Document:

ex10-2.htm

Exhibit 10.2

 

THIS NOTE (AS DEFINED BELOW) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT IN COMPLIANCE THEREWITH.

TRUE DRINKS HOLDINGS, INC.

TRUE DRINKS, INC.

SENIOR SECURED PROMISSORY NOTE

Date of Issuance:  October 9, 2015

RECITALS

WHEREAS, reference is hereby made to (a) the Bottling Agreement (as the same may be amended, modified, supplemented or restated from time to time, the “Bottling Agreement”) dated as of October 9, 2015 by and between True Drinks, Inc. (together with its successors and assigns, “Borrower”) and Niagara Bottling, LLC (together with its successors and assigns, “Niagara”) and (b) the Personal Guaranty of Bottling Agreement (as the same may be amended, modified, supplemented or restated from time to time, the “Guarantee”, and together with the Bottling Agreement, the “Transaction Documents”) by and between Vincent C. Smith (the “Guarantor”) and Niagara dated as of October 9, 2015.

WHEREAS, pursuant to the Transaction Documents, the Guarantor has agreed to guarantee the prompt payment by the Borrower of all sums payable by the Borrower owed by the Guarantor pursuant to Section 10.5 of the Bottling Agreement (any such payment by the Guarantor referred to herein as an “Advance” and the maximum amount of financial obligations guaranteed by the Guarantor under the Transaction Documents being referred to herein as the “Maximum Amount”).

WHEREAS, Red Beard Holdings, LLC (together with its successors and permitted assigns, the “Lender”) is an affiliate of the Guarantor and is under the control of the Guarantor or one or more of the Guarantor’s affiliated entities and is the funding vehicle through which the Guarantor, in its sole discretion, may choose to fulfill its financial obligations under the Transaction Documents.

WHEREAS, Parent and Borrower desire that any payments made by the Guarantor to satisfy the financial obligations of the Borrower under the Transaction Documents be (a) paid directly to Niagara or the designees of Niagara and (b) Advances hereunder in the form of senior secured indebtedness and subject to the terms hereof.

WHEREAS, True Drinks Holdings, Inc. (together with its successors and permitted assigns, “Parent”) is the direct holding company of Borrower and will receive a direct benefit from the success of Borrower, and the entering into by the Guarantor of the Transaction Documents and the sums to be made available by the Guarantor and/or the Lender are important to the success of the Borrower, and both Parent and Borrower understand and agree that the Guarantor would not execute the Transaction Documents, and the Lender would not agree to provide Advances hereunder, without each of Parent and Borrower being signatories hereto.

AGREEMENTS

FOR VALUE RECEIVED, Parent and Borrower (collectively, the “Loan Parties”), hereby promise to pay to the order of the Lender, at an address to be specified to the Borrower by the Lender, the principal sum equal to the Maximum Amount or such lesser amount as shall equal the outstanding principal balance of any Advances made hereunder on the dates specified herein, with interest as specified herein.

 

This Note is subject to the following additional provisions, terms and conditions:

 

 

  

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ARTICLE 1.  DEFINITIONS.

Section 1.1.  Certain Definitions.

All initially capitalized terms used herein (including in the recitals hereof) without definition shall have the meanings ascribed thereto in the Transaction Documents.  Any terms (whether capitalized or lower case) used in this Agreement that are defined in the Code (as defined below) shall be construed and defined as set forth in the Code unless otherwise defined herein or in the Transaction Documents; provided that to the extent that the Code is used to define any term used herein and if such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 of the Code shall govern.  In addition to those terms defined elsewhere in this Agreement, as used in this Agreement, the following terms shall have the following meanings:

“Bankruptcy Law” means Title 11, United State Code or any similar federal or state law for the relief of debtors.

“Business Day” means any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in New York, New York.

“Code” means the California Uniform Commercial Code, as in effect from time to time; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to the Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.

“Collateral” has the meaning set forth in Section 2.5.

 

“Distribution Event” means any insolvency, bankruptcy, receivership, liquidation, reorganization or similar proceeding (whether voluntary or involuntary) relating to any Loan Party or its property, or any proceeding for voluntary or involuntary liquidation, dissolution or other winding up of any Loan Party, whether or not involving insolvency or bankruptcy.

 

“Maturity Date” means the date that is 10 years from the date of this Note, unless accelerated prior to such date by Lender during the continuance of an Event of Default hereunder.

 

“Maximum Rate” means the maximum non-usurious interest rate permitted under applicable law.

“Note” means this Senior Secured Promissory Note made by the Loan Parties payable to the Lender, together with all amendments and supplements hereto, all substitutions and replacements hereof, and all renewals, extensions, increases, restatements, modifications, rearrangements and waivers hereof from time to time.

“Person” means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

 

“Transfer” has the meaning set forth in Section 4.2(b).

 

ARTICLE 2.  BASIC TERMS.

Section 2.1.  Principal.

(a)         Advances.  The parties hereto agree that any amounts paid by the Guarantor or the Lender pursuant to the Transaction Documents to Niagara shall be automatically considered Advances hereunder that have been drawn by the Loan Parties from the Lender and paid by the Guarantor or the Lender directly to Niagara, without the need for any further action by any Person for such amounts to be considered Advances hereunder.

  

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(b)           Repayment.  Any Advance made by the Lender hereunder shall be promptly repaid by the Loan Parties and in no event later than one Business Day after the making of any such Advance.  Without in any way limiting the foregoing, to the extent not previously paid, the entire unpaid principal balance of this Note, together with any accrued and unpaid interest (computed in accordance with Section 2.2 below) shall be due and payable on the Maturity Date by the Loan Parties.

 

(c)         Prepayment.  The Loan Parties may make voluntary prepayments in whole or in part of the unpaid principal hereunder from time to time without penalty or premium.

 

Section 2.2.  Interest.

 

(a)           The Loan Parties agree to pay interest in respect of the unpaid principal amount of this Note at a rate per annum equal to the lesser of the Applicable Federal Rate as published by the Internal Revenue Service for the particular month or months in which any Advances hereunder have been made from time to time or the Maximum Rate.  Upon the occurrence and during the continuance of an Event of Default, which has not been cured, the Loan Parties agree to pay during the period of the continuance of such Event of Default interest on the unpaid principal amount of this Note at a rate per annum equal to the lesser of the amount set forth in the first sentence of this Section 2.2 plus 2.0% and the Maximum Rate.

 

(b)           All interest on the unpaid principal balance of this Note must be paid in cash and shall be due and payable on the Maturity Date or, if earlier, the date this Note is prepaid in full.

(c)           Interest shall be calculated on the basis of a 365-day year.

 

Section 2.3.  Payments in General.  All payments of principal and interest on this Note shall be in such coin or currency of the United States of America as at the time of payment shall be legal tender for payment of public and private debts.  If any payment (whether of principal, interest or otherwise) on this Note is due on a day which is not a Business Day, such payment shall be due and payable on the next succeeding Business Day.  All payments under this Note shall be made by wire transfer or check in accordance with Lender’s instructions.

 

Section 2.4.  Surrender of Note on Transfer.  This Note shall, as a condition to transfer, be surrendered to the Borrower in exchange for a new Note in a principal amount equal to the principal amount remaining unpaid on the surrendered Note, and with the same terms and conditions as this Note.  In case the entire principal amount of this Note is prepaid, this Note shall be surrendered to the Borrower for cancellation and shall not be reissued.

 

Section 2.5.  Security.  To secure the indebtedness evidenced by this Note, including but not limited to all Advances made by Lender hereunder, all interest hereon, and all other fees and expenses related to this Note and any Advances that are or may be made hereunder, including all costs and expenses incurred by the Lender in the collection of the foregoing, each Loan Party hereby grants to the Lender a continuing security interest in its right, title, and interest in and to the following, whether now owned or hereafter acquired or arising and wherever located (collectively referred to herein as, the “Collateral”):

	 	
(a) 

	
all of such Loan Party’s Accounts;

	 	
(b) 

	
all of such Loan Party’s Books;

	 	
(c) 

	
all of such Loan Party’s Chattel Paper;

	 	
(d) 

	
all of such Loan Party’s Commercial Tort Claims;

	 	
(e) 

	
all of such Loan Party’s Deposit Accounts;

	 	
(f) 

	
all of such Loan Party’s Equipment;

	 	
(g) 

	
all of such Loan Party’s Farm Products;

	 	
(h) 

	
all of such Loan Party’s Fixtures;

	 	
(i) 

	
all of such Loan Party’s General Intangibles;

	 	
(j) 

	
all of such Loan Party’s Inventory;

	 	
(k) 

	
all of such Loan Party’s Investment Property;

	 	
(l) 

	
all of such Loan Party’s intellectual property and intellectual property licenses;

	 	
(m) 

	
all of such Loan Party’s negotiable collateral (including letters of credit, letter-of-credit rights, instruments, promissory notes, drafts and documents);

  

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(o) 

	
all of such Loan Party’s Securities Accounts;

	 	
(p) 

	
all of such Loan Party’s Supporting Obligations;

	 	
(q) 

	
all of such Loan Party’s money, Cash Equivalents, or other assets of such Loan Party thatnow or hereafter come into the possession, custody, or control of the Lender (or its agent or designee); and

	 	
(r) 

	
all of the proceeds (as such term is defined in the Code) and products, whethertangible or intangible, of any of the foregoing, including proceeds of insurance or Commercial Tort Claims covering or relating to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, Fixtures, General Intangibles, Inventory, Investment Property, Intellectual Property, Negotiable Collateral, Securities Accounts, Supporting Obligations, money, or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition of any of the foregoing, the proceeds of any award in condemnation with respect to any of the foregoing, any rebates or refunds, whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds thereof, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the extent not otherwise included, any indemnity, warranty, or guaranty payable by reason of loss or damage to, or otherwise with respect to any of the foregoing (the “Proceeds”).

Notwithstanding anything contained in this Agreement to the contrary, the term “Collateral” shall not include any of the following (such assets being referred to herein as the “Excluded Assets”): (i) voting equity interests of any foreign subsidiary, solely to the extent that pledging or hypothecating more than 65% of the total outstanding voting equity interests of such foreign subsidiary could reasonably be expected to result in material adverse tax consequences; or (ii) for so long as such contract, lease or license has been entered into without violating the terms of this Agreement, any rights or interest in any contract, lease or license if under the terms of such contract, lease or license, or applicable law with respect thereto, the grant of a security interest or lien therein is prohibited as a matter of law or is prohibited, would result in a breach, constitute a default or create a right of termination in favor of any party, under the terms of such contract, lease or license and such prohibition or restriction has not been waived or the consent of the other party to such contract, lease or license has not been obtained (provided, that, (A) the foregoing exclusions of this clause (ii) shall in no way be construed (1) to apply to the extent that any described prohibition or restriction is ineffective under Section 9-406, 9-407, 9-408, or 9-409 of the Code or other applicable law, or (2) to apply to the extent that any consent or waiver has been obtained that would permit Lender’s security interest or lien to attach notwithstanding the prohibition or restriction on the pledge of such contract, lease or license and (B) the foregoing exclusions of clauses (i) and (ii) shall in no way be construed to limit, impair, or otherwise affect any of Lender’s continuing security interests in and liens upon any rights or interests of any Loan Party in or to (1) monies due or to become due under or in connection with any described contract, lease or license or equity interests or (2) any proceeds from the sale, license, lease, or other dispositions of any such contract, lease or license, or Equity Interests); or (iii) any United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law, provided that upon submission and acceptance by the USPTO of an amendment to allege use pursuant to 15 U.S.C. Section 1060(a) (or any successor provision), such intent-to-use trademark application shall be considered Collateral.

Section 2.6.  Covenants.

 

(a)           Each Loan Party agrees to pay all obligations when due and perform fully all of its duties under and in connection with this Note.

 

 

  

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(b)           Each Loan Party agrees, at its own expense, to promptly take all actions reasonably requested by the Lender from time to time to perfect for Lender a first priority security interest in the Collateral, to create, perfect or protect the security interest purported to be granted hereby or to enable Lender to exercise and enforce its rights and remedies hereunder with respect to any of the Collateral.  Each Loan Party authorizes the filing by the Lender of financing or continuation statements, or amendments thereto, and such Loan Party will execute and deliver to the Lender such other instruments or notices, as the Lender may reasonably request, in order to perfect and preserve the security interest granted or purported to be granted hereby.  Furthermore, each Loan Party authorizes the Lender at any time and from time to time to file, transmit, or communicate, as applicable, financing statements and amendments describing the Collateral as “all personal property of debtor” or “all assets of debtor” or words of similar effect, or describing the Collateral as being of equal or lesser scope or with greater detail.  Each Loan Party acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement filed in connection with this Agreement without the prior written consent of the Lender.

(c)           Each Loan Party will provide prompt written notice of the creation or acquisition of any subsidiaries to the Lender and the Lender may decide, in its sole discretion, whether such subsidiary shall execute a joinder to this Note (to be in form and substance reasonably satisfactory to the Lender) in order to obligate such subsidiary hereunder as a Loan Party.

(d)           Each Loan Party will refrain from encumbering, or, other than in the ordinary course of business consistent with past practice, selling any of the Collateral, or permitting the Collateral or any interest in the Collateral to be encumbered, or seized, or, other than in the ordinary course of business consistent with past practice, transferred or otherwise disposed of; provided however that the foregoing shall not preclude the Loan Parties, collectively, from incurring up to $1,000,000 aggregate principal amount of secured promissory notes in the form substantially provided in the Form 8-K filed as of September 11, 2015 by Parent or from incurring capital leases or purchase money indebtedness secured solely by the asset being financed or acquired thereby.

(e)           Each Loan Party will promptly advise the Lender of (i) any breach of the Bottling Agreement by a Loan Party, including without limitation any event that may give rise to the ability of Niagara to terminate the Bottling Agreement and (ii) any event that would constitute a breach of this Note.

ARTICLE 3.  DEFAULT AND REMEDIES.

Section 3.1.  Events of Default.  An “Event of Default” occurs if:

 

(a)           any Loan Party defaults in the payment of principal or interest on the Note when the same becomes due and payable;

(b)           any Loan Party defaults in the punctual performance of any other obligation, covenant, term or provision contained in this Note; or

 

(c)           any Loan Party (i) commences a voluntary case concerning itself under any Bankruptcy Law now or hereafter in effect, or any successor thereof; (ii) is the object of an involuntary case under any Bankruptcy Law; or (iii) commences any Distribution Event or is the object of an involuntary Distribution Event; or

 

(d)           any Loan Party is sold to a third party; or

 

(e)           there is a death of one of the principals (CEO, CFO or CMO) during the term of the Note.

 

 

  

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Section 3.2.  Remedies.

 

(a)           If an Event of Default (other than an Event of Default under Section 3.1(c)) shall occur, the Lender may declare by notice in writing given to the Borrower, the entire unpaid principal amount of the Note, together with accrued but unpaid interest thereon, to be immediately due and payable, in which case the Note shall become immediately due and payable, both as to principal and interest, without presentment, demand, default, notice of intent to accelerate and notice of such acceleration, protest or notice of any kind, all of which are hereby expressly waived, anything herein or elsewhere to the contrary notwithstanding.

 

(b)           If an Event of Default under Section 3.1(c) shall occur, the entire unpaid principal amount of the Note, together with accrued but unpaid interest thereon, shall automatically become immediately due and payable, both as to principal and interest, without presentment, demand, default, notice of intent to accelerate and notice of such acceleration, protest or notice of any kind, all of which are hereby expressly waived, anything herein or elsewhere to the contrary notwithstanding.

 

(c)           If any Event of Default shall have occurred, the Lender may proceed to protect and enforce its rights either by suit in equity or by action at law, or both, and take any of the following actions (but it is expressly agreed and acknowledged that the Lender is under no duty to take any such actions):

 

(i)           require one or more Loan Parties to give possession or control of the Collateral to the Lender;

 

(ii)           take control of Proceeds referred to in Section 2.5, and use any such cash Proceeds to reduce any part of the indebtedness evidenced by this Note, all interest hereon or related fees and expenses;

(iii)           sell, or instruct any agent or broker to sell, all or any part of the Collateral in a public or private sale and apply all proceeds to the payment or other satisfaction of the indebtedness evidenced by this Note, all interest hereon or related fees and expenses in such order and manner as the Lender shall, in its discretion, choose;

(iv)           take any action any Loan Party is required to take or any other necessary or desirable action to obtain, preserve, and enforce this Note, and to maintain and preserve the Collateral, without notice to any Loan Party;

(v)           transfer any of the Collateral, or evidence thereof, into the Lender’s own name or that of its nominee and receive the Proceeds therefrom and hold the same as security for the indebtedness evidenced by this Note, interest hereon and related fees and expenses, or apply the same thereon;

(vi)           take control of funds generated by the Collateral, and use such funds to reduce any part of the indebtedness evidenced by this Note, interest hereon or related fees and expenses; and

(vii)           exercise all other rights that a secured creditor may exercise with respect to any of the Collateral.

 

ARTICLE 4.  MISCELLANEOUS.

 

Section 4.1.  Amendment.  This Note may be amended, modified, superseded or cancelled, and any of the terms, covenants, representations, warranties or conditions hereof and thereof may be waived, only by a written instrument executed by the Lender and the Loan Parties.

 

Section 4.2.  Successors and Assigns.

(a)           The rights and obligations of the Loan Parties and the Lender under this Note shall be binding upon, and inure to the benefit of, and be enforceable by, the Loan Parties and the Lender, and their respective permitted successors and assigns.

 

 

  

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(b)           No Loan Party may sell, assign (by operation of law or otherwise), transfer, pledge, grant a security interest in or delegate (collectively “Transfer”) any of its rights or obligations under this Note unless the Lender has granted its prior written consent and any such purported Transfer by any Loan Parties without obtaining such prior written consent shall be null and void ab initio.

 

Section 4.3.  Defenses.  Except as expressly set forth herein, the obligations of the Loan Parties under this Note shall not be subject to reduction, limitation, impairment, termination, defense, set-off, counterclaim or recoupment for any reason.

 

Section 4.4.  Replacement of Note.  Upon receipt by the Borrower of evidence, satisfactory to it, of the loss, theft, destruction, or mutilation of this Note and (in the cases of loss, theft or destruction) of any indemnity reasonably satisfactory to it, and upon surrender and cancellation of this Note, if mutilated, the Borrower will deliver a new Note of like tenor in lieu of this Note.  Any Note delivered in accordance with the provisions of this Section 4.4 shall be dated as of the date of this Note.

 

Section 4.5.  Attorneys’ and Collection Fees.  The Loan Parties agree that they shall be responsible for all costs, fees and expenses incurred by the Lender or the Guarantor in connection with the Transaction Documents and this Note, including without limitation the legal fees and expenses of counsel to the Lender and the Guarantor (and for the avoidance of doubt, the foregoing provision shall also be applicable in the event any principal on this Note shall not be paid when due and payable (whether upon demand, by acceleration or otherwise), and shall include all collection and enforcement costs and expenses incurred by Lender).  Such costs, fees and expenses shall be due and payable by the Borrower upon written demand by the Lender or the Guarantor and shall be paid within 10 Business Days of any request therefor.

 

Section 4.6.  Governing Law.  This Note and the validity and enforceability hereof shall be governed by and construed and interpreted in accordance with the laws of the State of California.

 

Section 4.7.  Waivers.  Except as may be otherwise provided herein, the makers, signers, sureties, guarantors and endorsers of this Note severally waive demand, presentment, notice of dishonor, notice of intent to demand or accelerate payment hereof, notice of acceleration, diligence in collecting, grace, notice, and protest, and agree to one or more extensions for any period or periods of time and partial payments, before or after maturity, without prejudice to the Lender.

 

Section 4.8.  No Waiver by Lender.  No failure or delay on the part of the Lender in exercising any right, power or privilege hereunder and no course of dealing between the Loan Parties and the Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

Section 4.9.  No Impairment.  No Loan Party will, by amendment of its certificate of incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by it, but will at times in good faith assist in the carrying out of all the provisions of this Note.

 

Section 4.10.  Limitation on Interest.  Notwithstanding any other provision of this Note, interest on the indebtedness evidenced by this Note is expressly limited so that in no contingency or event whatsoever, whether by acceleration of the maturity of this Note or otherwise, shall the interest contracted for, charged or received by the Lender exceed the maximum amount permissible under applicable law.  If from any circumstances whatsoever fulfillment of any provisions of this Note or of any other document evidencing, securing or pertaining to the indebtedness evidenced hereby, at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if from any such circumstances the Lender shall ever receive anything of value as interest or deemed interest by applicable law under this Note or any other document evidencing, securing or pertaining to the indebtedness evidenced hereby or otherwise an amount that would exceed the highest lawful rate, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing under this Note or on account of any other indebtedness of any Loan Party to the Lender, and not to the payment of interest, or if such excessive

  

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interest exceeds the unpaid balance of principal of this Note and such other indebtedness, such excess shall be refunded to the Borrower.  In determining whether or not the interest paid or payable with respect to any indebtedness of any Loan Party to the Lender, under any specific contingency, exceeds the highest lawful rate, the Loan Parties and the Lender shall, to the maximum extent permitted by applicable law, (a) characterize any non-principal payment as an expense, fee or premium rather than as interest, (b) exclude voluntary prepayments and the effects thereof, (c) amortize, prorate, allocate and spread the total amount of interest throughout the term of such indebtedness so that the actual rate of interest on account of such indebtedness does not exceed the maximum amount permitted by applicable law, and/or (d) allocate interest between portions of such indebtedness, to the end that no such portion shall bear interest at a rate greater than that permitted by applicable law.  The terms and provisions of this paragraph shall control and supersede every other conflicting provision of this Note and all other agreements between any Loan Party and the Lender.

 

Section 4.11.  Severability.  If one or more provisions of this Note are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Note and the balance of this Note shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.

 

Section 4.12.  Construction. This Note has been freely and fairly negotiated among the parties.  If an ambiguity or question of intent or interpretation arises, this Note will be construed as if drafted jointly by the parties and no presumption or burden of proof will arise favoring or disfavoring any party because of the authorship of any provision of this Note.  Unless the context requires otherwise, any agreements, documents, instruments or laws defined or referred to in this Note will be deemed to mean or refer to such agreements, documents, instruments or laws as from time to time amended, modified or supplemented, including (a) in the case of agreements, documents or instruments, by waiver or consent and (b) in the case of laws, by succession of comparable successor statutes.  All references in this Note to any particular law will be deemed to refer also to any rules and regulations promulgated under that law.  The words “include, “includes” and “including will be deemed to be followed by “without limitation.”  The word “or” is used in the inclusive sense of “and/or” unless the context requires otherwise.  References to a Person are also to its permitted successors and assigns.  Pronouns in masculine, feminine and neuter genders will be construed to include any other gender, and words in the singular form will be construed to include the plural and vice versa, unless the context requires otherwise.  When a reference in this Note is made to an Article, Section, Exhibit, Annex or Schedule, such reference is to an Article or Section of, or Exhibit, Annex or Schedule to, this Note unless otherwise indicated.  The words “this Note,” “herein,” “hereof,” “hereby,” “hereunder” and words of similar import refer to this Note as a whole and not to any particular subdivision unless expressly so limited.

 

Section 4.13.  Right of Setoff.  Notwithstanding the terms of this Note or any other agreement or document, the Lender and each of its affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, and without prior notice to any Loan Party, any such notice being expressly waived by each Loan Party, to set off and appropriate and apply any and all obligations and indebtedness (in whatever currency) at any time owing by the Lender or such affiliate to or for the credit or the account of any Loan Party against any and all of the obligations of such Loan Party now or hereafter existing under this Note to the Lender or its affiliates, whether direct or indirect, absolute or contingent, matured or unmatured, and irrespective of whether or not the Lender or its affiliates shall have made any demand under this Note and although such obligations of a Loan Party are owed to a subsidiary, office or affiliate of the Lender different from the subsidiary, office or affiliate obligated on such obligations or indebtedness.  The rights of the Lender and its affiliates under this Section 4.13 are in addition to other rights and remedies (including other rights of set-off) that the Lender or such affiliates may have.  The Lender agrees to notify the applicable Loan Party promptly after any such set off and appropriation and application; provided, however, that the failure to give such notice shall not affect the validity of such set off and appropriation and application.

Section 4.14.  Indemnification.  Each Loan Party shall, to the fullest extent permitted by law, indemnify, defend and hold harmless Lender and its officers, directors, employees, agents and advisors (each, an “Indemnified Party”) from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party in connection with or arising from this Note or the Transaction Documents; provided that such indemnity shall not, as to any Indemnified Party, be available to the extent that such claims, damages, losses, liabilities and expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have directly resulted from the gross negligence or willful misconduct of such Indemnified Party.

[Signature Page Follows]

  

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EXECUTED as of the date first written above.

 

 

TRUE DRINKS HOLDINGS, INC.

 

 

By:  /s/ Lance Leonard

Name:  Lance Leonard

Title: Chief Executive Officer

TRUE DRINKS, INC.

By:  /s/ Lance Leonard

Name:  Lance Leonard

Title:  Chief Executive Officer

The Lender hereby accepts this Note this ____ day of October 2015.

 

 

RED BEARD HOLDINGS, LLC

 

 

By:   /s/ Vincent C. Smith

Name:  Vincent C. Smith

Title:     Manager

-9-ex10-3.htm

Exhibit 10.3

 

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

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

True Drinks Holdings, Inc.

Warrant To Purchase Common Stock

Warrant No: 20151009-01

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

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

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

 

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

 

The terms and conditions of the Warrant are as follows:

 

1.      EXERCISE OF WARRANT.

 

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

  

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

 

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

 

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

 

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

                                                                                         B

For purposes of the foregoing formula:

 

	
  

	
A=

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

 

	
  

	
B=

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

 

	
  

	
C=

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

  

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

 

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

 

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

 

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

 

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

 

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

 

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

  

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

 

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

 

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

 

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

  

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

 

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

 

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

 

3.      FUNDAMENTAL TRANSACTIONS.

 

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

  

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

 

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

 

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

 

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

 

6.      REISSUANCE OF WARRANTS.

 

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

 

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

 

  

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

 

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

 

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

 

8.      NOTICES.

 

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

 

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

 

  

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

 

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

 

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

 

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

 

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

  

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

 

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

 

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

 

(a)      “Bloomberg” means Bloomberg Financial Markets.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  

-9-

  

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 [Signature Page Follows]

  

-10-

  

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

	
  

	
TRUE DRINKS HOLDINGS, INC.

 

By: /s/ Lance Leonard

Name: Lance Leonard

Title: Chief Executive Officer

  

-11-

  

 EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

True Drinks Holdings, Inc.

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

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

                  “Cash Exercise” with respect to _______________ Warrant Shares; and/or

                  “Cashless Exercise” with respect to _______________ Warrant Shares.

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

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

Date: _______________ __, ______

   Name of Registered Holder

By:   _____________________________

         Name:

         Title:

  

A-1

  

 EXHIBIT B

ASSIGNMENT FORM

 

True Drinks Holdings, Inc.

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

 

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

 

	
Name:

	         
	  	
(Please Print)

	
Address:                                                                

 

	  
	  	
(Please Print)

	
Dated: _______________ __, ______

	  
	
Holder’s Signature:                                                                

	  
	
Holder’s Address:                                                               

 

	  

 

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

 

B-1

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