KATALYST SECURITIES LLC
Exhibit
10.4
KATALYST SECURITIES LLC
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TEL: ▇▇▇-▇▇▇-▇▇▇▇ FAX: ▇▇▇-▇▇▇-▇▇▇▇
Member: FINRA & SIPC
February 15, 2019
STRICTLY CONFIDENTIAL
▇▇.
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CEO
Charlie’s Chalk Dust LLC
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Dear ▇▇. ▇▇▇▇▇:
This letter (the “Agreement”) constitutes our understanding with
respect to the engagement of Katalyst Securities LLC
(“Katalyst”), registered broker dealer and member of
the Financial Industry Regulatory Authority
(“FINRA”) and SIPC, as an exclusive placement agent
(hereinafter referred to as “Placement
Agent”), by
Charlie’s Chalk Dust LLC, a Delaware limited liability
company (the “Company”) to assist the Company with (i) a minimum
Sixteen Million Five Hundred Thousand Dollars ($16,500,000) private
placement financing of the Company (the “Offering”) of equity securities by the Company
immediately preceding the proposed merger (the
“Merger”) with a wholly owned subsidiary
(“Acquisition Sub”) of True Drinks Holdings, Inc., a
Nevada corporation (“TRUE”) or simultaneously with or immediately
after the Merger, and (iii) to assist the Company with other
filings required by FINRA, United States Securities and Exchange
Commission (the “SEC”) and as required under the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”). The terms and
conditions of the Merger will be negotiated between and mutually
agreed upon between the Company and TRUE and nothing herein implies
that the Placement Agent would have the power or authority to bind
the Company or TRUE or an obligation of the Company or TRUE to
accept a proposed Merger, issue any Securities (as defined herein),
or complete an Offering. The Offering will be made pursuant to the
exemptions afforded by Section 4(a)(2) of the Securities Act of
1933, as amended (the “Act”), and Regulation D promulgated thereunder
and applicable state securities laws. Following the Merger, the
“Company” shall be deemed to include TRUE and
Acquisition Sub. The proposed capitalization table of TRUE, post
reorganization, private placement offering is set forth in Exhibit
A, attached herewith, is not final and subject to
changes.
A. APPOINTMENT
OF KATALYST.
During
the Term (as defined below), the Company hereby engages the
Placement Agent to serve as its exclusive placement agent in
connection with the Offering.
The
Placement Agent hereby accepts such engagement on a
“reasonable best efforts” basis upon the terms and
conditions set forth herein. The Company acknowledges and agrees
that the Placement Agent will be entitled to provide services, in
whole or in part, through any current or future affiliate or
sub-agent(s) selected by the Placement Agent and references to the
Placement Agent shall, where the context so requires, include
reference to any such affiliate or sub-agent(s).
The Company acknowledges and agrees that Katalyst’s
engagement hereunder is not an agreement or commitment, express or
implied, by Katalyst or any of its affiliates to underwrite or
purchase any securities or otherwise provide financing. The
proposed private placement is to be made directly by the Company to
the purchasers pursuant to agreements entered into between the
purchasers and the Company. Purchases of Securities may be made by
the Placement Agent and any selected sub-dealers and their
respective officers, directors, employees and affiliates and by the
officers, directors, employees and affiliates of the Company
(collectively, the “Affiliates”) for the Offering and such purchases will
be made by the Affiliates based solely upon the same information
that is provided to the investors in the
Offering.
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The proposed Offering will seek to raise a minimum
of gross proceeds of Sixteen Million Five Hundred Thousand Dollars
($16,500,000) through the sale of units (such units, together with
the Class A Units, the Warrants and the Brokers Warrants (each as
defined herein) ,the “Securities”) consisting of (i) one Class A Unit of the
Company’s (the “Class A Unit”), and (ii) warrants
to purchase 0.50 Class A Units (the “Warrants”)
immediately preceding the Merger or TRUE common stock
simultaneously with or immediately after the Merger (in either
case, the “Common
Stock”), (the
“Minimum
Offering”), and a maximum
of gross proceeds of Twenty Million Dollars ($20,000,000) (the
“Maximum
Offering”). The Warrants
shall have a five (5) year life and an exercise price equal to
$2.50. The Warrants shall convert into similar warrants of TRUE
following consummation of the Merger. The Minimum Offering will
include the participation of to be identified strategic investor(s)
(the “Strategic Investor”) in the amount of at least
Five Million Dollars ($5,000,000). The offering price for each Unit
is $2.50 (the “Purchase
Price”). The minimum
subscription is Twenty Five Thousand Dollars ($25,000) provided,
however, subscriptions in lesser amounts may be accepted by the
Company in its sole discretion.
The Closing, as defined below, of the Offering is
anticipated on or before March 31, 2019, or at such time and place
as mutually agreed to by the Company and the Placement Agent. (the
“Offering
Period”).
B. FEES
AND EXPENSES.
1. FINANCING
FEE.
(a) CASH
PORTION.
Subject to the Closing of the Offering
and the Merger, the Company hereby agrees to pay (or cause TRUE to
pay) the Placement Agent (or the designees authorized by such
Placement Agent), at the Closing of the Offering, as compensation
for their services hereunder, a cash fee (the
“Financing
Fee”) in the amount of
Ten Percent (10.0%) of the gross proceeds from any sale of
Securities in the Offering to Investors. The Financing Fee shall be
paid to the Placement Agent in cash by wire transfer from the
escrow account in which the Offering proceeds are deposited,
concurrently with the delivery of the net proceeds to the Company
at the Closing of the Offering.
(b) WARRANT
PORTION. At
the Closing of the Merger, the Company
will issue to the Placement Agent (or the designees authorized by
such Placement Agent), as compensation for its services hereunder,
warrants to purchase shares of TRUE’s common stock equal to
Ten Percent (10%) of the Class A Units sold in the Offering (as
adjusted pursuant to the terms of the Merger) to Investors plus Ten
Percent (10%) of the Warrants sold in the Offering (as adjusted
pursuant to the terms of the Merger) to Investors (the
“Broker
Warrants”), with a term
of five (5) years from the final closing of the Offering and an
exercise price of $2.50 per share. The Broker Warrants shall be the
same as the warrants issued to the Investors upon the Merger. The
Financing Fee and the Broker Warrants are sometimes referred to
collectively as the “Broker
Fees”). The Broker
Warrants may be issued directly to the Placement Agent’s
employees and affiliates at the Placement Agent’s written
request.
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(c) TAIL
PROVISIONS.
The Company shall also pay to the
Placement Agent the Financing Fee and the Broker Warrants
calculated in the manner provided in Sections B.1(a) and 1(b) above
with respect to any subsequent public or private offering or other
financing or capital-raising transaction of any kind
(“Subsequent
Financing”) to the extent
that such financing or capital is provided the Company, or to any
Affiliate of the Company, by investors whom the Placement Agent had
“introduced” (as defined below), directly or
indirectly, to the Company during the Offering Period if such
Subsequent Financing is consummated at any time within the twelve
(12) month period following the earlier of the expiration or
termination of this Agreement or the closing of the Offering (the
“Tail
Period”). A party
“introduced” by the Placement Agent shall mean an
investor who either (i) participated in the Offering, (ii) met with
the Company and/or had a conversation with the Company either in
person or via telephone regarding the Offering, (iii) was provided
by the Placement Agent with a copy of the Company’s offering
memorandum (or other materials prepared and/or approved by the
Company in connection with the Offering), or (iv) contacted by the
Placement Agent during the Offering Period, in each case based upon
such investor expressing an interest, directly or indirectly, to
the Placement Agent in investing in the Offering. An
“Affiliate” of an entity shall mean any individual or
entity controlling, controlled by or under common control with such
entity and any officer, director, employee, stockholder, partner,
member or agent of such entity.
2. EXPENSES.
In addition to the compensation
payable pursuant to Section B(1), the Company hereby agrees to pay
Katalyst a non-accountable expense allowance in the amount of One
Hundred Twenty Five Thousand Dollars ($125,000) (the
“Katalyst Expense
Fee”) paid directly from
the escrow account at the time of the Closing from the gross
proceeds. The Katalyst Expense Fee is separate and apart from the
Broker Fees. Regardless whether the Offering is consummated and if
there is no Closing, the Katalyst Expense Fee will be due and
payable within five (5) days of written request to the Company by
wire transfer. The Katalyst Expense Fee is in addition to the
reimbursement of fees and expenses relating to attendance by the
Placement Agent at proceedings or to indemnification and
contribution as contemplated elsewhere in this
agreement.
C. TERM AND
TERMINATION
OF ENGAGEMENT.
Except as set forth below, the term of this Agreement begins on the
date of this Agreement and shall end automatically upon the earlier
to occur of (i) after final Closing of the Offering or (ii) the
date of termination of the Offering (the “Term”). Notwithstanding the Term of this
Agreement, this Agreement may be earlier terminated (a) immediately
by Company in the event of the Placement Agent’s failure to
perform any of its material obligations hereunder or fraud, illegal
or willful misconduct or gross negligence or (b) without cause by
either the Company or the Placement Agent, on written notice of no
less than ten (10) business days, provided that no such notice may
be given by the Company for a period of 30 days from the date of
this Agreement. Notwithstanding any such expiration or termination,
the terms of this Agreement other than Paragraphs A and B shall all
remain in full force and effect and be binding on the parties
hereto, including the exculpation, indemnification and contribution
obligations of the Company, the confidentiality obligations, and
provided the Agreement is not terminated by the Company pursuant to
subclause (a) of this paragraph C, the right of the Placement Agent
to receive any earned but unpaid Broker Fee hereunder and the right
of the Placement Agent to receive reimbursement for its expenses in
accordance with paragraph B(2) above.
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D. SUBSCRIPTION
AND CLOSING
PROCEDURES.
(a) The
Company shall cause to be delivered to the Placement Agent copies
of the Subscription Documents and has consented, and hereby
consents, to the use of such copies for the purposes permitted by
the Act and applicable securities laws and in accordance with the
terms and conditions of this Agreement, and hereby authorizes the
Placement Agent and its agents and employees to use the
Subscription Documents in connection with the sale of the
Securities until the earlier of (i) the Termination Date or (ii)
the final Closing, and no person or entity is or will be authorized
to give any information or make any representations other than
those contained in the Subscription Documents or to use any
offering materials other than the Subscription Documents in
connection with the sale of the Securities, unless the Company
first provides the Placement Agent with notification of such
information, representations or offering materials.
(b) The
Company shall make available to the Placement Agent and its
representatives such information, including, but
not limited to, financial information, and other information
regarding the Company (the “Information”), as may be reasonably requested in making
a reasonable investigation of the Company and its affairs. The
Company shall provide access to the officers, directors, employees,
independent accountants, legal counsel and other advisors and
consultants of the Company as shall be reasonably requested by the
Placement Agent. The Company recognizes and agrees that the
Placement Agent (i) will use and rely primarily on the Information
and generally available information from recognized public sources
in performing the services contemplated by this Agreement without
independently verifying the Information or such other information,
(ii) does not assume responsibility for the accuracy of the
Information or such other information, and (iii) will not make an
appraisal of any assets or liabilities owned or controlled by the
Company or its market competitors.
(c) Each
prospective purchaser will be required to complete and execute the
Subscription Documents, Anti-Money Laundering Form, Accredited
Investor Certification and other documents which will be forwarded
or delivered to the address identified in the Subscription
Documents.
(d) Simultaneously with the delivery to the Placement
Agent of the Subscription Documents, the subscriber’s check
or other good funds will be forwarded directly by the subscriber to
the escrow agent and deposited into a non interest bearing escrow
account (the “Escrow
Account”) established for
such purpose with Delaware Trust Company (the
“Escrow
Agent”). All such funds
for subscriptions will be held in the Escrow Account pursuant to
the terms of the escrow agreement among the Company, the Placement
Agent and Delaware Trust Company (the “Escrow
Agreement”). The Company shall (or shall cause TRUE to) pay all
fees related to the establishment and maintenance of the Escrow
Account. Subject to the receipt of subscriptions for the amount for
Closing, the Company will either accept or reject, for any or no
reason, the Subscription Documents in a timely fashion and at the
Closing will countersign the Subscription Documents and provide
duplicate copies of such documents to the Placement Agent. The
Company will forward directly to the subscribers the documents
countersigned by the Company. The Company will give notice to the
Placement Agent of its acceptance of each subscription. The
Company, or the Placement Agent on the Company’s behalf, will
promptly return to subscribers incomplete, improperly completed,
improperly executed and rejected subscriptions and give written
notice thereof to the Placement Agent upon such
return.
(e) If
subscriptions for at least the Minimum Amount for closing have
been accepted prior to the Termination Date, the funds
therefor have been collected by the Escrow Agent and all of the
conditions set forth elsewhere in this Agreement are fulfilled, a
closing shall be held promptly with respect to the Securities sold
(the “Closing”). Delivery of payment for the accepted
subscriptions for the Securities from the funds held in the Escrow
Account will be made at the Closing at the Placement Agent’s
office against delivery of the Securities by the Company at the
address set forth in Section 12 hereof (or at such other place as
may be mutually agreed upon between the Company and the Placement
Agent), net of amounts agreed upon by the parties herein,
including, the Blue Sky counsel as of the Closing. Executed
certificates for the post-merger shares of TRUE will be in such
authorized denominations and registered in such names as the
Placement Agent may request on or before the date of the Closing
(“Closing
Date”). The certificates
will be forwarded to the subscriber directly by either the Company
or the stock transfer agent within ten (10) business days following
the Closing. At the Closing, the Company will cause TRUE to deliver
irrevocable issuance instruction to its stock transfer agent, if
applicable, for the issuance of certificates representing the
Shares being sold and will deliver the warrants for the purchase of
TRUE common stock in exchange for the Warrants.
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(f) If
Subscription Documents for the Minimum Offering Amount for
Closing have
not been received and accepted by the Company on or before the
Termination Date for any reason, the Offering will be terminated,
no Securities will be sold, and the Escrow Agent will, at the
request of the Placement Agent, cause all monies received from
subscribers for the Securities to be promptly returned to such
subscribers without interest, penalty, expense or deduction. The
Company will be responsible for all the fees charged by the Escrow
Agent.
E. REPRESENTATIONS, WARRANTIES
AND COVENANTS.
The Company represents and warrants to, and agrees with, the
Placement Agent that:
1. The
Company represents and warrants that it has all requisite power
and authority
to enter into and carry out the terms and provisions of this
Agreement. The execution, delivery and performance of this
Agreement and the Offering of Securities will not violate or
conflict with any provision of the charter or bylaws of the Company
or, except as would not have a material adverse effect, any
agreement or other instrument to which the Company is a party or by
which it or any of its properties is bound. Any necessary
approvals, governmental and private, will be obtained by the
Company prior to any Closing, except as may be waived or obtained
or filed following any Closing and except where the failure to
obtain any such approval would not have a material adverse
effect.
2. The
Securities will be offered and sold by the Company and TRUE
in compliance
with the requirements for the exemption from registration pursuant
to Section 5 of the Securities Act of 1933, as amended (including
any applicable exemption therefrom), and with all other securities
laws and regulations. The Company or TRUE will file appropriate
notices with the Securities and Exchange Commission and with other
applicable securities authorities.
3. The
information in any presentation materials, memorandum or
other offering
documents furnished to investors in the Offering by the Company is
true and correct in all material respects and does not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated or necessary to make the statements
therein not misleading.
4. The
Company hereby permits the Placement Agent to rely on the
representations and warranties made or given by the Company, TRUE
or Acquisition Sub to any acquirer of Securities in any agreement,
certificate or otherwise in connection with the
Offering.
F. INDEMNIFICATION
AND CONTRIBUTION.
The Company agrees to (and will cause TRUE and Acquisition Sub,
upon consummation of the Merger, to undertake to) indemnify
Katalyst and its controlling persons, representatives and agents in
accordance with the indemnification provisions set forth in
Appendix
I. These provisions will apply
regardless of whether any Offering is
consummated.
G. LIMITATION
OF ENGAGEMENT TO
THE COMPANY.
The Company acknowledges that Katalyst has been retained only by
the Company, that Katalyst is providing services hereunder as an
independent contractor (and not in any fiduciary or agency
capacity) and that the Company’s engagement of Katalyst is
not deemed to be on behalf of, and is not intended to confer rights
upon, any shareholder, owner or partner of the Company or any other
person not a party hereto as against Katalyst or any of its
respective affiliates, or any of their respective officers,
directors, controlling persons (within the meaning of Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act of
1934, as amended (the “Exchange
Act”), employees or
agents. Unless otherwise expressly agreed in writing by Katalyst,
no one other than the Company is authorized to rely upon this
Agreement or any other statements or conduct of Katalyst, and
except for TRUE following the Merger, no one other than the Company
is intended to be a beneficiary of this Agreement. The Company
acknowledges that any recommendation or advice, written or oral,
given by Katalyst to the Company in connection with
Katalyst’s engagement is intended solely for the benefit and
use of the Company’s management and directors in considering
a possible Offering, and any such recommendation or advice is not
on behalf of, and shall not confer any rights or remedies upon, any
other person or be used or relied upon for any other purpose.
Katalyst shall not have the authority to make any commitment
binding on the Company. The Company, in its sole discretion, shall
have the right to reject any investor introduced to it by Katalyst,
or its respective designees, affiliates or
sub-dealers.
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H. LIMITATION
OF PLACEMENT
AGENT’S
LIABILITY
TO THE COMPANY.
Katalyst shall not have any liability to the Company, TRUE or
Acquisition Sub for any Losses attributable to the gross
negligence, intentional misrepresentation or willful misconduct of
another Placement Agent or Investment Banker.
I. GOVERNING
LAW.
This Agreement shall be deemed to have been made and delivered in
New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws
of the State of New York applicable to contracts to be wholly
performed in said state.
J. INFORMATION; RELIANCE.
The Company shall furnish, or cause to be furnished, to the
Placement Agent all information reasonably requested by the
Placement Agent for the purpose of rendering services hereunder and
shall further make available to the Placement Agent all such
information to the same extent and on the same terms as such
information is available to the Company and potential lenders and
investors (all such information being the
“Information”).
The Company shall notify the Placement Agent of any material
adverse change, or development that may lead to a material adverse
change, in the business, properties, operations or financial
condition or prospects of the Company or any other material
Information. In addition, the Company agrees to make available to
the Placement Agent upon request from time to time the officers,
directors, accountants, counsel and other advisors of the Company.
The Company recognizes and confirms that the Placement Agent (a)
will use and rely on the Information, including any documents
provided to investors in each Offering(the
“Offering
Documents,” which shall
include any Purchase Agreement) and if any prepared by the Company,
a private placement memorandum, and on information available from
generally recognized public sources in performing the services
contemplated by this Agreement without having independently
verified the same; (b) do not assume responsibility for the
accuracy or completeness of the Offering Documents or the
Information and such other information, except for any written
information furnished to the Company by the Placement Agent
specifically for inclusion in the Offering Documents; and (c) will
not make an appraisal of any of the assets or liabilities of the
Company. Upon reasonable request, the Company will meet with the
Placement Agent or its representatives to discuss all information
relevant for disclosure in the Offering Documents and will
cooperate in any investigation undertaken by the Placement Agent
thereof, including any document included therein. At each Offering
and the closing of the Merger, at the request of the Placement
Agent, the Company shall deliver copies of such officer’s
certificates, in form and substance reasonably satisfactory to the
Placement Agent and its counsel as is customary for such
Offering.
K. USE OF
INFORMATION.
The Company authorizes the Placement Agent to transmit to the
prospective purchasers of Securities the Company’s power
point presentation prepared by the Company and private placement
memorandum (if any, and if prepared by the Company) (the
“Presentation
Materials”). The Company
represents and warrants that the Presentation Materials (i) will be
prepared by the management of the Company; and (ii) will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading. The Company will advise the
Placement Agent promptly if it becomes aware of the occurrence of
any event or any other change known to the Company which results in
the Presentation Materials containing an untrue statement of a
material fact or omitting to state a material fact required to be
stated therein or necessary to make the statements therein or
previously made, in light of the circumstances under which they
were made, not misleading. Notwithstanding the foregoing, if any
Placement Agent elects to not transmit Presentation Materials to
prospective purchasers, such Placement Agent shall direct qualified
prospective purchasers to an electronic data room in which the
Company makes available the Presentation Materials for review by
qualified prospective purchasers.
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L. ANNOUNCEMENT
OF TRANSACTION.
The Company and the Placement Agent
acknowledge and agree that Katalyst may, subsequent to the Closing
of the Offering and to the extent Katalyst receives a Broker Fee
for Securities sold in the Offering, make public its involvement
with the Company and TRUE; provided that any such public
announcement or other public disclosure (other than customary
tombstone presentations or other investment banking presentation
materials containing only publicly available information) shall be
approved by the Company and TRUE, which approval shall not be
unreasonably withheld.
M. ADVICE TO
THE BOARD.
The Company acknowledges that any advice given by the Placement
Agent to the Company is solely for the benefit and use of the
Company’s board of directors and officers, who will make all
decisions regarding whether and how to pursue any opportunity or
transaction, including a potential Merger or Offering. The
Company’s board of directors and senior management may
consider the Placement Agent’s advice, but will base their
decisions on the advice of legal, tax and other business advisors
and other factors which they consider appropriate. Accordingly, as
an independent contractor, Katalyst will not assume the
responsibilities of a fiduciary to the Company or its stockholders
in connection with the performance of its services. Any advice
provided may not be used, reproduced, disseminated, quoted or
referred to without the Placement Agent’s prior written
consent. Katalyst does not provide accounting, tax, or legal
advice. Katalyst is not responsible for the success of any
Offering.
N. ENTIRE
AGREEMENT.
This Agreement was drafted by the Company and the Placement
Agent’s respective counsels and constitutes the entire
Agreement between the parties and supersedes and cancels any and
all prior or contemporaneous arrangements, understandings and
agreements, written or oral, between them relating to the subject
matter hereof.
O. AMENDMENT.
This Agreement may not be modified except in writing signed by each
of the parties hereto.
P. NO PARTNERSHIP.
The Company is a sophisticated business enterprise that has
retained the Placement Agent for the limited purposes set forth in
this Agreement. The parties acknowledge and agree that their
respective rights and obligations are contractual in nature. Each
party disclaims an intention to impose fiduciary obligations on the
other by virtue of the engagement contemplated by this
Agreement.
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Q. NOTICE.
All notices and other communications required hereunder shall be in
writing and shall be deemed effectively given to a party by (a)
personal delivery; (b) upon deposit with the United States Post
Office, by certified mail, return receipt requested, firstclass
mail, postage prepaid; (c) delivered by hand or by messenger or
overnight courier, addressee signature required, to the addresses
below or at such other address and/or to such other persons as
shall have been furnished by the parties;
If to the Company:
Charlie’s
Chalk Dust LLC
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With a copy
to:
(which
shall not constitute notice)
▇▇▇▇▇▇▇
▇▇▇▇, Esq.
Grushko
& ▇▇▇▇▇▇▇, ▇.▇.▇▇▇
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If
to Katalyst Securities LLC.
Katalyst
Securities, LLC
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Managing Director
With a copy
to:
(which
shall not constitute notice)
▇▇▇▇▇▇▇
▇. Glenns, Esq.
Law
Office of ▇▇▇▇▇▇▇ ▇. Glenns, Esq.
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R. SEVERABILITY. If
any term, provision, covenant or restriction herein is held by a
court of competent jurisdiction to be invalid, void or
unenforceable or against public policy, the remainder of the terms,
provisions and restrictions contained herein will remain in full
force and effect and will in no way be affected, impaired or
invalidated.
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S. GOVERNING
LAW
AND JURISDICTION.
This Agreement shall be deemed to have been made and delivered in
New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws
of the State of New York without regard to principles of conflicts
of law thereof.
THE PARTIES HERETO AGREE TO SUBMIT ALL CONTROVERSIES TO THE
EXCLUSIVE JURISDICTION OF FINRA ARBITRATION IN ACCORDANCE WITH THE
PROVISIONS SET FORTH BELOW AND UNDERSTAND THAT (A)
ARBITRATION IS FINAL AND BINDING ON THE PARTIES, (B) THE PARTIES
ARE WAIVING THEIR RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING THE
RIGHT TO A JURY TRIAL, (C) PRE-ARBITRATION DISCOVERY IS GENERALLY
MORE LIMITED AND DIFFERENT FROM COURT PROCEEDINGS, (D) THE
ARBITRATOR’S AWARD IS NOT REQUIRED TO INCLUDE FACTUAL
FINDINGS OR LEGAL REASONING AND ANY PARTY’S RIGHT TO APPEAL
OR TO SEEK MODIFICATION OF RULES BY ARBITRATORS IS STRICTLY
LIMITED, (E) THE PANEL OF FINRA ARBITRATORS WILL TYPICALLY INCLUDE
A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE
SECURITIES INDUSTRY, AND (F) ALL CONTROVERSIES WHICH MAY ARISE
BETWEEN THE PARTIES CONCERNING THIS AGREEMENT SHALL BE DETERMINED
BY ARBITRATION PURSUANT TO THE RULES THEN PERTAINING TO FINRA. ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
JUDGMENT ON ANY AWARD OF ANY SUCH ARBITRATION MAY BE ENTERED IN THE
SUPREME COURT OF THE STATE OF NEW YORK OR IN ANY OTHER COURT HAVING
JURISDICTION OVER THE PERSON OR PERSONS AGAINST WHOM SUCH AWARD IS
RENDERED. THE PARTIES AGREE THAT THE DETERMINATION OF THE
ARBITRATORS SHALL BE BINDING AND CONCLUSIVE UPON THEM. THE
PREVAILING PARTY, AS DETERMINED BY SUCH ARBITRATORS, IN A LEGAL
PROCEEDING SHALL BE ENTITLED TO COLLECT ANY COSTS, DISBURSEMENTS
AND REASONABLE ATTORNEY’S FEES FROM THE OTHER PARTY. PRIOR TO
FILING AN ARBITRATION, THE PARTIES HEREBY AGREE THAT THEY WILL
ATTEMPT TO RESOLVE THEIR DIFFERENCES FIRST BY SUBMITTING THE MATTER
FOR RESOLUTION TO A MEDIATOR, ACCEPTABLE TO ALL PARTIES, AND WHOSE
EXPENSES WILL BE BORNE
EQUALLY BY ALL PARTIES. THE MEDIATION WILL BE HELD IN THE
COUNTY
OF NEW YORK, STATE OF NEW YORK, ON AN EXPEDITED BASIS. IF THE
PARTIES CANNOT SUCCESSFULLY RESOLVE THEIR DIFFERENCES THROUGH
MEDIATION, THE MATTER WILL BE RESOLVED BY ARBITRATION. THE
ARBITRATION SHALL TAKE PLACE IN THE COUNTY OF NEW YORK, THE STATE
OF NEW YORK, ON AN EXPEDITED BASIS.
T.
OTHER
INVESTMENT
BANKING
SERVICES.
The Company acknowledges that
Katalyst and its affiliates are securities firms engaged in
securities trading and brokerage activities and providing
investment banking and financial advisory services. In the ordinary
course of business, the Placement Agent and its affiliates,
registered representatives and employees may at any time hold long
or short positions, and may trade or otherwise effect transactions,
for their own account or the accounts of customers, in the
Company’s or TRUE’s debt or equity securities, the
Company’s affiliates or other entities that may be involved
in the transactions contemplated by this Agreement. In addition,
the Placement Agent and its affiliates may from time to time
perform various investment banking and financial advisory services
for other clients and customers who may have conflicting interests
with respect to the Company, TRUE, the Merger, or an Offering. The
Company also acknowledges that the Placement Agent and its
affiliates have no obligation to use in connection with this
engagement or to furnish to the Company, confidential information
obtained from other companies. Furthermore, the Company
acknowledges the Placement Agent may have fiduciary or other
relationships whereby the Placement Agent or its affiliates may
exercise voting power over securities of various persons, which
securities may from time to time include securities of the Company
or TRUE or others with interests in respect of any Merger or
Offering. The Company acknowledges that the Placement Agent or such
affiliates may exercise such powers and otherwise perform their
functions in connection with such fiduciary or other relationships
without regard to the defined relationship to the Company
hereunder.
-9-
U.
MISCELLANEOUS.
(1) This
Agreement shall be binding upon and inure to the benefit of the
Placement Agent and the Company and their respective assigns,
successors, and legal representatives.
(2) This
Agreement may be executed in counterparts (including facsimile or
in pdf format counterparts), each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument.
(3) Notwithstanding
anything herein to the contrary, in the event that the Placement
Agent determines that any of the terms provided for hereunder shall
not comply with a FINRA rule, including but not limited to FINRA
Rule 5110, then the Company shall agree to amend this Agreement in
writing upon the request of the Placement Agent to comply with any
such rules; provided that any such amendments shall not provide for
terms that are less favorable to the Company.
V. CONFIDENTIALITY.
(a) The
Placement Agent will maintain the confidentiality of the
Information and, unless and until such Information shall have been
made publicly available by the Company or by others without breach
of a confidentiality agreement, shall disclose the Information only
as provided for herein, authorized by the Company or as required by
law or by request of a governmental authority, FINRA or court of
competent jurisdiction. In the event the Placement Agent is legally
required to make disclosure of any of the Information, the
Placement Agent will give prompt notice to the Company prior to
such disclosure, to the extent the Placement Agent can practically
do so.
(b) The
foregoing paragraph shall not apply to information
that:
(i) at
the time of disclosure by the Company, is or thereafter becomes,
generally available to the public or within the industries in which
the Company conducts business, other than as a result of a breach
by the Placement Agent of its obligations under this Agreement;
or
(ii) prior
to or at the time of disclosure by the Company, was already in the
possession of, the Placement Agent or any of its affiliates, or
could have been developed by them from information then lawfully in
their possession, by the application of other information or
techniques in their possession, generally available to the public;
at the time of disclosure by the Company thereafter, is obtained by
the Placement Agent or any of its affiliates from a third party who
the Placement Agent reasonably believes to be in possession of the
information not in violation of any contractual, legal or fiduciary
obligation to the Company with respect to that information; or is
independently developed by the Placement Agent or its
affiliates.
The
exclusions set forth in sub-section (b) above shall not apply to
pro forma financial information of the Company, which pro forma
Information shall in all events be subject to sub- section (a)
above.
(c) Nothing
in this Agreement shall be construed to limit the ability of the
Placement Agent or its affiliates to pursue, investigate, analyze,
invest in, or engage in investment banking, financial advisory or
any other business relationship with entities other than the
Company, notwithstanding that such entities may be engaged in a
business which is similar to or competitive with the business of
the Company, and notwithstanding that such entities may have actual
or potential operations, products, services, plans, ideas,
customers or supplies similar or identical to the Company’s,
or may have been identified by the Company as potential merger or
acquisition targets or potential candidates for some other business
combination, cooperation or relationship. The Company expressly
acknowledges and agrees that it does not claim any proprietary
interest in the identity of any other entity in its industry or
otherwise, and that the identity of any such entity is not
confidential information.
-10-
W. DISCLOSURE.
The Company acknowledges that some of
the shareholders of TRUE may be registered representatives, agents
or employees affiliated with the Placement Agent and may receive
selling commissions or payment as per the terms of this executed
Agreement.
X. NO
DISQUALIFICATION
EVENTS.
(a) The
Company represents and warrants the following:
(i) None of Company, any director, executive officer,
other officer of the Company participating in the Offering, any
beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power,
nor any promoter (as that term is defined in Rule 405 under the
Securities Act) connected with the Company in any capacity at the
time of sale (each, an “Issuer Covered
Person” and, together,
“Issuer Covered
Persons”) is subject to
any Disqualification Event (as defined below), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3) or has
been involved in any matter which would be a Disqualification Event
except for the fact that it occurred before September 23, 2013. The
Company has exercised reasonable care to determine whether any
Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and
has furnished to the Placement Agent a copy of any disclosures
provided thereunder.
(ii) The
Company will promptly notify Katalyst in writing of (A) any
Disqualification Event relating to any Issuer Covered Person and
(B) any event that would, with the passage of time, become a
Disqualification Event relating to any Issuer Covered
Person.
(iii) The Company is aware that other persons (other
that any Issuer Covered Persons and the Placement Agent Covered
Person (as defined below) will be paid (directly or indirectly)
remuneration for solicitation of purchasers in connection with the
sale of any Securities. (b) The
Placement Agent represents and warrants the
following:
(i) No
Disqualification Events. Neither it nor TRUE, nor to its
knowledge
any of their respective directors, executive officers, general
partners, managing members or other officers participating in the
Offering (each, a “Placement Agent Covered
Person” and, together,
“Placement Agent Covered
Persons”), is subject to
any of the “Bad Actor” disqualifications currently
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “Disqualification
Event”) or has been
involved in any matter which would be a Disqualification Event
except for the fact that it occurred before September 23,
2013.
(ii) Other
Covered Persons. The Placement Agent is aware that other persons
(other than any Issuer Covered Person or Placement Agent Covered
Person) will be paid (directly or indirectly) remuneration for
solicitation of purchasers in connection with the sale of any
Securities.
(iii) Notice
of Disqualification Events. The Placement Agent will notify the
Company promptly in writing of (A) any Disqualification Event
relating to any Placement Agent Covered Person not previously
disclosed to the Company in accordance with the provisions of this
Section and (B) any event that would, with the passage of time,
become a Disqualification Event relating to any Placement Agent
Covered Person.
[Signature
Page Follows]
-11-
In
acknowledgment that the foregoing correctly sets forth the
understanding reached by the Placement Agent and the Company,
please sign in the space provided below, whereupon this letter
shall constitute a binding Agreement as of the date first indicated
above.
Charlie’s Chalk Dust LLC.
By: /s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
CEO
KATALYST SECURITIES LLC
By: /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Managing Director
True Drinks Holdings, Inc. agrees that upon completion of the
Merger, and only following the Merger, (i) the term
“Company” as used in this Agreement shall also apply to
True Drinks Holdings, Inc., (ii) it becomes a party to this
Agreement as if signed by True Drinks Holdings, Inc. as of the date
hereof and (iii) it will guarantee the obligations of Acquisition
Sub, including the indemnification and tail provisions of this
Agreement.
By: /s/ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
Title:
Principal Executive Officer and Principal Financial
Officer
-12-
APPENDIX I
INDEMNIFICATION AND CONTRIBUTION
The Company agrees to indemnify and hold harmless the
Placement Agent, its affiliates, officers, directors, employees,
agents and controlling persons (each an “Indemnified
Person”) from and against
any and all losses, claims, damages, liabilities and expenses, to
which any such Indemnified Person may become subject arising out of
or in connection with the transactions contemplated in the
Agreement to which this Appendix I
is attached (the
“Agreement”), insofar as such loss, claim, damage,
liability or expense arises out of or is based upon any untrue
statement of a material fact or omission to state a material fact
in Offering Documents required to be stated therein or necessary to
make the statements therein not misleading in any litigation,
investigation or proceeding (collectively, the
“Proceedings”), regardless of whether any of such
Indemnified Person is a party to the Agreement, and to reimburse
such Indemnified Persons for any reasonable and documented legal or
other expenses as they are incurred in connection with
investigating, responding to or defending against in any
Proceeding, provided that the foregoing indemnification will not,
as to any Indemnified Person, apply to losses, claims, damages,
liabilities or expenses to the extent that they are finally
judicially determined to have resulted primarily and directly from
the fraud, gross negligence or willful misconduct of an Indemnified
Person; and provided, further, that the foregoing indemnification
will not apply to any loss, claim, damage, liability or expense
arising out of or based upon any written information furnished to
the Company by the Placement Agent specifically for inclusion in
the Offering Documents; provided further that the Company shall
only have the obligation to reimburse an Indemnified Person if such
Indemnified Person provides to the Company a written undertaking of
such Indemnified Person to repay to the Company the amount so
advanced to the extent that any such reimbursement is so held to
have been improper in a final judgment by a court of competent
jurisdiction, and if the court of competent jurisdiction holds that
such reimbursement was improper, such Indemnified Person shall
promptly return any amount advanced to it by the Company. The
Company also agrees that no Indemnified Person shall have any
liability (whether direct or indirect, in contract, tort or
otherwise) to the Company its affiliates, officers, directors
employees, agents, creditors or stockholders, directly or
indirectly, for or in connection with the Agreement, any
transactions contemplated in the Agreement, or the Placement
Agent’s role or services in connection with the Agreement,
except to the extent that any liability for losses, claims,
demands, damages, liabilities or expenses incurred by the Company
are finally judicially determined to have resulted primarily from
the fraud, gross negligence or willful misconduct of such
Indemnified Person or have resulted from any written information
furnished to the Company by the Placements Agent specifically for
inclusion in the Offering Documents. The Company will be liable to
pay the legal fees, expenses and costs incurred by Katalyst’s
legal team related to any lawsuit but will not be obligated to pay
the legal fees of a sub dealer brought in by Katalyst if named in
the lawsuit, unless agree to by the Company. If the Company engages
additional Placement Agents in addition to Katalyst, then the
Company will be liable for those Placement Agents’ legal
fees, expenses and costs separate and apart to the legal fees,
expenses and costs incurred by and due Katalyst’s legal
team.
If for any reason the foregoing indemnification is
unavailable to any Indemnified Person or insufficient to hold it
harmless, then the Company and the Placement Agent in accordance
with the contributions provisions herein, shall contribute to the
amount paid or payable by such Indemnified Person as a result of
such loss, claim, damage, liability or expense in such proportion
as is appropriate to reflect not only the relative benefits
received by the Company on the one hand and Katalyst on the other
hand, but also the relative fault of the Company and Katalyst, as
well as any relevant equitable considerations; provided that, in no
event, will the aggregate contribution of Katalyst hereunder exceed
the amount of fees actually received by Katalyst pursuant to this
Agreement and in no event will the aggregate contribution of the
Company hereunder exceed the amount of proceeds received by the
Company (or TRUE) through the sale of Securities in the Offering to
investors first contacted by Katalyst. The indemnity, reimbursement
and contribution obligations of the Company under this Agreement
will bind and inure to the benefit of any successors, assigns,
heirs and personal representatives of the Company and any
Indemnified Person.
-13-
Promptly
after receipt by an Indemnified Person of notice of the
commencement of any Proceedings, that Indemnified Person will, if a
claim is to be made under this indemnity agreement against the
Company in respect of the Proceedings, notify the Company in
writing of the commencement of the Proceedings; provided that (i)
the omission so to notify the Company will not relieve the Company
from any liability that the Company may have under this indemnity
agreement except to the extent the Company has been materially
prejudiced by such omission, and (ii) the omission to so notify the
Company will not relieve the Company from any liability that the
Company may have to an Indemnified Person otherwise than on account
of this indemnity agreement. In case any Proceedings are brought
against any Indemnified Person and it notifies the Company of the
commencement of the Proceedings, the Company will be entitled to
participate in the Proceedings and, to the extent that it may elect
by written notice delivered to the Indemnified Person, to assume
the defense of the Proceedings with counsel reasonably satisfactory
to the Indemnified Person; provided that, if the defendants in any
Proceedings include both the Indemnified Person and the Company and
the Indemnified Person concludes that there may be legal defenses
available to the Indemnified Person that are different from or in
addition to those available to the Company, the Indemnified Person
has the right to select separate counsel to assert those legal
defenses and to otherwise participate in the defense of the
Proceedings on its behalf at its sole expense. Upon receipt of
notice from the Company to the Indemnified Person of its election
to assume the defense of the Proceedings, the Company will not be
liable to the Indemnified Person for expenses incurred by the
Indemnified Person in connection with the defense of the
Proceedings (other than reasonable costs of investigation) unless
the Company authorizes, in writing, the employment of counsel for
the Indemnified Person and expressly agrees in writing to be liable
for the reasonable expenses of such legal counsel.
The
Company will not be liable for any settlement of any Proceedings
effected without its written consent (which consent must not be
unreasonably withheld), but if settled with the Company’s
written consent or if a final judgment for the plaintiff in any
such Proceedings is delivered, the Company agrees to indemnify and
hold harmless each Indemnified Person from and against any and all
losses, claims, damages, liabilities and expenses by reason of such
settlement or judgment. The Company may not, without the prior
written consent of an Indemnified Person (which consent shall not
be unreasonably withheld), effect any settlement of any pending or
threatened Proceedings in respect of which indemnity could have
been sought under this indemnity agreement by such Indemnified
Person unless the settlement includes an unconditional release of
the Indemnified Person, in form and substance reasonably
satisfactory to the Indemnified Person, from all liability on
claims that are the subject matter of such
Proceedings.
The
Company’s reimbursement, indemnity and contribution
obligations hereunder will be in addition to any liability that it
may otherwise have.
Capitalized terms used but not defined in
this Appendix I
have the meanings assigned to such
terms in the Agreement.
-14-