Document:

ex10-3.htm

Exhibit 10.3

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (the “Agreement”) is made and entered into as of this __th day of November, 2015 by and among True Drinks Holdings, Inc., a Nevada corporation (the “Company”), and the “Purchasers” named in that certain Securities Purchase Agreement, dated as of the date hereof, by and among the Company and the Purchasers (the “Purchase Agreement”).  Capitalized terms used herein have the respective meanings ascribed thereto in the Purchase Agreement unless otherwise defined herein.

 

The parties hereby agree as follows:

 

1.           Certain Definitions.

 

As used in this Agreement, the following terms shall have the following meanings:

 

“Common Stock” means the Company’s common stock, par value $0.001 per share, and any securities into which such shares may hereinafter be reclassified.

 

 “Prospectus” means (i) the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus, and (ii) any “free writing prospectus” as defined in Rule 405 under the 1933 Act.

 

“Purchasers” means the Purchasers identified in the Purchase Agreement and any permitted transferee of any Purchaser who is a subsequent holder of any Preferred Stock, Series C Warrants or Registrable Securities.

 

“Register,” “registered” and “registration” refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the 1933 Act (as defined below), and the declaration or ordering of effectiveness of such Registration Statement or document.

 

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

 

“Registration Statement” means any registration statement of the Company filed under the 1933 Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement (including, without limitation, a registration statement filed for purposes of a public offering of securities of the Company for its own account), amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement.

 

  

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“Required Purchasers” means the Purchasers holding a majority of the Registrable Securities.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Shares” means the shares of Common Stock issuable upon conversion of the Preferred Stock issued pursuant to the Purchase Agreement.

 

“1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Series C Warrants” means, the warrants to purchase shares of Common Stock issued to the Purchasers pursuant to the Purchase Agreement, the form of which is attached to the Purchase Agreement as Exhibit A.

 

“Warrant Shares” means the shares of Common Stock issuable upon the exercise of the Series C Warrants.

 

2.           Registration.

 

(a)           Demand Registration.

 

(i)           If, at any time after May __, 2016, the Company receives a request from the Required Purchasers that the Company file a Registration Statement with respect to all or at least fifty percent (50%) of the Registrable Securities (or such lesser amount as may be agreed to by the Company and the Required Purchasers), then the Company shall (i) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Purchasers (other than the Required Purchasers); and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Required Purchasers, file a Registration Statement covering (z) all Registrable Securities requested to be registered by the Required Purchasers and (y) any additional Registrable Securities requested to be included in such Registration Statement by any other Purchasers, as specified by notice given by each such Purchaser to the Company within twenty (20) days after the date the Demand Notice is given, and in each case, subject to the limitations of Section 2(a)(ii).

 

  

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(ii)           Notwithstanding the foregoing obligations, if the Company furnishes to Required Purchasers requesting a registration pursuant to this Section 2(a) a certificate signed by the Company's chief executive officer stating that in the good faith judgment of the Company's Board of Directors it would be materially detrimental to the Company and its stockholders for such Registration Statement to either become effective or remain effective for as long as such Registration Statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the 1933 Act or 1934 Act, then the Company shall have the right to defer taking action with respect to such filing, for a period of not more than sixty (60) days after the request of the Required Purchasers is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such sixty (60) day period, other than pursuant to a registration statement on Form S-4 or Form S-8 (or a similar or successor form).

 

(iii)           The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2(a)(i): (i) during the period that is ninety (90) days after the effective date of a Company-initiated registration, provided, that the Company is actively employing, in good faith, commercially reasonable efforts to cause such registration statement to become effective; or (ii) after the Company has effected two (2) registrations pursuant to Section 2(a)(i).  A registration shall not be counted as "effected" for purposes of this Section 2(a)(iii) until such time as (i) all Registrable Securities requested to be registered are so registered and (ii) the applicable Registration Statement has been declared effective by the SEC, unless the Required Purchasers withdraw their request for such registration (for any reason other than as a result of a material adverse change to the Company) and forfeit their right to one demand registration statement pursuant to Section 2(b), in which case such withdrawn registration statement shall be counted as "effected" for purposes of this Section 2(a)(iii).

 

(b)           Expenses.  The Company will pay all expenses incurred in connection with registrations and filings pursuant to Section 2(a), including filing and printing fees, the Company’s counsel and accounting fees, as well as expenses and costs associated with clearing the Registrable Securities for sale under applicable state securities laws, listing fees, fees and expenses; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1(a) if the registration request is subsequently withdrawn at the request of the Purchasers holding a majority of the Registrable Securities to be registered (in which case all such Purchasers shall bear such expenses on a pro-rata basis, based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Purchasers holding a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Section 2(a)(i) or Section 2(a)(ii), as the case may be; provided further that if, at the time of such withdrawal, any Purchaser shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Purchasers at the time of their request and have withdrawn the request with reasonable promptness after learning of such information then the Purchasers shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Section 2(a)(i) or Section 2(a)(ii). 

 

 

  

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(c)           Effectiveness.

 

(i)           The Company shall use its best efforts to have any Registration Statement filed pursuant to Section 2(a) declared effective as soon as practicable.  The Company shall notify the Purchasers by facsimile or e-mail as promptly as practicable, and in any event, within twenty-four (24) hours, after any Registration Statement is declared effective and shall simultaneously provide the Purchasers with copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby.  If (A) a Registration Statement covering the Registrable Securities is not declared effective by the SEC prior to five (5) business days after the SEC shall have informed the Company that no review of the Registration Statement will be made or that the SEC has no further comments on the Registration Statement or (B) after a Registration Statement has been declared effective by the SEC, sales cannot be made pursuant to such Registration Statement for any reason (including without limitation by reason of a stop order, or the Company’s failure to update the Registration Statement), but excluding any Allowed Delay (as defined below) or the inability of any Purchaser to sell the Registrable Securities covered thereby due to market conditions, then the Company will make pro rata payments to each Purchaser, as liquidated damages and not as a penalty, in an amount equal to 1.0% of the aggregate amount invested by such Purchaser for the first 30-day period or pro rata for any portion thereof following the date by which such Registration Statement should have been effective and 1.5% of the aggregate amount invested by such Purchaser for each 30-day period thereafter or pro rata for any portion thereof for which such Registration Statement should have been effective (the “Blackout Period”); provided, that the maximum payments to the Purchasers pursuant to this Section 2(c)(i) shall not exceed 10.0% of the aggregate amount invested by such Purchaser.  If the Company fails to pay any partial liquidated damages pursuant to this Section (2)(c)(i) in full within seven (7) days after the date payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Purchasers, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full.  Such payments shall constitute the Purchasers’ exclusive monetary remedy for such events, but shall not affect the right of the Purchasers to seek injunctive relief.

 

  

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(ii)           For not more than twenty (20) consecutive days or for a total of not more than forty-five (45) days in any twelve (12) month period, the Company may suspend the use of any Prospectus included in any Registration Statement contemplated by this Section 2(c)(ii) in the event that the Company determines in good faith that such suspension is necessary to (A) delay the disclosure of material non-public information concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company or (B) amend or supplement the affected Registration Statement or the related Prospectus so that such Registration Statement or Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus in light of the circumstances under which they were made, not misleading (an “Allowed Delay”); provided, that the Company shall promptly (a) notify each Purchaser in writing of the commencement of an Allowed Delay, but shall not (without the prior written consent of a Purchaser) disclose to such Purchaser any material non-public information giving rise to an Allowed Delay, (b) advise the Purchasers in writing to cease all sales under the Registration Statement until the end of the Allowed Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay as promptly as practicable.

 

(d)           Rule 415; Cutback.  If at any time the SEC takes the position that the offering of some or all of the Registrable Securities in a Registration Statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the 1933 Act or requires any Purchaser to be named as an “underwriter”, the Company shall use its best efforts to persuade the SEC that the offering contemplated by the Registration Statement is a valid secondary offering and not an offering “by or on behalf of the issuer” as defined in Rule 415 and that none of the Purchasers is an “underwriter”.  The Purchasers shall have the right to participate or have their counsel participate in any meetings or discussions with the SEC regarding the SEC’s position and to comment or have their counsel comment on any written submission made to the SEC with respect thereto.  No such written submission shall be made to the SEC to which the Purchasers’ counsel reasonably objects.  In the event that, despite the Company’s best efforts and compliance with the terms of this Section 2(d), the SEC refuses to alter its position, the Company shall (i) remove from the Registration Statement such portion of the Registrable Securities (the “Cut Back Shares”) and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the SEC may require to assure the Company’s compliance with the requirements of Rule 415 (collectively, the “SEC Restrictions”); provided, however, that the Company shall not agree to name any Purchaser as an “underwriter” in such Registration Statement without the prior written consent of such Purchaser.  Any cut-back imposed on the Purchasers pursuant to this Section 2(d) shall be allocated among the Purchasers on a pro rata basis and shall be applied first to any Warrant Shares, unless the SEC Restrictions otherwise require or provide or the Purchasers otherwise agree.  No liquidated damages shall accrue as to any Cut Back Shares until such date as the Company is able to effect the registration of such Cut Back Shares in accordance with any SEC Restrictions (such date, the “Restriction Termination Date” of such Cut Back Shares).  From and after the Restriction Termination Date applicable to any Cut Back Shares, all of the provisions of this Section 2 (including the liquidated damages provisions) shall again be applicable to such Cut Back Shares; provided, however, that (i) the Registration Statement including such Cut Back Shares shall be filed with the SEC ten (10) business days after such Restriction Termination Date, and (ii) the date by which the Company is required to obtain effectiveness with respect to such Cut Back Shares under Section 2(c) shall be the 60th day immediately after the Restriction Termination Date.

 

  

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(e)           Right to Piggyback Registration.

 

(i)           If at any time following the date of this Agreement that any Registrable Securities remain outstanding (A) there is not one or more effective Registration Statements covering all of the Registrable Securities and (B) the Company proposes for any reason to register any shares of Common Stock under the 1933 Act (other than pursuant to a registration statement on Form S-4 or Form S-8 (or a similar or successor form)) with respect to an offering of Common Stock by the Company for its own account or for the account of any of its stockholders, it shall at each such time promptly give written notice to the holders of the Registrable Securities of its intention to do so (but in no event less than thirty (30) days before the anticipated filing date) and, to the extent permitted under the provisions of Rule 415 under the 1933 Act, include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within fifteen (15) days after receipt of the Company’s notice (a “Piggyback Registration”).  Such notice shall offer the holders of the Registrable Securities the opportunity to register such number of shares of Registrable Securities as each such holder may request and shall indicate the intended method of distribution of such Registrable Securities.

 

(ii)           Notwithstanding the foregoing, (A) if such registration involves an underwritten public offering, the Purchasers must sell their Registrable Securities to, if applicable, the underwriter(s) at the same price and subject to the same underwriting discounts and commissions that apply to the other securities sold in such offering (it being acknowledged that the Company shall be responsible for other expenses as set forth in Section 2(b)) and subject to the Purchasers entering into customary underwriting documentation for selling stockholders in an underwritten public offering, and (B) if, at any time after giving written notice of its intention to register any Registrable Securities pursuant to Section 2(e)(i) and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to cause such registration statement to become effective under the 1933 Act, the Company shall deliver written notice to the Purchasers and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration; provided, however, that nothing contained in this Section 2(e)(ii) shall limit the Company’s liabilities and/or obligations under this Agreement, including, without limitation, the obligation to pay liquidated damages under this Section 2.

 

3.           Company Obligations.  The Company will use commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible:

 

(a)           use commercially reasonable efforts to cause such Registration Statement to become effective and to remain continuously effective for a period that will terminate upon the earlier of (i) the date on which all Registrable Securities covered by such Registration Statement as amended from time to time, have been sold, and (ii) the date on which all Registrable Securities covered by such Registration Statement, in the reasonable opinion of counsel to the Purchasers, (A) may be sold without restriction pursuant to Rule 144 and (B) (I) may be sold without the requirement for the Company to be in compliance with the current public information requirement under Rule 144 or (II) the Company is in compliance with the current public information requirement under Rule 144 (the “Effectiveness Period”), and advise the Purchasers in writing when the Effectiveness Period has expired;

 

  

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(b)           prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement current and effective for the Effectiveness Period and to comply with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all of the Registrable Securities covered thereby;

 

(c)           provide copies to and permit counsel designated by the Purchasers to review each Registration Statement, including any related Prospectus, and all amendments and supplements thereto no fewer than seven (7) business days prior to their filing with the SEC and not file any document to which such counsel reasonably objects;

 

(d)           respond as promptly as reasonably possible to any comments received from the SEC with respect to a Registration Statement or any amendment thereto;

 

(e)           furnish to the Purchasers and their legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company (but not later than two (2) business days after the filing date, receipt date or sending date, as the case may be) one (1) copy of any Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential treatment), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as each Purchaser may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Purchaser that are covered by the related Registration Statement;

 

(f)           use commercially reasonable efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such order at the earliest possible moment;

 

(g)           cooperate with any broker-dealer through which a Purchaser proposes to resell its Registrable Securities in effecting a filing with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110, as requested by any such Purchaser;

 

(h)           prior to any public offering of Registrable Securities, use commercially reasonable efforts to register or qualify or cooperate with the Purchasers and their counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions requested by the Purchasers and do any and all other commercially reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(f), (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject but for this Section 3(f), or (iii) file a general consent to service of process in any such jurisdiction;

 

  

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(i)           use commercially reasonable efforts to cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed;

 

(j)           immediately notify the Purchasers, at any time prior to the end of the Effectiveness Period, upon discovery that, or upon the happening of any event as a result of which, the Prospectus includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare, file with the SEC and furnish to such holder a supplement to or an amendment of such Prospectus as may be necessary so that such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

 

(k)           otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act, including, without limitation, Rule 172 under the 1933 Act, file any final Prospectus, including any supplement or amendment thereof, with the SEC pursuant to Rule 424 under the 1933 Act, promptly inform the Purchasers in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Purchasers are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder; and make available to its security holders, as soon as reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period of at least twelve (12) months, beginning after the effective date of each Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, including Rule 158 promulgated thereunder (for the purpose of this subsection 3(i), “Availability Date” means the 45th day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the Company’s fiscal year, “Availability Date” means the 90th day after the end of such fourth fiscal quarter); and

 

(l)           With a view to making available to the Purchasers the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the SEC that may at any time permit the Purchasers to sell shares of Common Stock to the public without registration, the Company covenants and agrees to:  (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) six months after such date as all of the Registrable Securities may be sold without restriction by the holders thereof pursuant to Rule 144 or any other rule of similar effect or (B) such date as all of the Registrable Securities shall have been resold; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the 1934 Act; and (iii) furnish to each Purchaser upon request, as long as such Purchaser owns any Registrable Securities, (A) a written statement by the Company that it has complied with the reporting requirements of the 1934 Act, (B) a copy of the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as may be reasonably requested in order to avail such Purchaser of any rule or regulation of the SEC that permits the selling of any such Registrable Securities without registration.

 

  

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4.           Due Diligence Review; Information.  The Company shall make available, upon reasonable advance written notice, during normal business hours, for inspection and review by the Purchasers, advisors to and representatives of the Purchasers (who may or may not be affiliated with the Purchasers and who are reasonably acceptable to the Company), all financial and other records, all SEC Filings (as defined in the Purchase Agreement) and other filings with the SEC, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review, and cause the Company’s officers, directors and employees, within a reasonable time period, to supply all such information reasonably requested by the Purchasers or any such representative, advisor or underwriter in connection with such Registration Statement (including, without limitation, in response to all questions and other inquiries reasonably made or submitted by any of them), prior to and from time to time after the filing and effectiveness of the Registration Statement for the sole purpose of enabling the Purchasers and such representatives, advisors and underwriters and their respective accountants and attorneys to conduct initial and ongoing due diligence with respect to the accuracy of such Registration Statement.

 

The Company shall not disclose material nonpublic information to the Purchasers, or to advisors to or representatives of the Purchasers, unless prior to disclosure of such information the Company identifies such information as being material nonpublic information and provides the Purchasers, such advisors and representatives with the opportunity to accept or refuse to accept such material nonpublic information for review and any Purchaser wishing to obtain such information enters into an appropriate confidentiality agreement with the Company with respect thereto.

 

5.           Obligations of the Purchasers.

 

(a)           Each Purchaser shall furnish in writing to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities.  At least five (5) business days prior to the first anticipated filing date of any Registration Statement, the Company shall notify each Purchaser of the information the Company requires from such Purchaser if such Purchaser elects to have any of the Registrable Securities included in the Registration Statement.  A Purchaser shall provide such information to the Company at least two (2) business days prior to the first anticipated filing date of such Registration Statement if such Purchaser elects to have any of its Registrable Securities included in the Registration Statement.

 

(b)           Each Purchaser, by its acceptance of the Registrable Securities agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Purchaser has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement.

 

(c)           Each Purchaser agrees that, upon receipt of any notice from the Company of either (i) the commencement of an Allowed Delay pursuant to Section 2(c)(ii), or (ii) the happening of an event pursuant to Section 3(h) hereof, such Purchaser will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until the Purchaser is advised by the Company that such dispositions may again be made.

 

 

  

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6.           Indemnification.

 

(a)           Indemnification by the Company.  The Company will indemnify and hold harmless each Purchaser and its officers, directors, members, employees and agents, successors and assigns, and each other person, if any, who controls such Purchaser within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement or omission or alleged omission of any material fact contained in any Registration Statement, any preliminary Prospectus or final Prospectus, or any amendment or supplement thereof; (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information herein called a “Blue Sky Application”); (iii) the omission or alleged omission to state in a Blue Sky Application a material fact required to be stated therein or necessary to make the statements therein not misleading; (iv) any violation by the Company or its agents of the 1933 Act, the 1934 Act or any other law, including any state securities law, or any rule or regulation promulgated thereunder, in connection with such registration; or (v) any failure to register or qualify the Registrable Securities included in any such Registration Statement in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company will undertake such registration or qualification on a Purchaser’s behalf and will reimburse such Purchaser, and each such officer, director or member and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Purchaser or any such controlling person in writing specifically for use in such Registration Statement or Prospectus.

 

(b)           Indemnification by the Purchasers.  Each Purchaser agrees, severally but not jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees, stockholders and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary Prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent that such untrue statement or omission is contained in any information furnished in writing by such Purchaser to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto.  In no event shall the liability of a Purchaser be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Purchaser in connection with any claim relating to this Section 6 and the amount of any damages such Purchaser has otherwise been required to pay by reason of such untrue statement or omission) received by such Purchaser upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.

 

  

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(c)           Conduct of Indemnification Proceedings.  Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided, further, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation.  It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties.  No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.

 

(d)           Contribution.  If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations.  No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation.  In no event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such holder in connection with any claim relating to this Section 6 and the amount of any damages such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.

 

7.           Miscellaneous.

 

(a)           No Piggyback on Registrations.  Except pursuant to a registration statement filed for purposes of a public offering of securities of the Company for its own account, neither the Company nor any of its security holders (other than the Purchasers in such capacity pursuant hereto) may include securities of the Company in any Registration Statements other than the Registrable Securities.

 

  

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(b)           Amendments and Waivers.  This Agreement may be amended only by a writing signed by the Company and the Required Purchasers.  In the event of an amendment approved by the Company and the Required Purchasers, no other approval shall be required by the Company’s stockholders.  The Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Required Purchasers.

 

(c)           Notices.  All notices and other communications provided for or permitted hereunder shall be made as set forth in the Purchase Agreement.

 

(d)           Assignments and Transfers by Purchasers.  The provisions of this Agreement shall be binding upon and inure to the benefit of the Purchasers and their respective successors and assigns.  A Purchaser may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder in connection with the transfer of Registrable Securities by such Purchaser to such person, provided that such Purchaser complies with all laws applicable thereto and provides written notice of assignment to the Company promptly after such assignment is effected (such transferee, a "permitted transferee").

 

(e)           Assignments and Transfers by the Company.  This Agreement may not be assigned by the Company (whether by operation of law or otherwise) without the prior written consent of the Required Purchasers, provided, however, that in the event that the Company is a party to a merger, consolidation, share exchange or similar business combination transaction in which the Common Stock is converted into the equity securities of another person or entity, from and after the effective time of such transaction, such person or entity shall, by virtue of such transaction, be deemed to have assumed the obligations of the Company hereunder, the term “Company” shall be deemed to refer to such person or entity and the term “Registrable Securities” shall be deemed to include the securities received by the Purchasers in connection with such transaction unless such securities are otherwise freely tradable by the Purchasers after giving effect to such transaction.

 

(f)           Benefits of the Agreement.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns 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 assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

(g)           No Inconsistent Agreements.  Neither the Company nor any of its subsidiaries has entered, as of the date hereof, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Purchasers in this Agreement or otherwise conflicts with the provisions hereof.  Neither the Company nor any of its subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any person or entity that have not been satisfied in full or waived with respect to any Registration Statement filed under this Agreement.

 

  

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(h)           Counterparts; Faxes.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may also be executed via facsimile or other electronic means, which shall be deemed an original.

 

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

 

(j)           Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect.

 

(k)           Further Assurances.  The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

 

(l)           Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

 

(m)           Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of California without regard to the choice of law principles thereof.  Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of California located in Orange County and the United States District Court for the Central District of California for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement.  Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

  

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IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

 

	The Company: 	 	TRUE DRINKS HOLDINGS, INC.
	 	 	 
	 	 	
By:_________________________

Name: Lance Leonard

Title: Chief Executive Officer

                                                               

 

  

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	 The Purchasers:	 	_________________________________
	 	 	 
	 	 	 
	 	 	By:_______________________________ 

Name:

Title:

 

 

-15-ex10-4.htm

Exhibit 10.4

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (“Agreement”), dated as of November 24, 2015 (the “Effective Date”), is made by and between True Drinks Inc., a Delaware corporation, located at 18552 MacArthur Blvd., Irvine, California 92612 (the “Company”), and Kevin Sherman, whose address is 23 Sunlight, Irvine, California 92603 (“Employee”), based upon the following:

 

RECITALS 

 

WHEREAS, the Company wishes to retain the services of Employee, and Employee wishes to render services to the Company, as its Chief Marketing Officer; and

 

WHEREAS, the Company and Employee wish to set forth in this Agreement the duties and responsibilities that Employee has agreed to undertake on behalf of the Company.

 

THEREFORE, in consideration of the foregoing and of the mutual promises contained in this Agreement, the Company and Employee (who are sometimes individually referred to as a “party” and collectively referred to as the “parties”) agree as follows:

 

AGREEMENT

 

1. TERM.

 

The term of Employee’s employment under this Agreement shall commence effective as of the Effective Date and shall continue for a period of two years (the “Term”), unless earlier terminated as herein provided or by operation of law. Thereafter, this Agreement and the Term shall be extended automatically for successive one-year periods unless terminated in accordance with the terms hereof or unless either party hereto, not less than one month before the commencement of any such one-year extension period, provides notice of such termination to the other party hereto. For all purposes of this Agreement, the Term shall include and be deemed to include all extensions of this Agreement. This Agreement may be terminated prior to the expiration of the Term by either party, without limitation, by the provision of notice of termination of this Agreement to the other party thirty (30) days in advance, except as permitted upon termination for “Cause” as set forth in Section 8. The notice period does not commence until actually received by the other party.

 

2. GENERAL DUTIES.

 

Employee shall report to the Company’s chief executive officer or as otherwise instructed by the Company’s board of directors (the “Board”) and shall devote his entire productive time, ability, and attention to the Company’s business during the period of this Agreement.  Employee shall do and perform all services, acts, or things necessary or advisable to discharge his duties as Chief Marketing Officer under this Agreement, and such other duties as are commonly performed by an employee of his rank or which may, from time to time, be prescribed by the Company through its managers, the Board, and/or the Company’s executives. Furthermore, Employee agrees to cooperate with and work to the best of his ability with the Company’s management team, the officers and other employees, to achieve the Company’s financial and business objectives, and to continually improve the Company’s reputation in its industry for quality products and performance.

 

3. COMPENSATION.

 

(a) Base Salary. So long as Employee’s employment continues hereunder, the Company shall pay to Employee a base salary equal to $22,916.67 per month (“Base Salary”).  The Base Salary shall be paid to Employee in accordance with the periodic payroll practices of the Company.

  

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(b) Bonus Plan. Employee shall be eligible to receive an annual bonus payable in the discretion of the Board of Directors (“Board”) based on the achievement of objectives established by the Board prior to the end of first quarter in the year in which such bonus shall be measured.   The maximum bonus target shall be 30% of Base Salary, which amount shall be paid in shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), until such time as the Company achieves positive cash flow for three consecutive months.  Future bonus payments may be paid in cash or Common Stock at Employee’s discretion. Any annual bonus payable hereunder shall be paid within 45 days after the end of the calendar year in which the bonus is earned.

 

(c) Retention Payment.  The Company shall pay Employee a retention bonus of $100,000, $50,000 of which shall be paid upon execution of this Agreement, and the balance of which shall be paid on or before the first anniversary of this Agreement.

 

(d)  Additional Incentives.  At such time as the Company has achieved the following objectives, based on a rolling three-month average, Employee shall be paid the following:

 

(i)           Employee shall be paid $3,000 per month in a housing allowance (“Housing Allowance”);

 

(ii)           Company achieves gross sales of $1.5 – $3.0 million per month for at least four consecutive months, Employee’s Base Salary shall increase by $125,000 per annum, and Employee’s Housing Allowance shall terminate;

 

(iii)           Company achieves gross sales of $3.0 - $4.0 million per month for at least four consecutive months, Employee’s Base Salary shall increase by an incremental $25,000 per annum, and Employee’s Housing Allowance shall terminate; and

 

(iv)           Company achieves gross sales of at least $4.0 million per month for at least four consecutive months, Employee’s Base Salary shall increase by an incremental $100,000 per annum, and Employee’s Housing Allowance shall terminate.

 

(c) Restricted Stock

 

(i)           Vesting Schedule. Employee has previously been issued 1,500,000 million shares of restricted Common Stock under the terms of the Company’s Stock Incentive Plan (“Restricted Shares”), which Restricted Shares have already vested.  In addition, Employee shall be issued additional Restricted Shares, which shall vest according to the following schedule: 799,424 Restricted Shares shall vest immediately upon execution of this Agreement, 799,424 Restricted Shares shall vest October 31, 2016, and 799,423 Restricted Shares shall vest November 30, 2017.   In the event Employee’s employment by the Company hereunder is terminated, Employee shall forfeit the right to any unvested Restricted Shares.

 

(ii)           Anti-Dilution Protection.    The parties agree and acknowledge that the Restricted Shares currently represent 3.25_% of the issued and outstanding shares of the Company’s Common Stock (“Protected Interest”), which Protected Interest represents all currently issued and outstanding shares of Common Stock, and the issuance of all shares of Common Stock upon conversion of issued and outstanding Series B Convertible Preferred Stock and Series C Convertible Preferred Stock.  In the event the Company issues additional shares of Common Stock, Preferred Stock or other securities convertible or exercisable for Common Stock, Employee shall be issued that number of additional Restricted Shares so that the total number of Restricted Shares beneficially owned by Employee equals the Protected Interest (“Additional Shares”); provided, however, that any Additional Shares issued to Employee shall vest pro-rata according to the vesting schedule set forth in Section (c)(i) above.

 

(d)  Change in Control Bonus. Employee shall be paid a cash bonus in the event of a change in control of the Company equal to 3.25% of the total value of the transaction resulting in a change in control (“CIC Bonus”), which CIC Bonus shall be reduced in amount by the fair market value of the Restricted Shares calculated on the date of consummation of the change in control (“Closing Date”), regardless of whether such Restricted Shares are beneficially owned by Employee on such date.  The parties agree and acknowledge that in the event the value of the Restricted Shares on the Closing Date exceed the CIC Bonus, no further amounts shall be due and payable Employee hereunder.

 

  

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For purposes of determining whether a CIC Bonus is due and payable Employee, a “change in control” shall mean the acquisition by any individual, entity, or group (other than Toba Capital, or an affiliate thereof) of beneficial ownership of 66.6% or more of the combined voting power of the then outstanding voting securities of the Company, or any parent of the Company, or a major brand is acquired from the Company.

(e) Indemnification. If during any period of the Term, Employee is a director or officer of the Company, the Company shall provide Employee with director’s and officer’s liability insurance to the extent that such insurance is provided to other directors and officers of the Company and is available at commercially reasonable premiums. Such insurance shall be in such form, and shall provide for such coverage and deductibles, as shall be commercially reasonable and standard for companies in businesses and circumstances similar to those of the Company.

 

(f) Participation In Employee Benefit Plans. Employee shall have the same rights, privileges, benefits and opportunities to participate in any of the Company’s employee benefit plans (health, dental and vision) which may now or hereafter be in effect on a general basis for executive officers or employees of the Company. The Company may discontinue any benefit plans and otherwise amend and change the type and quantity of benefits it provides in its sole discretion, provided that the Company continues to provide to Employee any benefits specifically set forth herein. In the event Employee receives payments from a disability plan maintained by the Company, the Company shall have the right to offset such payments against Employee’s Base Salary and any bonuses otherwise payable to Employee during the period for which payments are made by such disability plan.

 

4. REIMBURSEMENT OF BUSINESS EXPENSES.

 

The Company shall promptly reimburse Employee for all reasonable business expenses incurred by Employee in connection with the business of the Company. However, each such expenditure shall be reimbursable only if Employee furnishes to the Company adequate records and other documentary evidence required by federal and state statutes and regulations issued by the appropriate taxing authorities for the substantiation of each such expenditure as an income tax deduction.

 

5. ANNUAL VACATION.   Employee shall be entitled to 15 days vacation time per calendar year during the term of the Agreement.

 

6. INDEMNIFICATION OF LOSSES.

 

The Company shall indemnify and hold harmless Employee from any and all liability arising from Employee’s actions taken on the Company’s behalf and within Employee’s scope of duties and authority, so long as such actions were taken by Employee in good faith and in furtherance of the Company’s business. The Company shall indemnify and hold Employee harmless to the full extent of the law from any and all claims, losses and expenses sustained by Employee as a result of any action taken by him to discharge his duties under this Agreement, and the Company shall defend Employee, at the Company’s expense, in connection with any and all claims by shareholders or third parties which are based upon actions taken by Employee to discharge his duties under this Agreement.

 

7. PERSONAL CONDUCT.

 

Employee agrees to promptly and faithfully comply with all present and future policies, requirements, directions, and reasonable requests of Company executives and/or management and any rules, regulations, or other policies of the Company in connection with the Company’s business and Employee’s duties hereunder.

 

8. TERMINATION BY THE COMPANY.

 

Notwithstanding any provision hereunder, the Company may terminate Employee’s employment immediately if such termination is for “Cause.” For purposes of this Agreement, “Cause” shall mean:

 

(a)  Employee is convicted of any fraud or embezzlement against the Company; or

 

(b)  After written notice and an opportunity to cure, Employee willfully breaches or habitually neglects the duties and responsibilities which he is required to perform under the terms of this Agreement; or

  

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(c) Employee commits such acts of dishonesty, fraud, misrepresentation, gross negligence or willful misconduct which results in material harm to the Company or its business; or

 

(d) Employee violates any law, rule or regulation applicable to the Company or Employee relating to the business operations of the Company that may have a material adverse effect upon the Company’s business, operations or condition (financial or otherwise).

 

The Company may terminate this Agreement for Cause immediately upon written notice of termination to Employee; provided, however, if the Company terminates this Agreement due to Employee’s willful breach or habitual neglect of the duties he is required to perform, Employee shall be entitled to a period of thirty (30) days from the date of the initial written notice of termination to cure said breach. Except as otherwise set forth in this Section 8, upon any termination for “Cause,” the obligations of Employee and the Company under this Agreement shall immediately cease. Such termination shall be without prejudice to any other remedy to which the Company may be entitled either at law, in equity, or under this Agreement.

 

9. COMPENSATION UPON TERMINATION

 

(a) Upon Termination For Cause. In the event the Company terminates Employee’s employment for Cause in accordance with Section 8, Employee shall receive any payments of Base Salary earned through and including the date of termination (the “For Cause Payment”).

 

The For Cause Payment shall constitute Employee’s sole right and exclusive remedy in the event of such termination of Employee’s employment, and upon payment by the Company of the For Cause Payment, all other rights or remedies otherwise available shall cease immediately, and the Company shall have no further obligations to Employee under this Agreement, except that Employee shall have the right to exercise all benefits that have vested as of the date of termination to which Employee is entitled under any compensation or employee benefit plan of the Company in accordance with the terms and provisions of such compensation or employee benefit plan, all other documents and agreements that give rise to or otherwise govern such vested benefits and all applicable laws and regulations. Employee shall be entitled to receive such For Cause Payment only after Employee executes a waiver and general release in favor of the Company (but not Employee).

 

(b) Upon Termination Other Than For Cause. In the event Employee’s employment is terminated other than pursuant to Section 8, in exchange for execution of a general release and California Civil Code Section 1542 waiver, the Company shall pay Employee an amount equal to six months of Employee’s Base Salary in effect on the date of termination (the “Without Cause Severance Payment”), plus reimbursement for business expenses incurred by Employee up to the date of termination. The Without Cause Severance Payment will be paid within sixty (60) days after the Company’s receipt of the executed general release and California Civil Code Section 1542 waiver. The Without Cause Severance Payment is in addition to payment of Base Salary earned and payment of any unused and accrued vacation through and including the date of termination. In addition, in the event Employee’s employment is terminated other than pursuant to Section 8, all stock options held by Employee that are subject to vesting shall automatically upon such termination be fully vested and shall remain exercisable in accordance with their terms for a period of twelve (12) months following the date of such termination (notwithstanding any term or provision of any document (e.g., a stock option agreement) to the contrary).

 

The Without Cause Severance Payment shall constitute Employee’s sole right and exclusive remedy in the event of such termination of Employee’s employment, and upon payment by the Company of the Without Cause Severance Payment, all other rights or remedies otherwise available shall cease immediately, and the Company shall have no further obligations to Employee under this Agreement, except that Employee shall have the right to exercise all benefits that have vested as of the date of termination to which Employee is entitled under any compensation or employee benefit plan of the Company in accordance with the terms and provisions of such compensation or employee benefit plan, all other documents and agreements that give rise to or otherwise govern such vested benefits and all applicable laws and regulations.

 

(c) Exclusivity of Payments. Upon termination of Employee’s employment under this Agreement, Employee shall not be entitled to any severance payment or severance benefit from the Company other than the payments and benefits provided in this Section 9.

  

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(d) Withholding of Taxes; Tax Reporting. The Company may withhold from any amount payable under this Agreement all such federal, state, city and other taxes and may file with appropriate governmental authorities all such information, returns or other reports with respect to the tax consequences of any amount payable under this Agreement as may in the Company’s reasonable judgment be required.

 

10. PROPRIETARY INFORMATION.

 

(a) Company Information. Employee agrees at all times during the period of his employment with the Company and thereafter, to hold in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm, corporation or other entity without written authorization of the Board, any Proprietary Information (as defined herein) of the Company which Employee obtains, creates, or otherwise accesses in any way. Employee further agrees not to make copies of such Proprietary Information except as authorized by the Company. Employee understands that “Proprietary Information” means any Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, services, suppliers, customer lists and customers (including, but not limited to, customers of the Company on whom Employee called or with whom Employee became acquainted during the employment), prices and costs, markets, software, developments, inventions, formulas, technology, designs, drawings, marketing, licenses, finances, budgets or other business information disclosed to Employee by the Company either directly or indirectly in writing, orally or by drawings or observation of parts or equipment or created by Employee during the period of employment, whether or not during working hours. Employee understands that Proprietary Information also includes, but is not limited to, information pertaining to any aspects of the Company’s business which is either information not known by actual or potential competitors of the Company or is proprietary information of the Company or its customers or suppliers, whether of a technical nature or otherwise. Employee further understands that Proprietary Information does not include any of the foregoing items, which has become publicly and widely known and made generally available through no wrongful act of Employee or of others who were under confidentiality obligations as to the item or items involved.

 

(b) Former Employer Information. Employee represents that his performance of all terms of this Agreement as an employee of the Company have not breached and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by Employee in confidence or trust prior or subsequent to the commencement of employment with the Company, and Employee will not disclose to the Company, or induce the Company to use, any inventions, confidential or proprietary information or material belonging to any previous employer or any other party.

 

11. INVENTIONS.

 

(a) Inventions Retained and Licensed. Exhibit B attached hereto contains a full and exhaustive list describing with particularity all inventions, original works of authorship, developments, improvements, and trade secrets which were made or otherwise created by Employee prior to the commencement of Employee’s employment hereunder (collectively “Prior Inventions”). Such Prior Inventions belong solely to Employee or belong to Employee jointly with another as listed therein, which relate in any way to any of the Company’s proposed businesses, products or research and development, and which are not assigned to the Company hereunder; or, if no such list is attached, Employee represents that there are no such Prior Inventions. If, in the course of employment with the Company, Employee incorporates into a Company product or service a Prior Invention owned by Employee or in which Employee has an interest, the Company is hereby granted and shall have a non-exclusive, royalty-free, irrevocable, perpetual, worldwide license (with the right to sublicense) to make, have made, copy, modify, make derivative works of, use, sell and otherwise distribute such Prior Invention as part of or in connection with such product, process or machine.

 

(b) Assignment of Inventions. Employee agrees that Employee will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assign to the Company, or its designee, all his right, title and interest throughout the world in and to any and all inventions, original works of authorship, developments, concepts, know-how, improvements or trade secrets, whether or not patentable or registrable under copyright or similar laws, which Employee may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time in which Employee is employed by the Company (collectively referred to as “Inventions”), except as provided in Section 10(e) below. Employee further acknowledges that all inventions, original works of authorship, developments, concepts, know-how,

  

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improvements or trade secrets which are made by Employee (solely or jointly with others) within the scope of and during the period of employment with the Company are “works made for hire” (to the greatest extent permitted by applicable law) and are compensated by the compensation provided to Employee pursuant to this Agreement, unless regulated otherwise by the mandatory law of the state of California.

 

(c) Maintenance of Records. Employee agrees to keep and maintain adequate and current written records of all Inventions made by Employee (solely or jointly with others) during the period of employment with the Company. Such records may be in the form of notes, drawings, flow charts, electronic data or recordings, laboratory notebooks, and any other format and shall be made available to and remain the sole property of the Company at all times. Employee agrees not to remove such records from the Company’s place of business except as expressly permitted by Company policy which may, from time to time, be revised at the sole election of the Company.

 

(d) Assistance and Power of Attorney. Employee agrees to assist the Company, or its designee, at the Company’s expense, in every way to secure the Company’s rights in the Inventions and any copyrights, patents, trademarks, mask work rights, moral rights, or other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, recordations, and all other instruments which the Company shall deem necessary in order to apply for, obtain, maintain and transfer such rights and in order to assign and convey to the Company, its successors, assigns and nominees the sole and exclusive rights, title and interest in and to such Inventions, and any copyrights, patents or other intellectual property rights relating thereto. Employee further agrees that it is and shall remain Employee’s obligation to execute or cause to be executed, when it is in Employee’s power to do so, any such instrument or papers as required by the Company after the termination of this Agreement until the expiration of the last such intellectual property right to expire in any country of the world. In the event the Company is unable because of any mental or physical incapacity or unavailability or for any other reason to secure Employee’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions or original works of authorship assigned to the Company as above, Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney in fact, to act for and on Employee’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the application for, prosecution, issuance, maintenance or transfer of letters patent or copyright registrations thereon with the same legal force and effect as if originally executed by Employee. Employee hereby waives and irrevocably quitclaims to the Company any and all claims, of any nature whatsoever, which Employee now or hereafter has for infringement of any and all proprietary rights assigned to the Company.

 

(e) Exception to Assignments. Employee understands that the provisions of this Agreement requiring assignment of Inventions to the Company do not apply to any invention which qualifies fully under the provisions of California Labor Code Section 2870. Employee shall advise the Company promptly in writing of any inventions that Employee believe meet such provisions and are not otherwise disclosed to the Company.

 

12. RETURNING COMPANY DOCUMENTS.

 

At the time of the termination of Employee’s employment with the Company, Employee shall deliver to the Company (and will not keep in his possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, laboratory notebooks, materials, flow charts, equipment, other documents or property, or reproductions of any aforementioned items developed by Employee pursuant to Employee’s employment with the Company or otherwise belonging to the Company, its successors or assigns. Employee further agrees any property situated on the Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice. In the event of the termination of Employee’s employment hereunder, Employee agrees to sign and deliver a “Termination Certification” is a form reasonably requested by the Company.

 

13. NOTIFICATION TO OTHER PARTIES.

 

In the event that Employee leaves the employ of the Company, Employee hereby consents to notification by the Company to his new employer about Employee’s rights and obligations under this Agreement.

  

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14. SOLICITATION OF EMPLOYEES, CONSULTANTS AND OTHER PARTIES.

 

During the period of Employee’s employment with the Company, and for a period of twenty-four (24) months immediately following the termination of Employee’s employment with the Company for any reason, Employee shall not either directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees or consultants to terminate their relationship with the Company, or take away such employees or consultants, or attempt to solicit, induce, recruit, encourage or take away employees or consultants of the Company, either for himself or for any other person or entity. Further, for a period of twenty-four (24) months following termination of Employee’s employment with the Company for any reason, with or without cause, Employee shall not solicit any investor in, licensor to, or customer of the Company or licensee of the Company’s products, with respect to any business, products or services who are competitive to the products or services offered by the Company or under development as of the date of termination of Employee’s employment with the Company. Employee further agrees that, during the Term and for a period of five years following the termination of this Agreement, Employee will not engage in any conduct that is injurious to the reputation(s) and interest(s) of the Company and/or the Company’s past or present directors, officers, agents, fiduciaries, trustees, administrators, employees or assigns, including but not limited to disparaging (or inducing or encouraging others to disparage) the Company and/or any of the foregoing individuals. For purposes of this Agreement, the term “disparage” includes without limitation, making any statement that would adversely affect in any manner the conduct of the Company’s businesses, the business reputation of the Company and/or any of the foregoing individuals, and/or the personal reputation of any of the foregoing individuals.

 

If any of the foregoing provisions of this Section 14 is found by any court, agency or arbitrator of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

 

15. MISCELLANEOUS

 

(a) Preparation of Agreement. It is acknowledged by each party that such party either had separate and independent advice of counsel or the opportunity to avail itself or himself of the same. In light of these facts it is acknowledged that no party shall be construed to be solely responsible for the drafting hereof, and therefore any ambiguity shall not be construed against any party as the alleged draftsman of this Agreement.

 

(b) Cooperation. Each party agrees, without further consideration, to cooperate and diligently perform any further acts, deeds and things and to execute and deliver any documents that may from time to time be reasonably necessary or otherwise reasonably required to consummate, evidence, confirm and/or carry out the intent and provisions of this Agreement, all without undue delay or expense.

 

(c) Interpretation.

 

    i. Entire Agreement/No Collateral Representations. Each party expressly acknowledges and agrees that this Agreement, including all exhibits attached hereto: (1) is the final, complete and exclusive statement of the agreement of the parties with respect to the subject matter hereof; (2) supersedes any prior or contemporaneous agreements, promises, assurances, guarantees, representations, understandings, conduct, proposals, conditions, commitments, acts, courses of dealing, warranties, interpretations or terms of any kind, oral or written (collectively and severally, “Prior Agreements”), and that any such Prior Agreements are of no force or effect except as expressly set forth herein; and (3) may not be varied, supplemented or contradicted by evidence of any Prior Agreement, or by evidence of subsequent oral agreements. Any agreement hereafter made shall be ineffective to modify, supplement or discharge the terms of this Agreement, in whole or in part, unless such agreement is in writing and signed by the party against whom enforcement of the modification or supplement is sought.

  

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    ii. Waiver. No breach of any agreement or provision herein contained, or of any obligation under this Agreement, may be waived, nor shall any extension of time for performance of any obligations or acts be deemed an extension of time for performance of any other obligations or acts contained herein, except by written instrument signed by the party to be charged or as otherwise expressly authorized herein. No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof, or a waiver or relinquishment of any other agreement or provision or right or power herein contained.

 

    iii. Remedies Cumulative. The remedies of each party under this Agreement are cumulative and shall not exclude any other remedies to which such party may be lawfully entitled.

 

    iv. Severability. If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be determined to be invalid, illegal, or unenforceable under present or future laws effective during the period of this Agreement, then and, in that event: (A) the performance of the offending term or provision (but only to the extent its application is invalid, illegal or unenforceable) shall be excused as if it had never been incorporated into this Agreement, and, in lieu of such excused provision, there shall be added a provision as similar in terms and amount to such excused provision as may be possible and legal, valid and enforceable, and (B) the remaining part of this Agreement (including the application of the offending term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable) shall not be affected thereby and shall continue in full force and effect to the fullest extent provided by law.

 

    v. No Third Party Beneficiary. Notwithstanding anything else herein to the contrary, the parties specifically disavow any desire or intention to create any third party beneficiary obligations, and specifically declare that no person or entity, other than as set forth in this Agreement, shall have any rights hereunder or any right of enforcement hereof, except the heirs and personal representatives of Employee in the event of Employee’s death or disability.

 

    vi. Heading; References; Incorporation; Gender. The headings used in this Agreement are for convenience and reference purposes only, and shall not be used in construing or interpreting the scope or intent of this Agreement or any provision hereof. References to this Agreement shall include all amendments or renewals thereof. Any pronoun referenced in this Agreement shall be deemed to include the other gender, including neutral genders or genders appropriate for entities, if applicable, and the singular shall be deemed to include the plural, and vice versa, as the context requires.

 

(d) Enforcement.

 

    (i) Applicable Law. This Agreement and the rights and remedies of each party arising out of or relating to this Agreement (including, without limitation, equitable remedies) shall be solely governed by, interpreted under, and construed and enforced in accordance with the laws (without regard to the conflicts of law principles thereof) of the State of California, as if this agreement were made, and as if its obligations are to be performed, wholly within the State of California.

 

    (ii) Consent to Jurisdiction; Service of Process. Any action or proceeding arising out of or relating to this Agreement shall be filed in and heard and litigated solely before the state courts of California located within the County of Orange.

 

(e)  rights and benefits under this Agreement are personal to him and therefore (i) no such right

 

No Assignment of Rights or Delegation of Duties by Employee. Employee’s or benefit shall be subject to voluntary or involuntary alienation, assignment or transfer; and (ii) Employee may not delegate his duties or obligations hereunder.

  

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(f) Notices. Unless otherwise specifically provided in this Agreement, all notices, demands, requests, consents, approvals or other communications (collectively and severally called “Notices”) required or permitted to be given hereunder, or which are given with respect to this Agreement, shall be in writing, and shall be given by: (A) personal delivery (which form of Notice shall be deemed to have been given upon delivery), (B) by telegraph or by private airborne/overnight delivery service (which forms of Notice shall be deemed to have been given upon confirmed delivery by the delivery agency), (C) by electronic or facsimile or telephonic transmission, provided the receiving party has a compatible device or confirms receipt thereof (which forms of Notice shall be deemed delivered upon confirmed transmission or confirmation of receipt), or (D) by mailing in the United States mail by registered or certified mail, return receipt requested, postage prepaid (which forms of Notice shall be deemed to have been given upon the fifth business day following the date mailed). Each party, and their respective counsel, hereby agrees that if Notice is to be given hereunder by such party’s counsel, such counsel may communicate directly with all principals, as required to comply with the foregoing notice provisions. Notices shall be addressed to the address hereinabove set forth in the introductory paragraph of this Agreement, or to such other address as the receiving party shall have specified most recently by like Notice, with a copy to the other parties hereto. Any Notice given to the estate of a party shall be sufficient if addressed to the party as provided in this subparagraph.

 

(g) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument, binding on all parties hereto. Any signature page of this Agreement may be detached from any form hereto by having attached to it one or more additional signature pages.

 

(h) Execution by All Parties Required to be Binding; Electronically Transmitted Documents. This Agreement shall not be construed to be an offer and shall have no force and effect until this Agreement is fully executed by all parties hereto. If a copy or counterpart of this Agreement is originally executed and such copy or counterpart is thereafter transmitted electronically by facsimile or similar device, such facsimile document shall for all purposes be treated as if manually signed by the party whose facsimile signature appears.

 

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IN THE WITNESS HEREOF, THE PARTIES EXECUTE THIS EMPLOYMENT AGREEMENT AS OF THE DATE WRITTEN ABOVE:

 

 

TRUE DRINKS INC.                                                                          EMPLOYEE

 

By:  /s/ Lance Leonard                                                                     /s/ Kevin Sherman

Lance Leonard, CEO                                                                          Kevin Sherman

 

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