SEC Connect





 











Exhibit 10.1



 



SECURITIES PURCHASE AGREEMENT


 


This
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of January
__, 2017, is made by and among True Drinks Holdings, Inc., a
corporation organized under the laws of the State of Nevada (the
“Company”) and
each of the purchasers (individually, a “Purchaser” and collectively the
“Purchasers”)
set forth in the execution pages hereof (each, an
“Execution
Page” and collectively the “Execution Pages”).



RECITALS


 


WHEREAS, the Company and the Purchasers
are executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by the provisions
of Regulation D (“Regulation
D”), as promulgated by the United States Securities
and Exchange Commission (the “SEC”) under the Securities Act of
1933, as amended (the “Securities Act”);


WHEREAS, upon the terms and subject to
the satisfaction of certain conditions set forth in this Agreement,
the Purchasers, severally and not jointly, desire to purchase, and
the Company desires to issue and sell to the Purchasers an
aggregate of Fifty Thousand (50,000) shares of the Company’s
newly created Series D Convertible Preferred Stock, par value
$0.001 per share (the “Preferred Stock”) for $100.00 per
share, which Preferred Stock shall have the rights, preferences and
privileges set forth in the Company’s Certificate of
Designation, Preferences, Rights and Limitations of Series D
Convertible Preferred Stock, filed by the Company with the
Secretary of State of the State of Nevada on January __, 2017, a
copy of which is attached hereto as Exhibit A (the
“Certificate of
Designation”);


 


WHEREAS, in connection with the purchase
of Preferred Stock by the Purchasers, each Purchaser shall receive
a five-year warrant, in the form attached hereto as Exhibit B (the
“Warrant(s)”),
to acquire that number of shares of the Company’s common
stock, par value $0.001 per share (“Common Stock”), at a price of
$0.15 per share (the “Exercise Price”), equal to 200%
of the Conversion Shares, as such term is defined below, issuable
upon conversion of the Preferred Stock purchased by such Purchaser
on any Closing Date. This Agreement, the Certificate of Designation
and the Warrant are collectively referred to herein as the
“Transaction
Documents”; and


 


WHEREAS, the shares of Common Stock
issuable upon conversion of the Preferred Stock are referred to
herein as the “Conversion
Shares” and the shares of Common Stock issuable upon
exercise of the Warrants are referred to herein as the
“Warrant
Shares.” The Preferred Stock, the Warrants, the
Conversion Shares and the Warrant Shares are collectively referred
to herein as the “Securities” and each of them may
individually be referred to herein as a “Security.”


 


NOW, THEREFORE, in consideration of the
premises and mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Purchasers hereby agree as
follows:


 


1. PURCHASE AND SALE.


(a) Purchase Price. Subject to the
terms and conditions hereof, on any Closing Date (as defined
below), the Company shall issue and sell to each Purchaser, and
each Purchaser, severally and not jointly, shall purchase from the
Company, that number of shares of Preferred Stock set forth on such
Purchaser’s Execution Page, for a purchase price (as to each
Purchaser, the “Purchase
Price”) equal to $100.00 per share of Preferred
Stock.


(b) Closing. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6
below, closing of the transactions contemplated hereby (each a
“Closing” and
collectively, the “Closings”) shall occur at
the time and place as
the Company and the Purchasers may mutually agree (the
“Closing
Date”). The date of the first Closing shall be
referred to as the “Initial
Closing Date.”


 



 

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(c) Method of Funding. Upon
satisfaction of the conditions precedent set forth in Sections 6
and 7 below, each Purchaser shall fund the Purchase Price for the
shares of Preferred Stock and Warrants to be issued and sold to
such Purchaser on the applicable Closing Date by wire transfer of
immediately available funds to the Company using the wire
instructions attached hereto as Exhibit C.


(d) Delivery of Securities. Upon
satisfaction of the conditions set forth in Section 6 below, the
Company shall deliver to each Purchaser the shares of Preferred
Stock and Warrants purchased on the applicable Closing
Date.


2. PURCHASERS’ REPRESENTATIONS AND
WARRANTIES.


  Each
Purchaser, severally, but not jointly, represents and warrants to
the Company as follows:


(a) Purchase for Own Account, Etc.
Such Purchaser is purchasing the Securities for such
Purchaser’s own account, for investment purposes only, and
not with a view towards the public sale or distribution thereof,
except pursuant to sales that are exempt from the registration
requirements of the Securities Act and/or sales registered under
the Securities Act. Such Purchaser has substantial experience in
evaluating and investing in private placement transactions of
securities in companies similar to the Company, and is capable of
evaluating the merits and risks of its investment in the Company.
Such Purchaser understands that it must bear the economic risk of
this investment indefinitely, unless the Securities are registered
pursuant to the Securities Act and any applicable state securities
or blue sky laws or an exemption from such registration is
available, and that the Company has no present intention of
registering the resale of any such Securities. Notwithstanding
anything in this Section 2(a) to the contrary, by making the
representations herein, such Purchaser does not agree to hold the
Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption from the
registration requirements under the Securities Act.


(b) Accredited Investor Status.
Such Purchaser is an “Accredited Investor”, as that
term is defined in Rule 501(a) of Regulation D.


(c) No Disqualification Events.
Such Purchaser 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).


(d) Reliance on Exemptions. Such
Purchaser understands that the Securities are being offered and
sold to such Purchaser in reliance upon specific exemptions from
the registration requirements of United States federal and state
securities laws, and that the Company is relying upon the truth and
accuracy of, and such Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of such Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility
of such Purchaser to acquire the Securities.


(e) Information. All materials
relating to the business, finances and operations of the Company
(including the Company’s most recent Annual Report on Form
10-K) and materials relating to the offer and sale of the
Securities which have been specifically requested by any Purchaser
or its counsel have been made available to such Purchaser and its
counsel, if any. Neither such inquiries nor any other investigation
conducted by such Purchaser or its counsel or any of such
Purchaser’s representatives shall modify, amend or affect
such Purchaser’s right to rely on the Company’s
representations and warranties contained in Section 3 below. Such Purchaser
understands that its investment in the Securities involves a high
degree of risk, including the risk of loss of its entire investment
in the Securities.


(f) Governmental Review. Such
Purchaser understands that no United States federal or state agency
or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the
Securities.


(g) Transfer or Resale. Such
Purchaser understands that (i) the sale or resale of the Securities
have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be
transferred unless (A) the transfer is made pursuant to and as set
forth in an effective registration statement under the Securities
Act covering the Securities; or (B) such Purchaser shall have
delivered to the Company an opinion of counsel (which opinion shall
be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an
exemption from such registration; or (C) sold under and in
compliance with Rule 144 promulgated under the Securities Act
(including any successor rule, “Rule 144”); or (D) sold or
transferred to an affiliate of such Purchaser that agrees to sell
or otherwise transfer the Securities only in accordance with the
provisions of this Section 2(g) and that is an Accredited Investor;
and (ii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or
any state securities laws. Notwithstanding the foregoing or
anything else contained herein to the contrary, the Securities may
be pledged as collateral in connection with a bona fide margin
account or other lending arrangement, provided such pledge is
consistent with applicable laws, rules and
regulations.


(h) Legends. Such Purchaser
understands that the Preferred Stock, Warrants and, until such time
as the Conversion Shares and Warrant Shares may be sold by such
Purchaser under Rule 144, the certificates for the Conversion
Shares and Warrant Shares may bear a restrictive legend in
substantially the following form:


THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR IN ANY OTHER
JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED,
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS
UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE
LAWS.


        The legend set forth
above shall be removed and the Company shall issue a certificate
without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws,
(i) the sale of such Security is registered under the Securities
Act (including registration pursuant to Rule 416 thereunder); (ii)
such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or
transfer of such Security may be made without registration under
the Securities Act; or (iii) such holder provides the Company with
reasonable assurances that such Security can be sold under Rule
144. In the event the above legend is removed from any Security and
thereafter the effectiveness of a registration statement covering
such Security is suspended or the Company determines that a
supplement or amendment thereto is required by applicable
securities laws, then, upon reasonable advance written notice to
such Purchaser, the Company may require that the above legend be
placed on any such Security that cannot then be sold pursuant to an
effective registration statement or under Rule 144 and such
Purchaser shall cooperate in the replacement of such legend. Such
legend shall thereafter be removed when such Security may again be
sold pursuant to an effective registration statement or under Rule
144.


(i) Authorization; Enforcement. The
Transaction Documents have been duly and validly authorized,
executed and delivered on behalf of such Purchaser and are valid
and binding agreements of such Purchaser, enforceable against such
Purchaser in accordance with their 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 creditors’ rights and
remedies.


(j) Residency. Such Purchaser is a
resident of the jurisdiction set forth under such Purchaser’s
name on the Execution Page hereto executed by such
Purchaser.


3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.


   
    Except as set forth on a Disclosure Schedule,
executed and delivered by the Company to each Purchaser (the
“Disclosure
Schedule”), the Company represents and warrants to
each Purchaser as follows:


(a) Organization and Qualification;
Subsidiaries. The Company and each of its subsidiaries
(collectively, the “Subsidiaries”) is a corporation
duly organized and existing in good standing under the laws of the
jurisdiction in which it is incorporated or organized, and has the
requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the
nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have, or would
reasonably be expected to result in, a Material Adverse Effect. For
purposes of this Agreement, “Material Adverse Effect” means
any material adverse effect on (i) the Securities, (ii) the ability
of the Company to perform its obligations under this Agreement or
the other Transaction Documents or (iii) the business, operations,
properties, prospects, financial condition or results of operations
of the Company and its Subsidiaries, taken as a whole. Other than
the Subsidiaries set forth on the Disclosure Schedule, the Company
has no subsidiaries.


(b) Authorization; Enforcement. (i)
The Company has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement and the
other Transaction Documents, to issue and sell the Preferred Stock
and Warrants in accordance with the terms hereof, to issue the
Conversion Shares upon conversion of the Preferred Stock in
accordance with the terms thereof and to issue the Warrant Shares
upon exercise of the Warrants in accordance with the terms thereof;
(ii) the execution, delivery and performance of this Agreement and
the other Transaction Documents by the Company and the consummation
by it of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Preferred Stock
and Warrants, and the issuance and reservation for issuance of the
Conversion Shares and Warrant Shares) have been duly authorized by
the Company’s Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or any
committee of the Board of Directors is required, and (iii) this
Agreement constitutes, and, upon execution and delivery by the
Company of the other Transaction Documents, such Transaction
Documents will constitute, valid and binding obligations of the
Company enforceable against the Company in accordance with their
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 creditors’
rights and remedies. Neither the execution, delivery or performance
by the Company of its obligations under this Agreement or the other
Transaction Documents, nor the consummation by it of the
transactions contemplated hereby or thereby (including, without
limitation, the issuance of the Preferred Stock and Warrants, or
the issuance or reservation for issuance of the Conversion Shares
or Warrant Shares) requires any consent or authorization of the
Company’s stockholders.



 

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(c) Capitalization. The
capitalization of the Company as of the date hereof, including the
authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for
issuance pursuant to the Company’s stock option plans, the
number of shares issuable and reserved for issuance pursuant to
securities (other than the Preferred Stock and the Warrants)
exercisable or exchangeable for, or convertible into, any shares of
capital stock and the number of shares reserved for issuance upon
conversion of the Preferred Stock and exercise of the Warrants is
set forth in Section 3(c) of the Disclosure Schedule. All of such
outstanding shares of capital stock have been, or upon issuance in
accordance with the terms of any such exercisable, exchangeable or
convertible securities will be, validly issued, fully paid and
non-assessable. No shares of capital stock of the Company
(including the Conversion Shares and the Warrant Shares) are
subject to preemptive rights or any other similar rights of the
stockholders of the Company or any liens or encumbrances. Except
for the Securities and as set forth in Section 3(c) of the
Disclosure Schedule, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company or any of its Subsidiaries, or
arrangements by which the Company or any of its Subsidiaries is or
may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries, nor are any such issuances or
arrangements contemplated, (ii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is
obligated to register the sale of any of its or their securities
under the Securities Act; (iii) there are no outstanding securities
or instruments of the Company which contain any redemption or
similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company is or may
become bound to redeem any security of the Company; and (iv) the
Company does not have any shareholder rights plan, “poison
pill” or other anti-takeover plans or similar arrangements.
Section 3(c) of the Disclosure Schedule sets forth all of the
securities or instruments issued by the Company or any of its
Subsidiaries that contain anti-dilution or similar provisions that
will be triggered by, and all of the resulting adjustments that
will be made to such securities and instruments as a result of, the
issuance of the Securities in accordance with the terms of this
Agreement, the Preferred Stock or the Warrants. The Company has no
knowledge of any voting agreements, buy-sell agreements, option or
right of first purchase agreements or other agreements of any kind
among any of the security holders of the Company relating to the
securities of the Company held by them. The Company can furnish,
upon request, true and correct copies of the Company’s
Articles of Incorporation as in effect on the date hereof
(“Articles of
Incorporation”), the Company’s Bylaws as in
effect on the date hereof (the “Bylaws”), and all other
instruments and agreements governing securities convertible into or
exercisable or exchangeable for capital stock of the Company. The
Company or one of its Subsidiaries has the unrestricted right to
vote, and (subject to limitations imposed by applicable law) to
receive dividends and distributions on, all capital securities of
its Subsidiaries as owned by the Company or any such
Subsidiary.


(d) Issuance of Securities. The
Preferred Stock and Warrants are duly authorized and, upon issuance
in accordance with the terms of this Agreement, (i) will be validly
issued and free from all taxes, liens, claims and encumbrances
(other than restrictions on transfer contained in this Agreement or
the Certificate of Designation or Warrants), (ii) will not be
subject to preemptive rights, rights of first refusal or other
similar rights of stockholders of the Company or any other person
and (iii) will not impose personal liability on the holder thereof.
The Conversion Shares and Warrant Shares are duly authorized and
reserved for issuance, and, upon conversion of the Preferred Stock
and exercise of the Warrants in accordance with the terms thereof,
(x) will be validly issued, fully paid and non-assessable, and free
from all taxes, liens, claims and encumbrances (other than
restrictions on transfer contained in this Agreement), (y) will not
be subject to preemptive rights, rights of first refusal or other
similar rights of stockholders of the Company or any other person
and (z) will not impose personal liability upon the holder thereof.
Except for the filing of any notice prior or subsequent to any
Closing Date that may be required under applicable state and/or
federal securities laws (or comparable laws of any other
jurisdiction), no authorization, consent, approval, license,
exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency,
instrumentality or other third party, is or will be necessary for,
or in connection with, the execution and delivery by the Company of
this Agreement, for the offer, issue, sale, execution or delivery
of the Preferred Stock and Warrants, or for the performance by the
Company of its obligations under this Agreement. No “bad
actor” Disqualifying Event is applicable to the Company or,
to the Company’s knowledge, any Person listed in the first
paragraph of Rule 506(d)(1), except for a Disqualification Event as
to which Rule 506(d)(2)(ii–iv) or (d)(3), is
applicable.



 

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(e) No Conflicts. Except as set
forth in Section 3(e) of the Disclosure Schedule, the execution,
delivery and performance of this Agreement and the other
Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Preferred Stock
and Warrants, and the issuance and reservation for issuance of the
Conversion Shares and Warrant Shares) will not (i) result in a
violation of the Articles of Incorporation or Bylaws, (ii) conflict
with, or constitute a default (or an event that 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
the Company or any of its Subsidiaries is a party, (iii) result in
a violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws, rules
and regulations and rules and regulations of any self-regulatory
organizations to which either the Company or its securities are
subject) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its
Subsidiaries is bound or affected, or (iv) result in the imposition
of a mortgage, pledge, security interest, encumbrance, charge or
other lien on any asset of the Company or any Subsidiary (except,
with respect to clauses (ii) and (iii), for such conflicts,
defaults, terminations, amendments, accelerations, cancellations
and violations that would not, individually or in the aggregate,
have a Material Adverse Effect).


(f) Compliance. Neither the Company
nor any of its Subsidiaries is in violation of its Articles of
Incorporation, Bylaws or other organizational documents, and
neither the Company nor any of its Subsidiaries is in default (and
no event has occurred that with notice or lapse of time or both
would put the Company or any of its Subsidiaries in default) under,
nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a
party. The businesses of the Company and its Subsidiaries are not
being conducted, and shall not be conducted so long as the
Purchaser (or any of its respective affiliates) own any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations the sanctions
for which either singly or in the aggregate have not had and would
not have a Material Adverse Effect. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or
other person acting on behalf of the Company or any Subsidiary has,
in the course of his actions for, or on behalf of, the Company,
used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity, made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds, violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee. The
Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal,
state, provincial or foreign regulatory authorities that are
material to the conduct to its business, and neither the Company
nor any of its Subsidiaries has received any notice of proceeding
relating to the revocation or modification of any such certificate,
authorization or permit. The Company has complied in all material
respects with and is not in default or violation in any material
respect of, and is not, to the Company’s knowledge, under
investigation with respect to or has not been, to the knowledge of
the Company, threatened to be charged with or given notice of any
violation of, any applicable federal, state, local or foreign law,
statute, ordinance, license, rule, regulation, policy or guideline,
order, demand, writ, injunction, decree or judgment of any federal,
state, local or foreign governmental or regulatory authority.
Except for statutory or regulatory restrictions of general
application, no federal, state, local or foreign governmental or
regulatory authority has placed any material restriction on the
business or properties of the Company.



 

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(g) SEC Documents, Financial
Statements. The Company has timely filed (within applicable
extension periods) all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to
the reporting requirements of the Securities Exchange Act of 1934,
as amended (the “Exchange
Act”) (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements
and schedules thereto and documents incorporated by reference
therein, the “SEC
Documents”). As of their respective dates, the SEC
Documents complied in all material respects with the requirements
of the Exchange Act or the Securities Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, 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 light of the circumstances under which they
were made, not misleading. None of the statements made in any such
SEC Documents is, or has been, required to be amended or updated
under applicable law (except for such statements as have been
amended or updated in subsequent filings made prior to the date
hereof). As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and
the published rules and regulations of the SEC applicable with
respect thereto. Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles
(“GAAP”),
consistently applied, during the periods involved (except as may be
otherwise indicated in such financial statements or the notes
thereto or, in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to immaterial
year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the Select SEC Documents (as
defined below), the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to the date of such financial
statements and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under
GAAP to be reflected in such financial statements, which
liabilities and obligations referred to in clauses (i) and (ii),
individually or in the aggregate, are not material to the financial
condition or operating results of the Company. For purposes of this
Agreement, “Select SEC
Documents” means the Company’s (A) Annual Report
on Form 10-K for the fiscal year ended December 31, 2015, (B)
Quarterly Reports on Form 10-Q for the periods ended March 31,
2016, June 30, 2016 and September 30, 2016 and (B) all Current
Reports on Form 8-K filed since November 14, 2016.


(h) Absence of Certain Changes.
Since November 14, 2016, (i) there has not been any change in the
capital stock (other than pursuant to the Company’s stock
plans pursuant to the Company’s Approved Share Plan (defined
below), pursuant to the conversion or exercise of outstanding
securities that are convertible into or exercisable for Common
Stock, or pursuant to publicly disclosed equity or debt financings)
or long-term debt of the company, or any dividend or distribution
of any kind declared, set aside for payment, paid or made by the
Company on any class of capital stock; (ii) the Company has not
entered into any transaction or agreement that is material to the
Company taken as a whole or incurred any liability or obligation,
direct or contingent, that is material to the Company and, except
as contemplated by this Agreement, has not made any material change
or amendment to a material contract or arrangement by which the
Company or any of its assets or properties is bound or subject;
(iii) the Company has not sustained any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court
or arbitrator or governmental or regulatory authority; and (iv)
there has been no material adverse change and no material adverse
development in the business, properties, operations, prospects,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole. The Company has not taken any
steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy or receivership law, nor does
the Company or any of its Subsidiaries have any knowledge or reason
to believe that its creditors intend to initiate involuntary
bankruptcy proceedings with respect to the Company or any of its
Subsidiaries.


(i) Transactions With Affiliates.
None of the officers, directors, or employees of the Company or any
of its Subsidiaries is presently a party to any transaction with
the Company or any of its Subsidiaries (other than for ordinary
course services solely in their capacity as officers, directors or
employees), including, without limitation, 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 such officer,
director or employee or any corporation, partnership, trust or
other entity in which any such officer, director, or employee has
an ownership interest of five percent or more or is an officer,
director, trustee or partner.


(j) Absence of Litigation. Except
as disclosed in the Select SEC Documents, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body
(including, without limitation, the SEC) pending or affecting the
Company, any of its subsidiaries, or any of their respective
directors or officers in their capacities as such. To the knowledge
of the Company or any of its Subsidiaries, there are no actions,
suits, proceedings, inquiries or investigations before or by any
court, public board, government agency, self-regulatory
organization or body (including, without limitation, the SEC)
threatened against the Company, any of its Subsidiaries, or any of
their respective directors or officers in their capacities as such,
which, if determined adversely, could, either individually or in
the aggregate, have a Material Adverse Effect. There are no facts
which, if known by a potential claimant or governmental authority,
could give rise to a claim or proceeding which, if asserted or
conducted with results unfavorable to the Company or any of its
Subsidiaries, could reasonably be expected to have a Material
Adverse Effect.


(k) Intellectual Property. Each of
the Company and its Subsidiaries owns or is duly licensed (and, in
such event, has the unfettered right to grant sublicenses) to use
all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright
applications, licenses, permits, inventions, discoveries,
processes, scientific, technical, engineering and marketing data,
object and source codes, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, “Intellectual Property”) used in
or necessary for the conduct of its business as now being conducted
and as presently contemplated to be conducted in the future
(collectively, the “Company
Intellectual Property”). Section 3(k) of the
Disclosure Schedule sets forth a list of all material Company
Intellectual Property owned and/or used by the Company in its
business. Except as set forth on the Disclosure Schedule, there are
no rights of third parties to any of the Company Intellectual
Property except through licensing agreements. Except as set forth
on the Disclosure Schedule, there are no outstanding options,
licenses or agreements of any kind relating to the Company
Intellectual Property, nor is the Company bound by or a party to
any options, licenses or agreements of any kind with respect to the
Intellectual Property of any other person or entity (collectively,
the “Third Party
License Agreements”)
other than such licenses or agreements arising from the purchase of
generally available products, as to which the aggregate
consideration paid by or due from the Company does not exceed
$25,000 in value, or “off the shelf” products. All of
the Third Party License Agreements are valid, binding and in full
force and effect in all material respects and to the
Company’s knowledge enforceable by the Company in accordance
with their respective terms in all material respects, subject to
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors’
rights and remedies. The Company is not in breach of any such Third
Party License Agreements, other than such breaches as would not
result, individually or in the aggregate, in a Material Adverse
Effect. To the Company’s knowledge, no other party to any of
the Third Party License Agreements is in default thereunder, other
than such defaults as would not result, individually or in the
aggregate, in a Material Adverse Effect. Neither the Company nor
any Subsidiary of the Company infringes or is in conflict with any
right of any other person with respect to any third party
Intellectual Property. Neither the Company nor any of its
Subsidiaries has received written notice of any pending conflict
with or infringement upon any third party Intellectual Property.
There is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others challenging
the Company’s ownership of or licensing rights in or to any
Company Intellectual Property. Neither the Company nor any of its
Subsidiaries has entered into any consent agreement,
indemnification agreement, forbearance to sue or settlement
agreement with respect to the validity of the Company’s or
its Subsidiaries’ ownership of or right to use its Company
Intellectual Property and there is no reasonable basis for any such
claim to be successful. The Company Intellectual Property are valid
and enforceable and no registration relating thereto has lapsed,
expired or been abandoned or canceled or is the subject of
cancellation or other adversarial proceedings, and all applications
therefor are pending and in good standing. The Company has taken
all reasonable steps required to perfect its ownership of and
interest in its Company Intellectual Property and has taken
reasonable security measures to protect the secrecy,
confidentiality and value of all of its Company Intellectual
Property. The Company and its Subsidiaries have complied, in all
material respects, with their respective contractual obligations
relating to the protection of the Company Intellectual Property
used pursuant to licenses. No person is infringing on or violating
the Company Intellectual Property owned or used by the Company or
its Subsidiaries.



 

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(l)  Title. The Company and its
Subsidiaries have good and marketable title in fee simple to all
real property and good and merchantable title to all personal
property owned by them that is material to the business of the
Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as 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 the
Company and its Subsidiaries. Any real property and facilities held
under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions
as are not material and do not materially interfere with the use
made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.


(m) Tax Status. Except as set forth
on the Disclosure Schedule, the Company and each of its
Subsidiaries has made or filed all foreign, U.S. federal, state,
provincial and local income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its
Subsidiaries has set aside on its books provisions reasonably
adequate for the payment of all unpaid and unreported taxes) and
has paid all taxes and other governmental assessments and charges
shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has
set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim. The Company has not executed a
waiver with respect to any statute of limitations relating to the
assessment or collection of any foreign, federal, state, provincial
or local tax. None of the Company’s tax returns is presently
being audited by any taxing authority.


(n) Key Employees. Each of the
Company’s directors and officers and any Key Employee (as
defined below) is currently serving the Company in the capacity
disclosed in the Select SEC Documents. No Key Employee is, or is
now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the
continued employment of each Key Employee does not subject the
Company or any of its Subsidiaries to any material liability with
respect to any of the foregoing matters. No Key Employee has, to
the knowledge of the Company and its Subsidiaries, any intention to
terminate or limit his employment with, or services to, the Company
or any of its Subsidiaries, nor is any such Key Employee subject to
any constraints which would cause such employee to be unable to
devote his full time and attention to such employment or services.
For purposes of this Agreement, “Key Employee” means the persons
listed in Section 3(n) of the Disclosure Schedule and any
individual who assumes or performs any of the duties of a Key
Employee.


(o) Employee Relations. (i) No
application or petition for certification of a collective
bargaining agent is pending and none of the employees of Company or
any of its Subsidiaries are or have been represented by any union
or other bargaining representative and no union has attempted to
organize any group of the Company's employees, and no group of the
Company's employees has sought to organize themselves into a union
or similar organization for the purpose of collective bargaining.
The Company and its Subsidiaries believe that their relations with
their employees are good; (ii) no executive officer (as defined in
Rule 501(f) of the Securities Act) has notified the Company that
such officer intends to leave the Company or otherwise terminate
such officer’s employment with the Company; and (iii) the
Company and its Subsidiaries are in compliance with all federal,
state and local laws and regulations and, to the Company’s
knowledge, all foreign laws and regulations, in each case
respecting employment and employment practices, terms and
conditions of employment and wages and hours, except where failure
to be in compliance would not, either individually or in the
aggregate, result in a Material Adverse Effect.


(p) Insurance. The Company and each
of its Subsidiaries has in force fire, casualty, product liability
and other insurance policies, with extended coverage, sufficient in
amount to allow it to replace any of its material properties or
assets which might be damaged or destroyed or sufficient to cover
liabilities to which the Company may reasonably become subject, and
such types and amounts of other insurance with respect to its
business and properties, on both a per occurrence and an aggregate
basis, as are customarily carried by persons engaged in the same or
similar business as the Company. No default or event has occurred
that could give rise to a default under any such
policy.



 

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(q) Environmental Matters. The
Company is in compliance with all foreign, federal, state and local
rules, laws and regulations relating to the use, treatment, storage
and disposal of Hazardous Substances and protection of health and
safety or the environment which are applicable to its business.
There is no environmental litigation or other environmental
proceeding pending or threatened by any governmental regulatory
authority or others with respect to the current or any former
business of the Company or any of its Subsidiaries or any
partnership or joint venture currently or at any time affiliated
with the Company or any of its Subsidiaries. No state of facts
exists as to environmental matters or Hazardous Substances (as
defined below) that involves the reasonable likelihood of a
material capital expenditure by the Company or any of its
Subsidiaries. No Hazardous Substances have been treated, stored or
disposed of, or otherwise deposited, in or on the properties owned
or leased by the Company or any of its Subsidiaries or by any
partnership or joint venture currently or at any time affiliated
with the Company or any of its Subsidiaries in violation of any
applicable environmental laws. The environmental compliance
programs of the Company and each of its Subsidiaries comply in all
respects with all environmental laws, whether foreign, federal,
state, provincial or local, currently in effect. For purposes of
this Agreement, “Hazardous
Substances” means any substance, waste, contaminant,
pollutant or material that has been determined by any governmental
authority to be capable of posing a risk of injury to health,
safety, property or the environment.


(r) Listing. The Company is not in
violation of the listing requirements of the OTC Pink Marketplace
(the “OTC
Pink”) on which it trades, does not reasonably
anticipate that the Common Stock will be delisted by the OTC Pink
for the foreseeable future, and has not received any notice
regarding the possible delisting of the Common Stock from the OTC
Pink.


(s) No General Solicitation.
Neither the Company nor any person acting for the Company has
conducted any “general solicitation” (as such term is
defined in Regulation D) with respect to any of the Securities
being offered hereby.


(t) No Brokers. The Company has
taken no action that would give rise to any claim by any person for
brokerage commissions, finder’s fees or similar payments by
any Purchaser relating to this Agreement or the transactions
contemplated hereby.


(u) Acknowledgment Regarding
Securities. The number of Conversion Shares issuable upon
conversion of the Preferred Stock and the number of Warrant Shares
issuable upon exercise of the Warrants may increase in certain
circumstances. The Company’s directors and executive officers
have studied and fully understand the nature of the Securities
being sold hereunder. The Company acknowledges that its obligation
to issue Conversion Shares upon conversion of the Preferred Stock
in accordance with the terms thereof and the Warrant Shares upon
the exercise of the Warrants in accordance with the terms thereof
is absolute and unconditional, regardless of the dilution that such
issuance may have on the ownership interests of other stockholders
and the availability of remedies provided for in this Agreement or
the Warrants relating to a failure or refusal to issue Conversion
Shares or Warrant Shares. Taking the foregoing into account, the
Company’s Board of Directors has determined in its good faith
business judgment that the issuance of the Preferred Stock and
Warrants hereunder and the consummation of the other transactions
contemplated hereby are in the best interests of the Company and
its stockholders.


(v) Internal Control over Financial
Reporting. The Company maintains a system of internal
control over financial reporting (as such term is defined in Rule
13a-15(f) of the Exchange Act) that complies with the requirements
of the Exchange Act and has been designed by the Company’s
principal executive officer and principal financial officer, or
under their supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP.
The Company does not have any material weaknesses in its internal
control over financial reporting. Since the date of the latest
audited financial statements included in the Select SEC Documents,
there has been no change in the Company’s internal control
over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company’s
internal control over financial reporting.



 

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(w) Disclosure Controls and
Procedures. The Company maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) of the
Exchange Act) that comply with the requirements of the Exchange
Act. Such disclosure controls and procedures have been designed to
ensure that material information relating to the Company is
accumulated and communicated to the Company’s management,
including the Company’s principal executive officer and
principal financial officer, by others within those
entities.


(x) Sarbanes-Oxley Compliance. The
Company and the Company’s directors and officers, in their
capacities as such, are in compliance with any provision of the
Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated in connection therewith (“SOX”), including Section 402
related to loans and Sections 302 and 906 related to
certifications, and neither the Company nor any of its officers has
received notice from any governmental entity questioning or
challenging the accuracy, completeness, content, form or manner of
filing or submission of such certifications. The Company has no
reasonable basis to believe that it will not continue to be in
compliance with SOX as in effect on any Closing Date (including,
without limitation, the requirements of Section 404
thereof).


(y) Certain Agreements. Neither the
Company nor any of its Subsidiaries is party to, or bound by, any
agreement, understanding, instrument, contract or proposed
transaction pursuant to which any Change of Control, as such term
is defined in the Certificate of Designation, of the Company or any
of its Subsidiaries that would result in a breach of the terms,
conditions, or provisions thereof, or constitute a default
thereunder, or otherwise result in any payment or termination
right.


(z) Disclosure. All information
relating to or concerning the Company and/or any of its
Subsidiaries set forth in this Agreement or provided to the
Purchaser pursuant to Section 2(e) hereof or otherwise by the
Company in connection with the transactions contemplated hereby is
true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances
under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to the Company or
its Subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which has not been
publicly disclosed but, under applicable law, rule or regulation,
would be required to be disclosed by the Company in a registration
statement filed on the date hereof by the Company under the
Securities Act with respect to a primary issuance of the
Company’s securities.


4. COVENANTS.


(a) Rights of First
Offer.  As long as a
Purchaser holds shares of Preferred Stock, such Purchaser shall
have a pro rata right, based on such Purchaser’s percentage
of Common Stock held (on a fully-diluted basis), to participate in
subsequent securities offerings undertaken by the Company;
provided, however, this Section 4(a) shall not apply to the
issuance of any Excluded Securities, as such term is defined in
Section 4(c) below.


(b) Warrant Exchange. Each
Purchaser agrees to, within thirty (30) days following any Closing
Date, submit the Warrants issued to such Purchaser on the
applicable Closing to the Company for cancellation, and, in return,
the Company agree to issue to such Purchaser one-half of one share
of Common Stock for each Warrant Share issuable upon exercise of
the cancelled Warrant (the “Warrant Exchange”). The Warrant
Exchange shall occur pursuant to the terms and conditions of the
Exchange Agreement, a copy of which is attached hereto as
Exhibit E (the
“Exchange
Agreement”).



 

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


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


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


(iii) the Conversion Shares,


(iv) the Warrants; and


(v) the Warrant Shares (each of the
foregoing in clauses (i) through (v), collectively the
“Excluded
Securities”).


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


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



 

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(d) Form D; Blue Sky Laws. The
Company shall timely file with the SEC a Form D with respect to the
Securities as required under Regulation D and provide a copy
thereof to each Purchaser promptly after such filing. The Company
shall, on or before the Initial Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the
Securities for sale to each Purchaser pursuant to this Agreement
under applicable securities or “blue sky” laws of the
states of the United States or obtain exemption therefrom, and
shall provide evidence of any such action so taken to each
Purchaser on or prior to each Closing Date. Within four business
days after the execution of this Agreement, the Company shall file
a Form 8-K with the SEC concerning this Agreement and the
transactions contemplated hereby, which Form 8-K shall attach this
Agreement and its Exhibits as exhibits to such Form 8-K, and,
within four business days after each subsequent Closing Date, the
Company shall file a Form 8-K with the SEC concerning the issuance
of additional Securities to each Purchaser on such dates if
required by Item 3.02 of Form 8-K (the “8-K Filings”). From and after the
8-K Filings, the Company hereby acknowledges that no Purchaser
shall be in possession of any material nonpublic information
received from the Company, any of its Subsidiaries or any of its
respective officers, directors, employees or agents, that is not
disclosed in the 8-K Filings. The Company shall not, and shall
cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents not to, provide any
Purchaser with any material nonpublic information regarding the
Company or any of its Subsidiaries from and after the 8-K Filings
without the express written consent of such Purchaser.


(e) Reporting Status. So long as
any Purchaser (or any of its affiliates) beneficially owns any of
the Securities, the Company shall timely file all reports required
to be filed with the SEC pursuant to the Exchange Act, and the
Company shall not terminate its status as an issuer required to
file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination. In
addition, the Company shall take all actions necessary to meet the
“registrant eligibility” requirements set forth in the
general instructions to Form S-1 or any successor form thereto, to
continue to be eligible to register the resale of its Common Stock
on a registration statement on Form S-1 under the Securities
Act.


(f) Use of Proceeds. The Company
shall use the proceeds from the sale and issuance of the Preferred
Stock and Warrants for general corporate purposes and working
capital; provided that such proceeds shall not be used to (i) pay
dividends; (ii) purchase debt or equity securities of any entity
(including redeeming the Company’s own securities), except
for (A) evidences of indebtedness issued or fully guaranteed by the
United States of America and having a maturity of not more than one
year from the date of acquisition, (B) certificates of deposit,
notes, acceptances and repurchase agreements having a maturity of
not more than one year from the date of acquisition issued by a
bank organized in the United States, (C) the highest-rated
commercial paper having a maturity of not more than one year from
the date of acquisition, and (D) “Money Market” fund
shares, or money market accounts fully insured by the Federal
Deposit Insurance Corporation and sponsored by banks and other
financial institutions, provided that the investments consist
principally of the types of investments described in clauses (A),
(B), or (C) above; (iii) make any repayment of principal or
interest on the Company’s outstanding promissory notes; or
(iv) make any investment not directly related to the current
business of the Company.


(g) Reservation of Shares. Within
ninety (90) days following the Initial Closing Date, the Company
shall reserve such number of shares of its authorized but unissued
shares of Common Stock to provide for full conversion of the
Preferred Stock and the issuance of the Conversion Shares in
connection therewith, the full exercise of the Warrants and the
issuance of the Warrant Shares in connection therewith, and as
otherwise required by the Preferred Stock and the Warrants
(collectively, the “Issuance
Obligations”). In the event such number of shares
becomes insufficient to satisfy the Issuance Obligations, the
Company shall take all necessary action to authorize and reserve
such additional shares of Common Stock necessary to satisfy the
Issuance Obligations.



 

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(h) Listing. The Company shall
maintain, so long as any Purchaser (or any of its affiliates)
beneficially owns any Securities, the listing of all Conversion
Shares and Warrant Shares from time to time issuable upon
conversion of the Preferred Stock and exercise of the Warrants on
each national securities exchange, automated quotation system or
electronic bulletin board on which shares of Common Stock are
currently listed. The Company will use its best efforts to continue
the listing and trading of its Common Stock on the OTC Pink or the
NASDAQ Capital Market (the “NASDAQ”) or the NYSE MKT Exchange
(the “NYSE
MKT”) and will comply in all respects with the
reporting, filing and other obligations under the bylaws or rules
of the Financial Industry Regulatory Authority (“FINRA”), such exchanges, or such
electronic system, as applicable. The Company shall promptly
provide to each Purchaser copies of any notices it receives
regarding the continued eligibility of the Common Stock for trading
on the OTC Pink or on any securities exchange or automated
quotation system on which securities of the same class or series
issued by the Company are then listed or quoted, if
any.


(i) 
Fees.  The
Company shall reimburse V3 Capital Partners, LLC
(“V3”),
as the lead Purchaser, for all costs and expenses incurred by V3,
or its affiliates, in connection with the transactions contemplated
by the Transaction Documents (including, without limitation, all
legal fees and disbursements in connection therewith, structuring,
documentation and implementation of the transactions contemplated
by the Transaction Documents and due diligence and regulatory
filings in connection therewith); provided,
however, such expenses shall
not exceed $15,000, which amount shall be withheld from the
Purchase Price payable by V3 on the applicable Closing Date,
and such expenses shall be deemed to have been paid in full by
the Company at the applicable Closing Date. Except as otherwise set
forth in the Transaction Documents, each party to this Agreement
shall bear its own expenses in connection with the sale of the
Securities to the Purchasers.


(j) Corporate Existence. So long as
any Purchaser (or any of its affiliates) beneficially owns any
Securities, the Company shall maintain its corporate existence, and
in the event of a merger, consolidation or sale of all or
substantially all of the Company’s assets, the Company shall
ensure that the surviving or successor entity in such transaction
and, if an entity different from the successor or acquiring entity,
the entity whose securities into which the Common Stock shall
become convertible or exchangeable in such transaction (i) assumes
the Company’s obligations under this Agreement and the other
Transaction Documents and the agreements and instruments entered
into in connection herewith and therewith regardless of whether or
not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to
effect the conversion of all the Preferred Stock and exercise in
full of all Warrants outstanding as of the date of such transaction
and (ii) except in the event of a merger, consolidation of the
Company into any other corporation, or the sale or conveyance of
all or substantially all of the assets of the Company where the
consideration consists solely of cash, the surviving or successor
entity and, if an entity different from the successor or acquiring
entity, the entity whose securities into which the Common Stock
shall become convertible or exchangeable in such transaction, is a
publicly traded corporation whose common stock is listed for
trading on NASDAQ or the NYSE MKT.


(k) No Integrated Offerings. The
Company shall not make any offers or sales of any security (other
than the Securities and the Preferred Stock issuable in connection
with the Exchange Agreement) under circumstances that would require
registration of the Securities being offered or sold hereunder
under the Securities Act or cause this offering of the Securities
to be integrated with any other offering of securities by the
Company for purposes of any stockholder approval provision
applicable to the Company or its securities.


(l) Legal Compliance. The Company
shall conduct its business and the business of its Subsidiaries in
compliance with all laws, ordinances or regulations of governmental
entities applicable to such businesses, except where the failure to
do so would not have a Material Adverse Effect.



 

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5. TRANSFER AGENT
INSTRUCTIONS.


(a) Upon conversion of the Preferred Stock
or exercise of the Warrants by any person, (i) if the DTC Transfer
Conditions (as defined below) are satisfied, the Company shall
cause its transfer agent to electronically transmit all Conversion
Shares and Warrant Shares by crediting the account of the Purchaser
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 issue and
deliver, or instruct its transfer agent to issue and deliver,
certificates (subject to the legend and other applicable provisions
hereof and the Certificate of Designation and Warrants), registered
in the name of such person its nominee, physical certificates
representing the Conversion Shares and Warrant Shares, as
applicable. Even if the DTC Transfer Conditions are satisfied, any
person effecting a conversion of Preferred Stock or exercising
Warrants may instruct the Company to deliver to such person or its
nominee physical certificates representing the Conversion Shares
and Warrant Shares, as applicable, in lieu of delivering such
shares by way of DTC Transfer. For purposes of this Agreement,
“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 or Warrant Shares required to be delivered do not
bear a legend and the person effecting such conversion or exercise
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 5 and stop transfer instructions to give effect to Section
2(g) hereof in the case of the transfer of the Conversion Shares or
Warrant Shares prior to registration of the Conversion Shares and
Warrant Shares under the Securities Act or without an exemption
therefrom, shall be given by the Company to its transfer agent and
that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in
this Agreement. Nothing in this Section shall affect in any way the
Purchasers’ obligations and agreement set forth in Section
2(g) hereof to resell the Securities pursuant to an effective
registration statement or under an exemption from the registration
requirements of applicable securities law.


(c) If any Purchaser 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 Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration, or any Purchaser
provides the Company with reasonable assurances that such
Securities may be sold under Rule 144, the Company shall permit the
transfer and, in the case of the Conversion Shares and Warrant
Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by
the Purchasers.


6. CONDITIONS TO THE COMPANY’S
OBLIGATION TO SELL.


  The
obligation of the Company hereunder to issue and sell the Preferred
Stock and Warrants to each Purchaser is subject to the
satisfaction, on or before each Closing Date, 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:


(a) Each Purchaser shall have executed
such Purchaser’s Execution Page to this Agreement and each
other Transaction Document to which such Purchaser is a party and
delivered the same to the Company.


(b) Each Purchaser shall have delivered
the full amount of such Purchaser’s applicable Purchase Price
for such Closing Date in accordance with Section 1
hereof.



 

-12-







 






 


(c) The representations and warranties of
each Purchaser shall be true and correct as of the date when made
and the applicable Closing Date as though made at that time (except
for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and
correct as of such date), and such Purchaser 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 Purchaser on or prior
to such Closing Date.


(d) No statute, rule, regulation,
executive order, decree, ruling, injunction, action or proceeding
shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.


7. CONDITIONS TO THE PURCHASER’S
OBLIGATION TO PURCHASE.


  The
obligation of each Purchaser hereunder to purchase the Preferred
Stock and Warrants on each Closing Date is subject to the
satisfaction of each of the following conditions, provided that
such conditions are for each Purchaser’s individual and sole
benefit and may be waived by such Purchaser at any time in such
Purchaser’s sole discretion:


(a) The Company shall have executed such
Purchaser’s Execution Page to this Agreement and each other
Transaction Document to which the Company is a party and delivered
executed originals of the same to such Purchaser.


(b) All consents, approvals and waivers
required for the consummation of the transactions contemplated
hereby shall have been obtained.


(c) The Company shall have delivered to
such Purchaser duly executed certificates representing the
Preferred Stock and Warrants for the number of shares of Preferred
Stock and Warrants being purchased by such Purchaser on each
respective Closing Date, registered in such Purchaser’s
name.


(d) The Common Stock shall be authorized
for quotation and listed on the OTC Pink and trading in the Common
Stock (or on the OTC Pink generally) shall not have been suspended
by the SEC or the OTC Pink.


(e) The representations and warranties of
the Company shall be true and correct as of the date when made and
as of each Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date,
which representations and warranties shall be true and correct as
of such date) and the Company 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 the Company on or prior to such
Closing Date. In connection with the issuance of the Securities on
each Closing Date, such Purchaser shall have received a
certificate, executed by the Chief Executive Officer of the Company
after reasonable investigation, dated as of such Closing Date to
the foregoing effect and as to such other matters as may reasonably
be requested by such Purchaser.


(f) No statute, rule, regulation,
executive order, decree, ruling, injunction, action or proceeding
shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters
contemplated hereby which questions the validity of, challenges or
prohibits the consummation of, any of the transactions contemplated
by this Agreement.



 

-13-







 






 


(g) Such Purchaser shall have received an
opinion of the Company’s counsel, dated as of the Initial
Closing Date, in substantially the form attached hereto as
Exhibit
D.


(h) There shall have been no material
adverse changes and no material adverse developments in the
business, properties, operations, prospects, financial condition or
results of operations of the Company and its Subsidiaries, taken as
a whole, since the date hereof, and no information that is
materially adverse to the Company and of which such Purchaser is
not currently aware shall come to the attention of such
Purchaser.


(i) Such Purchaser shall have received a
copy of resolutions, duly adopted by the Board of Directors of the
Company, which shall be in full force and effect at the time of
each Closing Date, authorizing the execution, delivery and
performance by the Company of this Agreement and the other
Transaction Documents and the consummation by the Company of the
transactions contemplated hereby and thereby, certified as such by
the Secretary or Assistant Secretary of the Company on or before
the Initial Closing Date, and such other documents they reasonably
request in connection with the issuance of the Securities on any
Closing Date.


8. GOVERNING LAW;
MISCELLANEOUS.


(a) Governing Law; Jurisdiction.
This Agreement shall be governed by and construed in accordance
with the laws of the State of California applicable to contracts
made and to be performed in the State of California. The Company
and each Purchaser irrevocably consent to the exclusive
jurisdiction of the United States federal courts and the state
courts located in the County of Orange, State of California, in any
suit or proceeding based on or arising under this Agreement and
irrevocably agree that all claims in respect of such suit or
proceeding may be determined in such courts. The Company
irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company further agrees
that service of process upon the Company mailed by first class mail
shall be deemed in every respect effective service of process upon
the Company in any such suit or proceeding. Nothing herein shall
affect the right of any Purchaser to serve process in any other
manner permitted by law. The Company agrees that a final
non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on
such judgment or in any other lawful manner.


(b) Counterparts. This Agreement
may be executed in two or more 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. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission or
electronic mail of a copy of this Agreement bearing the signature
of the party so delivering this Agreement.


(c) Construction. Whenever the
context requires, the gender of any word used in this Agreement
includes the masculine, feminine or neuter, and the number of any
word includes the singular or plural. Unless the context otherwise
requires, all references to articles and sections refer to articles
and sections of this Agreement, and all references to schedules are
to schedules attached hereto, each of which is made a part hereof
for all purposes. The descriptive headings of the several articles
and sections of this Agreement are inserted for purposes of
reference only, and shall not affect the meaning or construction of
any of the provisions hereof.


(d) Severability. If any provision
of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect
the validity or enforceability of the remainder of this Agreement
or the validity or enforceability of this Agreement in any other
jurisdiction.



 

-14-







 






 


(e) Entire Agreement; Amendments.
This Agreement and the other Transaction Documents (including any
schedules and exhibits hereto and thereto) contain the entire
understanding of the Purchasers, the Company, their affiliates and
persons acting on their behalf with respect to the matters covered
herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Purchasers make any
representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived other
than by an instrument in writing signed by the party to be charged
with enforcement, and no provision of this Agreement may be amended
other than by an instrument in writing signed by the Company and
each Purchaser.


(f) Notices. Any notices required
or permitted to be given under the terms of this Agreement shall be
sent by certified or registered mail (return receipt requested) or
delivered personally, by responsible overnight carrier or by
confirmed facsimile, and shall be effective five days after being
placed in the mail, if mailed, or upon receipt or refusal of
receipt, if delivered personally or by responsible overnight
carrier or confirmed facsimile, in each case addressed to a party.
The initial addresses for such communications shall be as follows,
and each party shall provide notice to the other parties of any
change in such party’s address:


(i) If to the Company:


True
Drinks Holdings, Inc.


18662
MacArthur Boulevard, Suite 110


Irvine,
CA 92612


Telephone: (949)
203-3500


Attention: Chief
Financial Officer


 


with a
copy simultaneously transmitted by like means (which transmittal
shall not constitute notice hereunder) to:


 


Disclosure Law
Group LLP


600
West Broadway, Suite 700


San
Diego, CA 92101


Telephone: (619)
795-1134


Facsimile: (619)
330-2101


Attention: Daniel
W. Rumsey, Esq.


 


(ii) If to any Purchasers, to the address
set forth under such Purchaser’s name on the Execution Page
hereto executed by such Purchaser.



 

-15-







 






 


(g) Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. Except as provided
herein, the Company shall not assign this Agreement or any rights
or obligations hereunder. Any Purchaser may assign or transfer the
Securities pursuant to the terms of this Agreement and of such
Securities. Any Purchaser may assign such Purchaser’s rights
hereunder or thereunder to any other person or entity, except for
direct competitors of the Company or persons or entities that have
publicly announced plans to compete directly with the Company. In
addition, and notwithstanding anything to the contrary contained in
this Agreement or the other Transaction Documents, the Securities
may be pledged and all rights of any Purchaser under this Agreement
or any other Transaction Document may be assigned, without further
consent of the Company, to a bona fide pledgee in connection with
such Purchaser’s margin or brokerage account.


(h) Third Party Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for
the benefit of, nor may any provision hereof be enforced by, any
other person.


(i) Survival. The representations
and warranties of the Company and the agreements and covenants set
forth in Sections 2, 3, 4, 6 and 7 hereof shall survive each of the
Closing Dates notwithstanding any due diligence investigation
conducted by or on behalf of any Purchaser. Moreover, none of the
representations and warranties made by the Company herein shall act
as a waiver of any rights or remedies any Purchaser may have under
applicable U.S. federal or state securities laws.


(j) 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.


(k) Indemnification. In
consideration of each Purchaser’s execution and delivery of
this Agreement and the other Transaction Documents and purchase of
the Securities hereunder, and in addition to all of the
Company’s other obligations under this Agreement and the
other Transaction Documents, from and after each of the Closing
Dates, the Company shall defend, protect, indemnify and hold
harmless each Purchaser and each other holder of the Securities and
all of their stockholders, partners, members, officers, directors,
employees and direct or indirect investors and any of the foregoing
persons’ agents or other representatives, including, without
limitation, those retained in connection with the transactions
contemplated by this Agreement (collectively, the
“Indemnitees”),
from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages,
and expenses in connection therewith (irrespective of whether any
such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or
relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement,
any other Transaction Document or any other certificate, instrument
or document contemplated hereby or thereby, (ii) any breach of any
covenant, agreement or obligation of the Company contained in this
Agreement, any other Transaction Document or any other certificate,
instrument or document contemplated hereby or thereby or (iii) any
cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out
of or resulting from (A) the execution, delivery, performance or
enforcement of this Agreement, any other Transaction Document or
any other certificate, instrument or document contemplated hereby
or thereby, (B) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the
issuance and sale of the Securities, or (C) the status of such
Purchaser or holder of the Securities as an investor in the
Company. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make
the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable
law.


(l) Joint Participation in
Drafting. Each party to this Agreement has participated in
the negotiation and drafting of this Agreement and the other
Transaction Documents. As such, the language used herein and
therein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict
construction will be applied against any party to this
Agreement.


(m) Knowledge. As used in this
Agreement, the term “knowledge” of any person or entity
shall mean and include (i) with respect to the Company, the actual
knowledge of any of the Company’s officers or directors and
(ii) that knowledge which a reasonably prudent business person
could have obtained in the management of his or her business
affairs after making due inquiry and exercising due diligence which
a prudent business person should have made or exercised, as
applicable, with respect thereto.


(n) Exculpation Among Purchasers.
The Company acknowledges that the obligations of each Purchaser
under this Agreement and each of the other Transaction Documents
are several and not joint with the obligations of any other
Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under the
Transaction Documents. Each Purchaser acknowledges that it has
independently evaluated the merits of the transactions contemplated
by this Agreement and the other Transaction Documents, that it has
independently determined to enter into the transactions
contemplated hereby and thereby, that it is not relying on any
advice from or evaluation by any other Purchaser, and that it is
not acting in concert with any other Purchaser in making its
purchase of securities hereunder or in monitoring its investment in
the Company. The Purchasers and, to its knowledge, the Company
agree that the no action taken by any Purchaser pursuant hereto or
to the other Transaction Documents shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or would deem such
Purchasers to be members of a “group” for purposes of
Section 13(d) of the Exchange Act, and the Purchasers have not
agreed to act together for the purpose of acquiring, holding,
voting or disposing of equity securities of the Company. The
Company has elected to provide all Purchasers with the same terms
and Transaction Documents for the convenience of the Company and
not because it was required or requested to do so by the
Purchasers. The Company acknowledges that such procedure with
respect to the Transaction Documents in no way creates a
presumption that the Purchasers are in any way acting in concert or
as a “group” for purposes of Section 13(d) of the
Exchange Act with respect to the Transaction Documents or the
transactions contemplated hereby or thereby. Each Purchaser
acknowledges that it has been represented by its own separate legal
counsel in their review and negotiation of the Transaction
Documents.


(o) Business Days and Trading Days.
For purposes of this Agreement, the term “business day”
means any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or
obligated by law, regulation or executive order to close, and the
term “trading day” means any day on which the OTC Pink
or, if the Common Stock is not then traded on the OTC Pink, the
principal national securities exchange, automated quotation system
or other trading market where the Common Stock is then listed,
quoted or traded, is open for trading.


 


[REMAINDER OF PAGE
LEFT BLANK INTENTIONALLY]


 



 

-16-







 






 


   
    IN WITNESS WHEREOF, the Purchaser and the
Company have caused this Agreement to be duly executed as of the
date first above written.


 


TRUE
DRINKS HOLDINGS, INC.


 



By: 










Name:
Dan Kerker


Title:
Chief Financial Officer

 





PURCHASER:


 


(Print
or Type Name of Purchaser)


 



By:







Name:


Title:


 



ADDRESS:                      









Telephone:                                                      









Facsimile:                                                      









Attention:                                                      








 


SUBSCRIPTION
AMOUNT:


 



Number of shares of
Preferred
Stock:                                                                                     











Number of
Warrants:                                                                                                            









Purchase Price
($100.00 per share of Preferred
Stock):                                               










 


 




 

-17-








 






 



EXHIBIT A


 


Certificate
of Designation


 



 

A-1







 






 



EXHIBIT B


 


Form
of Warrant


 




 

B-1








 






 



EXHIBIT C


 


Wiring
Instructions


 




 

C-1








 











EXHIBIT D


 


Legal
Opinion


 




 

D-1








 











EXHIBIT E


 


Form
of Exchange Agreement


 




 

E-1