KATALYST SECURITIES LLC NEW YORK, NY 10017 TEL: 212-400-6993 FAX: 212-247-1059 Member: FINRA & SIPC
KATALYST
SECURITIES LLC
000
XXXXX XXXXXX, 0XX XXXXX
XXX
XXXX, XX 00000
TEL:
000-000-0000 FAX: 000-000-0000
Member:
FINRA & SIPC
Exhibit 10.5
As of
April 16, 2019
STRICTLY CONFIDENTIAL
Xx. Xxxxxxx Xxxxx
CEO
Charlie’s Chalk Dust LLC
0000 Xxxxxx Xxxxx
Xxxxx
Xxxx, XX 00000
Dear
Xx. Xxxxx:
Reference is made
to that certain engagement letter agreement, dated as of February
15, 2019, (the “Engagement
Letter”), 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 the placement agent
(hereinafter referred to as “Placement Agent”), by
Charlie’s Chalk Dust LLC, a Delaware limited liability
company (the “Company”). The parties wish to
amend the Engagement Letter to increase the minimum and maximum
amount of the Offering, change the date for initial close and fees
due Katalyst by entering into this letter (this “Amendment”). Capitalized terms
not defined in this First Amendment have the meanings set forth in
the Engagement Letter.
The
parties agree that the terms of the Offering as set forth in the
first paragraph of the Engagement Letter is hereby amended and
restated in its entirety as follows:
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 Twenty Three Million Seven Hundred Fifty
Thousand Dollars ($23,750,000.00) 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 (ii) 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.
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The
parties agree that the terms of the Offering as set forth in
Paragraph A, third and fourth paragraphs, are hereby amended and
restated in their entirety as follows:
The
proposed Offering will seek to raise a minimum of gross proceeds of
Twenty Three Million Seven Hundred Fifty Thousand Dollars
($23,750,000.00) 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 Seven Million Five Hundred Thousand
Dollars ($27,500,000.00) (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. In connection with the Offering, funds from certain
investors identified as direct investors in the Offering Documents
(“Direct Investors”) will be included in reaching the
Minimum Offering.
The
Closing, as defined below, of the Offering is anticipated on or
before May 31, 2019, or at such time and place as mutually agreed
to by the Company and the Placement Agent. (the “Offering Period”).
The
parties agree that the terms of Section B.1. Financing Fee are
hereby amended and restated in their entirety as
follows:
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 also referred to as the Purchasers and Direct Investors
as defined in the Offering documents. 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 and Direct 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 and the
Direct Investors 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.
Except
as amended by this First Amendment, the Engagement Letter remains
unmodified and in full force and effect.
This
First Amendment 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.
This
First Amendment 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.
SIGNATURE
PAGE TO FOLLOW
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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 First
Amendment to the Engagement Letter shall constitute a binding
Agreement as of the date first indicated above.
CHARLIE’S
CHALK DUST LLC.
By:
/s/ Xxxxxxx
Xxxxx
Xxxxxxx
Xxxxx
CEO
KATALYST
SECURITIES LLC
By:
/s/ Xxxxxxx X.
Xxxxxxxxx
Name: Xxxxxxx
X. Xxxxxxxxx
Title:
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 First Amendment 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 the Agreement.
By: /s/
Xxxxxx Xxx Xxxxxx
Name:
Xxxxxx Xxx Xxxxxx
Title:
Principal Executive Officer and Principal Financial
Officer
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