Exhibit 10.4

 

 

STANDSTILL AGREEMENT

(Heavenly RX)

 

This Standstill Agreement (this “Agreement”), dated as of July 11, 2019, is
entered into by and between Jones Soda Co., a Washington corporation (the
“Company”), and Heavenly RX Ltd., a British Columbia corporation (“Investor”).

 

RECITALS

 

WHEREAS, the Company and Investor are parties to that certain Securities
Purchase Agreement, dated as of the date hereof (as such agreement may be
amended, restated or modified from time to time, the “Purchase Agreement”),
pursuant to which Investor will purchase from the Company (i) 15,000,000 shares
(the “Shares”) of common stock of the Company, no par value (“Common Stock”),
and (ii) a warrant (the “Warrant”) representing the right to acquire up to
15,000,000 shares of Common Stock, subject to adjustment as set forth in the
Warrant;

 

WHEREAS, upon the closing of the transactions contemplated by the Purchase
Agreement, Investor will own approximately 24.8% of the outstanding Common
Stock; and

 

WHEREAS, in order to induce the Company to enter into the Purchase Agreement,
the Company and Investor desire to enter into this Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties to this Agreement, intending to be
legally bound, hereby agree as follows:

 

1.                  Definitions. For purposes of this Agreement:

 

1.1              “Agreement” has the meaning set forth in the Preamble.

 

1.2              “Affiliate” means, with respect to any Person, any other Person
that is directly or indirectly controlled by such Person, where “control” and
derivative terms mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise. For the
sake of clarity, SOL Global Investments Corp., an Ontario corporation and a
minority shareholder of Investor, shall not be deemed to be an Affiliate of
Investor for purposes of this Agreement.

 

1.3              “Board” means the board of directors of the Company.

 

1.4              “Common Stock” has the meaning set forth in the Recitals.

 

1.5              “Company” has the meaning set forth in the Preamble.

 

1.6              “Exchange Act” has the meaning set forth in Section 2.2.

 

1.7              “Investor” has the meaning set forth in the Preamble.

 

 

 

1.8              “Investor Designees” has the meaning set forth in the Rights
Agreement.

 

1.9              “Investor Group” means Investor and its Affiliates.

 

1.10          “Person” means any individual, corporation, limited or general
partnership, limited liability company, limited liability partnership, trust,
association, joint venture, governmental entity, or other entity.

 

1.11          “Purchase Agreement” has the meaning set forth in the Recitals.

 

1.12          “Representative” means, as to any Person, such Person’s
Affiliates, and its and their respective directors, officers, employees,
managing members, general partners, agents and consultants (including attorneys,
financial advisors and accountants), solely in their capacity as representatives
acting on the direction of and on behalf of such Person.

 

1.13          “Rights Agreement” means the Investor Rights Agreement, dated as
of the date hereof, by and among the Company, Investor and the other existing
shareholders of the Company signatories thereto, as such agreement may be
amended, restated or modified from time to time.

 

1.14          “Shares” has the meaning set forth in the Recitals.

 

1.15          “Warrant” has the meaning set forth in the Recitals.

 

1.16          “Warrant Shares” means the shares of Common Stock or other capital
stock of the Company then purchasable upon exercise of the Warrant in accordance
with the terms of the Warrant.

 

2.                  Investor Group Covenants. Unless approved in advance in
writing by the Board (acting by a simple majority not including any Investor
Designees, each of whom shall abstain from any vote on the matter), no member of
the Investor Group, nor any of their respective Representatives in their
capacities as such, will (and Investor will cause each member of the Investor
Group and their respective Representatives acting in such capacity not to),
directly or indirectly, acting on behalf of themselves or in concert with the
Company (or any of its Representatives in their capacities as such):

 

2.1              acquire (or propose or agree to acquire), of record or
beneficially, on the open market or otherwise, by purchase or otherwise, any
loans, debt securities, equity securities, or assets of the Company or any of
its subsidiaries, or rights or options to acquire interests in any of the
Company’s loans, debt securities, equity securities, or assets, except for (a)
the purchase of the Shares and the Warrant pursuant to the Purchase Agreement,
(b) the purchase of the Warrant Shares pursuant to the exercise of the Warrant,
or (c) as provided in Section 3 below;

 

2.2              make any statement or proposal to the Board or to any of the
Company’s shareholders regarding, or make any public announcement, proposal, or
offer (including any “solicitation” of “proxies” as such terms are defined or
used in Regulation 14A of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) with respect to, or otherwise solicit, seek or offer to effect
(including, for the avoidance of doubt, indirectly by means of communication
with the press or media): (a) any business combination, merger, tender offer,
exchange offer, or similar transaction involving the Company or any of its
subsidiaries; (b) any restructuring, recapitalization, liquidation, or similar
transaction involving the Company or any of its subsidiaries; (c) any
acquisition of any of the Company’s loans, debt securities, equity securities or
assets, or rights or options to acquire interests in any of the Company’s loans,
debt securities, equity securities, or assets; (d) any proposal to seek
representation on the Board or otherwise seek to control or influence the
management, Board, or policies of the Company; (e) make any request or proposal
to waive, terminate, or amend the provisions of this Section 2; or (f) make any
proposal, arrangement, or other statement that is inconsistent with the terms of
this Section 2; provided, however, none of the foregoing shall limit or prevent
the Investor Designees from serving as members of the Board in accordance with
the Rights Agreement, including participation and consideration of matters
properly brought before the Board;

 

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2.3              instigate, encourage, or assist any third party (including
forming a “group” (as defined in Rule 13d-5(b)(1) of the Exchange Act) with any
such third party) to do, or enter into any discussions or agreements with any
third party with respect to, any of the actions set forth in Section 2.2 above;
or

 

2.4              take any action that would reasonably be expected to require
the Company or any of its Affiliates to make a public announcement regarding any
of the actions set forth in Section 2.2 above.

 

3.                  Exceptions to Investor Group Covenants. Notwithstanding
anything to the contrary in this Agreement:

 

3.1              Investor shall be permitted (as an exception to the
restrictions in Section 2) to acquire in the open market, from time to time and
in the aggregate, up to such additional number of shares of Common Stock equal
to 50% of the Warrant Shares that have been purchased upon exercise of the
Warrant as of such time; and

 

3.2              Investor shall be permitted (as an exception to the
restrictions in Section 2) to exercise all of its rights, including its right of
first offer, pursuant to the Rights Agreement, in full and without restriction.

 

4.                  Termination. This Agreement, including the restrictions set
forth in Section 2, shall terminate and be of no further force and effect on the
earlier to occur of (i) the two-year anniversary of the date of this Agreement
and (ii) the date on which the Warrant is exercised in full in accordance with
its terms. Upon termination, the Investor Group and their Representatives may
acquire in the open market or otherwise additional shares of Common Stock or
other securities of the Company in compliance with applicable state and federal
laws.

 

5.                  Miscellaneous.

 

5.1              Successors and Assigns. The terms and conditions of this
Agreement inure to the benefit of and are binding upon the respective successors
and permitted assignees of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and permitted assignees any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.

 

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5.2              Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall be
deemed to be one and the same agreement. A signed copy of this Agreement
delivered by facsimile, e-mail or other means of electronic transmission shall
be deemed to have the same legal effect as delivery of an original signed copy
of this Agreement.

 

5.3              Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting this Agreement.

 

5.4              Notices. All notices, requests, consents, claims, demands,
waivers and other communications under this Agreement shall be in writing and
shall be deemed to have been given (a) when delivered by hand (with written
confirmation of receipt); (b) when received by the addressee if sent by a
nationally recognized overnight courier (receipt requested); (c) on the date
sent by facsimile or e-mail of a PDF document (with confirmation of
transmission) if sent during normal business hours of the recipient, and on the
next Business Day if sent after normal business hours of the recipient; or (d)
on the third day after the date mailed, by certified or registered mail, return
receipt requested, postage prepaid. Any communication to Investor or the Company
shall be sent in accordance with the contact information set forth below (or at
such other contact information as specified in a notice given in accordance with
this Section 5.4).

 

If to the Company:Jones Soda Co.

66 S Hanford St., Suite 150

Seattle, WA 98134

Facsimile: (206) 624-6857

E-mail: finance@jonessoda.com

Attention: Chief Executive Officer

 

with a copy (which shall not constitute notice) to:

 

Summit Law Group, PLLC

315 Fifth Avenue S., Suite 1000

Seattle, WA 98104

Facsimile: (206) 676-7001

E-mail: andys@summitlaw.com and laurab@summitlaw.com

Attention: Andy Shawber and Laura Bertin

 

If to Investor:Heavenly RX Ltd.

Address: 1112 North Flagler Drive

                 Fort Lauderdale, FL 33304

E-mail: mbeedles@heavenlyrx.com

Attention: Mike Beedles / Steve Avalon

 

with a copy (which shall not constitute notice) to:

 

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Dorsey & Whitney LLP

TD Canada Trust Tower

Brookfield Place

161 Bay Street, Suite 4310

Toronto, ON, Canada M5J 2S1

Email: Raymer.richard@dorsey.com; van.horn.jonathan@dorsey.com

Attention: Richard Raymer; Jonathan A. Van Horn

 

5.5              Amendments and Waivers. Any term of this Agreement may be
amended, modified or terminated and the observance of any term of this Agreement
may be waived (either generally or in a particular instance, and either
retroactively or prospectively) only with the written consent of each of the
parties hereto.

 

5.6              Severability. In case any one or more of the provisions
contained in this Agreement is for any reason held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Agreement, and such invalid,
illegal, or unenforceable provision shall be reformed and construed so that it
will be valid, legal, and enforceable to the maximum extent permitted by law.

 

5.7              Entire Agreement. This Agreement, the Rights Agreement, the
Purchase Agreement, the other documents and agreements delivered pursuant to the
Purchase Agreement constitute the sole and entire agreement of the parties to
this Agreement with respect to the subject matter contained herein and therein,
and supersede all prior and contemporaneous understandings and agreements, both
written and oral, with respect to such subject matter, including the Term Sheet
for Common Stock Financing of Jones Soda Co., dated as of June 7, 2019.

 

5.8              Specific Performance. Each party acknowledges and agrees that
each party hereto will be irreparably damaged in the event any of the provisions
of this Agreement are not performed by the parties in accordance with their
specific terms or are otherwise breached. Accordingly, it is agreed that each
party to this Agreement shall be entitled to an injunction to prevent breaches
of this Agreement, and to specific enforcement of this Agreement and its terms
and provisions.

 

5.9              Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial.

 

(a)               This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction).

 

(b)               ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED
UPON THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE INSTITUTED IN
THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF
WASHINGTON IN EACH CASE LOCATED IN THE CITY OF SEATTLE AND COUNTY OF KING, AND
EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN
ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR
OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH IN THIS AGREEMENT SHALL
BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT
IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY
OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH
COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.

 

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(c)               EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF
A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER,
(C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 5.9(C).

 

5.10          Delays or Omissions. No delay or omission to exercise any right,
power, or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power, or remedy of such non-breaching or non-defaulting party, nor shall it be
construed to be a waiver of or acquiescence to any such breach or default, or to
any similar breach or default thereafter occurring, nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. All remedies, whether under this Agreement
or by law or otherwise afforded to any party, shall be cumulative and not
alternative.

 

 

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

 

COMPANY:

 

JONES SODA CO.

 

By_/s/ Jennifer Cue____________________

Name: Jennifer Cue

Title: President and Chief Executive Officer

 

 

 

INVESTOR:

 

HEAVENLY RX LTD.

 

By_/s/ Bradley Morris__________________

Name: Bradley Morris

Title: Director

 

 

 

 

[Signature Page to Heavenly Standstill Agreement]