
Market Capitalization Milestones
If the
Company’s common stock is publicly traded during the Term and
the market capitalization of the Company is for 20 consecutive
trading days during the Term at or above the following milestones,
the Executive shall receive, within five business days following
such 20th consecutive trading day, an award of shares of Company
common stock (a) which shall vest quarterly over a three year
period after the grant, and (b) that, upon the date of the grant,
shall have an aggregate value equal the percentage of the market
capitalization set forth next to the applicable milestone* below
based on the closing price of the common stock on the Principal
Market on the date of the grant (the “
Fair Market
Value
”):
Company
Market
Capitalization Milestone
|
Percentage
|
$100,000,000
|
0.0%
|
$150,000,000
|
.5%
|
$200,000,000
|
1.0%
|
$250,000,000
|
1.0%
|
$300,000,000
|
1.5%
|
$350,000,000
|
1.5%
|
$400,000,000
|
2.5%
|
$450,000,000
|
3.0%
|
$500,000,000
|
3.5%
|
every additional $100,000,000 thereafter (cumulated with the
applicable immediately preceding milestone)
|
3.5%
|
Each
milestone above is a separate milestone for which the Executive may
earn the applicable percentage. The Executive will be entitled to
earn the applicable percentage for each milestone only once. The
Company’s market capitalization for each applicable milestone
and measurement period will be determined based on the market
capitalization reported by Bloomberg LP.
* For
example:
If the
Company’s market capitalization is at least $250,000,000 as
of market close for at least 20 consecutive trading days and the
Fair Market Value is $12.50 per share, Executive shall receive
800,000 fully vested shares of common stock of the Company (800,000
*$12.50 = $10,000,000 which is 4% of $250,000,000).
Financial Milestones
EBIDTA.
If the Company’s EBIDTA for any fiscal year shall exceed
$50,000,000.00 then the Company shall pay the Executive an
additional cash bonus of $500,000.
Exhibit B
Annual Award
An
annual award of shares of Company common stock having an aggregate
value equal to half the Executive’s then Base Salary
(“Stock Compensation”). The shares shall vest quarterly
in equal amounts over a three-year period after the
grant.
While
the Executive acknowledges that he is responsible to pay income
taxes applicable to any issuances of stock pursuant to meeting the
Annual Award, the Company agrees that it shall withhold and pay the
taxes on behalf of the Executive and will cover any additional
taxes owed by the Executive via a net issuance at time of issuance
of any shares related to the Annual Award and/or at the time of a
Code 83(b) election, if so requested by the Executive.
Treatment
upon termination of employment
Death
or Disability
|
All
unvested award shares immediately vest on the applicable
Termination Date.
|
Voluntary
quit
|
All
unvested award shares that did not yet vest will be cancelled on
the last day of employment.
|
Termination
for Cause
|
All
unvested award shares that did not yet vest will be cancelled on
the last day of employment.
|
Termination
without Cause or for Good Reason
|
All
unvested award shares immediately vest on the applicable
Termination Date.
|
The terms of any award under this Exhibit B
shall be more fully set forth in an Award Agreement.
It is expressly acknowledged and
agreed that this Exhibit B is a summary of the contemplated terms
of the applicable Award Agreement, which shall be subject to the
Company’s receipt of all corporate approvals required by
applicable law or the applicable rules and regulations prior to
effectiveness thereof. To the extent that there is any conflict
between the terms of this Exhibit B and the applicable Award
Agreement, the terms of the Award Agreement shall
govern.
Exhibit C
(Board
Resolutions for Prospective Waiver of Corporate
Opportunities)
The
Board of the Company has been advised by the Executive that he has
a minority ownership interest in a retail CBD business known as
Bellerose CBD Trade Co (“Bellerose”). It is currently
located at 1288 South Broadway, Denver, CO 80210. The Company
waives any and all rights to the Executive’s interest in
Bellerose and the Executive shall be allowed to maintain its
ownership interest in Bellerose even though some of
Bellerose’s business may compete with the
Company.
Exhibit 10.8
Employment Agreement
This
EMPLOYMENT AGREEMENT (the “
Agreement
”), is entered
into as of April 26, 2019, by and between True Drink Holdings,
Inc., a Nevada corporation (the “
Company
”), and Ryan
Stump(“
Executive
”).
WHEREAS, the
Company recognizes that the Executive has had and is expected to
continue to have a critical and essential role in guiding the
Company and in developing the Company’s
business;
WHEREAS, the
Executive is expected to make major contributions to the stability,
growth and financial strength of the Company;
WHEREAS, the
Company has determined that appropriate arrangements should be
taken to encourage the continued attention and dedication of the
Executive to his assigned duties without distraction;
WHEREAS, in
consideration of the Executive’s employment with the Company,
the Company desires to provide the Executive with certain
compensation and benefits as set forth in this Agreement;
and
WHEREAS, the
Executive desires to be employed by the Company on the terms
contained in this Agreement which shall supersede all previous
employment agreements regarding the Executive’s service as an
officer, director and employment by the Company.
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements herein
contained and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree
as follows:
1.
Position and
Duties
.
(a)
The Executive shall
serve as the Chief Operating Officer (“COO”) of the
Company reporting to the Company’s Chief Executive Officer.
The Executive shall primarily work out of any office he deems
appropriate.
(b)
The Company agrees
to propose to the shareholders of the Company at each appropriate
meeting of such shareholders during the Term and any Renewal Term
(as such terms are defined below), the election and reelection of
the Executive as a member of the Board of Directors (the
“
Board
”). In addition, in
his capacity as the Company’s Chief Executive Officer, the
Executive shall either serve as a director, manager, member and
senior executive officer of each of the Company’s
subsidiaries or affiliates, or shall alone act on the
Company’s behalf in the Company’s capacity as member,
manager, shareholder, partner, or otherwise as interest holder in
respect of any and all of the Company’s subsidiaries and
affiliates, except that the Executive himself may delegate such
function or appoint another in his stead.
(c)
The Executive shall
have such duties, authority and responsibilities as are consistent
with the role of COO and as may be set forth in the Bylaws of the
Company on the date hereof. Executive shall only have duties as
arise from this Agreement and any duties or obligations to the
Company under any previous employment agreement are hereby
cancelled. For purposes of the applicability of the Company’s
compensation plans to the Executive, Executive shall be considered
an “employee.” Nothing herein shall require the
Executive to devote more than a substantial amount of his business
time to the performance of his duties hereunder. Accordingly, the
Executive shall be entitled to (i) serve as an advisor or member of
the board of directors of unaffiliated companies, (ii) serve on
civic, charitable, educational, religious, public interest or
public service boards, (iii) manage the Executive’s personal
and family investments, and (iv) engage in and/or have an ownership
interest in other businesses. In addition, the Executive has
disclosed to the Company his involvement in entities and
investments other than the Company (collectively, the
“
Outside
Activities
”). The Executive is permitted to continue
to engage in the Outside Activities. The Company shall also permit
the Executive to engage in other business related activities
provided that the Executive agrees to disclose to the Board any
actual or potential conflict of interest arising out of any such
activities.
2.
Term
.
This Agreement and Executive’s
employment hereunder shall be for an initial term of
three
(
3
) years (“
Initial
Term
”) commencing on the
date hereof (the “
Effective
Date
”) and ending on the
third anniversary of the Effective Date, unless terminated earlier
by the Company or the Executive pursuant to Section 4 of this
Agreement (the “
Term
”).
Thereafter, at the election of the Executive or the Company, this
Agreement may be extended for an additional one (1) year
(the “
First
Extension
”). Thereafter, the Term shall continue for
an additional one-year periods unless, at least one hundred and
eighty (180) days before the expiration of the First Extension, the
Company provides notice in writing to the Executive that the Term
shall not be further extended.
Each
such extension shall be referred to as a Renewal Term. The date
upon which this Agreement would terminate if both extensions are
elected shall be referred to as the Expiration
Date.
3.
Compensation and Related
Matters
.
(a)
Base Salary
. The
Executive’s initial annual base salary shall be $500,000.00
subject to applicable withholdings (the “
Base Salary
”). The Base
Salary shall be payable in accordance with the Company’s
normal payroll procedures in effect from time to time. On each
calendar year the base salary will increase no less than $25,000.00
(“minimum”). The Compensation Committee of the Board
(“
Compensation
Committee
”) shall review the Base Salary annually and
may increase the Base Salary more than the minimum, and the term
“Base Salary” shall refer to such increased
amount.
(b)
Annual Bonus
. During the Term,
the Executive may receive an annual cash bonus, in respect of each
full or partial fiscal year of the Company occurring during the
Term a target bonus of $750,000 (the “Target Bonus”).
The bonus for the first year will be based on gross revenue of at
least $35,000,000 (the “GR Target”). If the
Company’s gross revenue is less than 50% of the GR Target,
then the Executive shall not receive any Target Bonus; if the
Company’s gross revenue is above 50% of the GR Target then
the Executive shall receive a percentage of the Target Bonus equal
to the percentage of the GR Target that the Company has achieved;
if the Company’s gross revenue is 105% of the GR Target, the
Executive shall receive an amount equal to 110% of the Target
Bonus; and if the Company’s Gross Revenue is 110% or more of
of the GR target, then Executive shall receive 120% of the Target
Bonus. The Annual Bonus shall be capped at 120% of the target
bonus.
(c)
Milestone Bonuses
. In addition
to any other compensation to which the Executive is entitled, upon
the Company obtaining any of the milestones set forth on
Exhibit A
hereof,
Executive will be entitled to awards of common stock calculated in
accordance with
Exhibit
A
hereof.
(d)
Long Term Incentive Plan
. The
Executive shall be entitled to participate in all bonus plans,
policies, practices, policies and programs adopted by the Company
and applicable generally to senior executives and employees of the
Company. At Executive’s request, the Company shall, at the
Company’s expense, set up a retirement plan for executives
and senior officers of the Company.
(e)
Equity Incentive Plan
. The
Executive shall be granted the equity rights set forth on
Exhibit B
.
Additionally, the Executive shall be entitled to participate in any
and all plans providing for awards of equity or instruments
convertible into equity adopted by the Company and applicable
generally to other senior executives and employees of the Company.
When used in this Agreement “Fair Market Value” shall
mean: (1) If the Company’s common stock (the
“
common
stock
”) is listed on a national securities exchange or
traded in the over-the-counter market and sales prices are
regularly reported for the common stock, the closing or, if not
applicable, the last price of the common stock on the composite
tape or other comparable reporting system for the last trading day
prior to the applicable date; (2) If the common stock is not traded
on a national securities exchange but is traded on the
over-the-counter market, if sales prices are not regularly reported
for the common stock for the trading day referred to in clause (1),
and if bid and asked prices for the Common Stock are regularly
reported, the mean between the bid and the asked price for the
common stock at the close of trading in the over-the-counter market
for the trading day on which common stock was traded on the
applicable date and if such applicable date is not a trading day,
the last market trading day prior to such date; and (3) If the
common stock is neither listed on a national securities exchange
nor traded in the over-the-counter market, such value as the
Compensation Committee and the Executive, in good faith, shall
determine.
(f)
Business Expenses
. The Company
shall promptly reimburse the executive for all reasonable
business-related expenses incurred in connection with the
performance of the Executive’s duties hereunder in accordance
with the policies and procedures then in effect and established by
the Company for its senior executive officers.
(g)
Insurance
. The Company shall
provide the Executive with health insurance for the Executive and
his dependents. The insurance coverage provided shall be not less
than what the Executive has prior to this agreement and in any
event not less than 100% coverage at the highest available family
plan available from the company’s current benefits provider
for California State Residents. At a minimum Health will include
100% coverage of medical, dental, vision, and 100% coverage of
long-term disability for Executive’s entire Base Salary and
accidental death and/or dismemberment. Company will also provide
Executive with $5,000,000.00 of life insurance
with an insurance company rated “A” or
higher.
Should the Executive elect to not utilize any of the
benefits described in this paragraph or any benefits described
elsewhere in this Agreement, then the Company will pay to the
Executive the equivalent value of such insurance plan or
benefit.
(h)
Other Benefits
. The Executive
shall be entitled to participate in all pension, savings and
retirement plans, welfare and insurance plans, practices, policies,
programs and perquisites of employment applicable generally to
other senior executives of the Company and any benefits or covered
expenses included in all previous employment agreements between the
Company and the Executive. Executive shall also receive the same
compensation as other members of the Company’s Board for his
service on the Board. Should the Executive defer such benefits for
one year it shall not be deemed deferred for any other
year.
(i)
Vacation
. The Executive shall
be entitled to accrue up to 21 paid vacation days in each year,
which shall be accrued ratably. The Executive shall also be
entitled to all paid holidays given by the Company to its
executives and employees. Any unused vacation days shall be rolled
forward to be used in future years.
(j)
Sick Days
. The Executive shall
be entitled to accrue up to 10 paid sick days in each year, which
shall be accrued ratably. Any unused sick days shall be rolled
forward to be used in future years.
(k)
Withholding
. All amounts
payable to the Executive under this Section 3 shall be subject to
all required federal, state and local withholding, payroll and
insurance taxes and requirements.
(l)
Direct Payment
. To the extant
practical, at the request of the Executive, all benefits granted
hereunder will be paid directly by the Company to the
vendor.
(m)
Shares in lieu
. In lieu of cash
for any payments due to the Executive including all payments due
upon termination of this Agreement, the Executive may elect to
receive shares of the Company’s common stock valued at the
Fair Market Value based upon the date such cash should have been
paid to the Executive. The election can be made from 30 days before
and 60 days after the date such cash should have been paid to the
Executive.
(n)
Automobile Allowance
. During
the Term, Executive shall receive a monthly automobile allowance in
the amount of $750.00 per month for automobile-related
expenses.
4.
Termination
. The
Executive’s employment may be terminated under the following
circumstances:
(a)
Death
. The Executive’s
employment hereunder shall terminate upon his death.
(b)
Disability
. The Company may
terminate the Executive’s employment if the Executive becomes
subject to a Disability. For purposes of this Agreement,
“
Disability
” means the
Executive is unable to perform the essential functions of his
position as COO, with or without a reasonable accommodation, for a
period of 120 consecutive days or 180 days during any rolling
consecutive 12-month period. Notice of termination for Disability
shall not take effect unless notice of at least 90 days is provided
to the Executive. Such notice may not be given (and the Disability
not deemed to have occurred) until the Disability is first
confirmed in writing by a medical professional mutually acceptable
to both the Executive and the Compensation Committee.
(c)
Termination by Company for
Cause
. The Company may terminate the Executive’s
employment for Cause. For purposes of this Agreement,
“
Cause
”
means the Executive’s: (i) willful misconduct or gross
negligence which causes material harm to the Company; (ii) fraud,
embezzlement or willful other material dishonesty with respect to
the affairs of the Company or any of its affiliates; (iii)
conviction, plea of
nolo
contendere
, guilty plea, or confession to either a felony or
any lesser crime relating to the affairs of the Company or any of
its affiliates or of which fraud, embezzlement, or moral turpitude
is a material element; or (iv) a willful material breach of this
Agreement or a willful breach of a fiduciary duty owed to the
Company. Provided that any such Cause, except for Cause pursuant to
subsection 4(c)(iii), shall not constitute Cause unless the Company
has provided the Executive with (x) written notice of the acts or
omissions giving rise to a termination of his employment for Cause;
(y) the opportunity to correct the act or omission within 30 days
after receiving the Company’s notice (the “
Cure Period
”); and (z) a
meaningful opportunity to be heard before the Board with the
Executive’s counsel present at least two business days prior
to the Board’s decision to provide a Termination for Cause
notice the Executive.
(d)
Termination by the Company without
Cause
. The Company may not terminate the Executive’s
employment during any Term or Renewal Term without
Cause.
(e)
Termination by the Executive for Any
Reason
. The Executive may terminate his employment at any
time for any reason.
(f)
Termination by the Executive for Good
Reason
. The Executive may terminate his employment for Good
Reason. For purposes of this Agreement, “
Good Reason
” means: (i) a
material reduction in the Executive’s Base Salary; (ii) a
material diminution in the Executive’s responsibilities as
COO; (iii) the assignment of duties to the Executive materially
inconsistent with his position as COO; (iv) the requirement that
the Executive relocate his primary place of employment from
Executive’s current location (v) the Company shall have had a
Change in Control (as defined below); (vi) Executive receipt of a
termination notice from the Company seeking to terminate the
Executive’s employment in violation of Section 4(d); or (vii)
the Company’s material breach of this Agreement. For the
purposes of this Agreement a “
Change in Control
” shall
mean any of the following to occur: (1) an acquisition after the
date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange
Act) of effective control (whether through legal or beneficial
ownership of capital stock of Company, by contract or otherwise) in
excess of 15% of the voting securities of Company, (2) Company
merges into or consolidates with any other person, or any person
merges into or consolidates with Company and, after giving effect
to such transaction, the stockholders of Company immediately prior
to such transaction own less than 50% of the aggregate voting power
of Company or the successor entity of such transaction, (3) if the
Executive ceases or be a director of the Company for any reason
except a voluntary resignation by the Executive, (4) Company sells
or transfers all or substantially all of its assets to a
non-affiliated person or entity (5)
During the term of this
Agreement, individuals who at the time of the signing of this
Agreement, who constitute the Board, cease for any reason to
constitute a majority of the Board,
(6) replacement at one
time or within a five year period of one-half or more of the
members of the Board, (7) An actual or threatened contested proxy
)
including but not limited to, the
actual or threatened
election contest or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board,
(8) a person or group of people acting in concert to
acquire, manage, vote or otherwise exercise control over 15% or
more of the outstanding common stock of the Company, (9) the
Company not nominating the Executive for reelection as a director,
or (10) the execution by Company of an agreement to which Company
is a party or by which it is bound, providing for any of the events
set forth in clauses (1) through (9) above. A Change in Control
shall be deemed to have occurred after any action taken in
furtherance of such event or if the Change in Control occurs as a
result of a change in circumstances without any specific action
taken.
(g)
Expiration
. Executive’s
employment shall terminate on the final day of the Term if there is
no election to renew the Term or renew the Renewal
Term.
(h)
Termination Date
. The
“
Termination
Date
” means: (i) if the Executive’s employment
is terminated by his death under Section 4(a), the date of his
death; (ii) if the Executive’s employment is terminated on
account of his Disability under Section 4(b), the date on which the
Company provides the Executive a written termination notice; (iii)
if the Company terminates the Executive’s employment for
Cause under Section 4(c), 10 business days after which the Company
provides the Executive a written termination following the end of
any Cure Period; (iv) if, despite the restriction against doing so
under Section 4(d), the Company terminates the Executive’s
employment without Cause, 30 days after the date on which the
Company provides the Executive a written termination notice; (v) if
the Executive terminates or resigns his employment without Good
Reason under Section 4(e), immediately upon notice to the Company
from the Executive, or such later date as set forth in the notice,
regardless of any termination notice given at any time by the
Company to the Executive; (vi) if the Executive terminates or
resigns his employment with Good Reason under Section 4(f), the
date on which the Executive provides the Company a written
termination notice regardless of any termination notice given at
any time by the Company to the Executive, except the Termination
Date shall be the last day of any relevant Cure Period, if
applicable. Provided further, the Executive must terminate within
one (1) year of the event, act, or omission giving rise to such
termination with each such event, act, or omission having its own
one-year time period; and (vii) the Expiration Date if the
Executive’s employment terminates under Section 4(g).
If an
occurrence of any event or any change in circumstances described in
Section 4(f) occurs at any time prior to the Termination
Date,
the Executive may exercise his rights under Section
4(f) regardless of any exercise by the Company of its rights
under this Agreement or any other agreement, whether any such
exercise by the Company of any of its rights occurs before or
after Executive's exercise of his rights under Section 4(f). If
more than one Termination Date is applicable hereunder, Executive
shall select the Termination Date.
5.
Compensation upon a Good Reason,
Change in Control or Termination
.
(a)
Termination by the Company for Cause;
by the Executive without Good Reason; or upon the Expiration
Date
. If the Executive’s employment with the Company
is terminated pursuant to Sections 4(c), 4(e), or 4(g) following
the Executive’s election not to renew the Term or Renewal
Term, the Company shall pay or provide to the Executive the
following amounts through the Termination Date: any earned but
unpaid Base Salary, unpaid expense and benefits reimbursements, any
earned but unpaid Annual Bonus, any accrued and unused vacation
days (the “
Accrued
Obligations
”) on or before the time required by law
but in no event more than 30 days after the Executive’s
Termination Date. Provided however, in the event of a termination
under Section 4(e) above, the Executive shall continue to receive,
as if this Agreement had not been terminated the compensation set
forth in Sections 3(a) and 3(h) and 3(c) for one year post
termination, provided however the compensation amount set forth in
Section 3(a) shall be paid as if such year was the final year of
this Agreement prior to the Expiration Date.
(b)
Death; Disability
. If the
Executive’s employment terminates because of his death as
provided in Section 4(a) or because of a Disability as provided in
Section 4(b), then the Executive (or his authorized representative
or estate) shall be entitled to the following:
(i)
the Accrued
Obligations earned through the applicable Termination Date (payable
on or before the time required by law but in no event more than 30
days after the applicable Termination Date);
(ii)
a
pro-rata portion of the Executive’s Annual Bonus, if any, for
the fiscal year in which the Executive’s termination occurs
(determined by multiplying the amount of such bonus which would be
due for the full fiscal year by a fraction, the numerator of which
is the number of days during the fiscal year of termination that
the Executive is employed by the Company and the denominator of
which is 365) payable at the same time bonuses for such year are
paid to other senior executives of the Company;
(iii)
vest
the Executive on the applicable Termination Date for any and all
previously granted outstanding equity-incentive awards subject to
time-based vesting criteria as if the Executive continued to
provide services to the Company for 12 months following the
applicable Termination Date;
(iv)
subject
to the Executive’s or, in the event of his death, his
eligible dependents’ timely election of continuation coverage
under the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended (“
COBRA
”), the Company
shall reimburse the Executive or his eligible dependents the
monthly premium payable to continue his and his eligible
dependents’ participation in the Company’s group health
plan (to the extent permitted under applicable law and the terms of
such plan) which covers the Executive (and the Executive’s
eligible dependents) for a period of eighteen (18) months,
provided
that the
Executive is eligible and remains eligible for COBRA coverage; and
provided
,
further
, that in
the event that the Executive obtains other employment that offers
group health benefits, such continuation of coverage by the Company
shall immediately cease. If the reimbursement of any COBRA premiums
would violate the nondiscrimination rules or cause the
reimbursement of claims to be taxable under the Patient Protection
and Affordable Care Act of 2010, together with the Health Care and
Education Reconciliation Act of 2010 (collectively, the
“
Act
”)
or Section 105(h) of the Internal Revenue Code (the
“Code”), the Company paid premiums shall be treated as
taxable payments and be subject to imputed income tax treatment to
the extent necessary to eliminate any discriminatory treatment or
taxation under the Act or Section 105(h) of the Code;
and
(v)
in the case of a
termination due to Disability, in addition to the aforementioned
awards, continuation of the Base Salary in effect on the
Termination Date until the earlier of (A) the 12-month anniversary
of the Termination Date, and (B) the date Executive is eligible to
commence receiving payments under the Company’s long-term
disability policy. If the net compensation from the Base Salary is
greater than the net compensation from the long-term disability
policy, the Company, through the 12-month anniversary of the
Termination Date will compensate the Executive’s estate the
difference in net compensation.
(c)
Termination by the Company without
Cause, by the Executive with Good Reason
. If the
Executive’s employment is terminated by the Company without
Cause despite the restriction against doing so under Section 4(d),
or the Executive terminates his employment for Good Reason as
provided in Section 4(f), then the Executive shall be entitled to
the following:
(i)
The Accrued
Obligations and all Base Salary
(at the increased rate set forth
in Section 4(d)), Stock Compensation, bonuses, payments,
compensation, benefits, bonuses, milestone payments and any other
payment, including but not limited to everything payable under
Section 3 of this Agreement earnable through the Expiration Date
(“Future Obligations”), payable on or before the time
required by law but in no event more than 30 days after the
applicable Termination.
(ii)
Full
vesting of the Executive of any and all previously granted
outstanding equity-based incentive awards subject to time-based
vesting criteria and any equity grants that would have accrued
through the Expiration Date as set forth on Exhibit B or in any
other agreement. All such grants, entitlements and rights,
including any Compensation Shares and shares pursuant to Section
3(n) above, shall be valued at the lower of the Fair Market Value
on (A) the date of this Agreement; (B) the Termination Date; or (C)
the date of the Change of Control event.
(iii)
Unless
specified elsewhere in this Agreement for the benefit of the
Executive, all rights, benefits, incentives and milestones bonuses
or any other Company obligations, including but not limited to any
items in Exhibit A or Exhibit B, shall be paid in accordance with
the terms of this Agreement as if it was not
terminated.
(iv)
Subject
to the Executive’s timely election of continuation coverage
under COBRA, the Company shall reimburse the Executive the monthly
premium payable to continue his and his eligible dependents’
participation in the Company’s group health plan (to the
extent permitted under applicable law and the terms of such plan)
which covers the Executive (and the Executive’s eligible
dependents) for a period of 18 months,
provided
that the Executive is
eligible and remains eligible for COBRA coverage; and
provided
,
further
, that in the event that
the Executive obtains other employment that offers group health
benefits, such continuation of coverage by the Company shall
immediately cease. If the reimbursement of any COBRA premiums would
violate the nondiscrimination rules or cause the reimbursement of
claims to be taxable under the Act or Section 105(h) of the Code,
the Company paid premiums shall be treated as taxable payments and
be subject to imputed income tax treatment to the extent necessary
to eliminate any discriminatory treatment or taxation under the Act
or Section 105(h) of the Code.
(v)
Executive shall
retain the proxy to vote any shares of common stock for which the
Company has been granted a long-term proxy to vote such shares
through the Expiration Date, unless the Executive is earlier
terminated for Cause. Provided however if the Executive contests
the termination for Cause, Executive shall retain such right until
a final non-appealable court or arbitration decision that there was
Cause.
(d)
Change in Control or Good
Reason
. In addition to the Executive’s other rights
described herein, upon a Change in Control or Good Reason, even if
this Agreement is not terminated, the Base Salary for the calendar
year in which Change in Control or Good Reason occurs and all
subsequent increases through the Expiration Date shall
automatically and immediately increase, until the Expiration Date
by twenty percent (20%) from the Base Salary amounts otherwise set
forth herein. All payments made to the Executive upon a Termination
shall be calculated at the increased Base Salary calculated by this
Section. In addition, the Fair Market Value milestones and the
Total Market Value milestones in Exhibit A shall automatically
decrease by 30% until the Expiration Date. Any Compensation Shares
issued upon a Change in Control or Good Reason shall be valued at
the lower of the Fair Market Value on (A) the date of this
Agreement; or (B) the date of the Change of Control or Good Reason
event.
(e)
No Mitigation or Offset
. In the
event of any termination of Executive’s employment hereunder,
Executive shall be under no obligation to seek other employment or
otherwise mitigate the obligations of the Company under this
Agreement, and there shall be no offset against any amounts due
under this Agreement on account of any remuneration attributable to
any subsequent employment that Executive may obtain.
(f)
Effect of Termination as Officer on
Board Position.
Any termination of the Executive with
respect to the Executive’s standing as an executive officer
must expressly designate which such role is subject to termination.
The termination of the Executive as an Officer will not thereby
terminate the Executive’s Board status.
(g)
Default
. In the event the
Company fails to make any payment or issue any stock owed pursuant
to this Section 5, even if such failure was because of a good faith
belief that such amount were not due or payable, then commencing on
the fifth (5
th
) day after such
payment or stock issuance was due (the “Default Date”)
interest shall accrue in cash at the rate of 24% per annum on such
payment or the Full Market Value of such stock from the Default
Date until such payment is made or stock is issued.
6.
Section 409A
Compliance
.
(a)
All in-kind
benefits provided and expenses eligible for reimbursement under
this Agreement shall be provided by the Company or incurred by the
Executive during the time periods set forth in this Agreement. All
reimbursements shall be paid as soon as administratively
practicable, but in no event shall any reimbursement be paid after
the last day of the taxable year following the taxable year in
which the expense was incurred. The amount of in-kind benefits
provided or reimbursable expenses incurred in one taxable year
shall not affect the in-kind benefits to be provided or the
expenses eligible for reimbursement in any other taxable year. Such
right to reimbursement or in-kind benefits is not subject to
liquidation or exchange for another benefit.
(b)
To the extent that
any of the payments or benefits provided for in Section 5(b), (c)
or (d) are deemed to constitute non-qualified deferred compensation
benefits subject to Section 409A of the United States Internal
Revenue Code (the “
Code
”), the following
interpretations apply to Section 5:
(i)
Any termination of
the Executive’s employment triggering payment of benefits
under Section 5(b), (c) or (d) must constitute a “separation
from service” under Section 409A(a)(2)(A)(i) of the Code and
Treas. Reg. §1.409A-1(h) before distribution of such benefits
can commence. To the extent that the termination of the
Executive’s employment does not constitute a separation of
service under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg.
§1.409A-1(h) (as the result of further services that are
reasonably anticipated to be provided by the Executive to the
Company or any of its parents, subsidiaries or affiliates at the
time the Executive’s employment terminates), any benefits
payable under Section 5(b), (c) or (d) that constitute deferred
compensation under Section 409A of the Code shall be delayed until
after the date of a subsequent event constituting a separation of
service under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg.
§1.409A-1(h). For purposes of clarification, this Section
6(b)(i) shall not cause any forfeiture of benefits on the
Executive’s part, but shall only act as a delay until such
time as a “separation from service”
occurs.
(ii)
If
the Executive is a “specified employee” (as that term
is used in Section 409A of the Code and regulations and other
guidance issued thereunder) on the date his separation from service
becomes effective, any benefits payable under Section 5(b), (c) or
(d) that constitute non-qualified deferred compensation under
Section 409A of the Code shall be delayed until the earlier of (A)
the business day following the six-month anniversary of the date
his separation from service becomes effective, and (B) the date of
the Executive’s death, but only to the extent necessary to
avoid such penalties under Section 409A of the Code. On the earlier
of (A) the business day following the six-month anniversary of the
date his separation from service becomes effective, and (B) the
Executive’s death, the Company shall pay the Executive in a
lump sum the aggregate value of the non-qualified deferred
compensation that the Company otherwise would have paid the
Executive prior to that date under Section 5(b), (c) or (d) of this
Agreement.
(iii)
It
is intended that each installment of the payments and benefits
provided under Section 5(b), (c) or (d) of this Agreement shall be
treated as a separate “payment” for purposes of Section
409A of the Code.
(iv)
Neither
the Company nor the Executive shall have the right to accelerate or
defer the delivery of any such payments or benefits except to the
extent specifically permitted or required by Section 409A of the
Code.
7.
Excess Parachute
Payments
.
(a)
To the extent that
any payment, benefit or distribution of any type to or for the
benefit of the Executive by the Company or any of its affiliates,
whether paid or payable, provided or to be provided, or distributed
or distributable pursuant to the terms of this Agreement or
otherwise (including, without limitation, any accelerated vesting
of stock options or other equity-based awards) (collectively, the
“
Total
Payments
”) would be subject to the excise tax imposed
under Section 4999 of the Internal Revenue Code of 1986, as amended
(the “
Code
”), then the Total
Payments shall be reduced (but not below zero) so that the maximum
amount of the Total Payments (after reduction) shall be one dollar
($1.00) less than the amount which would cause the Total Payments
to be subject to the excise tax imposed by Section 4999 of the
Code, but only if the Total Payments so reduced result in the
Executive receiving a net after tax amount that exceeds the net
after tax amount the Executive would receive if the Total Payments
were not reduced and were instead subject to the excise tax imposed
on excess parachute payments by Section 4999 of the Code. Unless
the Executive shall have given prior written notice to the Company
to effectuate a reduction in the Total Payments if such a reduction
is required, any such notice consistent with the requirements of
Section 409A of the Code to avoid the imputation of any tax,
penalty or interest thereunder, the Company shall reduce or
eliminate the Total Payments by first reducing or eliminating any
cash severance benefits (with the payments to be made furthest in
the future being reduced first), then by reducing or eliminating
any accelerated vesting of stock options or similar awards, then by
reducing or eliminating any accelerated vesting of restricted stock
or similar awards, then by reducing or eliminating any other
remaining Total Payments. The preceding provisions of this Section
7(a) shall take precedence over the provisions of any other plan,
arrangement or agreement governing the Executive’s rights and
entitlements to any benefits or compensation.
(b)
If the Total
Payments to the Executive are reduced in accordance with Section
7(a), as a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial reduction under Section
7(a), it is possible that Total Payments to the Executive which
will not have been made by the Company should have been made
(“
Underpayment
”) or that
Total Payments to the Executive which were made should not have
been made (“
Overpayment
”). If an
Underpayment has occurred, the amount of any such Underpayment
shall be promptly paid by the Company to or for the benefit of the
Executive. In the event of an Overpayment, then the Executive shall
promptly repay to the Company the amount of any such Overpayment
together with interest on such amount (at the same rate as is
applied to determine the present value of payments under Section
280G of the Code or any successor thereto), from the date the
reimbursable payment was received by the Executive to the date the
same is repaid to the Company.
8.
Confidentiality and Restrictive
Covenants
.
(a)
Covenant Against Disclosure
.
All Confidential Information (defined below) relating to the
Business of the Company and its affiliates is, shall be and shall
remain the sole property and confidential business information of
them, free of any rights of the Executive. The Executive shall not
make any use of the Confidential Information except in the
performance of his duties hereunder and, except as he reasonably
believes is necessary or appropriate with respect to the
performance of his duties, shall not disclose any Confidential
Information to third parties, without the prior written consent of
the Company. “Confidential Information”
includes without limitation such documents as
business plans, source code, documentation, financial analysis,
marketing plans, customer names, customer lists, customer data,
contracts and other business information, including the information
of the Company and its affiliates, existing or prospective
customers, clients, investors or other third parties with whom the
Company and its affiliates hereto have relationships or conduct
business that may be disclosed to the Executive as part of the
Executive’s employment.
Notwithstanding anything else
set forth herein, nothing in this Agreement shall be construed to
prohibit Executive from reporting, without first notifying the
Company or otherwise, possible violations of law or regulation to
any governmental agency or entity.
(b)
Return of Company Documents
. On
the Termination Date or on any prior date upon the Company’s
written demand, the Executive will return all Confidential
Information in his possession, directly or indirectly, that is in
written or other tangible form (together with all duplicates
thereof).
(c)
Further Covenants
. During the
Term and through the first anniversary of the Termination Date, the
Executive shall not, directly or indirectly, take any of the
following actions, and, to the extent the Executive owns, manages,
operates, controls, is employed by or participates in the
ownership, management, operation or control of, or is connected in
any manner with, any business, the Executive will use his best
efforts to ensure that such business does not take any of the
following actions:
(i)
persuade or attempt
to persuade any customer of the Company or its affiliates to cease
doing business with the Company or its affiliates, or to reduce the
amount of business any customer does with the Company or its
affiliates;
(ii)
solicit
for himself or any entity the business of a person or entity that
was a customer of the Company or its affiliates within the 12
months prior to the termination of the Executive’s
employment, in competition with the Company or its affiliates;
or
(iii)
persuade
or attempt to persuade any employee of the Company or its
affiliates to leave the employ of the Company or its affiliates, or
hire or engage, directly or indirectly, any individual who was an
employee of the Company or its affiliates within 1 year prior to
the Executive’s Termination Date, unless such employee was
terminated by the Company. It shall not be a breach of this
provision if the Executive hires one non-executive level employee
of the Company within 1 year of the Termination Date.
9.
D&O
Insurance
. At the request of
the Executive, the Company obtain and continue for as long as
Executive is employed by the Company, Directors and Officers
insurance coverage (“D & O Insurance”), at levels
no less than $10,000,000 with an insurance company rated
“A” or higher. In the event that Company elects to
change coverage or carriers for its D & O Insurance, Company
shall notify Executive of such change and purchase, at a minimum, a
three-year tail policy for such former insurance policy at the sole
expense of Company and deliver evidence of such tail policy to
Executive within, five (5) days after termination of
Company’s existing D & O Insurance. Upon the termination
of the Executive’s employment the Company shall purchase, at
a minimum, a three-year tail policy at the sole expense of Company
and deliver evidence of such tail policy to
Executive.
10.
Current Employment Agreement
.
Any shares or share related compensation which have not yet vested
or any bonuses which have not yet been earned pursuant to a prior
employment agreement or otherwise approved by the Board will not be
affected to the detriment of the Executive by this Agreement. Any
bonuses or payments or potential payments previously authorized for
the Executive, including without limitation, those associated with
Food Hatch and Company spinoffs shall remain in effect and be
considered a bonus under this Agreement.
11.
Waiver
.
Except with respect to opportunities in which the
Company would be interested in the ordinary course of its business
and which are presented to the Executive in his capacity as a
director or executive officer of the Company, the Board has
renounced on behalf of the Company and its shareholders all
interest and expectancy to (or being offered any opportunity to
participate in) any opportunity presented to the Executive that may
be considered a corporate opportunity of the Company, and the
Executive shall have no obligation to communicate, offer, or
present any opportunity presented to the Executive that may be
considered a corporate opportunity of the Company, whether centered
on geography, land rights, or otherwise (the
“
Renouncement
”).
The Company acknowledges that the Renouncement is a material term
of this Agreement and the Executive is specifically relying on the
Renouncement in agreeing to enter into this Agreement. Except with
respect to opportunities in which the Company would be interested
in the ordinary course of its business and which are presented to
the Executive in his capacity as a director or executive officer of
the Company, to the fullest extent permitted by law, the Company
hereby prospectively waives any and all claims arising from any
business transacted by the Executive that could be construed as a
corporate opportunity of the Company. A copy of the Board
resolution is attached hereto as
Exhibit
C
.
12.
No Disparagement
. During the
Term and through the second anniversary of the Termination Date,
the Executive will not make public statements or communications
that disparage the Company or any of its businesses, services,
products, affiliates or current, former or future directors and
executive officers in their capacity as such. During the Term and
through the second anniversary of the Termination Date, the Company
will instruct its directors and executives not to make public
statements or communications that disparage the Executive. The
foregoing obligations shall not be violated by truthful statements
to any governmental agency or entity, required governmental
testimony or filings, or administrative or arbitral proceedings
(including, without limitation, depositions in connection with such
proceedings).
13.
Non-Compete
. During the term of
this Agreement and for three year after the termination of this
Agreement the Executive shall not, except as a passive investor
holding 5% or less of the equity securities of a publicly traded
company, have an equity, management, employment, consulting
relationship with any person or entity that directly competes with
the Company. In addition to the limitations contained in the
preceding sentence, during the term of this Agreement and for one
year after the termination of this Agreement, Employee will not
engage in any form of commercial enterprise with any of the
Company’s customers or potential customers the Company is
currently in discussions with, other than for the retail purchase
of food as a normal consumer. If any of the covenants contained in
this section or any part thereof, are held by a court of competent
jurisdiction to be unenforceable because of the duration or
geographic scope of such provision, the activity limited by or the
subject of such provision and/or the geographic area covered
thereby, then the court making such determination shall construe
such restriction so as to thereafter be limited or reduced to be
enforceable to the greatest extent permissible by applicable
law.
14.
Indemnification
. During the
Term and thereafter, the Company shall indemnify and hold the
Executive and the Executive’s heirs and representatives
harmless, to the maximum extent permitted by law, against any and
all damages, costs, liabilities, losses and expenses (including
reasonable attorneys’ fees) as a result of any claim or
proceeding (whether civil, criminal, administrative or
investigative), or any threatened claim or proceeding (whether
civil, criminal, administrative or investigative), against the
Executive that arises out of or relates to the Executive’s
service as an officer, director or employee, as the case may be, of
the Company, or the Executive’s service in any such capacity
or similar capacity with any affiliate of the Company or other
entity at the Company’s request, both prior to and after the
Effective Date, and to promptly advance to the Executive or the
Executive’s heirs or representatives such expenses, including
litigation costs and attorneys’ fees, upon written request
with appropriate documentation of such expense and the Company
shall also indemnify Executive for any claims related to this
Agreement. During the Term and thereafter, the Company also shall
provide the Executive with coverage under its then current
directors’ and officers’ liability policy to the same
extent that it provides such coverage to its other executive
officers. If the Executive has any knowledge of any actual or
threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative, as to which the Executive may
request indemnity under this provision, the Executive will give the
Company prompt written notice thereof; provided that the failure to
give such notice shall not affect the Executive’s right to
indemnification. The Company shall be entitled to assume the
defense of any such proceeding and the Executive will use
reasonable efforts to cooperate with such defense. To the extent
that the Executive in good faith determines that there is an actual
or potential conflict of interest between the Company and the
Executive in connection with the defense of a proceeding, the
Executive shall so notify the Company and shall be entitled to
separate representation at the Company’s expense by counsel
selected by the Executive which counsel shall cooperate, and
coordinate the defense, with the Company’s counsel and
minimize the expense of such separate representation to the extent
consistent with the Executive’s separate defense. This
Section 14 shall continue in effect after the termination of the
Executive’s employment or the termination of this
Agreement.
15.
Disputes
.
(a)
Any dispute or
controversy arising out of or relating to this Agreement or
Executive’s employment shall be brought solely in the state
and federal courts located in the State and County of New York.
Provided however, the Executive shall have the right to submit any
such dispute to binding arbitration to by AAA or JAMS to take place
in New York NY with all such costs to be paid by the
Company.
(b)
BOTH THE COMPANY
AND THE EXECUTIVE HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY TO THE
MAXIMUM EXTENT PERMITTED BY APPLICABLE FEDERAL OR STATE
LAW.
(c)
The Company shall
pay all of Executive’s legal expenses with respect to any
such dispute regardless of who initiates the suit or any claims
being made regarding the conduct of the Executive. Such payments
shall be made on a monthly basis and shall be billed directly to
the Company and will be considered an obligation of the Company.
The Executive shall be entitled to seek preliminary injunctive
relief from a Court or Arbitrator as appropriate to ensure such
payments are made.
16.
Integration
. This Agreement,
together will all other documents or agreement referenced herein,
constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements
between the parties concerning such subject matter.
17.
Successors
. This Agreement
shall inure to the benefit of and be enforceable by the
Executive’s personal representatives, executors,
administrators, heirs, distributees, devisees and legatees. In the
event of the Executive’s death after his termination of
employment but prior to the completion by the Company of all
payments due him under this Agreement, the Company shall continue
such payments to the Executive’s beneficiary designated in
writing to the Company prior to his death (or to his estate, if the
Executive fails to make such designation). The Company shall
require any successor to the Company to expressly assume and agree
to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place.
18.
Enforceability
. If any portion
or provision of this Agreement (including, without limitation, any
portion or provision of any section of this Agreement) shall to any
extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other
than those as to which it is so declared illegal or unenforceable,
shall not be affected thereby, and each portion and provision of
this Agreement shall be valid and enforceable to the fullest extent
permitted by law. The Company and Executive agree that this
agreement is subject to review by tax counsel and in the event any
provision of this Agreement would result in severe negative tax
treatment for the Executive or the Company such provision will be
deleted, and the Company and Executive shall negotiate in good
faith to amend this Agreement to provide the Executive with a
similar benefit without the negative tax treatment. Any ambiguity
in any provision in this Agreement or in any other agreement
between the Executive and the Company will be construed in a manner
most beneficial to the Executive. The limitations and restrictions
contained in Sections 8(c), and 13 shall not apply if the agreement
is terminated by the Executive for Good Reason or by the Company
without Cause.
19.
Survival
. The provisions of
this Agreement shall survive the termination of this Agreement
and/or the termination of the Executive’s employment to the
extent necessary to effectuate the terms contained
herein.
20.
Waiver
. No waiver of any
provision hereof shall be effective unless made in writing and
signed by the waiving party. The failure of any party to require
the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not
prevent any subsequent enforcement of such term or obligation or be
deemed a waiver of any subsequent breach.
21.
Notices
. Any notices, requests,
demands and other communications provided for by this Agreement
shall be sufficient if in writing and delivered in person or sent
by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt
requested, to the Executive at the last address the Executive has
filed in writing with the Company or, in the case of the Company,
at its main offices.
If to
Executive:
If to
Company:
True
Drink Holdings, Inc.
With a
copy to:
22.
Amendment
. This Agreement may
be amended or modified only by a written instrument signed by the
Executive and by a duly authorized representative of the
Company.
23.
Governing Law
. This is a New
York contract and shall be construed under and be governed in all
respects by the laws of New York for contracts to be performed in
that State and without giving effect to the conflict of laws
principles of New York or any other State.
24.
Counterparts
. This Agreement
may be executed in any number of counterparts, each of which when
so executed and delivered shall be taken to be an original; but
such counterparts shall together constitute one and the same
document.
[REMAINDER
OF THIS PAGE LEFT INTENTIONALLY BLANK]
IN
WITNESS WHEREOF, the parties have executed this Agreement effective
on the date and year first above written.
TRUE
DRINK HOLDINGS, INC.
Name:
Title:
Ryan
Stump
Exhibit A
Market Capitalization Milestones
If the
Company’s common stock is publicly traded during the Term and
the market capitalization of the Company is for 20 consecutive
trading days during the Term at or above the following milestones,
the Executive shall receive, within five business days following
such 20th consecutive trading day, an award of shares of Company
common stock (a) which shall vest quarterly over a three year
period after the grant, and (b) that, upon the date of the grant,
shall have an aggregate value equal the percentage of the market
capitalization set forth next to the applicable milestone* below
based on the closing price of the common stock on the Principal
Market on the date of the grant (the “
Fair Market
Value
”):
Company
Market
Capitalization Milestone
|
Percentage
|
$100,000,000
|
0.0%
|
$150,000,000
|
.5%
|
$200,000,000
|
1.0%
|
$250,000,000
|
1.0%
|
$300,000,000
|
1.5%
|
$350,000,000
|
1.5%
|
$400,000,000
|
2.5%
|
$450,000,000
|
3.0%
|
$500,000,000
|
3.5%
|
every additional $100,000,000 thereafter (cumulated with the
applicable immediately preceding milestone)
|
3.5%
|
Each
milestone above is a separate milestone for which the Executive may
earn the applicable percentage. The Executive will be entitled to
earn the applicable percentage for each milestone only once. The
Company’s market capitalization for each applicable milestone
and measurement period will be determined based on the market
capitalization reported by Bloomberg LP.
* For
example:
If the
Company’s market capitalization is at least $250,000,000 as
of market close for at least 20 consecutive trading days and the
Fair Market Value is $12.50 per share, Executive shall receive
800,000 fully vested shares of common stock of the Company (800,000
*$12.50 = $10,000,000 which is 4% of $250,000,000).
Financial Milestones
EBIDTA.
If the Company’s EBIDTA for any fiscal year shall exceed
$50,000,000.00 then the Company shall pay the Executive an
additional cash bonus of $500,000.
Exhibit B
Annual Award
An
annual award of shares of Company common stock having an aggregate
value equal to half the Executive’s then Base Salary
(“Stock Compensation”). The shares shall vest quarterly
in equal amounts over a three-year period after the
grant.
While
the Executive acknowledges that he is responsible to pay income
taxes applicable to any issuances of stock pursuant to meeting the
Annual Award, the Company agrees that it shall withhold and pay the
taxes on behalf of the Executive and will cover any additional
taxes owed by the Executive via a net issuance at time of issuance
of any shares related to the Annual Award and/or at the time of a
Code 83(b) election, if so requested by the Executive.
Treatment
upon termination of employment
Death
or Disability
|
All
unvested award shares immediately vest on the applicable
Termination Date.
|
Voluntary
quit
|
All
unvested award shares that did not yet vest will be cancelled on
the last day of employment.
|
Termination
for Cause
|
All
unvested award shares that did not yet vest will be cancelled on
the last day of employment.
|
Termination
without Cause or for Good Reason
|
All
unvested award shares immediately vest on the applicable
Termination Date.
|
The terms of any award under this Exhibit B
shall be more fully set forth in an Award Agreement.
It is expressly acknowledged and
agreed that this Exhibit B is a summary of the contemplated terms
of the applicable Award Agreement, which shall be subject to the
Company’s receipt of all corporate approvals required by
applicable law or the applicable rules and regulations prior to
effectiveness thereof. To the extent that there is any conflict
between the terms of this Exhibit B and the applicable Award
Agreement, the terms of the Award Agreement shall
govern.
Exhibit C
(Board
Resolutions for Prospective Waiver of Corporate
Opportunities)
The
Board of the Company has been advised by the Executive that he has
a minority ownership interest in a retail CBD business known as
Bellerose CBD Trade Co (“Bellerose”). It is currently
located at 1288 South Broadway, Denver, CO 80210. The Company
waives any and all rights to the Executive’s interest in
Bellerose and the Executive shall be allowed to maintain its
ownership interest in Bellerose even though some of
Bellerose’s business may compete with the
Company.
Exhibit
99.1
Charlie’s Chalk Dust, a Pioneering Brand in the Vapor Market,
enters into Exchange Agreement with True Drinks
Plans to Expand Charlie’s Premium Vapor Products Domestically
and Internationally along with the Highly Anticipated Launch of
Charlie’s CBD Products
IRVINE, CA, April 29, 2019
True Drinks Holdings, Inc. (the
“Company” or “True Drinks”) (OTC:TRUU) and
Charlie’s Chalk Dust, LLC (“Charlie’s”), a
leading producer of high quality vapor products, announced today
that both companies have entered into an agreement (the
“Share Exchange”) resulting in Charlie’s becoming
a wholly-owned subsidiary of True Drinks.
Pursuant
to the Share Exchange, True Drinks acquired all outstanding
membership interests in Charlie’s in exchange for the
issuance by True Drinks of units consisting of shares of common
stock, preferred stock and warrants (the “Exchange”).
Following the Exchange, the former members of Charlie’s and
participants in the Share Exchange will own approximately 87.55% of
the fully diluted shares of True Drinks.
The
Exchange was based on a combined value of Charlie’s and True
Drinks of approximately $105 million. Based on Charlie’s
audited December 31, 2018 and 2017 financial statements, net
revenues were $20.8 million in 2018 and $12.2 million in 2017,
representing 70.4% year-over-year growth in revenue.
Charlie’s anticipates continued strong growth in 2019 with
projected net revenues for the quarter ending March 31, 2019 of
approximately $6.8 million, representing sequential growth of
appropriately 51% from its quarter ending December 31,
2018.
In
connection with the Exchange, Charlie’s closed a private
placement transaction with accredited and institutional investors,
led by Vinny Smith,
the former owner
and chairman of Quest Software and founder of Toba Capital and Gron
Ventures
(the “Private
Placement”). The Private Placement resulted
in gross proceeds of approximately $27.5 million, and after the
payment to Charlie’s founders and other costs and expenses
incurred in connection with the Exchange, approximately $5.6
million in net cash proceeds that will be added to True
Drink’s consolidated balance sheet.
Katalyst Securities,
LLC acted as the lead placement agent for the Private Placement.
Stifel acted as financial
advisor to
Charlie’s in connection with the
Exchange.
Further details regarding the Share Exchange will be described in a
Current Report on Form 8-K to be filed with the Securities and
Exchange Commission (“SEC”) by the Company, and the
information herein is qualified in its entirety by reference to the
information set forth in such Current Report on Form 8-K.
The Company plans to provide additional information relating to its
business, corporate operations, among other plans in a Current
Report on Form 8-K to be filed with the SEC.
Additional
information about Charlie’s can be found at
www.charlieschalkdust.com
.
Purpose of the Exchange
The
Exchange provides Charlie’s with the ability to leverage True
Drinks distribution and product formulation expertise, while
capitalizing on Charlie’s brand recognition and relationships
with distributors, specialty retailers and third-party online
resellers. The synergies are intended to accelerate the expansion
of Charlie’s core business into new markets for its vapor
products, and allow Charlies to capitalize on opportunities to
expand its brand to include CBD products. The combined business
will be operated under the leadership of Brandon Stump, Chief
Executive Officer and Ryan Stump, Chief Operating Officer of
Charlie’s.
“We
started this business because we saw an opportunity to deliver a
BRAND - it takes courage to be different and we have plenty of
that,” commented Brandon Stump, Chief Executive Officer of
Charlies and True Drinks. “We are extremely fortunate to have
found a company to align our efforts to continue to build our brand
and create value for our employees and shareholders. People have
been telling us for years that they wish they could buy stock in
Charlie’s, well now they can.”
"We are
excited to build on the success we have achieved thus far in the
vapor space,” said Ryan Stump, Chief Operating Officer of
Charlies and True Drinks. “We’re looking forward
to working together on diversifying our product offerings while
penetrating new markets. This opportunity grants us access to
capital for scaling the business and helps bring the story of
Charlie's Chalk Dust to the public markets. Simply put, we
are thrilled for what the future has in store - for our customers,
our employees, and shareholders."
“The
shareholders of True Drinks have gained an amazing team starting
today,” added Scot Cohen, Director of True Drinks. “In
this competitive space, Brandon and Ryan and the rest of their
loyal team have created a top tier industry brand in less than 5
years without any outside capital and they are just getting
started!
Vinny
Smith, the lead investor in Charlie’s private placement,
commented:
"We're incredibly impressed
with the business the Stump brothers have built and I expect
continued success for Charlie’s well into the
future.”
About Charlie’s Chalk Dust
Founded
in 2014 in southern California by brothers Brandon and Ryan Stump,
Charlie’s Chalk Dust produces high quality vapor products
currently distributed in over 90 countries around the world.
Charlie’s is regarded as an industry pioneer, having
developed an extensive portfolio of brand styles, flavor profiles
and innovative product formats. Its authentic brand, coupled with
unmatched culture and consistency, has cemented its position among
a vast consumer base. Additional information about Charlie’s
can be found at
www.charlieschalkdust.com
.
About True Drinks Holdings, Inc.
Prior to consummating the Exchange, True Drinks Holdings, Inc.
specialized in all-natural, vitamin-enhanced drinks. Its primary
business was the development, marketing and sale of AquaBall®
Naturally Flavored Water, which was distributed nationally through
select retail channels, such as grocery stores, mass merchandisers,
drug stores and online. Although, the Company has discontinued the
production, distribution and sale of AquaBall®, it continues
to market and distribute Bazi® All Natural Energy, a liquid
nutritional supplement drink, which is currently distributed online
and through the Company’s existing database of customers, and
is currently engaged in the formulation of products for ultimate
distribution, including products containing CBD. The Company
was founded in 2008 and is
currently headquartered in Irvine, California.
Cautionary Note on Forward-Looking Statements - Safe Harbor
Statement
This press release contains "forward-looking statements" within the
meaning of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, including but not limited to
statements regarding the Company's overall business, existing and
anticipated markets and expectations regarding future sales and
expenses. Words such as "expect," "anticipate," "should,"
"believe," "target," "project," "goals," "estimate," "potential,"
"predict," "may," "will," "could," "intend," variations of these
terms or the negative of these terms and similar expressions are
intended to identify these forward-looking statements.
Forward-looking statements are subject to a number of risks and
uncertainties, many of which involve factors or circumstances that
are beyond the Company's control. The Company's actual results
could differ materially from those stated or implied in
forward-looking statements due to a number of factors, including
but not limited to: the Company's ability to successful increase
sales and enter new markets; the Company's ability to manufacture
and produce product for its customers; the Company's ability to
formulate new products; the acceptance of existing and future
products; the complexity, expense and time associated with
compliance with government rules and regulations affecting nicotine
and products containing cannabidiol; litigation risks from the use
of the Company’s products; risks of government regulations;
the ability to obtain patents and defend IP against competitors;
the impact of competitive products; and the Company's ability to
maintain and enhance its brand, as well as other risk factors
included in the Company's most recent quarterly report on Form 10-Q
and other SEC filings. These forward-looking statements are made as
of the date of this press release and were based on current
expectations, estimates, forecasts and projections as well as the
beliefs and assumptions of management. Except as required by law,
the Company undertakes no duty or obligation to update any
forward-looking statements contained in this release as a result of
new information, future events or changes in its
expectations.
For more information, contact:
Dave
Allen, Chief Financial Officer
True
Drinks Holdings, Inc.
Charlies
Chalk Dust, LLC
1007
Brioso Dr., Costa Mesa, CA 92627
Phone:
203-640-8399
david@charlieschalkdust.com