Attached files
| file | filename |
|---|---|
| EX-10 - Charlie's Holdings, Inc. | ex10-04112018_010452.htm |
| EX-10 - Charlie's Holdings, Inc. | ex10-04112018_010450.htm |
| EX-10 - Charlie's Holdings, Inc. | ex10-04112018_010446.htm |
| 8-K - Charlie's Holdings, Inc. | form8k-04112018_010443.htm |
Exhibit 10.3
THIS
SECURED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS (I) PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR
(II) IN COMPLIANCE WITH AN EXEMPTION THEREFROM AND ACCOMPANIED, IF
REQUESTED BY THE PAYOR, WITH AN OPINION OF COUNSEL CHOSEN BY THE
HOLDER HEREOF THAT SUCH TRANSFER IS IN COMPLIANCE WITH AN EXEMPTION
THEREFROM.
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
$2,250,000
April 5,
2018
Irvine,
California
FOR
VALUE RECEIVED, the undersigned, True Drinks Holdings, Inc., a
Nevada corporation, its successors and assigns (the
“Payor”),
hereby promises to pay to the order of Red Beard Holdings, LLC its
successors and assigns (the “Holder”), without demand, the
principal amount of Two Million, Two Hundred Fifty Thousand Dollars
($2,250,000) (the “Principal
Amount”) on December 31, 2019 (the “Maturity Date”).
This
Note and all obligations hereunder of the Payor hereunder are
secured by a Security Agreement dated as of even date herewith (the
“Security
Agreement”).
1.
Payment
Terms.
(a) Maturity. Unless prepaid in
accordance with Section 1(c) hereof, the Payor shall repay the
Principal Amount, plus all accrued but unpaid interest
(“Outstanding
Balance”), on the Maturity Date. All payments whether
prepayments and/or scheduled payments made by or on behalf of the
Payor.
(b) Method of Payment. All payments
of principal, interest and any other payments due directly and/or
indirectly on this Note shall be paid by or on behalf of the Payor
in lawful money of the United States of America in immediately
available funds to the Holder at an account designated in writing
by the Holder. Any and all payments made by the Payor shall be made
by wire transfer of immediately available funds or by such other
method as may be reasonably acceptable to the Holder, to such
account of the Holder as shall have been designated in advance to
the Holder by the Payor in writing. On the date of each payment of
interest and/or Principal Amount, the Payor shall deliver to the
Holder a statement setting forth the Principal Amount, interest
and/or any other amount due on such payment date. The Payor shall
make all interest payments under this Note to the Holder by 5:00
p.m. PST on the Maturity Date.
(c) Prepayment. All or any portion
of the Principal Amount and/or interest may be prepaid by the Payor
at any time or from time to time. Any and all accrued but unpaid
interest and any other sums owned under this Note must be paid in
full before the payment of all or a
portion
of the Principal Amount. The Payor shall give written notice to the
Holder of the amount and date of any voluntary prepayment of this
Note not less than ten (10) Business Days prior to the date of such
prepayment. Upon notice of prepayment being given by the Payor, the
Payor covenants and agrees that it will pay the prepayment amount
set forth in such notice, on the date fixed for prepayment in such
notice.
2.
Interest.
(a) The Principal
Amount and any other payments due directly and/or indirectly shall
bear interest at a rate equal to eight percent (8%) per annum,
based upon a 360-day year (the “Interest Rate”), payable in
arrears. Interest shall compound monthly commencing on the date of
this Note and be payable at such time as all outstanding Principal
Amount owed under this Note shall be fully repaid, but unless
earlier paid in accordance with the terms of this Note, shall be
paid on the Maturity Date.
(b) Upon the occurrence
and during the continuation of an Event of Default (as defined
below), whether or not the Holder has accelerated payment of this
Note, after judgment has been rendered on this Note or after the
Maturity Date, as the case may be, the unpaid Principal Amount and
all other amounts due, shall automatically bear interest at an
annual rate equal to twelve percent (12%) per annum.
3.
Security.
The
indebtedness evidenced by this and all obligations hereunder are
secured, pursuant to a Security Agreement in favor of the Holder by
a senior first priority lien on the Company’s and its
subsidiaries’ assets, pursuant to and in accordance with the
Security Agreement. The Company represents, warrants, agrees and
covenants that such grant of security interest is and shall remain
in full while any indebtedness and/or other obligations under any
of the Notes is outstanding (including, but not limited to
Principal Amount and accrued but unpaid interest thereon), senior
in right to all other direct and/or indirect security interests of
the Company and/or its subsidiaries with regard to all Company
and/or its subsidiaries’ assets and is not and shall not be
subordinated directly and/or indirectly to any other security
interest, guaranty, lien and/or other similar item of any other
party.
4.
Conversion.
4.1 Subject to the
terms and conditions of this Section 4, including Section 4.2
herein, and provided this Note remains outstanding, the Holder
shall have the right, at the Holder’s sole option, to convert
the Outstanding Balance (the “Conversion Option”) into that
number of fully paid and non-assessable shares of the Payor’s
common stock, $0.001 par value (“Common Stock”), equal to the
Outstanding Balance divided by 0.005 (the “Conversion Shares”). If the
Holder desires to exercise the Conversion Option, the Holder shall,
by personal delivery or nationally-recognized overnight carrier,
surrender the original of this Note and give written notice to the
Payor (the “Conversion
Notice”), which Conversion Notice shall (a) state the
Holder’s election to exercise the Conversion Option, and (b)
provide for a representation and warranty of the Holder to the
Payor that, as of the date of the Conversion Notice, the Holder has
not assigned or otherwise transferred all or any portion of the
Holder’s rights under this Note to any third
parties.
The
Payor shall, as soon as practicable thereafter, issue and deliver
to the Holder the number of Conversion Shares to which the Holder
shall be entitled upon exercise of the Conversion Option.
Notwithstanding anything to the contrary contained in this Section
4, the Payor shall have the right, at the Payor’s option, to
pay all or a portion of the accrued and unpaid interest due and
payable to Holder upon Holder’s exercise of the Conversion
Option in cash.
4.2 Notwithstanding
anything in this Section 4 to the contrary, the Conversion Option
shall not be exercisable unless and until such time as the Payor
has filed with the Nevada Secretary of State a Certificate of
Amendment to its Articles of Incorporation to increase the number
of authorized shares of the Payor’s Common Stock from 300.0
million to at least 2.0 billion. The Payor shall use its best
efforts to cause the Certificate of Amendment to be filed with the
Nevada Secretary of State as soon as possible after the execution
of this Note following compliance with the applicable provisions of
the Nevada Revised Statutes and the Securities Exchange Act of
1934, as amended.
5.
Defaults and
Remedies.
5.1
Events of Default. An
“Event of Default” shall be deemed to have
occurred
hereunder
if:
(1) The Payor defaults
in the payment of any sums due hereunder, including,
but not
limited to, any accrued but unpaid interest, any Principal Amount
and/or any other amount payable under this Note;
(2) The Payor directly
and/or indirectly fails to comply, breaches and/or otherwise
defaults with respect to any covenant, provision, and/or agreement
relating directly and/or indirectly with the Security Agreement
and/or other documents, amendments, supplements, relating to and/or
attached to such agreements and/or the transactions contemplated in
and/or related to such documents and/or agreements (collectively,
the “Transaction
Documents”) when the same becomes due and
payable;
(3) Any default or an
event of default shall occur in respect of any agreement or
obligation relating to any indebtedness or other obligation (to the
Holder or to any other person) of the Payor or any of its
subsidiaries for borrowed money or otherwise, in any amount to the
Holder or to an affiliate of the Holder, or in an amount exceeding
Two Hundred Fifty Thousand Dollars ($250,000.00) (individually or
in the aggregate) to any other person(s), unless such Event of
Default is cured to the reasonable satisfaction of the Holder by
the Company no later than five (5) Trading Days
following the occurrence of such Event of
Default;
(4) The Payor or any of
its subsidiaries shall (i) voluntarily commence any proceeding or
file any petition (or equivalent) seeking relief under Title 11 of
the United States Bankruptcy Code or any other Federal or state or
foreign bankruptcy, insolvency or similar law;
(ii)
consent to the institution of, or fail to controvert in a timely
and appropriate manner, any such proceeding or the filing of any
such petition (or equivalent); (iii) apply for or consent to the
employment of a receiver, trustee, custodian, sequestrator or
similar official for itself or for a substantial part of its
property; (iv) file an answer admitting the material allegations of
a petition (or equivalent) filed against it in any such proceeding;
(v) make a general assignment for the
benefit
of creditors; (vi) become unable or admit in writing the inability
or the failure generally to pay its debts as they become due; or
(vii) take any corporate (or equivalent) action for the purpose of
effecting any of the foregoing;
(5) An involuntary
proceeding shall be commenced or an involuntary petition shall be
filed in a court of competent jurisdiction seeking (i) relief in
respect of the Payor and/or or any of its subsidiaries or of a
substantial part of either’s property under Title 11 of the
United States Bankruptcy Code or any other Federal or state
bankruptcy, insolvency or similar law (United States or foreign);
(ii) the appointment of a receiver, trustee, custodian,
sequestrator or similar official for the Payor and/or or any of its
subsidiaries or for a substantial part of either’s property;
or (iii) the winding-up or liquidation of the Payor and/or or any
of its subsidiaries which, in the case of any of the foregoing
clauses, is not dismissed or vacated within thirty (30) days after
the commencement or the filing thereof;
(6) The (i) rendering
of a court decision or court order directing payment of any
claim(s) against the Payor and/or or any of its affiliates and/or
subsidiaries and/or (ii) the Payor and/or or any of its affiliates
and/or subsidiaries enters into a settlement agreement and/or is
fined, penalized and/or required in any manner to pay directly or
indirectly Two Hundred Fifty Thousand Dollars ($250,000.00) or more
in the aggregate (or the equivalent in a foreign currency) for one
or more decisions, orders, judgments and agreements, etc., whether
or not the same shall be appealed or bonded;
(7) Any of the
Transaction Documents shall cease to be in full force and effect
with respect to the Payor or the Payor (or any person by, through
or on behalf of it) shall contest in any manner the validity,
binding nature or enforceability of this Note and/or any of the
Transaction Documents, unless such Event of Default is cured to the
reasonable satisfaction of the Holder by the Company no later than
five (5) Trading Days following the occurrence of such Event of
Default;
(8) The security
interests created pursuant to the Security Agreement shall at any
time not constitute a valid and perfected first priority security
interest on the collateral provided for therein in favor of the
Holder, free and clear of all other liens or security interests
unless such Event of Default is cured to the reasonable
satisfaction of the Holder by the Company no later than five (5)
Trading Days following the occurrence of such Event of
Default;
(9) Any material
adverse event occurs in relation to the Payor and/or any of its
subsidiaries, including but not limited to any event that has a
material adverse effect on the business, properties, assets,
operations, results of operations, condition (financial or
otherwise) or prospects of the Payor, individually or taken as a
whole, or on the authority or ability of the Payor to perform its
obligations under this Note and/or any of the Transaction Documents
unless such Event of Default is cured to the reasonable
satisfaction of the Holder by the Company no later than five (5)
Trading Days following the occurrence of such Event of
Default;
(11)
Any of Payor’s named executive officers or directors is named
and/or convicted in a violation of any securities laws, rules
and/or regulation or a settlement in excess of
$100,000 is reached
by any such officer or director (or an insurance carrier) relating
to being named and/or a violation of securities laws and/or other
rules, laws and/or regulations relating to
the
Company and/or any Subsidiary of the Company, any of the assets
and/or the business of the Company and/or any of its Subsidiaries,
or the trading of the securities of the Company, and/or breach of
fiduciary duty or self-dealing, unless such Event of Default is
cured to the reasonable satisfaction of the Holder by the Company
no later than five (5) Trading Days following the occurrence of
such Event of Default; or
5.2
Acceleration.
If an
Event of Default occurs, then, and in every such event, and at any
time, Holder may, by notice to the Payor, take any or all of the
following actions, at the same or different times (without any
waiver): (i) declare the Note to be due and payable in whole or in
part (in which case any Principal Amount not so declared to be due
and payable may thereafter at any time be declared to be due and
payable), and thereupon the Principal Amount so declared to be due
and payable, together with accrued interest thereon and all fees
and other accrued obligations, shall become due and payable
immediately, without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Payor;
(ii) exercise all of its rights as a secured party under this Note;
and/or (iii) exercise all of its rights otherwise as permitted by
law; provided, however, that in the case of any Event
of Default described in sub-clauses (4) or (5) of Section 4.1
above, the Principal Amount then outstanding, together with accrued
interest thereon and all fees and other accrued obligations, shall
automatically become due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived
by the Payor, and the Holder shall be permitted to exercise all of
its rights as set forth herein.
In
addition, upon an Event of Default the Holder may proceed to
protect and enforce its rights either by suit in equity or by
action at law, or both, whether for the specific performance of any
covenant or agreement contained in this Note or in the aid of the
exercise of any power granted in this Note, or the Holder may
proceed to enforce the payment of the Note or to enforce any other
legal or equitable right such Holder may possess.
6.
Miscellaneous.
6.1
Successor and
Assigns.
No
transfer, sale, hypothecation, encumbrance or assignment
(“Transfer”) of
the Payor’s obligations in and/or pursuant to this Note
and/or any of the other Transaction Documents will be valid without
the express prior written consent of the Holder. If a Transfer is
made by the Payor in violation of this Section 5.1, then the Payor
will continue to be obligated under each and every provision of
this Note notwithstanding such Transfer and/or any result
therefrom. All terms and conditions contained in this Note shall be
binding upon and enforceable against the successors and permitted
assigns of the Payor and Holder and their respective successors and
permitted assigns. Any Transfer by the Payor in violation of this
Section 5.1 shall be void ab
initio.
6.2
Remedies.
No
remedy conferred upon the Holder is intended to be exclusive of any
other remedy and each and every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder now or
hereafter existing at law or in equity by statute or otherwise.
No
course
of dealing with the Payor and Holder of any delay in exercising any
rights hereunder shall operate as a waiver of any rights of the
Holder.
6.3
Replacement.
Upon
notice to the Payor of the loss, theft, destruction or mutilation
of this Note, and in the case of any such mutilation upon surrender
and cancellation of the mutilated document, and in the case of any
such loss, theft or destruction, upon delivery by the Holder of an
indemnity agreement satisfactory to the Payor, the Payor will
execute and deliver to the Holder at such place as the Holder may
designate to the Payor in writing, an identical Note in
substitution for such lost, stolen, destroyed or mutilated Note;
provided, however, any such substitution shall
not be deemed to constitute a waiver, modification, compromise or
novation of the indebtedness evidenced hereby or any term or
condition hereof.
6.4
Amendment.
The
terms of this Note may not be amended except by a written
instrument executed by Payor and Holder.
6.5
Waiver.
Any
Event of Default and the failure of Payor to comply with any
covenant or other agreement contained herein may be waived only by
the written consent of Holder.
6.6
Governing Law; Jurisdiction; No Jury
Trial.
This
Note and all direct and/or indirect issues related thereto
(included, but not limited to, the other Transaction Documents)
shall be governed solely and exclusively by the internal laws of
the State of California, without giving effect to any choice of law
or conflict of law provision or rule that would cause the
application of the laws of any jurisdictions other than the State
of California. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in
Irvine, California for the adjudication of any direct and/or
indirect dispute hereunder or in connection herewith or with any
transaction contemplated hereby and/or discussed herein, and hereby
expressly and irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that
the venue of such suit, action or proceeding is improper. Each
party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address
for such notices to it under this Note and agrees that such service
shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law. In
any action brought concerning and/or arising directly and/or
indirectly out of this Note, the prevailing party shall be entitled
to recover all of its legal fees and expenses incurred by it with
respect to any such legal action. EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER
OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY
TRANSACTION CONTEMPLATED HEREBY OR RELATED TO THE TRANSACTION
DOCUMENTS.
6.7
Notices.
All
notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or by overnight courier, or
by registered or certified mail, return receipt requested,
addressed as set forth below, or to such new address as the
addressee of such a notice of communication may have notified the
sender thereof.
If to
the Payor:
True
Drinks Holdings, Inc.
18552
MacArthur Boulevard
Suite
325
Irvine,
CA 91612
Attention:
President
If to
Holder:
Red
Beard Holdings, LLC
17595
Harvard Avenue, Suite C511
Irvine,
CA 92614
Attention: Vincent
Smith
6.8
Costs and
Expenses.
The
Payor agrees to pay on demand all costs and expenses of the Holder,
and the fees and disbursements of counsel, in connection with the
enforcement or attempted enforcement of (in the case of a valid
exercise of such enforcement powers), and preservation of any
rights or interests under, this Note with respect to the Payor,
including in any out-of-court workout or other refinancing or
restructuring or in any bankruptcy case.
6.9
No Presumption Against
Drafter.
Neither
of the parties hereto shall be considered to be the drafter of this
Note or any provision hereof for the purpose of any statute, case
law, or rule of interpretation or construction that would or might
cause any provision to be construed against the drafter hereof.
This Note was drafted with substantial input by both parties and
their counsel, and no reliance was placed on any representation
other than those contained herein.
6.10
Savings Clause.
Notwithstanding
anything to the contrary contained in this Note, (a) all agreements
and communications between Payor and Holder are hereby and shall
automatically be limited so
that,
after taking into account all amounts deemed interest, the interest
contracted for, charged or received by Holder shall never exceed
the maximum lawful rate or amount, (b) in calculating whether any
interest exceeds the lawful maximum, all such interest shall be
amortized, prorated, allocated and spread over the full amount and
term of all principal indebtedness of Payor to Holder, and (c) if
through any contingency or event, Holder receives or is deemed to
receive interest in excess of the lawful maximum, any such excess
shall be deemed to have been applied toward payment of the
principal of any and all then outstanding indebtedness of Payor to
Holder, or if there is no such indebtedness, shall immediately be
returned to Payor.
6.11
Conflict.
In the
event of any direct and/or indirect conflict between the terms
and/or provisions of this Note and/or any other Transaction
Document, the terms and provisions of this Note shall
prevail.
[Remainder of this Page Intentionally Left Blank]
Dated as of the 5th
day of April, 2018.
True Drinks Holdings, Inc.
By:
/s/ James
Greco
Name:
James Greco
Title:
Chief Executive Officer
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