UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported)
December 20,
2018
|
LEVEL BRANDS, INC.
|
|
(Exact name of registrant as specified in its charter)
|
|
North Carolina
|
001-38299
|
47-3414576
|
|
(State or other jurisdiction of incorporation or
organization)
|
(Commission File Number)
|
(I.R.S. Employer Identification No.)
|
4521 Sharon Road, Suite 450, Charlotte, NC 28211
(Address of principal executive offices)(Zip Code)
Registrant's
telephone number, including area code
:
(704) 445-5800
|
not applicable
|
|
(Former name or former address, if changed since last
report)
|
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
☐
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☐
Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
☐
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
☐
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth
company as defined in in Rule 405 of the Securities Act of 1933
(
§230.405 of this chapter) or Rule 12b-2 of the
Securities Exchange Act of 1934 (§240.12b-2 of this
chapter)
.
|
Emerging
growth company ☑
|
|
If an
emerging growth company, indicate by checkmark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange
Act. ☐
Item
2.01
Completion
of Acquisition or Disposition of Assets.
On
December 20, 2018 (the “
Closing Date
”) the
two-step mergers occurred following the closing (the
“
Closing
”) of the
previously announced Agreement and Plan of Merger (the
“
Merger
Agreement
”) by and among Level Brands, Inc., its newly
organized wholly-owned subsidiaries AcqCo, LLC and cbdMD LLC, and
Cure Based Development, LLC (“
Cure Based Development
”).
On the Closing Date, and
upon the
terms and subject to the conditions set forth in the Merger
Agreement, AcqCo LLC was merged with and into Cure Based
Development with the Cure Based Development as the surviving
entity, and immediately thereafter Cure Based Development was
merged with and into cbdMD LLC with cbdMD LLC as the surviving
entity. cbdMD LLC will continue as a wholly-owned subsidiary of
Level Brands and will continue the operations of Cure Based
Development pre-closing. The Articles of Merger as filed with the
Secretaries of State of Nevada and North Carolina are filed
as
Exhibits 2.2, 2.3, 2.4
and 2.5
to this
report.
The Closing followed the
approval on
December 20, 2018 by the President of the United States of the
Agricultural Improvement Act of 2018, commonly known as the Farm
Bill, which contained a permanent declassification of cannabidiol
(CBD) as a controlled substance under Federal law.
Upon
the terms and subject to the conditions set forth in the Merger
Agreement, on the Closing Date the members of Cure Based
Development listed on Exhibit B to the Merger Agreement included in
our Current Report on Form 8-K as filed with the SEC on December 4,
2018 received contractual rights to receive 15,250,000 shares of
our common stock, representing approximately 60% of our outstanding
common stock following such issuance, as the merger consideration,
issuable as follows:
|
●
|
a
s promptly as practicable following receipt of approval by
our shareholders for the possible issuance of in excess of 19.99%
of our presently outstanding common stock in accordance with the
rules of the NYSE American (the “Shareholder Approval”)
the members of Cure Based Development will be issued an aggregate
of 6,500,000 shares of our common stock (the “First Tranche
Shares”); and
|
|
|
|
|
●
|
as
promptly as practicable after receipt of Shareholder Approval, we
will issue an additional 8,750,000 shares of our common stock (the
“Second Tranche Shares”) to CBD Holding, LLC, a member
of Cure Based Development which is controlled by Mr. Scott Coffman,
CEO and one of the managers of Cure Based Development
(“CBDH”), vesting follows: (i) 2,187,500 shares will
vest on the 12 month anniversary of the Closing Date; (ii) an
additional 2,187,500 shares will vest on the 24 month anniversary
of the Closing Date; (iii) an additional 2,187,500 shares will vest
on the 42 month anniversary of the Closing Date; and (iv) the
remaining 2,187,500 shares will vest on the 60 month anniversary of
the Closing Date.
|
For accounting purposes, the Closing of the
transaction will be treated as a reverse merger under U.S.
generally accepted accounting principles. The issuance of the First
Tranche Share and the Second Tranche Shares will constitute a
change of control under the rules and regulations of the NYSE
American and at the time of the initial issuance of these shares we
will be obligated to meet the initial listing standards of the NYSE
American in order to maintain the continued listing of our common
stock on the exchange.
We expect to include the Shareholder
Approval proposal covering both the First Tranche Shares and the
Second Tranche Shares, as well as the Earnout Shares, in the proxy
statement to be filed with the SEC for our 2019 annual shareholders
meeting. If this proposal is approved at this meeting, to be
scheduled for spring 2019, we will issue the First Tranche Shares
and the Second Tranche Shares immediately following the receipt of
Shareholder Approval. If this proposal is not approved at our 2019
annual meeting of shareholders, we are required to seek shareholder
approval of the proposal at additional special meetings of our
shareholders, to be held at least every six months, until such time
as Shareholder Approval is obtained. Until Shareholder Approval is
obtained, we are not obligated to issue any of these securities
under the terms of the Merger Agreement.
When issued, the First Tranche Shares and Second
Tranche Shares will be subject to leak out agreements pursuant to
which the holder will
be required to (1) limit the offer for
sale, sell, pledge, or otherwise transfer or dispose of (or enter
into any transaction or device that is designed to, or could be
expected to, result in the transfer or disposition by any person at
any time in the future of) any shares of our common stock; and (2)
refrain from entering into any swap or other derivatives
transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of any shares of our
common stock, whether any such transaction described in clause (1)
or (2) above is to be settled by delivery of shares of our common
stock or other securities, in cash or otherwise to the lesser of
(i) the volume limitations set forth in Rule 144(e) of the
Securities Act of 1933, as amended, or (ii) 20% of such shares in
any 90 day period. The description of the terms of the leakout
agreement is qualified in its entirety by reference to the
form of agreement which is filed
as
Exhibit 10.1
to this report.
In addition, when issued the Second Tranche Shares
will be subject to an irrevocable voting proxy agreement until such
time as the shares vest in accordance with the terms of the Merger
Agreement. The independent chairman of the Audit Committee of our
board of directors will serve as proxyholder and will vote those
shares in accordance with the recommendations of our board of
directors. The initial proxyholder is Mr. Seymour Siegel, the
current Chairman of the Audit Committee of our board of directors.
The description of the terms of the voting proxy agreement is
qualified in its entirety by reference to the form of agreement
which is filed as
Exhibit 10.2
to this report.
As described in the Merger Agreement as previously
filed with the SEC, the Merger Agreement also provides that CBDH
will be entitled to receive up to an additional 15,250,000 shares
of our common stock (the “
Earnout
Shares
”) as part of the
merger consideration, upon the satisfaction of certain aggregate
net revenue criteria by cbdMD LLC within 60 months following the
Closing. The issuance of the Earnout Shares is also subject to
prior Shareholder Approval.
Immediately
prior to the Closing, the holders of two promissory notes in the
aggregate amount of $1,000,000 due by Cure Based Development
converted those notes into the contractual right to receive an
aggregate of 500,000 shares of our common stock, which such shares
are included in the aforedescribed First Tranche Shares. Upon such
election by the noteholders, those notes were deemed satisfied in
full.
As described in our Current Report on Form 8-K as
filed with the SEC on December 4, 2018, following the execution of
the Merger Agreement, and pursuant to the terms and conditions of a
Secured Promissory Note and Security Agreement, we lent Cure Based
Development $2,000,000. At Closing, this amount remained
outstanding and will be treated as part of the purchase price
accounting for the transaction
.
Prior to the Closing Date, Cure Based Development
owed Edge of Business, LLC, an entity controlled by Mr. Coffman
(“
Edge
”),
an aggregate of $1,430,300 for working capital advances.
Immediately following the Closing Date, we repaid Edge $1,000,000
of this amount and the balance was converted into an
18
month 6% promissory note. The note is interest only for the first
12 months and thereafter payable in six equal and consecutive
monthly installments of principal and interest. The foregoing
description of the terms and conditions of this unsecured
promissory note is qualified in its entirety by reference to the
note which is filed as
Exhibit 10.3
to this
report.
Following
the Closing of the merger, CBDH issued Mr. Martin A. Sumichrast,
our Chairman of the Board and CEO, a warrant expiring on December
31, 2019, exercisable at $90.00, to purchase a 9% membership
interest in CBDH. As a result of this warrant, and assuming CBDH
distributes the securities to its members, Mr. Sumichrast will be
entitled to receive 787,500 Second Tranche Shares and up to
1,372,500 Earnout Shares. The shares, which are issuable to Mr.
Sumichrast if distributed by CBDH to its members, will also be
subject to the leakout and voting proxy agreements described
earlier in this section.
Item
5.01
Change
in Control of Registrant.
The Closing of the mergers will result in a change
of control of our company upon the issuance of the First Tranche
Shares and the Second Tranche Shares which will collectively
represent 60% of our then outstanding common stock, without giving
effect to the issuance of any additional shares by us. Based upon
the expected recipients of these shares, as set forth in Exhibit B
to the Merger Agreement as previously filed, upon the issuance of
the First Tranche Shares, Edge will be the record holder of 22.2%
of our then outstanding common stock, assuming no additional
issuances by us. As set forth above, Edge is controlled by Mr.
Coffman. Upon the issuance of the Second Tranche Shares, CBDH will
be the record owner of 34.5% of our then outstanding common stock,
giving effect to the issuance of the First Tranche Shares but
assuming no additional issuance of shares of common stock by us. As
set forth above, CBDH is also controlled by Mr. Coffman.
Accordingly, after giving effect to the issuance of the First
Tranche Shares and Second Tranche Shares, but no additional
issuances by us, Mr. Coffman (through his control of Edge and CBDH)
will be the beneficial owner of an aggregate of 12,434,000 shares
of our common stock, or approximately 49.1%. We expect Mr. Coffman
to disclaim this beneficial ownership interest except
to the
extent of his pecuniary interest therein.
As set forth above, both the First Tranche Shares
and Second Tranche Shares are subject to the leakout agreement, and
until such time as the Second Tranche Shares vest in accordance
with the terms of the Merger Agreement, such shares are subject to
the voting proxy agreement.
The
foregoing description gives no effect to the possible issuance of
the Earnout Shares to CBDH which are subject to the satisfaction of
net revenue milestones.
Item
5.02
Departure
of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
On
December 20, 2018 pursuant to the Closing of the Merger Agreement
Mr. Coffman was appointed to our board of directors. Biographical
information concerning Mr. Coffman is as follows:
Raymond
Scott Coffman
.
Mr. Coffman, 57, has over 25 years of business
experience in which he has started 12 companies and built them into
significant businesses in the internet services, manufacturing and
e-commerce sectors. As an executive or partner in all of these
entities, Mr. Coffman oversaw the strategic direction, developed
the business plan and oversaw the operation of the companies. Mr.
Coffman was a manager and Chief Executive Officer of Cure Based
Development LLC since founding the company in September 2017. Prior
to that, from 2012 to 2017, he was an
Operating Partner in a
regional restaurant group and also had day to day executive
oversight of Data Tech Systems, an internet hosting company.
I
n 2009 he founded and was the Chief
Executive Officer of Blu, an E-cigarette manufacturer which he
built into a leading brand and subsequently sold it to Lorillard
Tobacco in 2012. In 1999, Mr. Coffman founded Datatech Systems,
LLC, an internet hosting company, and served as its Chief Executive
Officer until 2012. Mr. Coffman currently serves as a member of the
board of directors of Datatech Systems, LLC and W Vapes, LLC, both
privately held companies. Mr. Coffman received a Bachelor of Arts
degree in Economics from Marshall University.
Mr.
Coffman is not considered an “independent director”
within the meaning of Section 803 of the NYSE American Company
Guide. As a management director, he is not eligible to receive the
compensation we pay to our non-management directors nor will he be
appointed to any committee of our board of directors.
Item
5.03
Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
On
December 12, 2018 our board of directors adopted a resolution
fixing the number of members of our board of directors at seven in
accordance with the provisions of Section 3.2 of our Bylaws,
thereby creating a vacancy on the board on the board which was
filled by Mr. Coffman’s appointment as described under Item
5.02 of this report.
As
set forth above, the Closing of the mergers will be treated as a
reverse merger for accounting purposes under U.S. generally
accepted accounting principles. We have elected to retain our
September 30 fiscal year following the Closing Date.
Item
8.01. Other Events.
Employment Agreements
On the
Closing Date cbdMD LLC entered into a five year Executive
Employment Agreement with Mr. Coffman pursuant to which he will
serve as chief executive officer of that entity, reporting to the
chief executive officer of our company. Under the terms of the
agreement, cbdMD LLC agreed to pay him an initial annual base
salary of $160,000 and he is entitled to a discretionary bonus at
the sole determination of the Compensation Committee of our board
of directors, as well as participation in benefit programs we offer
our employees and paid vacation. The agreement may be terminated by
cbdMD LLC in the event of his death or disability, by cbdMD for
cause (as defined in the agreement), or by Mr. Coffman without
cause. The agreement contains customary confidentiality,
non-compete, and indemnification provisions. The description of the
terms of the Executive Employment Agreement with Mr. Coffman is
qualified in its entirety by reference to the agreement which is
filed as
Exhibit
10.4
to this report.
On the
Closing Date cbdMD LLC also entered into a three year Executive
Employment Agreement with Ms. Caryn Dunayer pursuant to which she
will serve as president of that entity. Ms. Dunayer, formerly a
member of Cure Based Development, previously served as its
president. Under the terms of the agreement, cbdMD LLC agreed to
pay her an initial annual base salary of $125,000 and she is
entitled to a discretionary bonus at the sole determination of the
Compensation Committee of our board of directors, as well as
participation in benefit programs we offer our employees and paid
vacation. The agreement may be terminated by cbdMD LLC in the event
of her death or disability, by cbdMD for cause (as defined in the
agreement), or by Ms. Dunayer without cause. The agreement contains
customary confidentiality, non-compete, and indemnification
provisions. The description of the terms of the Executive
Employment Agreement with Ms. Dunayer is qualified in its entirety
by reference to the agreement which is filed as
Exhibit 10.5
to this
report.
Business of cbdMD LLC following the Closing
As
described earlier in this report, following the Closing Date cbdMD
LLC continues the business and operations of Cure Based
Development. Information regarding Cure Based Development’s
historic business is set forth below:
Cure
Based Development, which markets is products under the cbdMD brand,
produces
and distributes
various high-grade, premium CBD products, including:
●
animal treats and
oils.
Cure
Based Development’s website provides up-to-date information
about CBD quality and current industry events, as well as U.S.
based customer service. Cure Based Development tests its
broad-spectrum CBD extractions through independent, third-party
laboratories in an effort to guarantee the highest of standards and
it offers a 30-day, money-back guarantee.
Its products are available online at www.cbdMD.com
and 700 non-affiliated stores in 40 states. Cure Based Development
currently employs over 50 people in its corporate, manufacturing
and distribution sites based in Charlotte, NC. There are no
collective bargaining agreements with any employees of Cure Based
Development.
Sales and Marketing
Sales
by Cure Based Development of its products mainly come from online
sales and through inside sales concentrating on wholesale
distributors who can offer large quantities of cbdMD products at
physical retail locations.
Cure
Based Development utilizes a broad-based marketing strategy across
multiple platforms including:
●
secured online and
print advertising;
●
blog, web, and
visual content;
●
social media
engagement through accounts with large followings;
●
live and sponsored
events;
●
influencers and
celebrities;
●
affiliate
marketing; and
●
high-quality brand
apparel.
Product Manufacturing
Cure
Based Development manufactures its premium line of products at its
Charlotte, NC facility using 100%, all-natural CBD extracted from
organic, non-GMO, vegan, and gluten-free industrial hemp grown in
the USA. It utilizes a CO
2
extraction
process for broad-spectrum concentrations retaining other
cannabinoids, terpenes, vitamins, and various other compounds for
enhanced benefits while eliminating t
etrahydrocannabinol
(
THC) content.
Research and Development
The key
objectives and input points that drive Cure Based
Development’s the research and development process include
current product and new product development
activities:
Cure
Based Development’s current product improvement efforts
include:
●
consumer feedback
analysis;
●
optimization of its
product manufacturing process;
●
sourcing of
reliable, high-quality raw materials while maintaining strong
distributor relationships;
●
feedback from
panels of product testers.
Its new
product development efforts are focused on both near-term and
long-term results for the company:
With a
view toward near-term results:
●
in-depth market
research on current competitor campaigns;
●
website and product
development;
●
sample size testing
and research;
●
implementation of
new product campaigns utilizing social media, digital, affiliate,
and email;
●
rapid product
development following testing; and
●
quality ingredient
sourcing.
With a
view towards long-term results, Cure Based Development’s
efforts include:
●
development of new
product lines following initial market research;
●
use of current and
expected future product trends and research to develop new product
offerings;
●
refinement of
extraction and production methods for product
efficiency;
●
ingredient research
through sustainability testing;
●
manufacturing
process optimization;
●
in-depth product
testing;
●
package and graphic
development; and
●
large scale product
and brand marketing campaigns
Intellectual Property
Cure
Based Development currently holds six U.S. trademarks which are
held for current and future product offerings and extended branding
capability.
Competition
The market for the sale of CBD-based products is
fragmented and intensely competitive. Currently, in the United
States, Cure Brand Development does not believe that there are any
businesses that can demonstrate or claim a dominant market share of
the growing
CBD
products
market. Its competitors
in the retail location sales of
CBD-based products include Green Roads, PlusCBD, and Select CBD,
and in the digital space include Diamond CBD, CBDistillery, and
Lazarus Naturals. Cure Based Development
expects that the quantity and composition of its
competitive environment will continue to evolve as the industry
matures and new customers enter the marketplace. We expect that the
competition in this market segment will dramatically increase
following the approval of the Farm Bill.
Item 9.01.
Financial Statement and
Exhibits
.
(a)
Financial statements of businesses
acquired
.
Filed
as
Exhibit 99.1
to
this report are the audited financial statements of Cure Based
Development for the period of August 3, 2017 (inception) through
December 31, 2017 and for the eight months ended August 31, 2018.
Under an amendment to this report we will file the required
unaudited interim financial statements of Cure Based Development
for the periods required pursuant to Rule 8-04(b) of Regulation
S-X.
(b)
Pro forma financial
information
.
The pro
forma financial information required by Rule 8-05 of Regulation S-X
will be provided under an amendment to this report within the time
required pursuant to Item 9.01(c) of Form 8-K.
|
|
|
|
|
Incorporated by Reference
|
|
Filed or
Furnished
Herewith
|
|
No.
|
|
Exhibit Description
|
|
Form
|
|
Date Filed
|
|
Number
|
|
|
|
|
Merger
Agreement dated December 3, 2018 by and among Level Brands, Inc.,
AcqCo, LLC, cbdMD LLC and Cure Based Development, LLC
|
|
8-K
|
|
12/3/2018
|
|
2.1
|
|
|
|
2.2
|
|
Articles
of Merger dated December 20, 2018 as filed with the Secretary of
State of Nevada merging AcqCo, LLC with and into Cure Based
Development, LLC
|
|
|
|
|
|
|
|
(1)
|
|
2.3
|
|
Articles
of Merger dated December 20, 2018 as filed with the Secretary of
State of North Carolina merging AcqCo, LLC with and into Cure Based
Development, LLC
|
|
|
|
|
|
|
|
(1)
|
|
2.4
|
|
Articles
of Merger dated December 20, 2018 as filed with the Secretary of
State of Nevada merging Cure Based Development, LLC with an into
cbdMD LLC
|
|
|
|
|
|
|
|
(1)
|
|
2.5
|
|
Articles
of Merger dated December 20, 2018 as filed with the Secretary of
State of North Carolina merging Cure Based Development, LLC with an
into cbdMD LLC
|
|
|
|
|
|
|
|
(1)
|
|
|
|
Form of
leak out agreement
|
|
|
|
|
|
|
|
Filed
|
|
|
|
Form of
voting proxy agreement
|
|
|
|
|
|
|
|
Filed
|
|
|
|
6%
promissory note dated December 20, 2018 to Edge of Business,
LLC
|
|
|
|
|
|
|
|
Filed
|
|
|
|
Executive
Employment Agreement dated December 20, 2018 by and between cbdMD
LLC and R. Scott Coffman
|
|
|
|
|
|
|
|
Filed
|
|
|
|
Executive
Employment Agreement dated December 20, 2018 by and between cbdMD
LLC and Caryn Dunayer
|
|
|
|
|
|
|
|
Filed
|
|
|
|
Audited
financial statements of Cure Based Development, LLC for the period
of August 3, 2017 (inception) through December 31, 2017 and for the
eight months ended August 31, 2018
|
|
|
|
|
|
|
|
Filed
|
(1)
To be
filed by amendment to this report.
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
|
|
LEVEL
BRANDS, INC.
|
|
|
|
|
|
Date:
December 20, 2018
|
By:
|
/s/ Mark S.
Elliott
|
|
|
|
Mark S.
Elliott, Chief Financial Officer and Chief Operating
Officer
|
FORM OF LEAK-OUT AGREEMENT
December 20,
2018
Level
Brands, Inc.
4521
Sharon Road
Suite
450
Charlotte,
NC 28211
Re:
Agreement and Plan
of Merger dated December 3, 2018 (the “
Merger
Agreement
”) by and among Level Brands, Inc., a North
Carolina corporation (the “
Parent
”),
AcqCo LLC, a North Carolina limited liability company and a wholly
owned subsidiary of the Parent (“
Merger
Sub
”), cbdMD LLC, a North Carolina limited liability
company and wholly owned subsidiary of the Parent
(“
Sub
LLC
”) and Cure Based Development, LLC, a Nevada
limited liability company (the “
Company
”).
Ladies
and Gentlemen:
The
undersigned is a Member of the Company and upon the Closing of the
Mergers, the undersigned received certain contractual rights to
receive shares of Parent Common Stock in the amounts and upon the
events set forth Merger Agreement. In consideration of the
execution of the Merger Agreement by the Company and the
consummation of the Mergers, and for other good and valuable
consideration, the undersigned hereby irrevocably agrees that,
without the prior written consent of the Parent, the undersigned
agrees that following the issuance of the Parent Common Stock to
the undersigned [and the vesting of the Second Tranche Shares in
accordance with the terms of the Merger Agreement], and subject to
compliance with Rule 144 promulgated under the Securities Act of
1933, as amended (the “
Securities
Act
”) and the terms and conditions of the Merger
Agreement, to limit the offer for sale, sell, pledge, or otherwise
transfer or dispose of (or enter into any transaction or device
that is designed to, or could be expected to, result in the
transfer or disposition by any person at any time in the future of)
any Parent Common Stock; or (2) enter into any swap or other
derivatives transaction that transfers to another, in whole or in
part, any of the economic benefits or risks of ownership of any
shares of Parent Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery
of shares of Parent Common Stock or other securities, in cash or
otherwise (clauses (1) and (2) collectively, a “
Transfer
”),
to the
lesser
of (i) the
volume limitations set forth in Rule 144(e) of the Securities Act,
or (ii) twenty percent (20%) of such shares in any ninety (90) day
period (the “
Leak-Out
”).
The
foregoing paragraphs shall not apply to:
(a)
bona
fide gifts of shares of Parent Common Stock or any security
convertible into shares of Parent Common Stock, in each case that
are made exclusively between and among the undersigned or members
of the undersigned’s Immediate Family or Affiliates of the
undersigned, including its partners (if a partnership) or members
(if a limited liability company); or
(b)
any
Transfer of shares of Parent Common Stock or any security
convertible into shares of Parent Common Stock by will or intestate
succession upon the death of the undersigned.
Provided
that, in the case of clauses (a) and (b) above, it
shall be a condition to any such transaction that (i) the
transferee/donee agrees to be bound by the terms of this Leak-Out
Agreement (including, without limitation, the restrictions set
forth in the preceding sentence) to the same extent as if the
transferee/donee were a party hereto, (ii) each party (donor,
donee, transferor or transferee) shall not be required by law
(including without limitation the disclosure requirements of the
Securities Act and the Securities Exchange Act of 1934, as amended
(the “
Exchange
Act
”)) to make, and shall
agree to not voluntarily make, any filing or public announcement of
the transfer or disposition prior, and (iii) the undersigned
notifies the Parent at least five (5) business days prior to the
proposed transfer or disposition;
(c)
transfers
of shares of Parent Common Stock or any security convertible into
or exercisable or exchangeable for shares of Parent Common Stock
pursuant to a bona fide third party tender offer made to all
holders of the Parent Common Stock, merger, consolidation or other
similar transaction involving a Change of Control of the Parent,
including voting in favor of any such transaction or taking any
other action in connection with such transaction,
provided
that in the event that such
merger, tender offer or other transaction is not completed, the
shares of Parent Common Stock and any security convertible into or
exercisable or exchangeable for shares of Parent Common Stock shall
remain subject to the restrictions set forth herein.
When
used herein:
“
Affiliate
”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act;
“
Change of
Control
” means the consummation of any bona fide third
party tender offer, merger, purchase, consolidation or other
similar transaction the result of which is that any
“person” (as defined in Section 13(d)(3) of the
Exchange Act), or group of persons, becomes the beneficial owner
(as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of a
majority of total voting power of the voting stock of the
Company;
“
Immediate
Family
” means any
relationship by blood, marriage or adoption, not more remote than
first cousin) or any trust, limited partnership, limited liability
company or other entity for the direct or indirect benefit of the
undersigned or any immediate family member of the
undersigned;
and
“
Person
”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
The
undersigned hereby agrees that each outstanding certificate
representing the shares of Parent Common Stock shall, in addition
to any other legends as may be required in compliance with the
Merger Agreement and Federal securities laws, bear a legend reading
substantially as follows:
“
THE SALE OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A LEAK OUT AGREEMENT DATED DECEMBER 20, 2018 BY AND
BETWEEN LEVEL BRANDS, INC. AND THE SHAREHOLDER LISTED ON THE FACE
HEREOF. NO TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF
LEVEL BRANDS, INC. UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE
WITH THE TERMS OF SUCH LEAK-OUT AGREEMENT WHICH ARE SATISFACTORY TO
LEVEL BRANDS, INC. IN ITS SOLE
DISCRETION
.”
A copy
of this Agreement shall be filed with Parent's transfer agent of
record.
The
undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Leak-Out Agreement and
that, upon request, the undersigned will execute any additional
documents necessary in connection with the enforcement hereof. Any
obligations of the undersigned shall be binding upon the heirs,
personal representative, successors and assigns of the undersigned.
All terms not otherwise defined herein shall have the same meaning
as in the Merger Agreement.
The
undersigned further acknowledges his understanding that this
Agreement was prepared at the request of the Parent by Pearlman Law
Group LLP, its counsel, and that such firm did not represent the
Company or the undersigned in conjunction with this Agreement, the
Mergers or any of the related transactions. The undersigned, as
further evidenced by his signature below, acknowledges that he has
had the opportunity to obtain the advice of independent counsel of
his choosing prior to his execution of this Agreement and that he
has availed himself of this opportunity to the extent he deemed
necessary and advisable.
Very
truly yours,
By:______________________________
Name:
Title:
VOTING PROXY AGREEMENT
This
Voting Proxy Agreement (thee "
Agreement
")
is entered into this 20th day of December, 2018, by and between the
undersigned (the "
Grantee
"),
Level Brands, Inc., a North Carolina corporation (the
“
Parent
”)
and Seymour G. Siegel who is appointed proxy hereunder (the
"
Proxyholder
").
WHEREAS
, on December 3, 2018 the Parent,
AcqCo LLC, a North Carolina limited liability company and a wholly
owned subsidiary of the Parent (“
Merger
Sub
”), cbdMD LLC, a North Carolina limited liability
company and wholly owned subsidiary of the Parent
(“
Sub
LLC
”), and Cure Based Development, LLC, a Nevada
limited liability company (the “
Company
”)
entered into that certain Agreement and Plan of Merger (the
“
Merger
Agreement
”) pursuant to which the Merge Sub was merged
into the Company and the Company was merged into the Sub LLC (the
“
Mergers
”).
WHEREAS
, the Grantee was a Company
Member of the Company prior to the Merger.
WHEREAS
, the Grantee will receive
certain contractual rights to receive an aggregate of 8,750,000
shares of the Parent’s common stock representing the Second
Tranche Shares (as such term is defined in the Merger Agreement) in
the amounts, and upon the events, set forth in the Merger Agreement
(the “
Parent Common
Stock
”).
WHEREAS
, execution and delivery of this
Agreement by the Grantee is a condition to the execution and
delivery of the Merger Agreement by the Parent, the Merger Sub and
the Sub LLC, and by the Company, respectively.
NOW, THEREFORE
, in order to induce the
Parent, the Merger Sub, the Sub LLC and the Company to enter into
the Merger Agreement and in consideration of the mutual covenants
and agreements set forth herein, the parties hereto agree as
follows:
1.
Recitals; Definitions
. The
foregoing recitals are true and correct and are incorporated herein
by such reference. Capitalized terms not otherwise defined herein
shall have the same meaning ascribed to them in that certain Merger
Agreement, of even date herewith.
2.
Irrevocable Proxy
. The Grantee
hereby irrevocably constitutes and appoints the Proxyholder the
true and lawful attorney, agent and proxy, with full power of
substitution, for the Grantee for the the shares of the Parent
Common Stock that the Grantee has a contractual right to receive
set forth on
Exhibit
A
attached hereto and incorporated herein, and for the
respective periods set forth in such exhibit (the
“
Proxy
Periods
”), for and in the name, place and stead of the
Grantee, and to vote such shares of Parent Common Stock at any and
all meetings of the shareholders of the Parent, whether regular or
special, and at any adjournment or adjournments thereof, and to
execute with respect to said shares of Parent Common Stock any and
all instruments, consents, directions or other documents relative
to the corporate affairs of the Parent or calling for the approval
or disapproval of any corporate act or transaction by the
shareholders of the Parent, and the Grantee does hereby authorize
and empower the Proxyholder to vote or otherwise act, as aforesaid,
upon any and all matters and questions relating to the Parent of
whatsoever nature and kind, with all powers the Grantee would
possess as a shareholder if this proxy had not been granted. During
the applicable Proxy Periods, the Proxyholder shall vote the Parent
Common Stock in accordance with the recommendation of a majority of
the independent members of the Parent’s Board of
Directors.
3.
Prior Proxies
. The Grantee
hereby ratifies, confirms and approves everything lawful that the
Proxyholder may do by virtue hereof. The Grantee hereby represents
the Grantee has not executed prior proxies covering any shares of
Parent Common Stock.
4.
Proxy Coupled with an Interest
.
This proxy is being given simultaneously with closing of the
Mergers. It is uunderstood and agreed by the Grantee that this
proxy is being given as a material part of the consideration for
the consummation of the Mergers and that the consummation of the
Mergers is conditioned upon the execution and delivery of this
Agreement. All power and authority hereby conferred is coupled with
an interest and is irrevocable, shall not be terminated by any act
of Grantee or by operation of law, by lack of appropriate power or
authority, or by the occurrence of any other event or events and
shall be binding upon all beneficiaries, heirs at law, legatees,
distributees, successors, assigns and legal representatives of
Grantee. If after the execution of this Agreement the Grantee shall
cease to have appropriate power or authority, or if any other such
event or events shall occur, the Proxyholder is nevertheless
authorized and directed to vote the Parent Common Stock in
accordance with the terms of this Agreement as if such lack of
appropriate power or authority or other event or events had not
occurred and regardless of notice thereof.
5.
Scope of Proxy
. Until the
termination of this Agreement and the proxy granted hereby, the
Proxyholder shall possess in respect of the Parent Common Stock
deposited hereunder, and shall be entitled to, in his sole,
absolute and uncontrolled discretion, all of the rights and powers
granted hereunder, including but not by way of limitation, the
right to consent for every purpose and to vote or otherwise act
with respect to any and all matters and questions of whatsoever
kind and nature, including, but not by way of limitation: (i) the
purchase, sale, acquisition or other disposition of all or any part
of the assets and business of the Parent; (ii) the readjustment of
its capital structure; or (iii) the reorganization of the
Parent.
6.
Relationship; Delegation
. The
Proxyholder is the Chairman of the Audit Committee of the Parent
and is deemed to be an “independent director” under the
rules and regulations of the NYSE America, LLC. The Proxyholder may
appoint aany other person or persons who is then currently serving
on the Parent’s Board of Directors and meets the definition
of an “independent director” under the rules and
regulations of the NYSE American, LLC, or any successor stock
exchange on which the Parentt’s securities are then listed,
to represent him at any meeting of the shareholders of the Parent
and at such meeting to vote and otherwise to exercise all rights
appurtenant to the proxy granted hereby; and such person or persons
appointment shall be deemed the proxy and power of attorney for the
Grantee. The Proxyholder may also cause the Parent Common Stock
subject to the proxy granted hereunder to be voted and the rights
appurtenant thereto to be exercised in any other appropriate and
lawful manner.
7.
Liability
. In voting the Parent
Common Stock subject to the proxy granted hereunder, or acting with
respect to this Agreement, the Proxyholder assumes no
responsibility and shall incur no liability because of any act
which he may do or omit to do while acting in good faith. Any act
done or omitted by the Proxyholder pursuant to the advice of his
own attorneys shall be conclusive evidence of such good faith. The
Proxyholder in his individual capacity or any concern in which he
may have an interest may deal with the Parent as if he in fact were
not a Proxyholder hereunder and, without limiting the generality of
the foregoing, any such dealing approved by a majority of the
independent directors of the Parent (as that term is defined in the
rules of the stock exchange on which the Parent’s securities
are there listed) shall be conclusively presumed to be fair to the
Parent.
8.
Legend
.
The Grantee hereby agrees that each outstanding certificate
representing the shares Parent Common Stock shall during the
applicable Proxy Period, in addition to any other legends as may be
required in compliance with the Merger Agreement Federal securities
laws, bear a legend reading substantially as follows:
“
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO THE TERMS AND CONDITIONS OF A VOTING PROXY AGREEMENT
DATED DECEMBER 20, 2018 BY AND BETWEEN LEVEL BRANDS, INC., THE
SHAREHOLDER LISTED ON THE FACE HEREOF AND THE
PROXYHOLDER
.”
A copy
of this Agreement shall be filed with Parent's transfer agent of
record.
9.
Power and Authority
. The
Grantee has the right, power and authority to execute and deliver
this Agreement and to perform his or her obligations hereunder;
such execution, delivery and performance will not violate any
applicable law, rule or regulation or any outstanding agreement or
instrument to which the Grantee is a party. This Agreement
constitutes a legal, valid and binding agreement on the part of the
Grantee enforceable against the Grantee in accordance with its
terms.
10.
Effect of Invalidity
. Any term
or provision of this Agreement which is invalid or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such invalidity or unenforceability without rendering
invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable,
such provision shall be interpreted to be only so broad as is
enforceable.
11.
Counterparts
. This Agreement
may be executed in two or more counterparts, each of which shall be
an original, but all of which together shall constitute one and the
same agreement.
12.
Governing Law; Jurisdiction
.
This Agreement shall be governed by and construed in accordance
with the laws of the North Carolina without giving effect to the
conflicts of laws principles thereof. The parties agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. Accordingly, the
Proxyholder shall be entitled to specific performance of the terms
hereof, including an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any state or federal court sitting
in Charlotte, North Carolina, this being in addition to any other
remedy to which such party is entitled at law or in equity. Each of
the parties hereby further waives (a) any defense in any action for
specific performance that a remedy at law would be adequate and (b)
any requirement under any law to post security as a prerequisite to
obtaining equitable relief.
13.
Binding Effect
. This Agreement
shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, legal representatives,
successors and assigns.
14.
Role
of Counsel
. The Grantee acknowledges his understanding that
this Agreement was prepared at the request of the Parent by
Pearlman Law Group LLP, its counsel, and that such firm did not
represent the Company or the Grantee in conjunction with this
Agreement, the Mergers or any of the related transactions. The
Grantee, as further evidenced by his signature below, acknowledges
that he has had the opportunity to obtain the advice of independent
counsel of his choosing prior to his execution of this Agreement
and that he has availed himself of this opportunity to the extent
he deemed necessary and advisable.
[signature
page to follow]
IN WITNESS WHEREOF
, the parties have
executed this Agreement as of the date first above
written.
|
|
Parent:
|
|
|
|
|
|
Level
Brands, Inc.
|
|
|
By:
|
/s/ Mark S.
Elliott
|
|
|
|
Mark S.
Elliott, Chief Financial Officer and Chief Operating
Officer
|
|
|
|
|
|
|
Grantee:
|
|
|
|
|
|
|
CBD
Holding, LLC
|
|
|
|
|
|
|
By:
|
/s/ R. Scott
Coffman
|
|
|
|
R.
Scott Coffman, Manager
|
|
|
|
|
|
|
|
|
|
|
Proxyholder
:
|
|
|
|
|
|
|
/s/ Seymour G.
Siegel
|
|
|
Seymour
G. Siegel
|
Exhibit A
|
Number of Shares
|
Proxy Period Expires
|
|
|
|
|
2,187,500
|
December
20, 2019
|
|
|
|
|
2,187,500
|
December
20, 2020
|
|
|
|
|
2,187,500
|
December
20, 2022
|
|
|
|
|
2,187,500
|
December
20, 2024
|
|
8,750,000
|
|
6%
PROMISSORY NOTE
|
U.S.
$430,300
|
December
20, 2018
|
|
|
Charlotte,
North Carolina
|
FOR
VALUE RECEIVED, the undersigned,
LEVEL BRANDS, INC.
, a North Carolina
corporation (the “
Company
”),
hereby unconditionally promises to pay
EDGE OF BUSINESS, LLC
, a Delaware
limited liability company (the “
Holder
”),
in lawful money of the United States of America and in immediately
available funds, the principal amount of Four Hundred Thirty
Thousand Three Hundred Dollars ($430,300.00) (the
“
Principal
Amount
”) together with all unpaid interest, if any, in
accordance with the terms hereof. Interest shall be at the rate of
6% per annum (“
Interest
”)
based on a 360 day year. This Note is being entered into in
accordance with the terms and conditions of that certain Agreement
and Plan of Merger dated December 3, 2018 by and among the Company,
AcqCo LLC, a North Carolina limited liability company and a wholly
owned subsidiary of the Company, cbdMD LLC, a North Carolina
limited liability company and wholly owned subsidiary of the
Company, and the Cure Based Development, LLC, a North Carolina
limited liability company (the “
Merger
Agreement
”).
1.
Principal Amount and Interest
.
Accrued interest will be paid monthly commencing on February 1,
2019 and continuing on the first day of each month thereafter for
twelve (12) consecutive monthly Interest payments. Thereafter
Principal Amount and Interest payments will be made in six (6)
equal and consecutive monthly installments commencing on February
1, 2020 and continuing on the first day of each month thereafter
for six (6) total monthly payments sufficient to satisfy this Note
in full.
2.
Prepayment
. The Company shall
have the right to prepay all or a portion of the Note at any time
without notice to the Holder and without penalty.
3.
Events of Default
. The term
“
Event of
Default
” shall mean any of the events set forth in
this Section 3:
(a)
the Company shall
default in the performance of, or violate any material covenants
and agreements contained in this Note, including without
limitation, the failure to pay the amounts due under this Note on a
monthly basis;
(b)
there shall be a
dissolution, termination of existence, suspension or discontinuance
of the Company’s business for a continuous period of
forty-five (45) days or it ceases to operate as going
concern;
(c)
if the Company
shall:
(i)
admit in writing
its inability to pay its debts generally as they become
due;
(ii)
file
a voluntary petition in bankruptcy or a petition to take advantage
of any insolvency act;
(iii)
convey
any material portion of the assets of the Company to a trustee,
mortgage or liquidating agent or make an assignment for the benefit
of creditors;
(iv)
consent
to the appointment of a receiver, trustee, custodian or similar
official, for the Company or any material portion of the property
or assets of the Company;
(v)
on a petition in
bankruptcy filed against it, be adjudicated a
bankrupt;
(vi)
file
a petition or answer seeking reorganization or arrangement under
the federal bankruptcy laws or any other applicable law or statute
of the United States of America or any State, district or territory
thereof; or
(vii)
if
a court of competent jurisdiction shall enter an order, judgment,
or decree appointing, without the consent of the Company, a
receiver of the whole or any substantial part of the
Company’s assets, and such order, judgment or decree shall
not be vacated or set aside or stayed within 60 days from the date
of entry thereof.
If any
Event of Default described in clause (c) of Section 3 shall occur,
the Principal Amount of this Note, together with all accrued and
unpaid Interest shall automatically be and become immediately due
and payable, without notice or demand. If any Event of Default
(other than any Event of Default described in clause (c) of Section
3) shall occur for any reason, whether voluntary or involuntary,
the Holder, may, upon written notice to the Company, declare all or
any portion of the outstanding Principal Amount, together with all
accrued and unpaid Interest, to be due and payable, whereupon the
full unpaid Principal Amount hereof, together with all accrued and
unpaid Interest shall be so declared due and payable shall be and
become immediately due and payable if the default is not cured by
the Company within three (3) days of receipt of written notice,
except that notice for any payment default shall not be required to
be given any more than two (2) times in any twelve (12) months
period, without further notice, demand, or
presentment.
4.
Amendments and Waivers
. The
terms of this Note may be amended and the observance of any term of
this Note may be waived (either generally or in a particular
instance and either retroactively or prospectively) with the
written consent of the Company and the Holder.
5.
Notices
. All notices and other
communications hereunder shall be in writing and shall be deemed
duly given (a) on the date of delivery if delivered
personally, or if by facsimile or e-mail, upon written confirmation
of receipt by facsimile, e-mail or otherwise or (b) on the
first business day following the date of dispatch if delivered
utilizing a next-day service by a recognized next-day courier. All
notices hereunder shall be delivered to the addresses set forth
below, or pursuant to such other instructions as may be designated
in writing by the party to receive such notice:
if to
the Company, to:
Level
Brands, Inc.
4521
Sharon Road
Suite
450
Charlotte,
NC 28211
E-mail:
Mark@levelbrands.com
Attention: Mark
S. Elliott, Chief Financial Officer
if to
the Holder, to:
Edge of
Business, LLC
500
Archdale Drive
Charlotte,
North Carolina 28217
E-mail:
scoffman@datatech-global.com
Attention:
R. Scott Coffman
6.
Severability
. The
unenforceability or invalidity of any provision or provisions of
this Note as to any persons or circumstances shall not render that
provision or those provisions unenforceable or invalid as to any
other provisions or circumstances, and all provisions hereof, in
all other respects, shall remain valid and
enforceable.
7.
Governing Law
. This Note shall
be governed by and construed under the laws of the State of North
Carolina applicable to agreements made and to be performed entirely
within such jurisdiction. Any suit, action or proceeding arising
out of or relating to this Note shall be brought in any state or
federal courts sitting in Charlotte, North Carolina.
8.
Waivers
. The non-exercise by
either party of any of its rights hereunder in any particular
instance shall not constitute a waiver thereof in that or any
subsequent instance.
9.
Attorneys’ Fees; Costs
.
If any Event of Default occurs, the Company promises to pay all
costs of enforcement and collection, including but not limited to,
Holder’s reasonable attorneys’ fees, whether or not any
action or proceeding is brought to enforce the provisions
hereof.
10.
Successor and Assigns
. This
Note shall be binding upon the Company and its successors and
permitted assigns and shall inure to the benefit of the Holder and
its successors and assigns. The Company may not assign or delegate
any of its duties or obligations under this Note without the
written consent of the Holder.
[signature page
follows]
IN WITNESS WHEREOF
, the Company has
caused its duly authorized officers to execute this Note as of the
date first written above.
COMPANY:
LEVEL
BRANDS, INC.
By:
/s/ Mark S.
Elliott
Mark S.
Elliott, Chief Financial Officer and
Chief
Operating Officer
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE
EMPLOYMENT AGREEMENT
(this
“
Agreement
”)
is made and entered this 20th day of December, 2018 (the
“
Effective
Date
”) between cbdMD LLC, a North Carolina limited
liability company whose principal place of business is 4521 Sharon
Road, Charlotte, NC 28211 (the “
Company
”)
and R. Scott Coffman, an individual whose address is [●] (the
“
Executive
”).
RECITALS
WHEREAS
, the Company is a manufacturer
and distributor of a variety of cannabidiol (CBD) based products
(the “
Business
”).
WHEREAS
, the Company is a wholly-owned
subsidiary of Level Brands, Inc., a North Carolina corporation (the
“
Parent
”).
WHEREAS
, the Executive served as a
manager and the principal executive officer of Cure Based
Development, LLC (“
Cure
”),
an entity acquired by the Parent pursuant to the terms and
conditions of that certain Agreement and Plan of Merger dated
December 3, 2018 (the “
Merger
Agreement
”) by and among the Parent, AcqCo LLC, the
Company and Cure (the “
Mergers
”).
WHEREAS
, pursuant to the term of the
Merger Agreement, at the closing of the Mergers, the Executive was
appointed to the Parent’s Board of Directors (the
“
Parent
Board
”).
WHEREAS
, the Company desires to employ
the Executive and the Executive desires to be employed by the
Company pursuant to the terms of this Agreement.
WHEREAS
, the Executive, by virtue of the
Executive's employment with the Company, will become familiar with
the manner, methods, trade secrets and other confidential
information pertaining to the Company's business, including the
Company's client base.
NOW, THEREFORE
, in consideration of the
mutual agreements herein made, the Company and the Executive do
hereby agree as follows:
1.
Recitals
.
The above recitals are true, correct, and are herein incorporated
by reference.
2.
Employment
.
The Company hereby employs the Executive, and the Executive hereby
accepts employment with the Company, upon the terms and conditions
hereinafter set forth.
3.
Authority
and Power During Employment Period.
a.
Duties
and Responsibilities
. During the term of this Agreement, the
Executive will serve as Chief Executive Officer of the Company and
in this capacity, shall have such duties and responsibilities
consistent with Executive’s title(s), status, and position as
the Company’s Chief Executive Officer. The Executive will
report to the Chief Executive Officer of the Parent.
b.
Time
Devoted
. Throughout the term of the Agreement, the Executive
shall devote substantially all of the Executive's business time and
attention to the business and affairs of the Company consistent
with the Executive's position with the Company, except for
reasonable vacations and except for illness or incapacity, but
nothing in the Agreement shall preclude the Executive from engaging
in a business other than the Business of the Company which does not
compete with the Company, upon prior notice to the Audit Committee
of the Parent’s Board of Directors, and provided that such
activities do not interfere with the regular performance of the
Executive's duties and responsibilities under this
Agreement.
c.
Corporate
Policies
. The Executive shall abide by all corporate
governance and employment policies of the Company which may be
adopted or modified from time to time including, but not limited
to, the Parent’s insider trading and code of ethics
polities.
4.
Term
.
The initial term (“
Initial
Term
”) of employment hereunder will commence on the
Effective Date and end on the fifth (5th) anniversary of the
Effective Date and may be extended for additional one (1) year
periods (each a “
Renewal
Term”
) upon mutual consent of the parties by written
consent exchanged at least sixty (60) days before the expiration of
the Initial Term or any Renewal Term, as the case may be, unless
this Agreement shall have been terminated pursuant to Section 6 of
this Agreement. When used herein, ‘
Term
”
shall mean the Initial Term and any Renewal Term(s).
5.
Compensation
and Benefits
.
a.
Salary
.
The Executive shall be paid a base salary (“
Base
Salary
”), payable in accordance with the Company's
policies from time to time for senior executives, at an annual rate
of one hundred and eighty thousand dollars ($180,000). The Base
Salary thereafter may be increased, but not decreased, from time to
time, by the Compensation Committee of the Board of Directors of
the Parent (the “
Parent Compensation
Committee
”) in connection with reviews of
Executive’s performance, which such reviews shall occur no
less frequently than annually.
b.
Discretionary
Bonus.
(1) The
Parent Compensation Committee shall review the Executive's
performance on an annual basis, and in connection with such annual
review, the Executive may be entitled to receive an annual
discretionary bonus (the “
Annual
Discretionary Bonus
”) in such amount as may be
determined by the Parent Board, upon recommendation of the Parent
Compensation Committee, in its sole discretion. So long as the
Executive is a member of the Parent Board, he shall abstain from
participation in the deliberations of the Parent Board with respect
to the Annual Discretionary Bonus.
(2) The
Parent Compensation Committee shall commence each annual review by
the last business day of January of the following year. The Annual
Discretionary Bonus, if any, shall be paid to the Executive by the
last business day of February of the following year, or, if no
Annual Discretionary Bonus is awarded, the Parent Compensation
Committee shall so notify the Executive in writing of such
determination by the last business day of February of the following
year. For example, the Parent Compensation Committee review for the
year ending December 31, 2019 shall commence no later than January
31, 2020, and, assuming an Annual Discretionary Bonus is to be
awarded, the Executive shall be paid the Annual Discretionary Bonus
for the year ending December 31, 2019 on or before February 28,
2020. The Annual Discretionary Bonus, if any, may be paid to the
Executive in the form of cash, equity awards made under the
Parent’s 2015 Equity Compensation Plan or a combination
thereof, as determined by the Parent Compensation Committee in its
sole discretion.
c.
Executive
Benefits
. The Executive shall be entitled to participate in
all benefit programs of the Company currently existing or hereafter
made available to executive and/or salaried employees including,
but not limited to, stock option plans, pension and other
retirement plans, group life insurance, hospitalization, surgical
and major medical coverage, sick leave, salary continuation,
vacation and holidays, long-term disability, and other fringe
benefits.
d.
Vacation
.
During each fiscal year of the Company, the Executive shall be
entitled to such amount of vacation consistent with the Executive's
position and length of service to the Company.
e.
Business
Expense Reimbursement
. During the Term of employment, the
Executive shall be entitled to receive proper reimbursement for all
reasonable, out of-pocket expenses incurred by the Executive (in
accordance with the policies and procedures established by the
Parent) in performing services hereunder, provided the Executive
properly accounts therefor.
f
.
Clawback
Provisions
. Notwithstanding any other provisions in this
Agreement to the contrary, any incentive-based compensation, or any
other compensation, paid to the Executive pursuant to this
Agreement or any other agreement or arrangement with the Company
which is subject to recovery under any law, government regulation
or stock exchange listing requirement, will be subject to such
deductions and clawback as may be required to be made pursuant to
such law, government regulation or stock exchange listing
requirement (or any policy adopted by the Company pursuant to any
such law, government regulation or stock exchange listing
requirement).
6.
Termination
.
a.
Death
.
This Agreement will terminate upon the death of the
Executive.
b.
Disability
.
(1) The
Executive's employment will terminate in the event of his
disability, upon the first day of the month following the
determination of disability as provided below. Following such a
termination, the Executive shall be entitled to compensation in
accordance with the Company's disability compensation practice for
senior executives, including any separate arrangement or policy
covering the Executive, but in all events the Executive shall
continue to receive his Base Salary, at the annual rate in effect
immediately prior to the commencement of disability, for three (3)
months after the termination. Any amounts provided for in this
Section 6b shall not be offset by other long-term disability
benefits provided to the Executive by the Company or Social
Security.
(2) “
Disability
,”
for the purposes of this Agreement, shall be deemed to have
occurred if (A) the Executive is unable, by reason of a physical or
mental condition, to perform his duties under this Agreement for an
aggregate of ninety (90) days in any 12-month period or (B) the
Executive has a guardian of the person or estate appointed by a
court of competent jurisdiction. Anything herein to the contrary
notwithstanding, if, following a termination of employment due to
disability, the Executive becomes re-employed, whether as an
executive or a consultant, any compensation, annual incentive
payments or other benefits earned by the Executive from such
employment shall be offset against any compensation continuation
due to the Executive hereunder.
c.
Termination
by the Company For Cause
.
(1) Nothing
herein shall prevent the Company from terminating Executive for
Cause, as hereinafter defined. The Executive shall continue to
receive compensation only for the period ending with the date of
such termination as provided in this Section 6c. Any rights and
benefits the Executive may have in respect of any other
compensation shall be determined in accordance with the terms of
such other compensation arrangements or such plans or
programs.
(2) “
Cause
”
shall mean (A) committing or participating in an injurious act of
fraud, gross neglect or misrepresentation, embezzlement or
dishonesty against the Company; (B) committing or participating in
any other injurious act or omission wantonly, willfully, recklessly
or in a manner which was grossly negligent against the Company; (C)
engaging in a criminal enterprise involving moral turpitude; (D)
conviction for a felony under the laws of the United States or any
state thereof; (E) violation of any Federal or state securities
laws, rules or regulations, or any rules or regulations of any
stock exchange or other market on which the Parent's securities may
be listed or quoted for trading; (F) violation of the
Parent’s and/or the Company's corporate governance policies;
or (G) any assignment of this Agreement in violation of Section 14
of this Agreement.
(3) Notwithstanding
anything else contained in this Agreement, this Agreement will not
be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Executive a notice of termination
stating that the Executive committed one of the types of conduct
set forth in Section 6c(2) of this Agreement and specifying the
particulars thereof and the Executive shall be given a thirty (30)
day period to cure such conduct set forth in Section
6c(2).
d.
Voluntary
Termination
. If the Executive terminates the Executive's
employment on the Executive's own volition prior to the expiration
of the Term of this Agreement, including any renewals thereof, such
termination shall constitute a voluntary termination and in such
event the Executive shall be limited to the same rights and
benefits as provided in connection with a termination for Cause as
provided in Section 6c.
7.
Covenant
Not To Compete and Non-Disclosure of
Information
.
a.
Covenant
Not To Compete
. The Executive acknowledges and recognizes
the highly competitive nature of the Company's Business and the
goodwill, continued patronage, and the names and addresses of the
Company's Clients (as hereinafter defined) constitute a substantial
asset of the Company having been acquired through considerable
time, money and effort. Accordingly, in consideration of the
execution of this Agreement, and as except as may specifically
otherwise approved by the Parent Board, the Executive agrees to the
following:
(1) That
during the Restricted Period (as hereinafter defined) and within
the Restricted Area (as hereinafter defined), the Executive will
not, individually or in conjunction with others, directly or
indirectly, engage in any Business Activities (as hereinafter
defined), whether as an officer, director, proprietor, employer,
partner, independent contractor, investor (other than as a holder
solely as an investment of less than four and ninety-nine one
hundreds percent (4.99%) of the outstanding capital stock of a
publicly traded company), consultant, advisor, agent or
otherwise.
(2) That
during the Restricted Period and within the Restricted Area, the
Executive will not, directly or indirectly, compete with the
Company by soliciting, inducing or influencing any of the Company's
Clients which have a business relationship with the Company at the
time during the Restricted Period to discontinue or reduce the
extent of such relationship with the Company.
(3) That
during the Restricted Period and within the Restricted Area, the
Executive will not (A) directly or indirectly recruit, solicit or
otherwise influence any employee or agent of the Company to
discontinue such employment or agency relationship with the
Company, or (B) employ or seek to employ, or cause or permit any
business which competes directly or indirectly with the Business
Activities of the Company (the “
Competitive
Business
”) to employ or seek to employ for any
Competitive Business any person who is then (or was at any time
within two (2) years prior to the date Executive or the Competitive
Business employs or seeks to employ such person) employed by the
Company.
b.
Non-Disclosure
of Information
. The Executive acknowledges that the
Company's trade secrets, private or secret processes, methods and
ideas, as they exist from time to time, customer lists and
information concerning the Company's sources, products, services,
pricing, formula, training methods, development, technical
information, marketing activities and procedures, credit and
financial data concerning the Company and/or the Company's Clients,
and (the “
Proprietary
Information
”) are valuable, special and unique assets
of the Company, access to and knowledge of which are essential to
the performance of the Executive hereunder. In light of the highly
competitive nature of the industry in which the Company's Business
is conducted, the Executive agrees that all Proprietary
Information, heretofore or in the future obtained by the Executive
as a result of the Executive's association with the Company shall
be considered confidential.
In
recognition of this fact, the Executive agrees that the Executive,
during the Restricted Period, will not use or disclose any of such
Proprietary Information for the Executive's own purposes or for the
benefit of any person or other entity or organization (except the
Company) under any circumstances unless such Proprietary
Information has been publicly disclosed generally or, unless upon
written advice of legal counsel reasonably satisfactory to the
Company, the Executive is legally required to disclose such
Proprietary Information. Documents (as hereinafter defined)
prepared by the Executive or that come into the Executive's
possession during the Executive's association with the Company are
and remain the property of the Company, and when this Agreement
terminates, such Documents shall be returned to the Company at the
Company's principal place of business, as provided in the Notice
provision (Section 10) of this Agreement.
c.
Documents
.
“
Documents
”
shall mean all original written, recorded, or graphic matters
whatsoever, and any and all copies thereof, including, but not
limited to: papers; books; records; tangible things;
correspondence; communications; telex messages; memoranda;
work-papers; reports; affidavits; statements; formulas; summaries;
analyses; evaluations; client records and information; agreements;
agendas; advertisements; instructions; charges; manuals; brochures;
publications; directories; industry lists; schedules; price lists;
client lists; statistical records; training manuals; computer
printouts; books of account, records and invoices reflecting
business operations; all things similar to any of the foregoing
however denominated. In all cases where originals are not
available, the term “Documents” shall also mean
identical copies of original documents or non-identical copies
thereof.
d.
Company's
Clients
. The “
Company's
Clients
” shall be deemed to be any persons,
partnerships, companies, professional associations or other
organizations for
or with
whom
the Company or Cure, prior to the Mergers, has performed Business
Activities
, including, but not limited
to, suppliers or vendors with whom the Company or Cure, prior to
the Mergers, has done or is endeavoring to do
business
.
e.
Restrictive
Period
. The “
Restrictive
Period
” shall be deemed to be one (1) year following
termination of this Agreement.
f.
Restricted
Area
. The “
Restricted
Area
” shall be deemed to mean the United
States.
g.
Business
Activities
. “
Business
Activities
” shall be deemed to include the Business,
and any additional activities which the Company or any of its
affiliates may engage in during
any
portion of
the twelve (12) months prior to the termination
of Executive's employment.
h.
Covenants
as Essential Elements of this Agreement
. It is understood by
and between the parties hereto that the foregoing covenants
contained in Sections 7a and b are essential elements of this
Agreement, and that but for the agreement by the Executive to
comply with such covenants, the Company would not have agreed to
enter into this Agreement. Such covenants by the Executive shall be
construed to be agreements independent of any other provisions of
this Agreement. The existence of any other claim or cause of
action, whether predicated on any other provision in this
Agreement, or otherwise, as a result of the relationship between
the parties shall not constitute a defense to the enforcement of
such covenants against the Executive.
To
the extent that the covenants contained in this Section 7 may later
be deemed by a court to be too broad to be enforced with respect to
their duration or with respect to any particular activity or
geographic area, the court making such determination shall have the
power to reduce the duration or scope of the provision, and to add
or delete specific words or phrases to or from the provision. The
provision as modified shall then be enforced.
i.
Survival
After Termination of Agreement
. Notwithstanding anything to
the contrary contained in this Agreement, the covenants in Sections
7a and b shall survive the termination of this Agreement and the
Executive's employment with the Company.
j.
Remedies
.
(1) The
Executive acknowledges and agrees that the Company's remedy at law
for a breach or threatened breach of any of the provisions of
Section 7a or b herein would be inadequate and the breach shall be
per se deemed as causing irreparable harm to the Company. In
recognition of this fact, in the event of a breach by the Executive
of any of the provisions of Section 7a or b, the Executive agrees
that, in addition to any remedy at law available to the Company,
including, but not limited to monetary damages, all rights of the
Executive to payment or otherwise under this Agreement and all
amounts then or thereafter due to the Executive from the Company
under this Agreement may be terminated and the Company, without
posting any bond, shall be entitled to obtain, and the Executive
agrees not to oppose the Company's request for equitable relief in
the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy
which may then be available to the Company.
(2) The
Executive acknowledges that the granting of a temporary injunction,
temporary restraining order or permanent injunction merely
prohibiting the use of Proprietary Information would not be an
adequate remedy upon breach or threatened breach of Section 7a or b
and consequently agrees, upon proof of any such breach, to the
granting of injunctive relief prohibiting any form of competition
with the Company. Nothing herein contained shall be construed as
prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach.
8.
Indemnification
.
The Executive shall be covered by the Articles of Organization and
Operating Agreement of the Company with respect to matters
occurring on or prior to the date of termination of the Executive's
employment with the Company, subject to all the provisions of North
Carolina and Federal law, the Articles of Organization the Company
and the Operating Agreement of the Company then in effect. Such
reasonable expenses, including attorneys' fees, that may be covered
by these indemnification provisions shall be paid by the Company on
a current basis in accordance with such provision, the Company's
Articles of Organization, Operating Agreement and North Carolina
law. To the extent that any such payments by the Company pursuant
to these provisions may be subject to repayment by the Executive
pursuant to the provisions of the Articles of Organization and/or
Operating Agreement, or pursuant to North Carolina or Federal law,
such repayment shall be due and payable by the Executive to the
Company within twelve (12) months after the termination of all
proceedings, if any, which relate to such repayment and to the
Company's affairs for the period prior to the date of termination
of the Executive's employment with the Company and as to which
Executive has been covered by such applicable
provisions.
9.
Withholding
.
Anything to the contrary notwithstanding, all payments required to
be made by the Company hereunder to the Executive or the
Executive's estate or beneficiaries shall be subject to the
withholding of such amounts, if any, relating to tax and other
payroll deductions as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, the Company may accept other
arrangements pursuant to which it is satisfied that such tax and
other payroll obligations will be satisfied in a manner complying
with applicable law or regulation.
10.
Notices
.
Any notice required or permitted to be given under the terms of
this Agreement shall be sufficient if in writing and if sent
postage prepaid by registered or certified mail, return receipt
requested; by overnight delivery; by courier; or by confirmed
telecopy, in the case of the Executive to the Executive's last
place of business or residence as shown on the records of the
Company, or in the case of the Company to its principal office as
set forth in the first paragraph of this Agreement, or at such
other place as it may designate.
11.
Waiver
.
Unless agreed in writing, the failure of either party, at any time,
to require performance by the other of any provisions hereunder
shall not affect its right thereafter to enforce the same, nor
shall a waiver by either party of any breach of any provision
hereof be taken or held to be a waiver of any other preceding or
succeeding breach of any term or provision of this Agreement. No
extension of time for the performance of any obligation or act
shall be deemed to be an extension of time for the performance of
any other obligation or act hereunder.
12.
Completeness
and Modification
. This Agreement constitutes the entire
understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties
hereto concerning the Agreement. This Agreement may be amended,
modified, superseded or canceled, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived,
only by a written instrument executed by the parties or, in the
case of a waiver, by the party to be charged.
13.
Counterparts
.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute
but one agreement.
14.
Binding
Effect/Assignment
. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and
assigns. This Agreement shall not be assignable by the Executive
but shall be assignable by the Company in connection with the sale,
transfer or other disposition of its business or to any of the
Company's affiliates controlled by or under common control with the
Company.
15.
Governing
Law
. This Agreement shall become valid when executed and
accepted by the Company. The parties agree that it shall be deemed
made and entered into in the State of North Carolina and shall be
governed and construed under and in accordance with the laws of the
State of North Carolina. Anything in this Agreement to the contrary
notwithstanding, the Executive shall conduct the Executive's
business in a lawful manner and faithfully comply with applicable
laws or regulations of the state, city or other political
subdivision in which the Executive is located.
16.
Further
Assurances
. All parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary
to carry out the intent and purposes of this
Agreement.
17.
Headings
.
The headings of the sections are for convenience only and shall not
control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
18.
Survival
.
Any termination of this Agreement shall not, however, affect the
ongoing provisions of this Agreement which shall survive such
termination in accordance with their terms.
19.
Severability
.
The invalidity or unenforceability, in whole or in part, of any
covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause, phrase or word or of any provision of
this Agreement shall not affect the validity or enforceability of
the remaining portions thereof.
20.
Enforcement
.
Should it become necessary for any party to institute legal action
to enforce the terms and conditions of this Agreement, the
successful party will be awarded reasonable attorneys' fees at all
trial and appellate levels, expenses and costs.
21.
Venue
.
The Company and Executive acknowledge and agree that the U.S.
District Court for the State of North Carolina, or if such court
lacks jurisdiction, the State of North Carolina(or its successor)
in and for Mecklenburg County, North Carolina, shall be the venue
and exclusive proper forum in which to adjudicate any case or
controversy arising either, directly or indirectly, under or in
connection with this Agreement and the parties further agree that,
in the event of litigation arising out of or in connection with
this Agreement in these courts, they will not contest or challenge
the jurisdiction or venue of these courts.
22.
Construction.
This Agreement shall be construed within the fair meaning of each
of its terms and not against the party drafting the
document.
23.
Role
of Counsel
. The Executive acknowledges his understanding
that this Agreement was prepared at the request of the Company by
Pearlman Law Group LLP, its counsel, and that such firm did not
represent the Executive in conjunction with this Agreement or any
of the related transactions. The Executive, as further evidenced by
his signature below, acknowledges that he has had the opportunity
to obtain the advice of independent counsel of his choosing prior
to his execution of this Agreement and that he has availed himself
of this opportunity to the extent he deemed necessary and
advisable.
THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE HAS READ ALL OF THE
TERMS OF THIS AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO
ABIDE BY ITS TERMS AND CONDITIONS.
[signature
page follows]
IN WITNESS WHEREOF
, the parties have
executed this Agreement as of the Effective Date.
|
Witness:
|
THE COMPANY:
|
|
|
|
|
|
|
_____________________________
|
cbdMD LLC
|
|
|
|
|
|
|
_____________________________
|
By Level Brands,
Inc.,
|
|
|
|
Manager
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Mark S.
Elliott
|
|
|
|
|
Mark S.
Elliott,
|
|
|
|
|
Chief Financial
Officer and
|
|
|
|
|
Chief Operating
Officer
|
|
|
|
|
|
|
|
Witness:
|
THE
EXECUTIVE
|
|
|
|
|
|
|
|
_____________________________
|
/
s/
R.
Scott Coffman
|
|
|
_____________________________
|
R. Scott
Coffman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE
EMPLOYMENT AGREEMENT
(this
“
Agreement
”)
is made and entered this 20th day of December, 2018 (the
“
Effective
Date
”) between cbdMD LLC a North Carolina limited
liability company whose principal place of business is 4521 Sharon
Road, Charlotte, NC 28211 (the “
Company
”)
and Caryn Dunayer, an individual whose address is [●] (the
“
Executive
”).
RECITALS
WHEREAS
, the Company is a manufacturer
and distributor of a variety of cannabidiol (CBD) based products
(the “
Business
”).
WHEREAS
, the Company is a wholly-owned
subsidiary of Level Brands, Inc., a North Carolina corporation (the
“
Parent
”).
WHEREAS
, the Executive served as a
manager and the president of Cure Based Development, LLC
(“
Cure
”),
an entity acquired by the Parent pursuant to the terms and
conditions of that certain Agreement and Plan of Merger dated
December 3, 2018 by and among the Parent, AcqCo LLC, the Company
and Cure (the “
Mergers
”).
WHEREAS
, the Company desires to employ
the Executive and the Executive desires to be employed by the
Company pursuant to the terms of this Agreement.
WHEREAS
, the Executive, by virtue of the
Executive's employment with the Company, will become familiar with
the manner, methods, trade secrets and other confidential
information pertaining to the Company's business, including the
Company's client base.
NOW, THEREFORE
, in consideration of the
mutual agreements herein made, the Company and the Executive do
hereby agree as follows:
1.
Recitals
.
The above recitals are true, correct, and are herein incorporated
by reference.
2.
Employment
.
The Company hereby agrees to employ the Executive, and the
Executive hereby accepts employment with the Company, upon the
terms and conditions hereinafter set forth.
3.
Authority
and Power During Employment Period.
a.
Duties
and Responsibilities
. During the term of this Agreement, the
Executive will serve as President of the Company and in this
capacity, shall have such duties and responsibilities consistent
with Executive’s title(s), status, and position as the
Company’s President. The Executive will report to the
Company’s Chief Executive Officer.
b.
Time
Devoted
. Throughout the term of the Agreement, the Executive
shall devote substantially all of the Executive's business time and
attention to the business and affairs of the Company consistent
with the Executive's position with the Company, except for
reasonable vacations and except for illness or incapacity, but
nothing in the Agreement shall preclude the Executive from engaging
in a business other than the Business of the Company which do not
compete with the Company, upon notice to the Audit Committee of the
Parent’s Board, provided that such activities do not
interfere with the regular performance of the Executive's duties
and responsibilities under this Agreement.
c.
Corporate
Policies
. The Executive shall abide by all corporate
governance and employment policies of the Company which may be
adopted or modified from time to time including, but not limited
to, the Parent’s insider trading and code of ethics
polities.
4.
Term
.
The initial term (“
Initial
Term
”) of employment hereunder will commence on the
Effective Date and end on the third (3rd) anniversary of the
Effective Date and may be extended for additional one (1) year
periods (each a “
Renewal
Term”
) upon mutual consent of the parties by written
notice given by the Company to the Executive at least sixty (60)
days before the expiration of the Initial Term or the Renewal Term,
as the case may be, unless this Agreement shall have been
terminated pursuant to Section 6 of this Agreement. When used
herein, ‘
Term
”
shall mean the Initial Term and any Renewal Term(s).
5.
Compensation
and Benefits
.
a.
Salary
.
The Executive shall be paid a base salary (“
Base
Salary
”), payable in accordance with the Company's
policies from time to time for senior executives, at an annual rate
of one hundred twenty-five thousand dollars ($125,000). The Base
Salary thereafter may be increased, but not decreased, from time to
time, by the Compensation Committee of the Board of Directors of
the Parent (the “
Parent Compensation
Committee
”) in connection with reviews of
Executive’s performance, which such reviews shall occur no
less frequently than annually.
b.
Discretionary
Bonus.
(1) The
Parent Compensation Committee shall review the Executive's
performance on an annual basis, and in connection with such annual
review, the Executive may be entitled to receive an annual
discretionary bonus (the “
Annual
Discretionary Bonus
”) in such amount as may be
determined by the Parent Board, upon recommendation of the Parent
Compensation Committee, in its sole discretion.
(2) The
Parent Compensation Committee shall commence each annual review by
the last business day of January of the following year. The Annual
Discretionary Bonus, if any, shall be paid to the Executive by the
last business day of February of the following year, or, if no
Annual Discretionary Bonus is awarded, the Parent Compensation
Committee shall so notify the Executive in writing of such
determination by the last business day of February of the following
year. For example, the Parent Compensation Committee review for the
year ending December 31, 2019 shall commence no later than January
31, 2020, and, assuming an Annual Discretionary Bonus is to be
awarded, the Executive shall be paid the Annual Discretionary Bonus
for the year ending December 31, 2019 on or before February 28,
2020. The Annual Discretionary Bonus, if any, may be paid to the
Executive in the form of cash, equity awards made under the
Parent’s 2015 Equity Compensation Plan or a combination
thereof, as determined by the Parent Compensation Committee in its
sole discretion.
c.
Executive
Benefits
. The Executive shall be entitled to participate in
all benefit programs of the Company currently existing or hereafter
made available to executive and/or salaried employees including,
but not limited to, stock option plans, pension and other
retirement plans, group life insurance, hospitalization, surgical
and major medical coverage, sick leave, salary continuation,
vacation and holidays, long-term disability, and other fringe
benefits.
d.
Vacation
.
During each fiscal year of the Company, the Executive shall be
entitled to such amount of vacation consistent with the Executive's
position and length of service to the Company.
e.
Business
Expense Reimbursement
. During the Term of employment, the
Executive shall be entitled to receive proper reimbursement for all
reasonable, out of-pocket expenses incurred by the Executive (in
accordance with the policies and procedures established by the
Parent) in performing services hereunder, provided the Executive
properly accounts therefor.
f
.
Clawback
Provisions
. Notwithstanding any other provisions in this
Agreement to the contrary, any incentive-based compensation, or any
other compensation, paid to the Executive pursuant to this
Agreement or any other agreement or arrangement with the Company
which is subject to recovery under any law, government regulation
or stock exchange listing requirement, will be subject to such
deductions and clawback as may be required to be made pursuant to
such law, government regulation or stock exchange listing
requirement (or any policy adopted by the Company pursuant to any
such law, government regulation or stock exchange listing
requirement).
6.
Termination
.
a.
Death
.
This Agreement will terminate upon the death of the
Executive.
b.
Disability
.
(1) The
Executive's employment will terminate in the event of his
disability, upon the first day of the month following the
determination of disability as provided below. Following such a
termination, the Executive shall be entitled to compensation in
accordance with the Company's disability compensation practice for
senior executives, including any separate arrangement or policy
covering the Executive, but in all events the Executive shall
continue to receive his Base Salary, at the annual rate in effect
immediately prior to the commencement of disability, for three (3)
months after the termination. Any amounts provided for in this
Section 6b shall not be offset by other long-term disability
benefits provided to the Executive by the Company or Social
Security.
(2) “
Disability
,”
for the purposes of this Agreement, shall be deemed to have
occurred if (A) the Executive is unable, by reason of a physical or
mental condition, to perform his duties under this Agreement for an
aggregate of ninety (90) days in any 12-month period or (B) the
Executive has a guardian of the person or estate appointed by a
court of competent jurisdiction. Anything herein to the contrary
notwithstanding, if, following a termination of employment due to
disability, the Executive becomes re-employed, whether as an
executive or a consultant, any compensation, annual incentive
payments or other benefits earned by the Executive from such
employment shall be offset against any compensation continuation
due to the Executive hereunder.
c.
Termination
by the Company For Cause
.
(1) Nothing
herein shall prevent the Company from terminating Executive for
Cause, as hereinafter defined. The Executive shall continue to
receive compensation only for the period ending with the date of
such termination as provided in this Section 6c. Any rights and
benefits the Executive may have in respect of any other
compensation shall be determined in accordance with the terms of
such other compensation arrangements or such plans or
programs.
(2) “
Cause
”
shall mean (A) committing or participating in an injurious act of
fraud, gross neglect, misrepresentation, embezzlement or dishonesty
against the Company; (B) committing or participating in any other
injurious act or omission wantonly, willfully, recklessly or in a
manner which was grossly negligent against the Company; (C)
engaging in a criminal enterprise involving moral turpitude; (D)
conviction for a felony under the laws of the United States or any
state thereof; (E) violation of any Federal or state securities
laws, rules or regulations, or any rules or regulations of any
stock exchange or other market on which the Parent's securities may
be listed or quoted for trading; (F) violation of the
Parent’s and/or the Company's corporate governance policies;
or (G) any assignment of this Agreement in violation of Section 14
of this Agreement.
(3) Notwithstanding
anything else contained in this Agreement, this Agreement will not
be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Executive a notice of termination
stating that the Executive committed one of the types of conduct
set forth in Section 6c(2) of this Agreement and specifying the
particulars thereof and the Executive shall be given a thirty (30)
day period to cure such conduct set forth in Section
6c(2).
d.
Termination
by the Company Other Than For Cause
.
(1) The
foregoing notwithstanding, the Company may terminate the
Executive's employment for whatever reason it deems appropriate;
provided, however
, that in
the event such termination is not based on Cause, as provided in
Section 6c above, the Company may terminate this Agreement upon
giving the Executive thirty (30) days' prior written notice. During
such thirty (30) day period, the Executive shall continue to
perform the Executive's duties pursuant to this Agreement.
Notwithstanding any such termination, the Company shall continue to
pay to the Executive the Base Salary and Executive Benefits he
would be entitled to receive under this Agreement for the balance
of the Term of this Agreement in accordance with the Company's
regular payroll policies.
(2) In
the event that the Executive's employment with the Company is
terminated pursuant to this Section 6d or Section 6f, then Section
7a of this Agreement and all references thereto shall be voidable
as to the Executive and the Company. In addition, in the event that
the Executive's employment with the Company is terminated pursuant
to this Section 6d or Section 6f, the Executive's stock options
and/or restricted shares granted to the Executive during the Term
(to the extent not fully vested as of the termination date), shall
become fully vested as of the termination date, and the Executive
shall be permitted to exercise such options for up to twelve (12)
months following the termination date.
e.
Voluntary
Termination
. If the Executive terminates the Executive's
employment on the Executive's own volition (except as provided in
Section 6f prior to the expiration of the Term of this Agreement,
including any renewals thereof, such termination shall constitute a
voluntary termination and in such event the Executive shall be
limited to the same rights and benefits as provided in connection
with a termination for Cause as provided in Section
6c.
f.
Constructive
Termination of Employment
. A termination by the Company
without Cause under Section 6d (a “
Constructive
Termination
”) shall be deemed to have occurred upon
the occurrence of one or more of the following events without the
express written consent of the Executive:
(1) a
material breach of the Agreement by the Company;
(2) failure
by a successor company to assume the obligations under the
Agreement; and/or
(3) a
material change in the Executive’s duties and
responsibilities as described in Section 3a hereof.
Anything
herein to the contrary notwithstanding, the Executive shall give
written notice to the Parent Board that the Executive believes an
event has occurred which would result in a Constructive Termination
of the Executive's employment under this Section 6f, which written
notice shall specify the particular act or acts, on the basis of
which the Executive intends to so terminate the Executive's
employment, and the Company shall then be given the opportunity,
within thirty (30) days of its receipt of such notice, to cure said
event; provided, however, there shall be no period permitted to
cure a second occurrence of the same event and in no event will
there be any period to cure following the occurrence of two events
described in this Section 6f.
7.
Covenant
Not To Compete and Non-Disclosure of
Information
.
a.
Covenant
Not To Compete
. The Executive acknowledges and recognizes
the highly competitive nature of the Company's Business and the
goodwill, continued patronage, and the names and addresses of the
Company's Clients (as hereinafter defined) constitute a substantial
asset of the Company having been acquired through considerable
time, money and effort. Accordingly, in consideration of the
execution of this Agreement, and as except as may specifically
otherwise approved by the Parent Board, the Executive agrees to the
following:
(1) That
during the Restricted Period (as hereinafter defined) and within
the Restricted Area (as hereinafter defined), the Executive will
not, individually or in conjunction with others, directly or
indirectly, engage in any Business Activities (as hereinafter
defined), whether as an officer, director, proprietor, employer,
partner, independent contractor, investor (other than as a holder
solely as an investment of less than four and ninety-nine one
hundreds percent (4.99%) of the outstanding capital stock of a
publicly traded company), consultant, advisor, agent or
otherwise.
(2) That
during the Restricted Period and within the Restricted Area, the
Executive will not, directly or indirectly, compete with the
Company by soliciting, inducing or influencing any of the Company's
Clients which have a business relationship with the Company at the
time during the Restricted Period to discontinue or reduce the
extent of such relationship with the Company.
(3) That
during the Restricted Period and within the Restricted Area, the
Executive will not (A) directly or indirectly recruit, solicit or
otherwise influence any employee or agent of the Company to
discontinue such employment or agency relationship with the
Company, or (B) employ or seek to employ, or cause or permit any
business which competes directly or indirectly with the Business
Activities of the Company (the “
Competitive
Business
”) to employ or seek to employ for any
Competitive Business any person who is then (or was at any time
within two (2) years prior to the date Executive or the Competitive
Business employs or seeks to employ such person) employed by the
Company.
b.
Non-Disclosure
of Information
. The Executive acknowledges that the
Company's trade secrets, private or secret processes, methods and
ideas, as they exist from time to time, customer lists and
information concerning the Company's sources, products, services,
pricing, formula, training methods, development, technical
information, marketing activities and procedures, credit and
financial data concerning the Company and/or the Company's Clients,
and (the “
Proprietary
Information
”) are valuable, special and unique assets
of the Company, access to and knowledge of which are essential to
the performance of the Executive hereunder. In light of the highly
competitive nature of the industry in which the Company's Business
is conducted, the Executive agrees that all Proprietary
Information, heretofore or in the future obtained by the Executive
as a result of the Executive's association with the Company shall
be considered confidential.
In
recognition of this fact, the Executive agrees that the Executive,
during the Restricted Period, will not use or disclose any of such
Proprietary Information for the Executive's own purposes or for the
benefit of any person or other entity or organization (except the
Company) under any circumstances unless such Proprietary
Information has been publicly disclosed generally or, unless upon
written advice of legal counsel reasonably satisfactory to the
Company, the Executive is legally required to disclose such
Proprietary Information. Documents (as hereinafter defined)
prepared by the Executive or that come into the Executive's
possession during the Executive's association with the Company are
and remain the property of the Company, and when this Agreement
terminates, such Documents shall be returned to the Company at the
Company's principal place of business, as provided in the Notice
provision (Section 10) of this Agreement.
c.
Documents
.
“
Documents
”
shall mean all original written, recorded, or graphic matters
whatsoever, and any and all copies thereof, including, but not
limited to: papers; books; records; tangible things;
correspondence; communications; telex messages; memoranda;
work-papers; reports; affidavits; statements; formulas; summaries;
analyses; evaluations; client records and information; agreements;
agendas; advertisements; instructions; charges; manuals; brochures;
publications; directories; industry lists; schedules; price lists;
client lists; statistical records; training manuals; computer
printouts; books of account, records and invoices reflecting
business operations; all things similar to any of the foregoing
however denominated. In all cases where originals are not
available, the term “Documents” shall also mean
identical copies of original documents or non-identical copies
thereof.
d.
Company's
Clients
. The “
Company's
Clients
” shall be deemed to be any persons,
partnerships, companies, professional associations or other
organizations for
or with
whom
the Company or Cure, prior to the Mergers, has performed Business
Activities
, including, but not limited
to, suppliers or vendors with whom the Company or Cure, prior to
the Mergers, has done or is endeavoring to do
business
.
e.
Restrictive
Period
. The “
Restrictive
Period
” shall be deemed to be one (1) year following
termination of this Agreement.
f.
Restricted
Area
. The “
Restricted
Area
” shall be deemed to mean the United
States.
g.
Business
Activities
. “
Business
Activities
” shall be deemed to include the Business,
and any additional activities which the Company or any of its
affiliates may engage in during
any
portion of
the twelve (12) months prior to the termination
of Executive's employment.
h.
Covenants
as Essential Elements of this Agreement
. It is understood by
and between the parties hereto that the foregoing covenants
contained in Sections 7a and b are essential elements of this
Agreement, and that but for the agreement by the Executive to
comply with such covenants, the Company would not have agreed to
enter into this Agreement. Such covenants by the Executive shall be
construed to be agreements independent of any other provisions of
this Agreement. The existence of any other claim or cause of
action, whether predicated on any other provision in this
Agreement, or otherwise, as a result of the relationship between
the parties shall not constitute a defense to the enforcement of
such covenants against the Executive.
To
the extent that the covenants contained in this Section 7 may later
be deemed by a court to be too broad to be enforced with respect to
their duration or with respect to any particular activity or
geographic area, the court making such determination shall have the
power to reduce the duration or scope of the provision, and to add
or delete specific words or phrases to or from the provision. The
provision as modified shall then be enforced.
i.
Survival
After Termination of Agreement
. Notwithstanding anything to
the contrary contained in this Agreement, the covenants in Sections
7a and b shall survive the termination of this Agreement and the
Executive's employment with the Company.
j.
Remedies
.
(1) The
Executive acknowledges and agrees that the Company's remedy at law
for a breach or threatened breach of any of the provisions of
Section 7a or b herein would be inadequate and the breach shall be
per se deemed as causing irreparable harm to the Company. In
recognition of this fact, in the event of a breach by the Executive
of any of the provisions of Section 7a or b, the Executive agrees
that, in addition to any remedy at law available to the Company,
including, but not limited to monetary damages, all rights of the
Executive to payment or otherwise under this Agreement and all
amounts then or thereafter due to the Executive from the Company
under this Agreement may be terminated and the Company, without
posting any bond, shall be entitled to obtain, and the Executive
agrees not to oppose the Company's request for equitable relief in
the form of specific performance, temporary restraining order,
temporary or permanent injunction or any other equitable remedy
which may then be available to the Company.
(2) The
Executive acknowledges that the granting of a temporary injunction,
temporary restraining order or permanent injunction merely
prohibiting the use of Proprietary Information would not be an
adequate remedy upon breach or threatened breach of Section 7a or b
and consequently agrees, upon proof of any such breach, to the
granting of injunctive relief prohibiting any form of competition
with the Company. Nothing herein contained shall be construed as
prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach.
8.
Indemnification
.
The Executive shall be covered by the Articles of Organization and
Operating Agreement of the Company with respect to matters
occurring on or prior to the date of termination of the Executive's
employment with the Company, subject to all the provisions of North
Carolina and Federal law, the Articles of Organization the Company
and the Operating Agreement of the Company then in effect. Such
reasonable expenses, including attorneys' fees, that may be covered
by the these indemnification provisions shall be paid by the
Company on a current basis in accordance with such provision, the
Company's Articles of Organization, Operating Agreement and North
Carolina law. To the extent that any such payments by the Company
pursuant to these provisions may be subject to repayment by the
Executive pursuant to the provisions of the Articles of
Organization and/or Operating Agreement, or pursuant to North
Carolina or Federal law, such repayment shall be due and payable by
the Executive to the Company within twelve (12) months after the
termination of all proceedings, if any, which relate to such
repayment and to the Company's affairs for the period prior to the
date of termination of the Executive's employment with the Company
and as to which Executive has been covered by such applicable
provisions.
9.
Withholding
.
Anything to the contrary notwithstanding, all payments required to
be made by the Company hereunder to the Executive or the
Executive's estate or beneficiaries shall be subject to the
withholding of such amounts, if any, relating to tax and other
payroll deductions as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, the Company may accept other
arrangements pursuant to which it is satisfied that such tax and
other payroll obligations will be satisfied in a manner complying
with applicable law or regulation.
10.
Notices
.
Any notice required or permitted to be given under the terms of
this Agreement shall be sufficient if in writing and if sent
postage prepaid by registered or certified mail, return receipt
requested; by overnight delivery; by courier; or by confirmed
telecopy, in the case of the Executive to the Executive's last
place of business or residence as shown on the records of the
Company, or in the case of the Company to its principal office as
set forth in the first paragraph of this Agreement, or at such
other place as it may designate.
11.
Waiver
.
Unless agreed in writing, the failure of either party, at any time,
to require performance by the other of any provisions hereunder
shall not affect its right thereafter to enforce the same, nor
shall a waiver by either party of any breach of any provision
hereof be taken or held to be a waiver of any other preceding or
succeeding breach of any term or provision of this Agreement. No
extension of time for the performance of any obligation or act
shall be deemed to be an extension of time for the performance of
any other obligation or act hereunder.
12.
Completeness
and Modification
. This Agreement constitutes the entire
understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties
hereto concerning the Agreement. This Agreement may be amended,
modified, superseded or canceled, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived,
only by a written instrument executed by the parties or, in the
case of a waiver, by the party to be charged.
13.
Counterparts
.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute
but one agreement.
14.
Binding
Effect/Assignment
. This Agreement shall be binding upon the
parties hereto, their heirs, legal representatives, successors and
assigns. This Agreement shall not be assignable by the Executive
but shall be assignable by the Company in connection with the sale,
transfer or other disposition of its business or to any of the
Company's affiliates controlled by or under common control with the
Company.
15.
Governing
Law
. This Agreement shall become valid when executed and
accepted by the Company. The parties agree that it shall be deemed
made and entered into in the State of North Carolina and shall be
governed and construed under and in accordance with the laws of the
State of North Carolina. Anything in this Agreement to the contrary
notwithstanding, the Executive shall conduct the Executive's
business in a lawful manner and faithfully comply with applicable
laws or regulations of the state, city or other political
subdivision in which the Executive is located.
16.
Further
Assurances
. All parties hereto shall execute and deliver
such other instruments and do such other acts as may be necessary
to carry out the intent and purposes of this
Agreement.
17.
Headings
.
The headings of the sections are for convenience only and shall not
control or affect the meaning or construction or limit the scope or
intent of any of the provisions of this Agreement.
18.
Survival
.
Any termination of this Agreement shall not, however, affect the
ongoing provisions of this Agreement which shall survive such
termination in accordance with their terms.
19.
Severability
.
The invalidity or unenforceability, in whole or in part, of any
covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause, phrase or word or of any provision of
this Agreement shall not affect the validity or enforceability of
the remaining portions thereof.
20.
Enforcement
.
Should it become necessary for any party to institute legal action
to enforce the terms and conditions of this Agreement, the
successful party will be awarded reasonable attorneys' fees at all
trial and appellate levels, expenses and costs.
21.
Venue
.
The Company and Executive acknowledge and agree that the U.S.
District Court for the State of North Carolina, or if such court
lacks jurisdiction, the State of North Carolina(or its successor)
in and for Mecklenburg County, North Carolina, shall be the venue
and exclusive proper forum in which to adjudicate any case or
controversy arising either, directly or indirectly, under or in
connection with this Agreement and the parties further agree that,
in the event of litigation arising out of or in connection with
this Agreement in these courts, they will not contest or challenge
the jurisdiction or venue of these courts.
22.
Construction.
This Agreement shall be construed within the fair meaning of each
of its terms and not against the party drafting the
document.
23.
Role
of Counsel
. The Executive acknowledges his understanding
that this Agreement was prepared at the request of the Company by
Pearlman Law Group LLP, its counsel, and that such firm did not
represent the Executive in conjunction with this Agreement or any
of the related transactions. The Executive, as further evidenced by
his signature below, acknowledges that he has had the opportunity
to obtain the advice of independent counsel of his choosing prior
to his execution of this Agreement and that he has availed himself
of this opportunity to the extent he deemed necessary and
advisable.
THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE HAS READ ALL OF THE
TERMS OF THIS AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO
ABIDE BY ITS TERMS AND CONDITIONS.
IN WITNESS WHEREOF
, the parties have
executed this Agreement as of the Effective Date.
|
Witness:
|
THE COMPANY:
|
|
|
|
|
|
|
_____________________________
|
cbdMD LLC
|
|
|
|
|
|
|
_____________________________
|
By Level Brands,
Inc.,
|
|
|
|
Manager
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Mark S. Elliott
|
|
|
|
|
Mark S.
Elliott,
|
|
|
|
|
Chief Financial
Officer and
|
|
|
|
|
Chief Operating
Officer
|
|
|
|
|
|
|
|
Witness:
|
THE
EXECUTIVE
|
|
|
|
|
|
|
|
_____________________________
|
/
s/
Caryn
Dunayer
|
|
|
_____________________________
|
Caryn
Dunayer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
