UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): May 31, 2019

 

Freedom Leaf Inc.
(Exact Name of Registrant as Specified in Charter)
     
Nevada 000-55687 46-2093679
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
     
3571 E. Sunset Road, Suite 420, Las Vegas, NV 89120
(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (877) 442-0411

 

 
(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))

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each Class Trading Symbol Name of each exchange on which registered
N/A N/A N/A

 

Indicate by check mark whether the registrant is an emerging growth company as defined 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 check mark 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 1.01 Entry into a Material Definitive Agreement.

 

The description of the Voting Agreement in Item 2.01 below is incorporated by reference into this Item 1.01. That description of the Voting Agreement and its terms is qualified in its entirety by reference to the full text of the Voting Agreement, which is attached hereto as Exhibit 10.1 to, and incorporated by reference in, this report.

 

As disclosed in the Current Report on Form 8-K filed on October 3, 2018 (the “ Current Report ”), Freedom Leaf Inc., a Nevada corporation (the “ Company ”) entered into a Securities Purchase Agreement (the “ Securities Purchase Agreement ”) on September 28, 2018, with Merida Capital Partners II, LP (“ Merida ”) and seven other investors (Merida and the seven other investors, collectively, the “ Investors ”). Pursuant to the Securities Purchase Agreement, the Investors agreed to purchase, for an aggregate purchase price of $3,000,000 (the “ Purchase Price ”): (i) 25,000,000 shares of the Company’s common stock (the “ Common Shares ”); (ii) three-year non-cashless warrants to acquire 25,000,000 shares of the Company’s common stock at price of $0.18 per share (the “ Warrants ”); and (iii) with Merida, for leading the syndicate and providing 68% of the funds in the offering, receiving three-year non-cashless warrants to acquire 17,000,000 shares of the Company’s common stock at $0.25/share (the “ Bonus Warrants ”).

 

On May 31, 2019, the Company entered into Amendment No. 1 (the “ Amendment ”) to the Securities Purchase Agreement with certain Investors that comprise at least eighty percent of the Common Shares issued under the Securities Purchase Agreement and the stockholders holding all of the issued and outstanding preferred stock of the Company (the “ Preferred Shares ”). The Amendment gives the Company the right to convert each of the Preferred Shares into one hundred Common Shares at any time in the Company’s sole discretion beginning on or after May 30, 2019, effective upon the Company delivering written notice to each holder of record of the Preferred Shares, specifying the date and time of the conversion.

 

The foregoing description of the Securities Purchase Agreement, the Amendment, and their terms is qualified in its entirety by reference to (i) the full text of the Securities Purchase Agreement, which is attached as Exhibit 10.1 to the Company’ Current Report on Form 8-K filed on October 3, 2018, and is incorporated herein by reference, and (ii) the full text of the Amendment, which is attached hereto as Exhibit 10.2 to, and incorporated by reference in, this report.

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

On May 21, 2019, the Company entered into a Membership Interest Purchase Agreement (the “ Purchase Agreement ”) with Carlos Frias, Ngoc Quang (Daniel) Nguyen, Alex Frias, and Chris Fagan (collectively, the “ Sellers ”) to purchase all of the issued and outstanding membership interests and other ownership or beneficial interests of ECS Labs LLC (“ ECS ”), including its two wholly-owned operating subsidiaries, which collectively constitute the “Green Lotus” premium hemp oil products brand (the “ Acquisition ”), for a purchase price of fourteen million dollars ($14,000,000), to be paid in shares of the Company’s common stock (the “ Shares ”) at a share price based on the volume-weighted average trading price per share of the Company’s common stock (the “ VWAP ”) for the thirty trading days up to and including the trading day prior to the date of closing.

 

On May 31, 2019 (the “ Closing Date ”), the parties closed the Acquisition contemplated by the Purchase Agreement (the “ Closing ”). As a result of the Acquisition, the Company issued 86,419,752 Shares to the Sellers pursuant to the Purchase Agreement effective as of the Closing. In the aggregate, the Shares issued to the Sellers represent approximately 28% of the issued and outstanding common stock of the Company after the Closing of the Acquisition.

 

 

 

 

 

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Effective as of the Closing, the Company entered into a Voting Agreement (the “ Voting Agreement ”) with Merida Capital Partners II, LP (“ Merida ”), Clifford J. Perry, Raymond Medeiros, Richard Cowan, Carlos Frias, Ngoc Quang (Daniel) Nguyen and Alex Frias whereby the parties agreed to vote their shares of capital stock of the Company in favor of a Board of Directors (the “ Board ”) comprised of six persons, including two persons appointed by Merida, two persons appointed by Carlos Frias, Ngoc Quang (Daniel) Nguyen and Alex Frias, and two persons appointed by Clifford J. Perry and Raymond Medeiros.

 

The foregoing description of the Acquisition and the Purchase Agreement is qualified in its entirety by reference to the Purchase Agreement, which is attached as Exhibit 10.1 to the Company’ Current Report on Form 8-K filed on May 24, 2019, and is incorporated herein by reference.  

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The descriptions of the Acquisition and the Purchase Agreement set forth in Item 2.01 above are incorporated by reference into this Item 3.02.

 

Pursuant to the Purchase Agreement, effective as of the Closing of the Acquisition, the Company issued 86,419,752 shares of the Company’s common stock to Carlos Frias, Ngoc Quang (Daniel) Nguyen, Alex Frias, and Chris Fagan (the “ Shareholders ”) pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as there was no general solicitation, and the transaction did not involve a public offering.

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

The descriptions of the Acquisition, the Purchase Agreement and the Voting Agreement set forth in Item 2.01 above are incorporated by reference into this Item 5.02.

 

Effective as of the Closing of the Acquisition on May 31, 2019, Richard Segerblom and Richard Groberg resigned from the Board of Directors of the Company (the “ Board ”) and the Board appointed Carlos Frias and Ngoc Quang (Daniel) Nguyen to serve as directors on the Board to fill the vacancies created by the resignations of Mr. Segerblom and Mr. Groberg. As of May 31, 2019, after the Closing of the Acquisition, the Board consists of six persons: Clifford J. Perry, Raymond Medeiros, David Goldburg, David Vautrin, Carlos Frias and Daniel Nguyen.

 

Additionally, effective as of the Closing of the Acquisition on May 31, 2019, Clifford J. Perry resigned as Chief Executive Officer of the Company. Mr. Perry will continue to be employed at the Company in the position of Director of Corporate Development. Additionally, effective as of the Closing of the Acquisition on May 31, 2019, the Board appointed Carlos Frias to serve as the Chief Executive Officer of the Company and Daniel Nguyen to serve as the Chief Scientific Officer of the Company.

 

Mr. Frias, age 38, joined the Company in May 2019 effective as of the Closing of the Acquisition. A Marine Corps veteran, Mr. Frias co-founded and served as the CEO of Green Lotus™, a premium hemp oil brand that manufactures and distributes hemp-derived products both nationally and internationally. Mr. Frias has been a leader in the cannabis industry for 16 years, particularly in the medical cannabis market -- founding an investment fund and a non-profit in Texas and California, respectively.

 

Mr. Nguyen, age 40, joined the Company in May 2019 effective as of the Closing of the Acquisition, bringing with him a combined 19 years of experience in pharmaceuticals, nutraceuticals, and cosmetics. In October 2017, Mr. Nguyen was appointed CSO of Green Lotus™, where he oversaw compounding and production for the international premium hemp oil brand. Mr. Nguyen has also worked as a research chemist and chemical compounder, including positions at Access Pharmaceuticals and Fruit of the Earth.

 

 

 

 

 

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In connection with Mr. Frias’ appointment as Chief Executive Officer and a director of the Company, the Board approved an Employment Agreement, effective as of the Closing of the Acquisition, by and between the Company and Carlos Frias. Under the terms of the agreement, the Company agreed to pay Mr. Frias an annual base salary of $130,000 for a term of two years. Subject to Mr. Frias’ continued provision of services to the Company, the agreement also provides for cash incentives of $2,400,000 and equity incentives of $10,738,750 of the Company’s restricted common stock, at a share price equal to the VWAP of the Company’s common stock for the 30 trading days prior to its award. The agreement also contains provisions for further cash and equity incentive awards to be determined based upon the net operating income (as defined in the employment agreement) received by the Company in the twelve months after the Closing Date pursuant to a Master Manufacturing Agreement, dated as of November 13, 2017, by and between ECS and CBD LIFE SA DE CV (as amended, restated, modified or supplemented from time to time, the “ Master Agreement ”). Subject to Mr. Frias’ continued provision of services to the Company, Mr. Frias will receive a cash incentive award equal to 15 percent of such net operating income and an equity incentive award of the Company’s common stock equal to 25 percent of such net operating income, at a share price based on the VWAP of the Company’s common stock for the thirty trading days prior to its award. The agreement is terminable for cause, death or disability.

 

In connection with Mr. Nguyen’s appointment as Chief Scientific Officer and as a director of the Company, the Board approved an Employment Agreement, effective as of the Closing of the Acquisition, by and between the Company and Mr. Nguyen. Under the terms of the agreement, the Company agreed to pay Mr. Nguyen an annual base salary of $100,000 for a term of two years. Subject to Mr. Nguyen’s continued provision of services to the Company, the agreement also provides for cash incentives of $2,000,000 and equity incentives of $8,938,750 of the Company’s restricted common stock, at a share price equal to the VWAP of the Company’s common stock for the 30 trading days prior to its award. The agreement also contains provisions for further cash and equity incentive awards to be determined based upon the net operating income (as defined in the employment agreement) received by the Company in the twelve months after the Closing Date pursuant to the Master Agreement. Subject to Mr. Nguyen’s continued provision of services to the Company, Mr. Nguyen will receive a cash incentive award equal to 12.49875 percent of such net operating income and an equity incentive award of the Company’s common stock equal to 20.83125 percent of such net operating income, at a share price based on the VWAP of the Company’s common stock for the thirty trading days prior to its award. The agreement is terminable for cause, death or disability.

 

In connection with Clifford J. Perry’s engagement as Director of Corporate Development, the Board approved an Employment Agreement, dated May 31, 2019, by and between the Company and Clifford J. Perry. Under the terms of the agreement, the Company agreed to pay Clifford J. Perry and annual base salary of $115,000 for a term of two years. The agreement is terminable for cause, death or disability.

 

In connection with Raymond Medeiros’ engagement as Director of Business Development, the Board approved an Employment Agreement, dated May 31, 2019, by and between the Company and Raymond Medeiros. Under the terms of this agreement, the Company agreed to pay Raymond Medeiros and annual base salary of $100,000 for a term of two years. The agreement is terminable for cause, death or disability.

 

In connection with Alex Frias’ engagement as an employee of the Company, the Board approved an Employment Agreement, effective as of the Closing of the Acquisition, by and between the Company and Alex Frias. Under the terms of the agreement, the Company agreed to pay Alex Frias an annual base salary of $100,000 for a term of two years. Subject to Alex Frias’ continued provision of services to the Company, the agreement also provides for cash incentives of $1,600,000 and equity incentives of $7,138,750 of the Company’s restricted common stock, at a share price equal to the VWAP of the Company’s common stock for the 30 days prior to its award. The agreement also contains provisions for further cash and equity incentive awards to be determined based upon the net operating income (as defined in the employment agreement) received by the Company in the twelve months after the Closing Date pursuant to the Master Agreement. Subject to Mr. Frias’ continued provision of services to the Company, Mr. Frias will receive a cash incentive award equal to 10.00125 percent of such net operating income and an equity incentive award consisting of the Company’s common stock equal to 16.66875 percent of such net operating income, at a share price based on the VWAP of the Company’s common stock for the thirty trading days prior to its award. The agreement is terminable for cause, death or disability.

 

Effective as of the Closing of the Acquisition on May 31, 2019, Laurence Ruhe resigned as the Chief Financial Officer of the Company. Mr. Ruhe’s responsibilities will be assumed on an interim basis by John Kalkanian, who has spent the past two years with Origin House as a Divisional Controller and Director of Finance. Mr. Kalkanian has been a CFO and Controller for both public and private companies over the past 25 years and received his MBA from the University of California, Irvine and his BA in Economics from the University of Michigan. After the Closing of the Acquisition, the Company’s CFO and finance team will be transitioned to Dallas, and the Company has begun the process of actively recruiting a Dallas-based CFO.

 

The foregoing descriptions of each of the employment agreements is qualified in its entirety by reference to the applicable voting agreements, which are attached as Exhibits 10.3, 10.4, 10.5, 10.6 and 10.7.

 

 

 

 

 

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Item 7.01 Regulation FD Disclosure.

 

On June 4, 2019, the Company announced via press release the closing of its acquisition of ECS Labs LLC, including its two wholly-owned operating subsidiaries, which collectively constitute the “Green Lotus” premium hemp oil products brand, effective as of May 31, 2019.

 

A copy of the press release is furnished as Exhibit 99.1 to this current report on Form 8-K and incorporated herein by reference.

 

The information contained in this Item 7.01 and Exhibit 99.1 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under Section 18 and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Exchange Act.

 

Item 9.01 Financial Statements and Exhibits.

 

The exhibits listed in the following Exhibit Index are filed as part of this report:

 

10.1 Voting Agreement dated as of May 31, 2019, by and among Freedom Leaf Inc., Carlos Frias, Ngoc Quang (Daniel) Nguyen, Alex Frias, Chris Fagan, Merida Capital Partners II LP, Clifford Perry, Raymond Medieros and Richard Cowan
10.2 Amendment No. 1, dated as of May 31, 2019, to that certain Securities Purchase Agreement, dated as of September 28, 2018, by and among Freedom Leaf Inc., Merida Capital Partners II LP, JM10-FFF, Clifford Perry, and Richard Cowan
10.3 Employment Agreement of Carlos Frias, dated as of May 31, 2019, by and between Freedom Leaf Inc. and Carlos Frias
10.4 Employment Agreement of Ngoc Quang (Daniel) Nguyen, dated as of May 31, 2019, by and between Freedom Leaf Inc. and Ngoc Quang (Daniel) Nguyen
10.5 Employment Agreement of Alex Frias, dated as of May 31, 2019, by and between Freedom Leaf Inc. and Alex Frias
10.6 Employment Agreement of Clifford Perry, dated as of May 31, 2019, by and between Freedom Leaf Inc. and Clifford Perry
10.7 Employment Agreement of Raymond Medeiros, dated as of May 31, 2019, by and between Freedom Leaf Inc. and Raymond Medeiros
99.1 Press Release dated June 4, 2019

   

 

 

 

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SIGNATURE

 

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.

 

Date: June 4, 2019 FREEDOM LEAF, INC.
   
  /s/ Carlos Frias                              
  Name:   Carlos Frias
  Title:     Chief Executive Officer

 

 

 

 

 

 

 

 

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Exhibit 10.1

 

VOTING AGREEMENT

 

This VOTING AGREEMENT (this “ Agreement ”), is made and entered into as of this 31 st day of May, 2019, by and among Freedom Leaf Inc., a Nevada corporation (the “ Company ”), those certain stockholders of the Company listed on Schedule A attached hereto (the “ Existing Holders ”) and those certain stockholders of the Company listed on Schedule B attached hereto (the “ Key Holders ” and, together with the Existing Holders and any subsequent stockholders who become parties hereto, the “ Stockholders ”).

 

RECITALS

 

WHEREAS, concurrently with the execution of this Agreement, the Company has entered into a Membership Interest Purchase Agreement (the “ Purchase Agreement ”), pursuant to which the Company acquired 100% of the membership or other ownership interests of ECS Labs LLC, a Texas limited liability company (the “ Acquisition ”);

 

WHEREAS, pursuant to the terms of the Purchase Agreement, as a condition to the closing of the Acquisition, the Stockholders have agreed to enter into this Agreement in order to set forth their agreements and understandings with respect to how shares of the capital stock of the Company held by them will be voted on.

 

NOW, THEREFORE, the parties agree as follows:

 

1.                Voting Provisions Regarding the Board .

 

1.1             Size of the Board . Each Stockholder agrees to vote, or cause to be voted, all Shares (as defined below) owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that the size of the Board shall be set and remain at six (6) directors. For purposes of this Agreement, the term “ Shares ” shall mean and include any securities of the Company that the holders of which are entitled to vote for members of the Board, including without limitation, all shares of common stock, par value $0.001 per share, of the Company (“ Common Stock ”) and preferred stock, par value $0.001 per share, of the Company (“ Preferred Stock ”), by whatever name called, now owned or subsequently acquired by a Stockholder, however acquired, whether through stock splits, stock dividends, reclassifications, recapitalizations, similar events or otherwise.

 

1.2             Board Composition . Each Stockholder agrees to vote, or cause to be voted, all Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that at each annual or special meeting of stockholders at which an election of directors is held or pursuant to any written consent of the stockholders, subject to Section 5, the following persons shall be elected to the Board:

 

(a)              Two Persons designated from time to time by Merida Capital Partners II, LP (the “ Existing Holder Designees ”), for so long as such Stockholder and its Affiliates (as defined below) continue to own beneficially any shares of Common Stock (including shares of Common Stock issued or issuable upon conversion of the Preferred Stock), which individuals shall initially be David Goldburg and David Vautrin;

 

(b)              Two Persons designated from time to time by the holders of a majority of the shares of Common Stock held by the Key Holders, for so long as the Key Holders who are then providing services to the Company as officers, employees or consultants continue to own beneficially any shares of Common Stock, which individuals shall initially be Carlos Frias and Daniel Nguyen (the “ ECS Directors ”);

 

(c)              One Person designated from time to time by Clifford Perry (the “ Perry Designee ”), for so long as such Stockholder continues to own beneficially at least 80% of the Shares held by such Stockholder as of the date hereof (including shares of Common Stock issued or issuable upon conversion of the Preferred Stock), which individual shall initially be Clifford Perry; and

 

 

 

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(d)              One Person designated from time to time by Raymond Medeiros (the “ Medeiros Designee ”), for so long as such Stockholder continues to own beneficially at least 80% of the Shares held by such Stockholder as of the date hereof (including shares of Common Stock issued or issuable upon conversion of the Preferred Stock), which individual shall initially be Raymond Medeiros.

 

For purposes of this Agreement, an individual, firm, corporation, partnership, association, limited liability company, trust or any other entity (collectively, a “ Person ”) shall be deemed an “ Affiliate ” of another Person who, directly or indirectly, controls, is controlled by or is under common control with such Person, including, without limitation, any general partner, managing member, officer, director or trustee of such Person, or any venture capital fund or registered investment company now or hereafter existing that is controlled by one or more general partners, managing members or investment advisers of, or shares the same management company or investment adviser with, such Person.

 

1.3             Failure to Designate a Board Member . In the absence of any designation from the Persons or groups with the right to designate a director as specified above, the director previously designated by them and then serving shall be reelected if still eligible and willing to serve as provided herein and otherwise, such Board seat shall remain vacant.

 

1.4             Removal of Board Members . Each Stockholder also agrees to vote, or cause to be voted, all Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that:

 

(a)              no director elected pursuant to Sections 1.2 or 1.3 of this Agreement may be removed from office other than for cause unless (i) such removal is directed or approved by the affirmative vote of the Person(s), or of the holders of at least a majority of the Shares, entitled under Section 1.2 to designate that director; or (ii) the Person(s) originally entitled to designate or approve such director or occupy such Board seat pursuant to Section 1.2 is no longer so entitled to designate or approve such director or occupy such Board seat;

 

(b)              any vacancies created by the resignation, removal or death of a director elected pursuant to Sections 1.2 or 1.3 shall be filled pursuant to the provisions of this Section 1.4 ;

 

(c)              upon the request of any party entitled to designate a director as provided in Section 1.2(a) , 1.2(b) , 1.2(c) or 1.2(d) to remove such director, such director shall be removed.

 

All Stockholders agree to execute any written consents required to perform the obligations of this Section 1 , and the Company agrees at the request of any Person or group entitled to designate directors to call a special meeting of stockholders for the purpose of electing directors.

 

1.5             No Liability for Election of Recommended Directors . No Stockholder, nor any Affiliate of any Stockholder, shall have any liability as a result of designating a person for election as a director for any act or omission by such designated person in his or her capacity as a director of the Company, nor shall any Stockholder have any liability as a result of voting for any such designee in accordance with the provisions of this Agreement.

 

1.6             No “Bad Actor” Designees . Each Person with the right to designate or participate in the designation of a director as specified above hereby represents and warrants to the Company that, to such Person’s knowledge, none of the “bad actor” disqualifying events described in Rule 506(d)(1)(i)-(viii) under the Securities Act of 1933, as amended (the “ Securities Act ”) (each, a “ Disqualification Event ”), is applicable to such Person’s initial designee named above except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. Any director designee to whom any Disqualification Event is applicable, except for a Disqualification Event to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable, is hereinafter referred to as a “ Disqualified Designee ”. Each Person with the right to designate or participate in the designation of a director as specified above hereby covenants and agrees (A) not to designate or participate in the designation of any director designee who, to such Person’s knowledge, is a Disqualified Designee and (B) that in the event such Person becomes aware that any individual previously designated by any such Person is or has become a Disqualified Designee, such Person shall as promptly as practicable take such actions as are necessary to remove such Disqualified Designee from the Board and designate a replacement designee who is not a Disqualified Designee.

 

 

 

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2.                Vote to Increase Authorized Common Stock . Each Stockholder agrees to vote or cause to be voted all Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to increase the number of authorized shares of Common Stock from time to time to ensure that there will be sufficient shares of Common Stock available for conversion of all of the shares of Preferred Stock outstanding at any given time.

 

3.                Remedies .

 

3.1             Covenants of the Company . The Company agrees to use its best efforts, within the requirements of applicable law, to ensure that the rights granted under this Agreement are effective and that the parties enjoy the benefits of this Agreement. Such actions include, without limitation, the use of the Company’s best efforts to cause the nomination and election of the directors as provided in this Agreement.

 

3.2             Specific Enforcement . Each party acknowledges and agrees that each party hereto will be irreparably damaged in the event any of the provisions of this Agreement are not performed by the parties in accordance with their specific terms or are otherwise breached. Accordingly, it is agreed that each of the Company and the Stockholders shall be entitled to an injunction to prevent breaches of this Agreement, and to specific enforcement of this Agreement and its terms and provisions in any action instituted in any court of the United States or any state having subject matter jurisdiction.

 

3.3             Remedies Cumulative . All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

4.                “Bad Actor” Matters.

 

 

 

4.1             Definitions . For purposes of this Agreement:

 

(a)    Company Covered Person ” means, with respect to the Company as an “issuer” for purposes of Rule 506 promulgated under the Securities Act, any Person listed in the first paragraph of Rule 506(d)(1).

 

(b)    Disqualified Designee ” means any director designee to whom any Disqualification Event is applicable, except for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable.

 

(c)    Disqualification Event ” means a “bad actor” disqualifying event described in Rule 506(d)(1)(i)-(viii) promulgated under the Securities Act.

 

(d)    Rule 506(d) Related Party ” means, with respect to any Person, any other Person that is a beneficial owner of such first Person’s securities for purposes of Rule 506(d) under the Securities Act. 

 

4.2             Representations .

 

(a)    Each Person with the right to designate or participate in the designation of a director pursuant to this Agreement hereby represents that (i) such Person has exercised reasonable care to determine whether any Disqualification Event is applicable to such Person, any director designee designated by such Person pursuant to this Agreement or any of such Person’s Rule 506(d) Related Parties, except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable and (ii) no Disqualification Event is applicable to such Person, any Board member designated by such Person pursuant to this Agreement or any of such Person’s Rule 506(d) Related Parties, except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. Notwithstanding anything to the contrary in this Agreement, each Existing Holder makes no representation regarding any Person that may be deemed to be a beneficial owner of the Company’s voting equity securities held by such Existing Holder solely by virtue of that Person being or becoming a party to (x) this Agreement, as may be subsequently amended, or (y) any other contract or written agreement to which the Company and such Existing Holder are parties regarding (1) the voting power, which includes the power to vote or to direct the voting of, such security; and/or (2) the investment power, which includes the power to dispose, or to direct the disposition of, such security.

 

 

 

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(b)    The Company hereby represents and warrants to the Existing Holders that no Disqualification Event is applicable to the Company or, to the Company’s knowledge, any Company Covered Person, except for a Disqualification Event as to which Rule 506(d)(2)(ii–iv) or (d)(3) is applicable.

 

4.3             Covenants . Each Person with the right to designate or participate in the designation of a director pursuant to this Agreement covenants and agrees (i) not to designate or participate in the designation of any director designee who, to such Person’s knowledge, is a Disqualified Designee, (ii) to exercise reasonable care to determine whether any director designee designated by such person is a Disqualified Designee, (iii) that in the event such Person becomes aware that any individual previously designated by any such Person is or has become a Disqualified Designee, such Person shall as promptly as practicable take such actions as are necessary to remove such Disqualified Designee from the Board and designate a replacement designee who is not a Disqualified Designee, and (iv) to notify the Company promptly in writing in the event a Disqualification Event becomes applicable to such Person or any of its Rule 506(d) Related Parties, or, to such Person’s knowledge, to such Person’s initial designee named in Section 1 , except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable.

 

5.                Term . This Agreement shall be effective as of the date hereof and shall continue in effect until and shall terminate upon the earliest to occur of (a) the consummation of a sale of the Company and distribution of proceeds to or escrow for the benefit of the Stockholders in accordance with the Company’s articles of incorporation; or (b) termination of this Agreement in accordance with Section 6.7.

 

6.                Miscellaneous .

 

6.1             Transfers . Each transferee or assignee of any Shares subject to this Agreement shall continue to be subject to the terms hereof, and, as a condition precedent to the Company’s recognition of such transfer, each transferee or assignee shall agree in writing to be subject to each of the terms of this Agreement by executing and delivering an Adoption Agreement substantially in the form attached hereto as Exhibit A . Upon the execution and delivery of an Adoption Agreement by any transferee, such transferee shall be deemed to be a party hereto as if such transferee were the transferor and such transferee’s signature appeared on the signature pages of this Agreement and shall be deemed to be an Existing Holder and Stockholder, or Key Holder and Stockholder, as applicable. The Company shall not permit the transfer of the Shares subject to this Agreement on its books or issue a new certificate representing any such Shares unless and until such transferee shall have complied with the terms of this Section 6.1 . Each certificate instrument, or book entry representing the Shares subject to this Agreement if issued on or after the date of this Agreement shall be notated by the Company with the legend set forth in Section 6.11 .

 

6.2             Successors and Assigns . The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

6.3             Governing Law . This Agreement shall be governed by the internal law of the State of Nevada, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Nevada.

 

6.4             Counterparts . This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g. , www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

6.5             Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

 

 

  4  

 

 

6.6             Notices .

 

(a)              All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on Schedule A or Schedule B hereto, or to such email address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 6.6 . If notice is given to the Company, a copy shall also be sent to Kleinberg, Kaplan, Wolff & Cohen, P.C., 551 Fifth Avenue, New York, NY 10017, Attn: Jonathan Ain, Esq., and if notice is given to the Key Holders, a copy shall also be given to Adam Foster Law, 717 17 th Street, Suite 1900, Denver CO 90202, Attn: Adam Foster, Esq.

 

(b)              Consent to Electronic Notice . Each Existing Holder and Key Holder consents to the delivery of any stockholder notice pursuant to the Nevada Revised Statutes (the “ NRS ”), as amended or superseded from time to time, by electronic transmission at the electronic mail address or the facsimile number set forth below such Existing Holder’s or Key Holder’s name on the Schedules hereto, as updated from time to time by notice to the Company, or as reflected on the books and records of the Company. Each Existing Holder and Key Holder agrees to promptly notify the Company of any change in its electronic mail address, and that failure to do so shall not affect the foregoing.

 

6.7             Consent Required to Amend, Modify, Terminate or Waive . This Agreement may be amended, modified or terminated (other than pursuant to Section 4.1 ) and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by (a) the Company; and (b) the Stockholders holding a majority of the Shares (including securities or rights convertible into, or exercisable or exchangeable for, Shares) then held by the Existing Holders and the Key Holders who are then providing services to the Company as officers, employees or consultants (voting together as a single class). Notwithstanding the foregoing:

 

(a)              this Agreement may not be amended, modified or terminated and the observance of any term of this Agreement may not be waived with respect to any Existing Holder or Key Holder without the written consent of such Existing Holder or Key Holder unless such amendment, modification, termination or waiver applies to all Existing Holders or Key Holders, as the case may be, in the same fashion;

 

(b)              the provisions of Section 1.2(a) and this Section 6.7(b) may not be amended, modified, terminated or waived without the written consent of Merida Capital Partners II, LP;

 

(c)              the provisions of Section 1.2(b) and this Section 6.7(c) may not be amended, modified, terminated or waived without the written consent of the Key Holders who are at such time providing services to the Company as an officer, employee or consultant;

 

(d)              the provisions of Section 1.2(c) and this Section 6.7(d) may not be amended, modified, terminated or waived without the written consent of Clifford Perry;

 

(e)              the provisions of Section 1.2(d) and this Section 6.7(e) may not be amended, modified, terminated or waived without the written consent of Raymond Medeiros; and

 

(f)               any provision hereof may be waived by the waiving party on such party’s own behalf, without the consent of any other party.

 

The Company shall give prompt written notice of any amendment, modification, termination, or waiver hereunder to any party that did not consent in writing thereto. Any amendment, modification, termination, or waiver effected in accordance with this Section 6.7 shall be binding on each party and all of such party’s successors and permitted assigns, whether or not any such party, successor or assignee entered into or approved such amendment, modification, termination or waiver. For purposes of this Section 6.7 , the requirement of a written instrument may be satisfied in the form of an action by written consent of the Stockholders circulated by the Company and executed by the Stockholder parties specified, whether or not such action by written consent makes explicit reference to the terms of this Agreement.

 

 

 

  5  

 

 

6.8             Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default previously or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

6.9             Severability . The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

 

6.10          Entire Agreement . This Agreement (including the Exhibits hereto) and the other Ancillary Agreements (as defined in the Purchase Agreement) constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

 

6.11          Share Certificate Legend . Each certificate, instrument, or book entry representing any Shares issued after the date hereof shall be notated by the Company with a legend reading substantially as follows:

 

THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VOTING REQUIREMENTS AND OTHER RESTRICTIONS SET FORTH IN A VOTING AGREEMENT BETWEEN THE HOLDER OF THIS CERTIFICATE AND CERTAIN OTHER PARTIES. TRANSFER OF THE COMMON STOCK IS SUBJECT TO THE RESTRICTIONS CONTAINED IN SUCH AGREEMENT.

 

The Company, by its execution of this Agreement, agrees that it will cause the certificates instruments, or book entry evidencing the Shares issued after the date hereof to be notated with the legend required by this Section 6.11 of this Agreement, and it shall supply, free of charge, a copy of this Agreement to any holder of such Shares upon written request from such holder to the Company at its principal office. The parties to this Agreement do hereby agree that the failure to cause the certificates, instruments, or book entry evidencing the Shares to be notated with the legend required by this Section 6.11 herein and/or the failure of the Company to supply, free of charge, a copy of this Agreement as provided hereunder shall not affect the validity or enforcement of this Agreement.

 

6.12          Stock Splits, Stock Dividends, etc. In the event of any issuance of Shares or the voting securities of the Company hereafter to any of the Stockholders (including, without limitation, in connection with any stock split, stock dividend, recapitalization, reorganization, or the like), such Shares shall become subject to this Agreement and shall be notated with the legend set forth in Section 6.12 .

 

6.13          Manner of Voting . The voting of Shares pursuant to this Agreement may be effected in person, by proxy, by written consent or in any other manner permitted by applicable law. For the avoidance of doubt, voting of the Shares pursuant to the Agreement need not make explicit reference to the terms of this Agreement.

 

6.14          Further Assurances . At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to carry out the intent of the parties hereunder.

 

6.15          Dispute Resolution The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Nevada and to the jurisdiction of the United States District Court for the District of Nevada for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Nevada or the United States District Court for the District of Nevada, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

 

 

 

  6  

 

 

6.16          SEPARATE COUNSEL . EACH PARTY ACKNOWLEDGES THAT IT HAS BEEN ADVISED TO RETAIN LEGAL COUNSEL AND HAS OTHERWISE HAD THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL PRIOR TO EXECUTING THIS AGREEMENT.

 

6.17          WAIVER OF JURY TRIAL : EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

6.18          Costs of Enforcement . If any party to this Agreement seeks to enforce its rights under this Agreement by legal proceedings, the non-prevailing party shall pay all costs and expenses incurred by the prevailing party, including, without limitation, all reasonable attorneys’ fees.

 

6.19          Aggregation of Stock . All Shares held or acquired by a Stockholder and/or its Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement, and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

 

6.20          Spousal Consent . If any individual Stockholder is married on the date of this Agreement, such Stockholder’s spouse shall execute and deliver to the Company a consent of spouse in the form of Exhibit B hereto (“ Consent of Spouse ”), effective on the date hereof. Notwithstanding the execution and delivery thereof, such consent shall not be deemed to confer or convey to the spouse any rights in such Stockholder’s Shares that do not otherwise exist by operation of law or the agreement of the parties. If any individual Stockholder should marry or remarry subsequent to the date of this Agreement, such Stockholder shall within thirty (30) days thereafter obtain his/her new spouse’s acknowledgement of and consent to the existence and binding effect of all restrictions contained in this Agreement by causing such spouse to execute and deliver a Consent of Spouse acknowledging the restrictions and obligations contained in this Agreement and agreeing and consenting to the same.

 

[ Signature Page Follows ]

 

 

 

  7  

 

 

IN WITNESS WHEREOF, the parties have executed this Voting Agreement as of the date first written above.

 

  FREEDOM LEAF INC.
   
  By:   /s/ Raymond Medeiros
  Name: Raymond Medeiros
  Title: Executive Vice President & Corporate Secretary

 

 

 

 

 

 

 

Signature Page to Voting Agreement

 

 

  8  

 

 

 

  EXISTING HOLDERS:
   
  MERIDA CAPITAL PARTNERS II LP
  By:  Merida Manager II  LLC, its general partner
   
  By:     /s/ Mitchell Baruchowitz
  Name:  Mitchell Baruchowitz
  Title:     Manager
   
  Signature:    /s/ Clifford J. Perry
  Name: Clifford J. Perry
   
  Signature:  / s/  Raymond Medeiros
  Name: Raymond Medeiros
   
  Signature:   /s/ Richard Cowan
  Name: Richard Cowan

 

 

 

 

 

 

 

Signature Page to Voting Agreement

 

 

  9  

 

 

 

  KEY HOLDERS:
   
  Signature:   /s/  Carlos Frias
  Name:  Carlos Frias
   
   
  Signature:   /s/ Ngoc Quang Nguyen
  Name:  Ngoc Quang (Daniel) Nguyen
   
   
  Signature:   /s/  Alex Frias
  Name:  Alex Frias

 

 

 

 

 

 

 

 

Signature Page to Voting Agreement

 

 

  10  

 

 

SCHEDULE A

 

EXISTING HOLDERS

 

Name and Address Number of Shares Held
   

Merida Capital Partners II, LP

[REDACTED]

17,000,000
   

Clifford Perry

[REDACTED]

12,357,542
   

Raymond Medeiros

[REDACTED]

7,449,228
   

Richard Cowan

[REDACTED]

2,463,043

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  11  

 

 

 

SCHEDULE B

 

KEY HOLDERS

 

Name and Address Number of Shares Held
   

Carlos Frias

[REDACTED

22,987,654
   

Ngoc Quang (Daniel) Nguyen

[REDACTED 

22,987,654
   

Alex Frias

[REDACTED]

17,456,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  12  

 

EXHIBIT A

 

ADOPTION AGREEMENT

 

This Adoption Agreement (“ Adoption Agreement ”) is executed on ___________________, 2019, by the undersigned (the “ Holder ”) pursuant to the terms of that certain Voting Agreement dated as of May 31, 2019 (the “ Agreement ”), by and among the Company and certain of its Stockholders, as such Agreement may be amended or amended and restated hereafter. Capitalized terms used but not defined in this Adoption Agreement shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Adoption Agreement, the Holder agrees as follows.

 

1.1        Acknowledgement . Holder acknowledges that Holder is acquiring certain shares of the capital stock of the Company (the “ Stock ”) [or options, warrants, or other rights to purchase such Stock (the “ Options ”),] for one of the following reasons (Check the correct box):

 

¨ As a transferee of Shares from a party in such party’s capacity as an “Existing Holder” bound by the Agreement, and after such transfer, Holder shall be considered an “Existing Holder” and a “Stockholder” for all purposes of the Agreement.

 

¨ As a transferee of Shares from a party in such party’s capacity as a “Key Holder” bound by the Agreement, and after such transfer, Holder shall be considered a “Key Holder” and a “Stockholder” for all purposes of the Agreement.

 

1.2        Agreement . Holder hereby (a) agrees that the Stock [Options], and any other shares of capital stock or securities required by the Agreement to be bound thereby, shall be bound by and subject to the terms of the Agreement and (b) adopts the Agreement with the same force and effect as if Holder were originally a party thereto.

 

1.3        Notice . Any notice required or permitted by the Agreement shall be given to Holder at the address or facsimile number listed below Holder’s signature hereto.

 

HOLDER: ____________________ ACCEPTED AND AGREED:
   
By: __________ __________ FREEDOM LEAF INC.
Name and Title of Signatory  
   
Address: __________ __________ By: ____________________
   
____________________ Title: __________ _________
   
Facsimile Number: __________  

 

 

 

 

 

 

 

  13  

 

 

EXHIBIT B

 

CONSENT OF SPOUSE

 

I, ____________________, spouse of ______________, acknowledge that I have read the Voting Agreement, dated as of May 31, 2019, to which this Consent is attached as Exhibit B (the “ Agreement ”), and that I know the contents of the Agreement. I am aware that the Agreement contains provisions regarding the voting and transfer of shares of capital stock of the Company that my spouse may own, including any interest I might have therein.

 

I hereby agree that my interest, if any, in any shares of capital stock of the Company subject to the Agreement shall be irrevocably bound by the Agreement and further understand and agree that any community property interest I may have in such shares of capital stock of the Company shall be similarly bound by the Agreement.

 

I am aware that the legal, financial and related matters contained in the Agreement are complex and that I am free to seek independent professional guidance or counsel with respect to this Consent. I have either sought such guidance or counsel or determined after reviewing the Agreement carefully that I will waive such right.

 

 

 

Dated:__________ ____________________________
  Name of Stockholder’s Spouse

 

 

 

 

 

  14  

 

Exhibit 10.2

 

AMENDMENT NO. 1

 

TO

 

SECURITIES PURCHASE AGREEMENT

 

This Amendment No. 1 to Securities Purchase Agreement (this “ Amendment ”) is made as of May 31, 2019, by and among Freedom Leaf Inc., a Nevada corporation (the “ Company ”) and the parties signatories hereto (the “ Amending Stockholders ”).

 

WHEREAS, the Company and the Amending Stockholders are parties to that certain Securities Purchase Agreement, dated as of September 28, 2018, by and among the Company and the investors listed on the Schedule of Buyers attached thereto (the “ Agreement ”; capitalized terms used but not defined herein shall have the meanings given to them in the Agreement.);

 

WHEREAS, Section 9(e) of the Agreement permits amendment of the Agreement only in a writing signed by the Company and holders of at least eighty percent (80%) of the Common Shares issued and issuable under the Agreement (the “ Requisite Threshold ”);

 

WHEREAS, as of the date hereof, the Amending Stockholders collectively hold at least the Requisite Threshold; and

 

WHEREAS, this Amendment complies with the requirements of Section 9(e) of the Agreement.

 

NOW, THEREFORE, the Company and the Amending Stockholders hereby agree as follows:

 

1.                Amendment and Restatement . Section 4(q) of the Agreement is hereby deleted and replaced in its entirety by the following:

 

Conversion of Preferred Stock . The Company shall have the right to convert each share of Series A Preferred Stock issued and outstanding into one-hundred (100) fully paid and non-assessable Common Shares (the “ Mandatory Conversion ”) at any time in its sole discretion beginning on any date on or after May 30, 2019, by delivering written notice to each holder of record of shares of Series A Preferred Stock specifying the effective date and time of the Mandatory Conversion (the “ Mandatory Conversion Time ”). Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Series A Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares of Series A Preferred Stock (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account of the alleged loss, theft or destruction of such certificate) to the Company at the place designated in such notice. If so required by the Company, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Company, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Series A Preferred Stock converted, including the rights, if any, to receive notices and vote (other than as a holder of Common Shares), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender any certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or lost certificate affidavit and agreement) therefor, to receive the items provided for in this Section 4(q). As soon as practicable after the Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Series A Preferred Stock, the Company shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Shares issuable on such conversion in accordance with the provisions hereof. Such converted Series A Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Company may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series A Preferred Stock accordingly.

 

 

 

  1  

 

 

2.                Agreement . Except as modified by this Amendment, the Agreement shall remain unchanged and in full force and effect.

 

3.                Governing Law . This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of Nevada, without giving effect to the principles of conflicts of law.

 

4.                Counterparts . This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument.

 

[ Signature pages follow ]

 

 

 

 

 

 

 

 

 

 

 

 

  2  

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first written above.

 

  COMPANY
   
   
  FREEDOM LEAF INC.
   
  By:   /s/ Clifford Perry                                        
  Name: Clifford Perry
  Title:   Chief Executive Officer

 

 

 

 

 

 

 

 

[Signature Page to Amendment No. 1 to Securities Purchase Agreement]

 

 

 

  3  

 

 

 

  AMENDING STOCKHOLDERS
   
   
  MERIDA CAPITAL PARTNERS II, LP
   
  By:  Merida Manager II LLC, its general partner
  By:      /s/ Mitchell Baruchowitz
  Name: Mitchell Baruchowitz
  Title: Managing Partner
   
   
  JM10-FFF
   
  By: /s/ Abner Kurtin
  Name: Abner Kurtin
  Title:   Managing Partner

 

 

 

 

 

 

 

 

[Signature Page to Amendment No. 1 to Securities Purchase Agreement]

 

  4  

 

 

ACKNOWLEDGED AND AGREED:

 

 

 

Each of the undersigned holders of Series A Preferred Stock hereby acknowledges and agrees that the Conversion Rights (as defined in Article II of the Company’s Articles of Incorporation, as in effect from time to time) shall be automatically exercised, without any further action by the undersigned, upon the Company’s determination of the Mandatory Conversion Time in accordance with this Amendment.

 

 

 

/s/ Clifford J. Perry

Name: Clifford J. Perry

 

  

/s/ Richard C. Cowan

Name: Richard C. Cowan

 

 

 

 

 

 

 

 

 

 

 

  5  

 

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

(Carlos Frias)

 

This EMPLOYMENT AGREEMENT (this “ Agreement ”) is made and entered into as of this 31 st day of May, 2019 (the “ Effective Date ”), by and between Freedom Leaf Inc., a Nevada corporation (the “ Company ”), and Carlos Frias, an individual (“ Employee ”).

 

In consideration of the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and Employee, it is hereby agreed as follows:

 

ARTICLE I
EMPLOYMENT

 

1.1                Employment . The Company agrees to, and does hereby, employ Employee, and Employee agrees to, and does hereby accept such employment, upon the terms and subject to the conditions set forth in this Agreement. Employee represents and warrants to the Company that (A) Employee has the legal capacity to execute and perform this Agreement, (B) this Agreement is a valid and binding agreement enforceable against Employee according to its terms, and (C) the execution and performance of this Agreement by Employee does not violate the terms of any existing agreement or understanding to which Employee is a party or by which Employee otherwise may be bound. Effective as of the Effective Date, the Company agrees to continue to employ Employee as an employee of the Company and as the Chief Executive Officer of the Company as further set forth in Section 1.2, and Employee agrees to continue his employment by the Company, for the period commencing on the Effective Date and continuing until the two (2) year anniversary of the Effective Date unless earlier terminated in accordance with Article III below.

 

1.2               Position and Duties . Employee shall be employed in the position of Chief Executive Officer of the Company. Employee shall devote Employee’s entire business time, loyalty, attention and energies exclusively to the business interests of the Company while employed by the Company, will not engage in any other employment activities for any direct or indirect remuneration and shall perform his duties and responsibilities diligently and to the best of his ability.

 

ARTICLE II
COMPENSATION AND OTHER BENEFITS

 

2.1               Base Salary . As compensation for Employee’s services hereunder and in consideration of Employee’s other agreements hereunder, during the term of employment, the Company shall pay Employee a base salary equal to $130,000 per annum (“ Base Salary ”), subject to withholding and customary payroll deductions. The Base Salary shall be payable in accordance with the customary payroll practices of the Company.

 

2.2               Incentive Bonuses . In addition to the Base Salary, provided Employee is actively providing service to the Company as Chief Executive Officer, and subject to Article III, Employee shall receive the following incentive bonuses (collectively, the “ Incentive Bonuses ”):

 

(a)                Cash Incentives . Employee will be entitled to receive: (i) on the date that is thirty (30) days after the Effective Date, a cash bonus equal to $1,200,000; (ii) on the date that is one-hundred and twenty (120) days after the Effective Date, a cash bonus equal to $1,200,000, (iii) on the date that is twelve (12) months after the Effective Date, a cash bonus equal to 15% of the Net Operating Income (as defined below) received by the Company (and/or its affiliates) from the Effective Date until the one-year anniversary of the Effective Date pursuant to that certain Master Manufacturing Agreement, dated as of November 13, 2017, by and between ECS Labs LLC and CBD LIFE SA DE CV (as amended, restated, modified or supplemented from time to time, the “ Master Agreement ”); and (iv) any other cash bonus awards approved by the Board of Directors of the Company (the “ Board ”); provided, however, upon any termination of this Agreement prior to the Expiration Date (as defined below), Employee shall remit to the Company a cash amount equal to the Excess Amount upon demand by the Company, and if the Excess Amount is not so repaid within ninety (90) days of such demand, the Company shall have the right to take any and all action to effectuate such remittance.

 

(b)                Equity Incentives . Subject to the approval of the Board and stockholders of the Company, Employee shall receive (i) on the date that is sixty (60) days after the Effective Date, an equity award equal to $10,738,750 of the Company’s restricted common stock, as calculated based on the Common Stock Value (as defined below), subject to Employee’s execution of that certain restricted stock agreement set forth on Schedule A attached hereto (the “ RSA ”), (ii) on the date that is twelve (12) months from the Effective Date, an equity award equal to approximately 25% of the Net Operating Income received by the Company from the Effective Date until the one-year anniversary of the Effective Date pursuant to the Master Agreement, as calculated based on the Common Stock Value, subject to Employee’s execution of the RSA; and (iii) any other equity incentive awards approved by the Board.

 

 

 

 

  1  
 

 

2.3               Benefit Plans . During the term of Employee’s employment with the Company, Employee will be eligible to participate in the Company’s retirement plans that are qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), if any, and in the Company’s employee welfare benefit plans that are available to any other executive employees of the Company (the “ Plans ”), in accordance with and subject to the terms and conditions thereof. The terms and conditions of the Plans, as expressed in the Plan documents, will control including, but not limited to, the Company’s ability to amend, modify or terminate any of those programs as it determines appropriate in accordance with the Plans’ terms. During the term of Employee’s employment with the Company, the Company shall pay to maintain Employee’s existing health insurance plan or provide health insurance with substantially similar coverage to Employee’s existing health insurance plan.

 

2.4               Expenses . The Company shall reimburse Employee for all expenses reasonably incurred in the course of the performance of Employee’s duties and responsibilities pursuant to this Agreement and consistent with the Company’s policies with respect to travel, entertainment and miscellaneous expenses; provided, that any single expenditure in excess of $5,000 shall require the approval of the Board.

 

2.5               Vacation . In any year, Employee shall be entitled to take reasonable vacation provided that such vacation does not prevent him from adequately performing his duties under this Agreement.

 

2.6               Withholding . All payments to be made by the Company hereunder will be subject to any withholding requirements.

 

2.7               Certain Definitions . As used in this Section 2:

 

(a)                Common Stock Value ” means an amount per share of Common Stock equal to the arithmetic average of the volume-weighted average (rounded to two decimal places) trading price per share of Common Stock for the thirty (30) full trading days ended on and including the trading day prior to the applicable determination date, using trading prices reported on the OTCQB based on all trades in Common Stock on the OTCQB during the primary trading sessions from 9:30 a.m., New York Time, to 4:00 p.m., New York Time (and not an average of the daily averages during such thirty (30) trading days).

 

(b)                Excess Amount ” means the product obtained by multiplying (i) the gross amount received by Employee pursuant to Section 2.2(a) of this Agreement, by (ii) the Remaining Service Period.

 

(c)                Net Operating Income ” shall mean the difference of gross income less cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes and other expenses, each determined on a generally accepted accounting principles basis of accounting.

 

(d)                Remaining Service Period ” means the quotient obtained by dividing (i) that number of days between the effective date of any termination of this Agreement and the Expiration Date (not including the effective date of such termination, but including the Expiration Date), by (ii) 731.

 

ARTICLE III
TERMINATION; EQUITY

 

3.1               Term . Employee’s employment shall commence on the Effective Date and shall continue until the two (2) year anniversary of the Effective Date (the “ Expiration Date ”), unless earlier terminated pursuant to the terms of this Agreement.

 

3.2               Right to Terminate; Automatic Termination .

 

(a)                Termination for Cause . The Company shall be entitled to terminate this Agreement for Cause (as defined below) effective immediately in the event of (a) Employee’s material breach of any agreement between Employee and the Company; (b) Employee’s conviction of, or Employee’s plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State, provided, however, that such felony is not related to the manufacture, sale or possession of cannabis or any components thereof; (c) Employee’s gross negligence or willful misconduct in connection with the provision of services for the Company; or (d) Employee’s failure to cooperate in good faith with a governmental or internal investigation of the Company or its managers, officers or employees (collectively, “ Cause ”); provided, however, that if any such event by its nature is capable of being cured with no adverse effect to the Company, and Employee is taking reasonable and diligent steps to cure such event, then such termination shall be effective only if such event remains uncured for a period of thirty calendar days after the Company provides written notice to Employee setting forth the nature of the event constituting Cause hereunder.

 

(b)                Termination Upon Death or Disability . Subject to Section 3.3, Employee’s employment and the Company’s obligations under this Agreement, unless specifically stated otherwise herein, shall terminate: (i) automatically, effective immediately and without any notice being necessary, upon Employee’s death; and (ii) in the event of any Disability of Employee, by the Company giving notice of termination to Employee. As used in this Section 3.2(b), “ Disability ” shall mean that (A) Employee is unable, by reason of an injury, a sickness or accident, to perform Employee’s duties under this Agreement for an aggregate of sixty (60) days in any consecutive six (6) month period, or (B) Employee has a guardian of the person or estate appointed by a court of competent jurisdiction.

 

 

 

 

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3.3               Rights Upon Termination . If Employee’s employment is terminated pursuant to Section 3.2, or if Employee quits employment, notwithstanding the terms of this Agreement, Employee or Employee’s estate shall have no further rights against the Company hereunder, except for the right to receive, (i) any earned but unpaid Base Salary and Incentive Bonuses, (ii) reimbursement of expenses to which Employee is entitled pursuant to Section 2.4, and (iii) Employee shall be deemed to resign from any board to which Employee has been appointed or nominated by or on behalf of the Company.

 

3.4               No Automatic Cross-Default . This Agreement is being executed simultaneously with that certain Membership Interest Purchase Agreement, by and between, inter alia, the Company and Employee (the “ Purchase Agreement ”). Each of the Company and Employee acknowledge and agree that this Agreement, the RSA and the Purchase Agreement each create independent rights and obligations, are supported by adequate consideration and stand on their own. Accordingly, (i) a default by Employee or the Company under this Agreement shall not cause an automatic cross-default by Employee or the Company under the Restricted Stock Agreement and/or the Purchase Agreement, and (ii) a default by Employee or the Company under the Restricted Stock Agreement and/or the Purchase Agreement shall not cause an automatic cross-default under this Agreement. Notwithstanding the foregoing, nothing in this Section 3.4 shall preclude or otherwise limit either party from asserting any claim or right against the other party or from taking any other action under each of this Agreement, the RSA and/or the Purchase Agreement based upon the same act or omission by the other party that creates an alleged default under any one of the aforesaid agreements.

 

ARTICLE IV
CONFIDENTIALITY; NON-SOLICITATION

 

4.1               Confidential Information .

 

(a)                Company Information . Employee agrees that during and after his employment with the Company, he will hold in the strictest confidence, and will not (except for the benefit of the Company during his employment or for limited use by Employee’s accountants, financial planners, attorneys and other professional consultants), as required by applicable law, a court order or an order or request of a relevant regulatory authority or in order to enforce a claim against the Company (including, without limitation, under this Agreement), use or disclose to any person, firm, corporation or other entity any Company Confidential Information. Employee understands that “ Company Confidential Information ” means any non-public information that relates to the actual or anticipated business, research or development of the Company, or to the Company’s technical data, trade secrets, or know-how, including, but not limited to, research, product plans, or other information regarding the Company’s products or services and markets therefor; customer lists and customer contact information, their buying histories, and preferences (including, but not limited to, such information relating to customers of the Company on which Employee called or with which Employee may become acquainted during the term of his employment); personnel information (including, but not limited to, information regarding employees’ skills and performance); information about vendors, supplier and business partners; software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, and hardware configuration information; and marketing, finances, and/or other business information; provided , however , that Company Confidential Information does not include any of the foregoing items to the extent the same have become publicly known and made generally available through no wrongful act of Employee or of others. Employee understands that nothing in this Agreement is intended to limit employees’ rights to discuss the terms, wages, and working conditions of their employment, as protected by applicable law.

 

(b)                Third Party Information . Employee recognizes that the Company may have received and in the future may receive from third parties associated with the Company, e.g., the Company’s customers, suppliers, licensors, licensees, partners, or collaborators (“ Associated Third Parties ”), their confidential or proprietary information (“ Associated Third Party Confidential Information ”). By way of example, and not as an exhaustive list, Associated Third Party Confidential Information may include the habits or practices of Associated Third Parties, the technology of Associated Third Parties, requirements of Associated Third Parties, and information related to the business conducted between the Company and such Associated Third Parties. Employee agrees at all times during his employment with the Company and thereafter to hold in the strictest confidence, and not to use or to disclose to any person, firm, corporation, or other entity any Associated Third Party Confidential Information, except as necessary in carrying out his work for the Company consistent with the Company’s agreement with such Associated Third Parties or as required by applicable law, a court order or an order or request of a relevant regulatory authority. Employee further agrees to comply with any and all Company policies and guidelines that may be adopted from time to time during the term of his employment regarding Associated Third Parties and Associated Third Party Confidential Information. Employee understands that his unauthorized use or disclosure of Associated Third Party Confidential Information or violation during his employment of any Company policies will lead to disciplinary action, up to and including immediate termination and legal action by the Company. Third Party Confidential Information does not include any of the foregoing items to the extent the same have become publicly known and made generally available through no wrongful act of Employee or of others. Employee understands that nothing in this Agreement is intended to limit employees’ rights to discuss the terms, wages, and working conditions of their employment, as protected by applicable law.

 

 

 

 

 

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4.2               Inventions .

 

(a)                Inventions Retained and Licensed . Employee represents and warrants that there are no inventions, discoveries, original works of authorship, developments, improvements, and trade secrets that were conceived in whole or in part by Employee prior to his employment with the Company or any of its subsidiaries and to which he has any right, title, or interest, and which relate to the Company’s proposed business, products, or research and development (collectively, “ Prior Inventions ”). Notwithstanding the foregoing, if, in the course of his employment with the Company, Employee incorporates into or uses in connection with any product, process, service, technology, or other work by or on behalf of the Company any Prior Invention, Employee hereby grants to the Company a non-exclusive, royalty-free, fully paid-up, irrevocable, perpetual, worldwide license, with the right to grant and authorize sublicenses, to make, have made, modify, use, import, offer for sale, and sell such Prior Invention as part of or in connection with such product, process, service, technology, or other work, and to practice any method related thereto.

 

(b)                Assignment of Inventions . Employee agrees that he will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assigns to the Company, or its designee, all his right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs, discoveries, ideas, trademarks, or trade secrets, whether or not patentable or registrable under patent, copyright, or similar laws, which Employee may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time Employee is in the employ of the Company or any of its subsidiaries (including during his off-duty hours), or with the use of Company’s equipment, supplies, facilities, or Company Confidential Information, except as provided in Section 4.1 (collectively referred to as “ Inventions ”). Employee further acknowledges that all original works of authorship that are made by him (solely or jointly with others) within the scope of and during the period of his employment with the Company and that are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act. Employee understands and agrees that the decision whether or not to commercialize or market any Inventions is within the Company’s sole discretion and for the Company’s sole benefit, and that no royalty or other consideration will be due to Employee as a result of the Company’s efforts to commercialize or market any such Inventions.

 

(c)                Maintenance of Records . Employee agrees to keep and maintain adequate, current, accurate, and authentic written records of all Inventions made by him (solely or jointly with others) during the term of his employment with the Company. The records will be in the form of notes, sketches, drawings, electronic files, reports, or any other format that may be specified by the Company. The records are and will be available to and remain the sole property of the Company at all times.

 

(d)                Patent and Copyright Registrations . Employee agrees to reasonably assist the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in the Inventions and any rights relating thereto in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, and all other instruments that the Company shall deem proper or necessary in order to apply for, register, obtain, maintain, defend, and enforce such rights, and in order to assign and convey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title, and interest in and to such Inventions and any rights relating thereto, and testifying in a suit or other proceeding relating to such Inventions and any rights relating thereto. Employee further agrees that his obligation to execute or cause to be executed, when it is in his power to do so, any such instrument or papers shall continue after the termination of this Agreement. If the Company is unable because of Employee’s mental or physical incapacity or for any other reason to secure Employee’s signature with respect to any Inventions, including, without limitation, to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering such Inventions, then Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney in fact, to act for and in his behalf and stead, to execute and file any papers and oaths, and to do all other lawfully permitted acts with respect to such Inventions with the same legal force and effect as if executed by the Employee.

 

4.3               Conflicting Employment .

 

(a)                Current Obligations . Employee agrees that during the term of his employment with the Company, he will not engage in or undertake any other employment, occupation, consulting relationship, or commitment that is directly related to the business in which the Company is now involved or becomes involved or a business which Employee understands the Company to actively have plans to become involved, nor will Employee engage in any other activities that interfere with his ability to fully and satisfactorily perform his duties to the Company, except as may otherwise be agreed in writing by and between Employee and the Company.

 

 

 

 

 

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(b)                Prior Relationships . Without limiting Section 4.3(a), Employee represents that he has no other agreements, relationships, or commitments to any other person or entity that conflict with his obligations to the Company under this Agreement or his ability to become employed and perform the services for which he is being employed by the Company. Employee further agrees that if he has signed a confidentiality agreement or similar type of agreement with any former employer or other entity, he will comply with the terms of any such agreement to the extent that its terms are lawful under applicable law. Employee represents and warrants that after undertaking a careful search (including, but not limited to, searches of his computers, cell phones, electronic devices, and documents), he has returned all property and confidential information belonging to all prior employers. Moreover, he agrees to fully indemnify the Company, its directors, managers, officers, agents, employees, investors, shareholders, members, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns for all verdicts, judgments, settlements, and other losses incurred by any of them resulting from Employee’s breach of his obligations under any agreement to which he is a party or obligation to which he is bound, as well as any reasonable attorneys’ fees and costs if the plaintiff is the prevailing party in such an action, except as prohibited by law.

 

4.4               Returning Company Documents . Upon separation from employment with the Company or upon written demand by the Company during his employment, Employee will immediately deliver to the Company, and will not keep in his possession, recreate, or deliver to anyone else, any and all Company property, including, but not limited to, Company Confidential Information, Associated Third Party Confidential Information, as well as all devices and equipment belonging to the Company or its subsidiaries (including, but not limited to, computers, handheld electronic devices, telephone equipment, and other electronic devices), Company credit cards, records, data, notes, notebooks, reports, files, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, photographs, charts, any other documents and property, and reproductions of any and all of the aforementioned items that were developed by Employee pursuant to his employment with the Company, obtained by him in connection with his employment with the Company, or otherwise belonging to the Company, its successors, or assigns, including, without limitation, those records maintained pursuant to Section 4.2(c). Employee also consents to an exit interview to confirm his compliance with this Article IV.

 

4.5               Notification of New Employer . In the event that Employee leaves the employ of the Company, Employee hereby grants consent to notification by the Company to his new employer about his obligations under this Agreement including information to his new employer concerning the enforceability of this Agreement.

 

4.6               Non-Solicitation .

 

(a)                Solicitation of Employees . Employee agrees that for a period of two (2) years immediately following the documented date of termination of his relationship with the Company for any reason, whether voluntary or involuntary, with or without cause, Employee shall not either directly or indirectly solicit any employees of the Company or any of its subsidiaries to leave their employment, or attempt to solicit employees of the Company or any of its subsidiaries to leave their employment, either for Employee or for any other person or entity with which Employee is then employed or otherwise affiliated.

 

(b)                Solicitation of Customers, Suppliers, etc . Employee agrees that for a period of two (2) years immediately following the documented date of termination of his relationship with the Company for any reason, whether voluntary or involuntary, with or without cause, Employee shall not either directly or indirectly (i) request or advise any customer, supplier or any other person or entity known to be associated with the Company or any of its affiliates or subsidiaries, to withdraw, curtail or cancel or in any other way lessen its use of the business services of the Company or any of its affiliates or subsidiaries or (ii) for the purpose of conducting or engaging in any business directly or indirectly competitive with the Company (whether individually or on behalf of Employee’s affiliates or new employer) call upon, solicit, advise, sign, hire, interfere with, or otherwise do or conduct, or attempt to do or conduct, business with any person or entity covered by any written or oral agreement with the Company or any of its affiliates or subsidiaries, or take away or interfere or attempt to interfere with any Company business custom, business trade, or business patronage of the Company or any of its affiliates or subsidiaries.

 

4.7               Non-Compete . Employee agrees that for a period of one (1) year immediately following the documented date of termination of his relationship with the Company for any reason, whether voluntary or involuntary, Employee shall not either directly or indirectly in the geographical areas that the Company does business or has done business at the time of the Employee’s termination, engage or assist others in engaging in any business or enterprise (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) that is competitive with the Company’s business, including but not limited to any business or enterprise that develops, manufactures, markets, licenses, sells or provides any product or service that competes with any product or service developed, manufactured, marketed, licensed, sold or provided, or planned to be developed, manufactured, marketed, licensed, sold or provided, by the Company while Employee was employed by the Company. If Employee violates the provisions of any of the preceding paragraphs of this Section 4, Employee shall continue to be bound by the restrictions set forth in such paragraph until a period of one (1) year has expired without any violation of such provisions.

 

4.8               Representations . Employee agrees to execute any proper oath or verify any proper document reasonably required to carry out the terms of this Agreement. Employee represents that his performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by Employee in confidence or in trust prior to his employment by the Company or any of its subsidiaries. Employee hereby represents and warrants that he has not entered into, and Employee will not enter into, any oral or written agreement in conflict herewith.

 

 

 

 

 

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4.9               Non-Disparagement . During Employee’s employment with the Company and for a period of three (3) years thereafter, Employee agrees, to the fullest extent permissible by law, not intentionally to make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal, direct or indirect communications that are or could be harmful to or reflect negatively on the Company or its subsidiaries or that are otherwise disparaging of the Company or its subsidiaries and/or their businesses, or any of its or their subsidiaries, past, present or future officers, directors, managers, employees, equity holders, members, advisors, agents, policies, procedures, practices, services, products, decision-making, conduct, professionalism or compliance with standards of any of the foregoing provided that the foregoing is not intended to prohibit truthful statements made by the Employee in his capacity as an officer or employee of a competitor after his employment with the Company has terminated, provided that Employee continues to comply with his confidentiality obligations under this Agreement. The provisions of this Section 4.9 are in addition to any other written agreements on this subject that Employee may have with the Company or any of its subsidiaries, and are not meant to, and do not excuse any, additional obligations that Employee may have under such agreements. Nothing in this Section shall be construed to limit Employee’s ability to cooperate with the investigation of any government agency of competent jurisdiction or to bring or defend against any legal claim. In any civil litigation arising out of or related to this Agreement, the parties shall cooperate to seek a protective order consistent with this Section and Section 4.1 above.

 

ARTICLE V
GENERAL PROVISIONS

 

5.1               Notices . Any and all notices provided for in this Agreement shall be given in writing and shall be deemed given to a party at the earlier of (a) when actually delivered to such party, or (b) when mailed to such party by registered or certified mail (return receipt requested) or sent to such party by courier, confirmed by receipt, and addressed to such party at the address designated below for such party as follows (or to such other address for such party as such party may have substituted by notice to the other party pursuant to this Section 5.1):

 

  If to the Company: Freedom Leaf Inc.
    3571 E. Sunset Road, Suite 420
    Las Vegas, NV 89120
     
  with a copy to: Kleinberg, Kaplan, Wolff & Cohen, P.C.
    551 Fifth Avenue
    New York, NY 10176
    Telecopy: (212) 986-8866
    Telephone: (212) 880-9869
    Email: jain@kkwc.com
    Attention: Jonathan Ain
     
  If to Employee: Carlos Frias
    [REDACTED]
     
  with a copy to: Saunders Koechel & Sharp LLP
    Attention: John Koechel
    5404 Birchman Avenue
    Fort Worth, Texas 76107
    Telecopy: 303-396-0243
    Telephone: 214-923-7577
    Email: koechel@skandslegal.com

  

5.2               Entire Agreement; Survival . This Agreement contains the entire understanding and the full and complete agreement of the parties and supersedes and replaces any prior understandings and agreements among the parties with respect to the subject matter hereof. The provisions of this Agreement shall survive the termination of this Agreement, or of Employee’s employment for any reason, to the extent necessary to enable the parties to enforce their respective rights.

 

5.3               Amendment; Headings and References . This Agreement may be altered, amended or modified only in writing, signed by Employee and the Company, except that either party hereto may update its address set forth in Section 5.1 by providing a notice of the updated address in the manner set forth in Section 5.1. Headings included in this Agreement are for convenience only and are not intended to limit or expand the rights of the parties hereto. References to Sections herein shall mean sections of the text of this Agreement, unless otherwise indicated.

 

 

 

 

 

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5.4               Assignability . This Agreement and the rights and duties set forth herein may not be assigned by either of the parties without the express written prior consent of the other party. This Agreement shall be binding on, and inure to the benefit of, each party and such party’s respective heirs, legal representatives, successors and assigns.

 

5.5               Severability . If any court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then such invalidity or unenforceability shall have no effect on the other provisions hereof, which shall remain valid, binding and enforceable and in full force and effect, and such invalid or unenforceable provision shall be construed in a manner so as to give the maximum valid and enforceable effect to the intent of the parties expressed therein.

 

5.6               Waiver of Breach . The waiver by either party of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either party.

 

5.7               Governing Law; Jurisdiction; Construction . This Agreement shall be governed by the internal laws of the State of Texas, without regard to any rules of construction that would require application of the laws of another jurisdiction. Any legal proceeding related to this Agreement must be litigated in an appropriate Texas state or federal court sitting in Dallas County, Texas, and both the Company and Employee hereby consent to the exclusive jurisdiction of the State of Texas for this purpose; waive any objection they may now or hereafter have to venue or to convenience of forum and agree that all legal proceedings will be tried in a court of competent jurisdiction in Dallas County, Texas by a judge without a jury. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, accordingly, each party waives the application of any law, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

 

5.8               Tax Compliance .

 

(a)                The Company may withhold from any amounts payable hereunder any amounts required to be withheld under federal, state or local law and any other deductions authorized in writing by Employee.

 

(b)                The intent of the parties is that payments and benefits under this Agreement comply with or be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively “ Section 409A ”), and the Company shall have complete discretion to interpret and construe this Agreement and any associated documents in any manner that establishes an exemption from (or compliance with) the requirements of Section 409A.  If for any reason, such as imprecision in drafting, any provision of this Agreement (or of any award of compensation, including, without limitation, equity compensation or benefits) does not accurately reflect its intended establishment of an exemption from (or compliance with) Section 409A, as demonstrated by consistent interpretations or other evidence of intent, such provision shall be considered ambiguous as to its exemption from (or compliance with) Section 409A and shall be interpreted by the Company in a manner consistent with such intent, as determined in the discretion of the Company.

 

(c)                For purposes of Section 409A, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

 

(d)                With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, Employee, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (i) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (ii) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

(e)                Notwithstanding anything to the contrary in this Agreement, if Employee is a “specified employee” as determined pursuant to Section 409A as of the date of Employee’s “separation from service” as defined in Treasury Regulation Section 1.409A-1(h) (or any successor regulation) and if any payments or entitlements provided for in this Agreement constitute a “deferral of compensation” within the meaning of Section 409A and cannot be paid or provided in the manner provided herein without subjecting Employee to additional tax, interest or penalties under Section 409A, then any such payment or entitlement which is payable during the first six (6) months following Employee’s “separation from service” shall be paid or provided to Employee in a cash lump-sum on the first business day of the seventh (7th) calendar month immediately following the month in which Employee’s “separation from service” occurs or, if earlier, upon Employee’s death. In addition, any payments or benefits due hereunder upon a termination of Employee’s employment which are a “deferral of compensation” within the meaning of Section 409A shall only be payable or provided to Employee (or Employee’s estate) upon a “separation from service” as defined in Section 409A.

 

 

 

 

 

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(f)                 Whenever a payment under this Agreement specifies a payment period with reference to a number of days (for example, “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.  In no event may Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement, to the extent such payment is subject to Code Section 409A.

 

(g)                The Company makes no representation or warranty and shall have no liability to Employee or any other person or entity if any provisions of this Agreement are determined to constitute deferred compensation subject to Code Section 409A but do not satisfy an exemption from, or the conditions of, Code Section 409A.

 

5.9               Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may be executed and delivered by facsimile or other electronic transmission. A complete, accurate, fully-executed PDF or other facsimile copy of this Agreement may be used in place of an original for all purposes.

 

[Signature Page Follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF , the parties have executed this Agreement as of the day and year first written above.

 

 

  COMPANY: 
   
  FREEDOM LEAF INC.,
  a Nevada corporation
   
   
  By: /s/ Clifford Perry                              
  Name: Clifford Perry
  Title: Chief Executive Officer
   
   
  EMPLOYEE:
   
  CARLOS FRIAS
   
  /s/ Carlos Frias                                
  Carlos Frias
   

 

 

 

 

 

 

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Schedule A

   

FORM OF RESTRICTED STOCK AGREEMENT

 

FREEDOM LEAF INC.

 

RESTRICTED STOCK AGREEMENT

 

This Restricted Stock Agreement (the “ Agreement ”) is made as of [_], 2019 (the “ Effective Date ”) by and between Freedom Leaf Inc., a Nevada corporation (the “ Company ”), and Carlos Frias (“ Grantee ”).

 

Grant . In consideration of Grantee’s performance of services for the Company as a director and as chief executive officer, the Company hereby agrees to grant restricted shares (the “ Restricted Stock ”) of the Company’s Common Stock, par value $0.001 per share (“ Common Stock ”) to Grantee, subject to the conditions of this Agreement. As used in this Agreement, the term “ Shares ” shall mean the Restricted Stock granted under this Agreement, and all securities received (i) in replacement of the Restricted Stock, (ii) as a result of stock dividends or stock splits with respect to the Restricted Stock, and (iii) in replacement of the Restricted Stock in a merger, recapitalization, reorganization or similar corporate transaction.

 

Award and Vesting of Shares.

 

Award . The Restricted Stock shall be awarded to Grantee in the following amounts, at the following times and upon the following conditions, provided that the Continuous Service of Grantee continues through and on the applicable Award Date:

 

  Shares of Restricted Stock Award Date
     
  The First Award (as defined below). 60 days after the Effective Date of Grantee’s Employment Agreement with the Company (the “ First Award Date ”)
     
  The Second Award (as defined below). 12 months after the Effective Date of Grantee’s Employment Agreement with the Company (the “ Second Award Date ”)

 

The Restricted Stock will be issued by the Company to the Grantee on the First Award Date and on the Second Award Date in accordance with this Agreement and will not otherwise be issued or held in escrow or otherwise be outstanding prior to their issuance under this Agreement.

 

Vesting . The First Award of Restricted Stock will vest in accordance with the following vesting schedule: (i) 40.74% of the Shares shall vest in Grantee’s favor on the occurrence of the Milestone (as defined below) (the “ Milestone Vesting Date ”); (ii) 29.63% of the Shares shall vest in Grantee’s favor on the 12-month anniversary of the First Award Date (the “ First Vesting Date ”) provided that the Continuous Service of Grantee continues through such date; and (iii) 29.63% of the Shares shall vest in Grantee’s favor on the 24-month anniversary of the First Award Date (the “ Second Vesting Date ”) provided that the Continuous Service of Grantee continues through such date. The Second Award of Restricted Stock shall fully vest in Grantee’s favor immediately upon its grant on the Second Award Date (such date, together with the Milestone Vesting Date, the First Vesting Date and the Second Vesting Date, each a “ Vesting Date ” with respect to the applicable Shares of Restricted Stock).

 

 

 

 

 

  10  
 

 

Acceleration of Vesting . Except as otherwise provided in this Section 2(C) and in Section 4 of this Agreement, there shall be no proportionate or partial vesting of Shares of Restricted Stock in or during the months, days or periods prior to each Vesting Date, and all vesting of Shares of Restricted Stock shall occur only on the applicable Vesting Date.

 

Acceleration of Vesting Upon Change in Control . In the event that a Change in Control of the Company occurs during Grantee’s Continuous Service, the Shares of Restricted Stock subject to this Agreement shall become immediately vested in Grantee’s favor as of the date of the Change in Control.

 

Acceleration of Vesting at Company Discretion . Notwithstanding any other term or provision of this Agreement, the Board of Directors of the Company (the “ Board ”) shall be authorized, in its sole discretion, based upon its review and evaluation of the performance of Grantee and of the Company, to accelerate the vesting of any Shares of Restricted Stock under this Agreement, at such times and upon such terms and conditions as the Board shall deem advisable.

 

Adjustment to Number of Shares . In the event of a forward or reverse stock split of the issued and outstanding Shares of Common Stock of the Company, a Common Stock dividend or distribution, an asset distribution, recapitalization, reorganization or similar transaction by the Company which would customarily result in an adjustment to the number of Shares of Common Stock issuable or outstanding under other outstanding securities of the Company, then the number of Shares subject to vesting and issuance under this Agreement will automatically be adjusted upward or downward, as the case may be, proportionately and appropriately.

 

Definitions . For purposes of this Agreement, the following terms shall have the meanings indicated:

 

Cause ” means (a) Grantee’s material breach of any agreement between Grantee and the Company; (b) Grantee’s material failure to comply with the Company’s written policies or rules that result in material injury to the Company; (c) Grantee’s conviction of, or Grantee’s plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State; (d) Grantee’s gross negligence or willful misconduct in connection with the provision of services for the Company; or (e) Grantee’s failure to cooperate in good faith with a governmental or internal investigation of the Company or its managers, officers or employees.

 

Change of Control ” means the sale of all or substantially all of the outstanding Shares of capital stock, assets or business of the Company, by merger, consolidation, sale of assets or otherwise (other than a merger or consolidation in which all or substantially all of the individuals and entities who were beneficial owners of the Company’s voting securities immediately prior to such transaction beneficially own, directly or indirectly, more than 50% (determined on an as- converted basis) of the outstanding securities entitled to vote generally in the election of directors of the resulting, surviving or acquiring corporation in such transaction).

 

Common Stock Value ” means an amount per share of Common Stock equal to the arithmetic average of the volume-weighted average (rounded to two decimal places) trading price per share of Common Stock for the thirty (30) full trading days ended on and including the trading day prior to the applicable Award Date, using trading prices reported on the OTCQB based on all trades in Common Stock on the OTCQB during the primary trading sessions from 9:30 a.m., New York Time, to 4:00 p.m., New York Time (and not an average of the daily averages during such thirty (30) trading days).

 

 

 

 

 

  11  
 

 

Continuous Service ” means the uninterrupted provision of services as an employee, consultant, advisor, officer, or director of the Company or any Related Entity.

 

First Award ” means that number of Shares of Restricted Stock amounting to $10,738,750 in the aggregate, calculated based on the Common Stock Value as determined on the First Award Date; provided, that if such calculation shall result in a fractional Share, such fraction shall be disregarded.

 

Master Agreement ” means that certain Master Manufacturing Agreement, dated as of November 13, 2017, by and between ECS Labs LLC and CBD LIFE SA DE CV (as amended, restated, supplemented or modified from time to time).

 

Milestone ” means the occurrence of an extension of the Master Agreement through December 31, 2020.

 

Net Operating Income ” means the difference of gross income less cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes and other expenses, each determined on a generally accepted accounting principles basis of accounting.

 

Non-Vested Shares ” means any Shares of the Restricted Stock subject to this Agreement that have not become vested pursuant to this Section 2.

 

Second Award ” means that number of Shares of Restricted Stock amounting to an aggregate amount equal to 25% of the Net Operating Income received by the Company from the Effective Date until the Second Award Date pursuant to the Master Agreement, as calculated based on the Common Stock Value as determined on the Second Award Date; provided, that if such calculation shall result in a fractional Share, such fraction shall be disregarded.

 

Related Entity ” means the Company’s wholly-owned subsidiaries on or after the Effective Date, including without limitation ECS Labs LLC, a Texas limited liability company and/or its wholly-owned subsidiaries, and any other wholly-owned subsidiaries of the Company.

 

Vested Shares ” means any Shares of the Restricted Stock subject to this Agreement that have become vested pursuant to this Section 2.

         

 

 

 

 

  12  
 

 

Delivery of Restricted Stock.

 

Issuance of Stock Certificates and Legends. One or more stock certificates evidencing the Restricted Stock shall be issued in the name of Grantee but shall be held and retained by the Company until the Vesting Date on which the Shares (or a portion thereof) subject to this Restricted Stock award become Vested Shares pursuant to Section 2 hereof, subject to the provisions of Section 4 hereof. All such stock certificates shall bear the following legends, along with such other legends that the Board shall deem necessary and appropriate or which are otherwise required or indicated pursuant to any applicable stockholders agreement:

 

THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THAT CERTAIN RESTRICTED STOCK AGREEMENT BY AND BETWEEN MR. CARLOS FRIAS AND FREEDOM LEAF INC. (THE “COMPANY”), DATED AS OF [____], 2019 (A COPY OF WHICH IS ON FILE WITH THE COMPANY; THE “RSA”). EXCEPT AS OTHERWISE PROVIDED IN THE RSA, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER.

 

THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VOTING REQUIREMENTS AND OTHER RESTRICTIONS SET FORTH IN A VOTING AGREEMENT BETWEEN THE HOLDER OF THIS CERTIFICATE AND CERTAIN OTHER PARTIES. TRANSFER OF THE COMMON STOCK IS SUBJECT TO THE RESTRICTIONS CONTAINED IN SUCH AGREEMENT.

 

THE COMPANY WILL FURNISH TO EACH HOLDER WHO SO REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF WHICH THE COMPANY IS AUTHORIZED TO ISSUE AND OF THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. ANY SUCH REQUEST IS TO BE ADDRESSED TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.

 

Stop-Transfer Instructions . Grantee agrees that, to ensure compliance with the restrictions imposed by this Agreement, the Company may issue appropriate “stop-transfer” instructions to its transfer agent, if any, and if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

 

Stock Powers. Grantee shall deposit with the Company stock powers or other instruments of transfer or assignment, duly endorsed in blank with signature(s) guaranteed, corresponding to each certificate representing Shares of Restricted Stock until such Shares become Vested Shares. If Grantee shall fail to provide the Company with any such stock power or other instrument of transfer or assignment, Grantee hereby irrevocably appoints the Secretary of the Company as his attorney-in-fact, with full power of appointment and substitution, to execute and deliver any such power or other instrument which may be necessary to effectuate the transfer of the Restricted Stock (or assignment of distributions thereon) on the books and records of the Company.

 

Refusal to Transfer . The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares, or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.

 

 

 

 

 

  13  
 

 

Delivery of Stock Certificates. On or after each Vesting Date, upon written request to the Company by Grantee, the Company shall promptly cause a new certificate or certificates to be issued to Grantee for and with respect to all Shares that become Vested Shares on that Vesting Date, which certificate(s) shall be delivered to Grantee as soon as administratively practicable after the date of receipt by the Company of Grantee’s written request. The new certificate or certificates shall continue to bear those legends and endorsements that the Company shall deem necessary or appropriate (including those relating to restrictions on transferability and/or obligations and restrictions under applicable securities laws).

 

Issuance Without Certificates. If the Company is authorized to issue Shares without certificates, then the Company may, in the discretion of the Board, issue Shares pursuant to this Agreement without certificates, in which case any references in this Agreement to certificates shall instead refer to whatever evidence may be issued to reflect Grantee’s ownership of the Shares subject to the terms and conditions of this Agreement.

 

Forfeiture of Non-Vested Shares . If Grantee’s Continuous Service with the Company and the Related Entities is terminated for any reason, all Non-Vested Shares shall be forfeited immediately upon such termination of Continuous Service and revert back to the Company without any payment to Grantee. The Board shall have the power and authority to enforce on behalf of the Company any rights of the Company under this Agreement in the event of Grantee’s forfeiture of Non-Vested Shares pursuant to this Section 4.

 

Rights with Respect to Restricted Stock.

 

General. Except as otherwise provided in this Agreement, Grantee shall have, with respect to all of the Shares of Restricted Stock, whether Vested Shares or Non-Vested Shares, all of the rights of a holder of Shares of Common Stock of the Company, including without limitation (i) the right to vote such Restricted Stock, (ii) the right to receive dividends, if any, as may be declared on the Restricted Stock from time to time, and (iii) the rights available to all holders of Shares of Common Stock of the Company upon any merger, consolidation, reorganization, liquidation or dissolution, stock split-up, stock dividend or recapitalization undertaken by the Company; provided, however, that all of such rights shall be subject to the terms, provisions, conditions and restrictions set forth in this Agreement (including without limitation conditions under which all such rights shall be forfeited). Any Shares issued to Grantee as a dividend with respect to Shares of Restricted Stock shall have the same status and bear the same legend as the Shares of Restricted Stock and shall be held by the Company, if the Shares of Restricted Stock that such dividend is attributed to is being so held, unless otherwise determined by the Board.

 

No Restrictions on Certain Transactions. Notwithstanding any term or provision of this Agreement to the contrary, the existence of this Agreement, or of any outstanding Restricted Stock awarded hereunder, shall not affect in any manner the right, power or authority of the Company to make, authorize or consummate: (i) any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business; (ii) any merger, consolidation or similar transaction by or of the Company; (iii) any offer, issue or sale by the Company of any capital stock of the Company, including any equity or debt securities, or preferred or preference stock that would rank prior to or on parity with the Restricted Stock and/or that would include, have or possess other rights, benefits and/or preferences superior to those that the Restricted Stock includes, has or possesses, or any warrants, options or rights with respect to any of the foregoing; (iv) the dissolution or liquidation of the Company; (v) any sale, transfer or assignment of all or any part of the stock, assets or business of the Company; or (vi) any other corporate transaction, act or proceeding (whether of a similar character or otherwise).

 

Transferability. Unless otherwise determined by the Board, the Shares of Restricted Stock are not transferable unless and until the later of (i) the date that is twelve (12) months after the date hereof and (ii) the date such Shares become Vested Shares in accordance with this Agreement, otherwise than by will or under the applicable laws of descent and distribution. The terms of this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Grantee. Except as otherwise permitted pursuant to the first sentence of this Section 5(C), any attempt to effect a Transfer of any Shares of Restricted Stock prior to the date on which the Shares become Vested Shares shall be void ab initio . For purposes of this Agreement, “ Transfer ” shall mean any sale, transfer, encumbrance, gift, donation, assignment, pledge, hypothecation, or other disposition, whether similar or dissimilar to those previously enumerated, whether voluntary or involuntary, and including, but not limited to, any disposition by operation of law, by court order, by judicial process, or by foreclosure, levy or attachment.

 

 

 

 

  14  
 

 

Representations and Warranties of Grantee. Grantee hereby represents and warrants to the Company that:

 

Terms of this Agreement . Grantee has received a copy of this Agreement, has read and understands the terms of this Agreement, and agrees to be bound by its terms and conditions.

 

Acceptance of Shares for Own Account for Investment . Grantee is acquiring the Shares for Grantee’s own account for investment purposes only and not with a view to, or for sale in connection with, a distribution of the Shares within the meaning of the Securities Act of 1933, as amended (the “ Securities Act ”). Grantee has no present intention of selling or otherwise disposing of all or any portion of the Shares.

 

Access to Information . Grantee has had access to all information regarding the Company and its present and prospective business, assets, liabilities and financial condition that Grantee reasonably considers important in making the decision to acquire the Shares, and Grantee has had ample opportunity to ask questions of the Company’s representatives concerning such matters and this investment.

 

Understanding of Risks . Grantee is fully aware of: (i) the highly speculative nature of the investment in the Shares; (ii) the financial hazards involved; (iii) the lack of liquidity of the Shares and the restrictions on transferability of the Shares (e.g., that Grantee may not be able to sell or dispose of the Shares or use them as collateral for loans); (iv) the qualifications and backgrounds of the management of the Company; and (v) the tax consequences of an investment in the Shares. Grantee is capable of evaluating the merits and risks of this investment, has the ability to protect Grantee’s own interests in this transaction and is financially capable of bearing a total loss of this investment.

 

Accredited Investor . Grantee is an “accredited investor” pursuant to Rule 501(a) of Regulation D under the Securities Act.

 

No General Solicitation . At no time was Grantee presented with or solicited by any publicly issued newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and issue of the Shares.

 

Compliance with Securities Laws. Grantee understands and acknowledges that the Shares have not been registered with the Securities and Exchange Commission (the “ SEC ”) under the Securities Act and that, notwithstanding any other provision of this Agreement to the contrary, the issuance of any Shares is expressly conditioned upon compliance with the Securities Act and all applicable state securities laws. Grantee agrees to cooperate in good faith (but at no material cost to Grantee) with the Company to ensure compliance with such laws.

 

No Transfers Unless Registered or Exempt . Grantee understands that Grantee may not transfer any Shares unless such Shares are registered under the Securities Act and qualified under applicable state securities laws or unless, in the good faith opinion of counsel to the Company, exemptions from such registration and qualification requirements are available. Grantee understands that only the Company may file a registration statement with the SEC and that the Company is under no obligation to do so with respect to the Shares. Grantee has also been advised that exemptions from registration and qualification may not be available or may not permit Grantee to transfer all or any of the Shares in the amounts or at the times proposed by Grantee.

 

SEC Rule 144 . In addition, Grantee has been advised that SEC Rule 144 promulgated under the Securities Act, which permits certain limited sales of unregistered securities, may not always be available with respect to the Shares and, in any event, requires that the Shares be held for a minimum of six months, and in certain cases one (1) year, after they have been acquired before they may be resold under Rule 144. Grantee understands that Rule 144 may indefinitely restrict transfer of the Shares so long as Grantee remains an “affiliate” of the Company or if “current public information” about the Company (as defined in Rule 144) is not publicly available.

 

 

 

 

 

  15  
 

 

Market Standoff Agreement . Grantee agrees in connection with any registration of the Company’s securities that, upon the request of the Company or the underwriters managing any public offering of the Company’s securities, Grantee shall not sell or otherwise dispose of any Shares without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) after the effective date of such registration that is requested by such underwriters and subject to all restrictions as the Company or the underwriters may specify. Grantee further agrees to enter into any agreement reasonably required by the underwriters to implement the foregoing.

 

Tax Matters; Section 83(b) Election .

 

Section 83(b) Election. If Grantee properly elects, within thirty (30) days of the applicable Award Date, to include in gross income for federal income tax purposes an amount equal to the fair market value (as of the applicable Award Date) of the Restricted Stock pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the “ Code ”), Grantee shall make arrangements satisfactory to the Company to pay to the Company any federal, state or local income taxes required to be withheld with respect to the Restricted Stock. If Grantee shall fail to make such tax payments as are required, the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind (including without limitation, the withholding of any Shares that otherwise would be issued to Grantee under this Agreement) otherwise due to Grantee any federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Stock.

 

No Section 83(b) Election. If Grantee does not properly make the election described in paragraph 7(A) above, Grantee shall, no later than the date or dates as of which the restrictions referred to in this Agreement hereof shall lapse, pay to the Company, or make arrangements satisfactory to the Board for payment of, any federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Stock (including without limitation the vesting thereof), and the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind (including without limitation, the withholding of any Shares that otherwise would be distributed to Grantee under this Agreement) otherwise due to Grantee any federal, state, or local taxes of any kind required by law to be withheld with respect to the Restricted Stock.

 

Satisfaction of Withholding Requirements. Grantee may satisfy the withholding requirements with respect to the Restricted Stock pursuant to any one or combination of the following methods: (a) payment in cash; or (b) if and to the extent permitted by the Board, payment by surrendering unrestricted previously held Shares which have a value equal to the required withholding amount or the withholding of Shares that otherwise would be deliverable to Grantee pursuant to this Award. Grantee may surrender Shares either by attestation or by delivery of a certificate or certificates for Shares duly endorsed for transfer to the Company, and if required with medallion level signature guarantee by a member firm of a national stock exchange, by a national or state bank (or guaranteed or notarized in such other manner as the Board may require).

 

Grantee’s Responsibilities for Tax Consequences. Tax consequences on Grantee (including without limitation federal, state, local and foreign income tax consequences) with respect to the Restricted Stock (including without limitation the grant, vesting and/or forfeiture thereof) are the sole responsibility of Grantee. Grantee shall consult with his or her own personal accountant(s) and/or tax advisor(s) regarding these matters, the making of a Section 83(b) election, and Grantee’s filing, withholding and payment (or tax liability) obligations.

 

Amendment, Modification & Assignment; Non-Transferability. This Agreement may only be modified or amended in a writing signed by both the Company and the Grantee. No promises, assurances, commitments, agreements, undertakings or representations, whether oral, written, electronic or otherwise, and whether express or implied, with respect to the subject matter hereof, have been made by either party which are not set forth expressly in this Agreement. Unless otherwise consented to in writing by the Company, in its sole discretion, this Agreement (and Grantee’s rights hereunder) may not be assigned, and the obligations of Grantee hereunder may not be delegated, in whole or in part. The rights and obligations created hereunder shall be binding on Grantee and his heirs and legal representatives and on the successors and assigns of the Company.

 

Complete Agreement. This Agreement (together with those agreements and documents expressly referred to herein, but only for the purposes referred to herein) embody the complete and entire agreement and understanding between the parties with respect to the subject matter hereof, and supersede any and all prior promises, assurances, commitments, agreements, undertakings or representations, whether oral, written, electronic or otherwise, and whether express or implied, which may relate to the subject matter hereof in any way.

 

 

 

 

 

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Miscellaneous .

 

No Right to (Continued) Employment or Service. This Agreement and the grants of Restricted Stock hereunder shall not shall confer, or be construed to confer, upon Grantee any right to employment or service, or continued employment or service, with the Company or any Related Entity.

 

No Limit on Other Compensation Arrangements. Nothing contained in this Agreement shall preclude the Company or any Related Entity from adopting or continuing in effect other or additional compensation plans, agreements or arrangements, and any such plans, agreements and arrangements may be either generally applicable or applicable only in specific cases or to specific persons.

 

Severability. If any term or provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or under any applicable law, rule or regulation, then such provision shall be construed or deemed amended to conform to applicable law (or if such provision cannot be so construed or deemed amended without materially altering the purpose or intent of this Agreement and the grants of Restricted Stock to Grantee hereunder, such provision shall be stricken as to such jurisdiction and the remainder of this Agreement and the award hereunder shall remain in full force and effect).

 

No Trust or Fund Created. Neither this Agreement nor the grants of Restricted Stock hereunder shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Related Entity and Grantee or any other person. To the extent that Grantee or any other person acquires a right to receive payments from the Company or any Related Entity pursuant to this Agreement, such right shall be no greater than the right of any unsecured general creditor of the Company.

 

Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada (without reference to the conflict of laws rules or principles thereof).

 

Interpretation. Grantee accepts the Restricted Stock subject to all of the terms, provisions and restrictions of this Agreement. The undersigned Grantee hereby accepts as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Agreement.

 

Headings. Section, paragraph and other headings and captions are provided solely as a convenience to facilitate reference. Such headings and captions shall not be deemed in any way material or relevant to the construction, meaning or interpretation of this Agreement or any term or provision hereof.

 

 

 

 

 

 

 

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Notices. Any and all notices provided for in this Agreement shall be given in writing and shall be deemed given to a party at the earlier of (a) when actually delivered to such party, or (b) when mailed to such party by registered or certified mail (return receipt requested) or sent to such party by courier, confirmed by receipt, and addressed to such party at the address designated below for such party as follows (subject to the right of either party to designate some other address at any time hereafter in a notice satisfying the requirements of this Section 8(H)):

 

  If to the Company: Freedom Leaf Inc.
    3571 E. Sunset Road, Suite 420
    Las Vegas, NV 89120
     
  with a copy to: Kleinberg, Kaplan, Wolff & Cohen, P.C.
    551 Fifth Avenue
    New York, NY 10176
    Telecopy: (212) 986-8866
    Telephone: (212) 880-9869
    Email: jain@kkwc.com
    Attention: Jonathan Ain
     
  If to Grantee: Carlos Frias:
    ____________________________________
    ____________________________________
    Telephone: ___________________________
    Email: _______________________________
     
  with a copy to: Saunders Koechel & Sharp LLP
    Attention: John Koechel
    5404 Birchman Avenue
    Fort Worth, Texas 76107
    Telecopy: 303.396.0243
    Telephone: 214.923.7577
    Email: koechel@skandslegal.com

 

Section 409A.

 

It is intended that the Restricted Stock awarded pursuant to this Agreement be exempt from Section 409A of the Code (“ Section 409A ”) because it is believed that the Agreement does not provide for a deferral of compensation and accordingly that the Agreement does not constitute a nonqualified deferred compensation plan within the meaning of Section 409A. The provisions of this Agreement shall be interpreted in a manner consistent with this intention, and the provisions of this Agreement shall not be amended, adjusted, assumed or substituted for, converted or otherwise modified without Grantee’s prior written consent if and to the extent that the Company believes or reasonably should believe that such amendment, adjustment, assumption or substitution, conversion or modification would cause the award to violate the requirements of Section 409A.

 

 

 

 

 

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In the event that either the Company or Grantee believes, at any time, that any benefit or right under this Agreement is subject to Section 409A, and does not comply with the requirements of Section 409A, it shall promptly advise the other and the Company and Grantee shall negotiate reasonably and in good faith to amend the terms of such benefits and rights, if such an amendment may be made in a commercially reasonable manner, such that they comply with Section 409A with the most limited possible economic effect on Grantee and on the Company.

 

Notwithstanding the foregoing, the Company does not make any representation to Grantee that the Shares of Restricted Stock awarded pursuant to this Agreement are exempt from, or satisfies, the requirements of Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless Grantee or any beneficiary for any tax, additional tax, interest or penalties that Grantee or any beneficiary may incur in the event that any provision of this Agreement, or any amendment or modification thereof or any other action taken with respect thereto that either is consented to by Grantee or that the Company reasonably believes should not result in a violation of Section 409A, is deemed to violate any of the requirements of Section 409A

 

Non-Waiver of Breach. The waiver by any party hereto of the other party’s prompt and complete performance, or breach or violation, of any term or provision of this Agreement shall be effected solely in a writing signed by such party, and shall not operate nor be construed as a waiver of any subsequent breach or violation, and the waiver by any party hereto to exercise any right or remedy which he or it may possess shall not operate nor be construed as the waiver of such right or remedy by such party, or as a bar to the exercise of such right or remedy by such party, upon the occurrence of any subsequent breach or violation.

 

Reliance on Counsel and Advisors. Grantee acknowledges that Kleinberg, Kaplan, Wolff & Cohen, P.C., is representing only the Company in this transaction. Grantee acknowledges that he or she has had the opportunity to review this Agreement, including all attachments hereto, and the transactions contemplated by this Agreement with his or her own legal counsel, tax advisors and other advisors. Grantee is relying solely on his or her own counsel and advisors and not on any statements or representations of the Company or its agents for legal or other advice with respect to this investment or the transactions contemplated by this Agreement.

 

Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same agreement. This Agreement may be executed and delivered by facsimile or other electronic transmission. A complete, accurate, fully-executed PDF or other facsimile copy of this Agreement may be used in place of an original for all purposes.

 

( signature page follows )

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have executed this Agreement as of the date first written above.

 

 

CARLOS FRIAS

 

 

 

 

_______________________________________ 


Signature

 

 

 

FREEDOM LEAF INC.

 

By: ___________________________________

 

Name: _________________________________

 

Title: __________________________________

 

 

 

 

 

 

 

 

 

 

 

 

  20  

 

Exhibit 10.4

 

EMPLOYMENT AGREEMENT

(Daniel Nguyen)

 

This EMPLOYMENT AGREEMENT (this “ Agreement ”) is made and entered into as of this 31 st day of May, 2019 (the “ Effective Date ”), by and between Freedom Leaf Inc., a Nevada corporation (the “ Company ”), and Ngoc Quang (Daniel) Nguyen, an individual (“ Employee ”).

 

In consideration of the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and Employee, it is hereby agreed as follows:

 

ARTICLE I
EMPLOYMENT

 

1.1                Employment . The Company agrees to, and does hereby, employ Employee, and Employee agrees to, and does hereby accept such employment, upon the terms and subject to the conditions set forth in this Agreement. Employee represents and warrants to the Company that (A) Employee has the legal capacity to execute and perform this Agreement, (B) this Agreement is a valid and binding agreement enforceable against Employee according to its terms, and (C) the execution and performance of this Agreement by Employee does not violate the terms of any existing agreement or understanding to which Employee is a party or by which Employee otherwise may be bound. Effective as of the Effective Date, the Company agrees to continue to employ Employee as an employee of the Company as further set forth in Section 1.2, and Employee agrees to continue his employment by the Company, for the period commencing on the Effective Date and continuing until the two (2) year anniversary of the Effective Date unless earlier terminated in accordance with Article III below.

 

1.2               Position and Duties . Employee shall devote Employee’s entire business time, loyalty, attention and energies exclusively to the business interests of the Company while employed by the Company, will not engage in any other employment activities for any direct or indirect remuneration and shall perform his duties and responsibilities diligently and to the best of his ability.

 

ARTICLE II
COMPENSATION AND OTHER BENEFITS

 

2.1               Base Salary . As compensation for Employee’s services hereunder and in consideration of Employee’s other agreements hereunder, during the term of employment, the Company shall pay Employee a base salary equal to $100,000 per annum (“ Base Salary ”), subject to withholding and customary payroll deductions. The Base Salary shall be payable in accordance with the customary payroll practices of the Company.

 

2.2               Incentive Bonuses . In addition to the Base Salary, provided Employee is actively providing service to the Company hereunder, and subject to Article III, Employee shall receive the following incentive bonuses (collectively, the “ Incentive Bonuses ”):

 

(a)                Cash Incentives . Employee will be entitled to receive: (i) on the date that is thirty (30) days after the Effective Date, a cash bonus equal to $1,000,000; (ii) on the date that is one-hundred and twenty (120) days after the Effective Date, a cash bonus equal to $1,000,000, (iii) on the date that is twelve (12) months after the Effective Date, a cash bonus equal to 12.49875% of the Net Operating Income (as defined below) received by the Company (and/or its affiliates) from the Effective Date until the one-year anniversary of the Effective Date pursuant to that certain Master Manufacturing Agreement, dated as of November 13, 2017, by and between ECS Labs LLC and CBD LIFE SA DE CV (as amended, restated, modified or supplemented from time to time, the “ Master Agreement ”); and (iv) any other cash bonus awards approved by the Board of Directors of the Company (the “ Board ”); provided, however, upon any termination of this Agreement prior to the Expiration Date (as defined below), Employee shall remit to the Company a cash amount equal to the Excess Amount upon demand by the Company, and if the Excess Amount is not so repaid within ninety (90) days of such demand, the Company shall have the right to take any and all action to effectuate such remittance.

 

(b)                Equity Incentives . Subject to the approval of the Board and stockholders of the Company, Employee shall receive (i) on the date that is sixty (60) days after the Effective Date, an equity award equal to approximately $8,938,750 of the Company’s restricted common stock, as calculated based on the Common Stock Value (as defined below), subject to Employee’s execution of that certain restricted stock agreement set forth on Schedule A attached hereto (the “ RSA ”), (ii) on the date that is twelve (12) months from the Effective Date, an equity award equal to approximately 20.83125% of the Net Operating Income received by the Company from the Effective Date until the one-year anniversary of the Effective Date pursuant to the Master Agreement as calculated based on the Common Stock Value, subject to Employee’s execution of the RSA; and (iii) any other equity incentive awards approved by the Board.

 

 

 

 

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2.3               Benefit Plans . During the term of Employee’s employment with the Company, Employee will be eligible to participate in the Company’s retirement plans that are qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), if any, and in the Company’s employee welfare benefit plans that are available to any other executive employees of the Company (the “ Plans ”), in accordance with and subject to the terms and conditions thereof. The terms and conditions of the Plans, as expressed in the Plan documents, will control including, but not limited to, the Company’s ability to amend, modify or terminate any of those programs as it determines appropriate in accordance with the Plans’ terms. During the term of Employee’s employment with the Company, the Company shall pay to maintain Employee’s existing health insurance plan or provide health insurance with substantially similar coverage to Employee’s existing health insurance plan.

 

2.4               Expenses . The Company shall reimburse Employee for all expenses reasonably incurred in the course of the performance of Employee’s duties and responsibilities pursuant to this Agreement and consistent with the Company’s policies with respect to travel, entertainment and miscellaneous expenses; provided, that any single expenditure in excess of $5,000 shall require the approval of the Board.

 

2.5               Vacation . In any year, Employee shall be entitled to take reasonable vacation provided that such vacation does not prevent him from adequately performing his duties under this Agreement.

 

2.6               Withholding . All payments to be made by the Company hereunder will be subject to any withholding requirements.

 

2.7               Certain Definitions . As used in this Section 2:

 

(a)                Common Stock Value ” means an amount per share of Common Stock equal to the arithmetic average of the volume-weighted average (rounded to two decimal places) trading price per share of Common Stock for the thirty (30) full trading days ended on and including the trading day prior to the applicable determination date, using trading prices reported on the OTCQB based on all trades in Common Stock on the OTCQB during the primary trading sessions from 9:30 a.m., New York Time, to 4:00 p.m., New York Time (and not an average of the daily averages during such thirty (30) trading days).

 

(b)                Excess Amount ” means the product obtained by multiplying (i) the gross amount received by Employee pursuant to Section 2.2(a) of this Agreement, by (ii) the Remaining Service Period.

 

(c)                Net Operating Income ” shall mean the difference of gross income less cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes and other expenses, each determined on a generally accepted accounting principles basis of accounting.

 

(d)                Remaining Service Period ” means the quotient obtained by dividing (i) that number of days between the effective date of any termination of this Agreement and the Expiration Date (not including the effective date of such termination, but including the Expiration Date), by (ii) 731.

 

ARTICLE III
TERMINATION; EQUITY

 

3.1               Term . Employee’s employment shall commence on the Effective Date and shall continue until the two (2) year anniversary of the Effective Date (the “ Expiration Date ”), unless earlier terminated pursuant to the terms of this Agreement.

 

3.2               Right to Terminate; Automatic Termination .

 

(a)                Termination for Cause . The Company shall be entitled to terminate this Agreement for Cause (as defined below) effective immediately in the event of (a) Employee’s material breach of any agreement between Employee and the Company; (b) Employee’s conviction of, or Employee’s plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State, provided, however, that such felony is not related to the manufacture, sale or possession of cannabis or any components thereof; (c) Employee’s gross negligence or willful misconduct in connection with the provision of services for the Company; or (d) Employee’s failure to cooperate in good faith with a governmental or internal investigation of the Company or its managers, officers or employees (collectively, “ Cause ”); provided, however, that if any such event by its nature is capable of being cured with no adverse effect to the Company, and Employee is taking reasonable and diligent steps to cure such event, then such termination shall be effective only if such event remains uncured for a period of thirty calendar days after the Company provides written notice to Employee setting forth the nature of the event constituting Cause hereunder.

 

(b)                Termination Upon Death or Disability . Subject to Section 3.3, Employee’s employment and the Company’s obligations under this Agreement, unless specifically stated otherwise herein, shall terminate: (i) automatically, effective immediately and without any notice being necessary, upon Employee’s death; and (ii) in the event of any Disability of Employee, by the Company giving notice of termination to Employee. As used in this Section 3.2(b), “ Disability ” shall mean that (A) Employee is unable, by reason of an injury, a sickness or accident, to perform Employee’s duties under this Agreement for an aggregate of sixty (60) days in any consecutive six (6) month period, or (B) Employee has a guardian of the person or estate appointed by a court of competent jurisdiction.

 

 

 

 

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3.3               Rights Upon Termination . If Employee’s employment is terminated pursuant to Section 3.2, or if Employee quits employment, notwithstanding the terms of this Agreement, Employee or Employee’s estate shall have no further rights against the Company hereunder, except for the right to receive, (i) any earned but unpaid Base Salary and Incentive Bonuses, (ii) reimbursement of expenses to which Employee is entitled pursuant to Section 2.4, and (iii) Employee shall be deemed to resign from any board to which Employee has been appointed or nominated by or on behalf of the Company.

 

3.4               No Automatic Cross-Default . This Agreement is being executed simultaneously with that certain Membership Interest Purchase Agreement, by and between, inter alia, the Company and Employee (the “ Purchase Agreement ”). Each of the Company and Employee acknowledge and agree that this Agreement, the RSA and the Purchase Agreement each create independent rights and obligations, are supported by adequate consideration and stand on their own. Accordingly, (i) a default by Employee or the Company under this Agreement shall not cause an automatic cross-default by Employee or the Company under the Restricted Stock Agreement and/or the Purchase Agreement, and (ii) a default by Employee or the Company under the Restricted Stock Agreement and/or the Purchase Agreement shall not cause an automatic cross-default under this Agreement. Notwithstanding the foregoing, nothing in this Section 3.4 shall preclude or otherwise limit either party from asserting any claim or right against the other party or from taking any other action under each of this Agreement, the RSA and/or the Purchase Agreement based upon the same act or omission by the other party that creates an alleged default under any one of the aforesaid agreements.

 

ARTICLE IV
CONFIDENTIALITY; NON-SOLICITATION

 

4.1               Confidential Information .

 

(a)                Company Information . Employee agrees that during and after his employment with the Company, he will hold in the strictest confidence, and will not (except for the benefit of the Company during his employment or for limited use by Employee’s accountants, financial planners, attorneys and other professional consultants), as required by applicable law, a court order or an order or request of a relevant regulatory authority or in order to enforce a claim against the Company (including, without limitation, under this Agreement), use or disclose to any person, firm, corporation or other entity any Company Confidential Information. Employee understands that “ Company Confidential Information ” means any non-public information that relates to the actual or anticipated business, research or development of the Company, or to the Company’s technical data, trade secrets, or know-how, including, but not limited to, research, product plans, or other information regarding the Company’s products or services and markets therefor; customer lists and customer contact information, their buying histories, and preferences (including, but not limited to, such information relating to customers of the Company on which Employee called or with which Employee may become acquainted during the term of his employment); personnel information (including, but not limited to, information regarding employees’ skills and performance); information about vendors, supplier and business partners; software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, and hardware configuration information; and marketing, finances, and/or other business information; provided , however , that Company Confidential Information does not include any of the foregoing items to the extent the same have become publicly known and made generally available through no wrongful act of Employee or of others. Employee understands that nothing in this Agreement is intended to limit employees’ rights to discuss the terms, wages, and working conditions of their employment, as protected by applicable law.

 

(b)                Third Party Information . Employee recognizes that the Company may have received and in the future may receive from third parties associated with the Company, e.g., the Company’s customers, suppliers, licensors, licensees, partners, or collaborators (“ Associated Third Parties ”), their confidential or proprietary information (“ Associated Third Party Confidential Information ”). By way of example, and not as an exhaustive list, Associated Third Party Confidential Information may include the habits or practices of Associated Third Parties, the technology of Associated Third Parties, requirements of Associated Third Parties, and information related to the business conducted between the Company and such Associated Third Parties. Employee agrees at all times during his employment with the Company and thereafter to hold in the strictest confidence, and not to use or to disclose to any person, firm, corporation, or other entity any Associated Third Party Confidential Information, except as necessary in carrying out his work for the Company consistent with the Company’s agreement with such Associated Third Parties or as required by applicable law, a court order or an order or request of a relevant regulatory authority. Employee further agrees to comply with any and all Company policies and guidelines that may be adopted from time to time during the term of his employment regarding Associated Third Parties and Associated Third Party Confidential Information. Employee understands that his unauthorized use or disclosure of Associated Third Party Confidential Information or violation during his employment of any Company policies will lead to disciplinary action, up to and including immediate termination and legal action by the Company. Third Party Confidential Information does not include any of the foregoing items to the extent the same have become publicly known and made generally available through no wrongful act of Employee or of others. Employee understands that nothing in this Agreement is intended to limit employees’ rights to discuss the terms, wages, and working conditions of their employment, as protected by applicable law.

 

 

 

 

 

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4.2               Inventions .

 

(a)                Inventions Retained and Licensed . Employee represents and warrants that there are no inventions, discoveries, original works of authorship, developments, improvements, and trade secrets that were conceived in whole or in part by Employee prior to his employment with the Company or any of its subsidiaries and to which he has any right, title, or interest, and which relate to the Company’s proposed business, products, or research and development (collectively, “ Prior Inventions ”). Notwithstanding the foregoing, if, in the course of his employment with the Company, Employee incorporates into or uses in connection with any product, process, service, technology, or other work by or on behalf of the Company any Prior Invention, Employee hereby grants to the Company a non-exclusive, royalty-free, fully paid-up, irrevocable, perpetual, worldwide license, with the right to grant and authorize sublicenses, to make, have made, modify, use, import, offer for sale, and sell such Prior Invention as part of or in connection with such product, process, service, technology, or other work, and to practice any method related thereto.

 

(b)                Assignment of Inventions . Employee agrees that he will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assigns to the Company, or its designee, all his right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs, discoveries, ideas, trademarks, or trade secrets, whether or not patentable or registrable under patent, copyright, or similar laws, which Employee may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time Employee is in the employ of the Company or any of its subsidiaries (including during his off-duty hours), or with the use of Company’s equipment, supplies, facilities, or Company Confidential Information, except as provided in Section 4.1 (collectively referred to as “ Inventions ”). Employee further acknowledges that all original works of authorship that are made by him (solely or jointly with others) within the scope of and during the period of his employment with the Company and that are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act. Employee understands and agrees that the decision whether or not to commercialize or market any Inventions is within the Company’s sole discretion and for the Company’s sole benefit, and that no royalty or other consideration will be due to Employee as a result of the Company’s efforts to commercialize or market any such Inventions.

 

(c)                Maintenance of Records . Employee agrees to keep and maintain adequate, current, accurate, and authentic written records of all Inventions made by him (solely or jointly with others) during the term of his employment with the Company. The records will be in the form of notes, sketches, drawings, electronic files, reports, or any other format that may be specified by the Company. The records are and will be available to and remain the sole property of the Company at all times.

 

(d)                Patent and Copyright Registrations . Employee agrees to reasonably assist the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in the Inventions and any rights relating thereto in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, and all other instruments that the Company shall deem proper or necessary in order to apply for, register, obtain, maintain, defend, and enforce such rights, and in order to assign and convey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title, and interest in and to such Inventions and any rights relating thereto, and testifying in a suit or other proceeding relating to such Inventions and any rights relating thereto. Employee further agrees that his obligation to execute or cause to be executed, when it is in his power to do so, any such instrument or papers shall continue after the termination of this Agreement. If the Company is unable because of Employee’s mental or physical incapacity or for any other reason to secure Employee’s signature with respect to any Inventions, including, without limitation, to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering such Inventions, then Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney in fact, to act for and in his behalf and stead, to execute and file any papers and oaths, and to do all other lawfully permitted acts with respect to such Inventions with the same legal force and effect as if executed by the Employee.

 

4.3               Conflicting Employment .

 

(a)                Current Obligations . Employee agrees that during the term of his employment with the Company, he will not engage in or undertake any other employment, occupation, consulting relationship, or commitment that is directly related to the business in which the Company is now involved or becomes involved or a business which Employee understands the Company to actively have plans to become involved, nor will Employee engage in any other activities that interfere with his ability to fully and satisfactorily perform his duties to the Company, except as may otherwise be agreed in writing by and between Employee and the Company.

 

 

 

 

 

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(b)                Prior Relationships . Without limiting Section 4.3(a), Employee represents that he has no other agreements, relationships, or commitments to any other person or entity that conflict with his obligations to the Company under this Agreement or his ability to become employed and perform the services for which he is being employed by the Company. Employee further agrees that if he has signed a confidentiality agreement or similar type of agreement with any former employer or other entity, he will comply with the terms of any such agreement to the extent that its terms are lawful under applicable law. Employee represents and warrants that after undertaking a careful search (including, but not limited to, searches of his computers, cell phones, electronic devices, and documents), he has returned all property and confidential information belonging to all prior employers. Moreover, he agrees to fully indemnify the Company, its directors, managers, officers, agents, employees, investors, shareholders, members, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns for all verdicts, judgments, settlements, and other losses incurred by any of them resulting from Employee’s breach of his obligations under any agreement to which he is a party or obligation to which he is bound, as well as any reasonable attorneys’ fees and costs if the plaintiff is the prevailing party in such an action, except as prohibited by law.

 

4.4               Returning Company Documents . Upon separation from employment with the Company or upon written demand by the Company during his employment, Employee will immediately deliver to the Company, and will not keep in his possession, recreate, or deliver to anyone else, any and all Company property, including, but not limited to, Company Confidential Information, Associated Third Party Confidential Information, as well as all devices and equipment belonging to the Company or its subsidiaries (including, but not limited to, computers, handheld electronic devices, telephone equipment, and other electronic devices), Company credit cards, records, data, notes, notebooks, reports, files, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, photographs, charts, any other documents and property, and reproductions of any and all of the aforementioned items that were developed by Employee pursuant to his employment with the Company, obtained by him in connection with his employment with the Company, or otherwise belonging to the Company, its successors, or assigns, including, without limitation, those records maintained pursuant to Section 4.2(c). Employee also consents to an exit interview to confirm his compliance with this Article IV.

 

4.5               Notification of New Employer . In the event that Employee leaves the employ of the Company, Employee hereby grants consent to notification by the Company to his new employer about his obligations under this Agreement including information to his new employer concerning the enforceability of this Agreement.

 

4.6               Non-Solicitation .

 

(a)                Solicitation of Employees . Employee agrees that for a period of two (2) years immediately following the documented date of termination of his relationship with the Company for any reason, whether voluntary or involuntary, with or without cause, Employee shall not either directly or indirectly solicit any employees of the Company or any of its subsidiaries to leave their employment, or attempt to solicit employees of the Company or any of its subsidiaries to leave their employment, either for Employee or for any other person or entity with which Employee is then employed or otherwise affiliated.

 

(b)                Solicitation of Customers, Suppliers, etc . Employee agrees that for a period of two (2) years immediately following the documented date of termination of his relationship with the Company for any reason, whether voluntary or involuntary, with or without cause, Employee shall not either directly or indirectly (i) request or advise any customer, supplier or any other person or entity known to be associated with the Company or any of its affiliates or subsidiaries, to withdraw, curtail or cancel or in any other way lessen its use of the business services of the Company or any of its affiliates or subsidiaries or (ii) for the purpose of conducting or engaging in any business directly or indirectly competitive with the Company (whether individually or on behalf of Employee’s affiliates or new employer) call upon, solicit, advise, sign, hire, interfere with, or otherwise do or conduct, or attempt to do or conduct, business with any person or entity covered by any written or oral agreement with the Company or any of its affiliates or subsidiaries, or take away or interfere or attempt to interfere with any Company business custom, business trade, or business patronage of the Company or any of its affiliates or subsidiaries.

 

4.7               Non-Compete . Employee agrees that for a period of one (1) year immediately following the documented date of termination of his relationship with the Company for any reason, whether voluntary or involuntary, Employee shall not either directly or indirectly in the geographical areas that the Company does business or has done business at the time of the Employee’s termination, engage or assist others in engaging in any business or enterprise (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) that is competitive with the Company’s business, including but not limited to any business or enterprise that develops, manufactures, markets, licenses, sells or provides any product or service that competes with any product or service developed, manufactured, marketed, licensed, sold or provided, or planned to be developed, manufactured, marketed, licensed, sold or provided, by the Company while Employee was employed by the Company. If Employee violates the provisions of any of the preceding paragraphs of this Section 4, Employee shall continue to be bound by the restrictions set forth in such paragraph until a period of one (1) year has expired without any violation of such provisions.

 

4.8               Representations . Employee agrees to execute any proper oath or verify any proper document reasonably required to carry out the terms of this Agreement. Employee represents that his performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by Employee in confidence or in trust prior to his employment by the Company or any of its subsidiaries. Employee hereby represents and warrants that he has not entered into, and Employee will not enter into, any oral or written agreement in conflict herewith.

 

 

 

 

 

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4.9               Non-Disparagement . During Employee’s employment with the Company and for a period of three (3) years thereafter, Employee agrees, to the fullest extent permissible by law, not intentionally to make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal, direct or indirect communications that are or could be harmful to or reflect negatively on the Company or its subsidiaries or that are otherwise disparaging of the Company or its subsidiaries and/or their businesses, or any of its or their subsidiaries, past, present or future officers, directors, managers, employees, equity holders, members, advisors, agents, policies, procedures, practices, services, products, decision-making, conduct, professionalism or compliance with standards of any of the foregoing provided that the foregoing is not intended to prohibit truthful statements made by the Employee in his capacity as an officer or employee of a competitor after his employment with the Company has terminated, provided that Employee continues to comply with his confidentiality obligations under this Agreement. The provisions of this Section 4.9 are in addition to any other written agreements on this subject that Employee may have with the Company or any of its subsidiaries, and are not meant to, and do not excuse any, additional obligations that Employee may have under such agreements. Nothing in this Section shall be construed to limit Employee’s ability to cooperate with the investigation of any government agency of competent jurisdiction or to bring or defend against any legal claim. In any civil litigation arising out of or related to this Agreement, the parties shall cooperate to seek a protective order consistent with this Section and Section 4.1 above.

 

ARTICLE V
GENERAL PROVISIONS

 

5.1               Notices . Any and all notices provided for in this Agreement shall be given in writing and shall be deemed given to a party at the earlier of (a) when actually delivered to such party, or (b) when mailed to such party by registered or certified mail (return receipt requested) or sent to such party by courier, confirmed by receipt, and addressed to such party at the address designated below for such party as follows (or to such other address for such party as such party may have substituted by notice to the other party pursuant to this Section 5.1):

 

  If to the Company: Freedom Leaf Inc.
    3571 E. Sunset Road, Suite 420
    Las Vegas, NV 89120
     
  with a copy to: Kleinberg, Kaplan, Wolff & Cohen, P.C.
    551 Fifth Avenue
    New York, NY 10176
    Telecopy: (212) 986-8866
    Telephone: (212) 880-9869
    Email: jain@kkwc.com
    Attention: Jonathan Ain
     
  If to Employee: Ngoc Quang (Daniel) Nguyen
    [REDACTED]
     
  with a copy to: Saunders Koechel & Sharp LLC
    Attention: John Koechel
    5404 Birchman Avenue
    Fort Worth, Texas 76107
    Telecopy: (303) 396-0243
    Telephone: (214) 923-7577
    Email: koechel@skandslegal.com

  

5.2               Entire Agreement; Survival . This Agreement contains the entire understanding and the full and complete agreement of the parties and supersedes and replaces any prior understandings and agreements among the parties with respect to the subject matter hereof. The provisions of this Agreement shall survive the termination of this Agreement, or of Employee’s employment for any reason, to the extent necessary to enable the parties to enforce their respective rights.

 

5.3               Amendment; Headings and References . This Agreement may be altered, amended or modified only in writing, signed by Employee and the Company, except that either party hereto may update its address set forth in Section 5.1 by providing a notice of the updated address in the manner set forth in Section 5.1. Headings included in this Agreement are for convenience only and are not intended to limit or expand the rights of the parties hereto. References to Sections herein shall mean sections of the text of this Agreement, unless otherwise indicated.

 

 

 

 

 

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5.4               Assignability . This Agreement and the rights and duties set forth herein may not be assigned by either of the parties without the express written prior consent of the other party. This Agreement shall be binding on, and inure to the benefit of, each party and such party’s respective heirs, legal representatives, successors and assigns.

 

5.5               Severability . If any court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then such invalidity or unenforceability shall have no effect on the other provisions hereof, which shall remain valid, binding and enforceable and in full force and effect, and such invalid or unenforceable provision shall be construed in a manner so as to give the maximum valid and enforceable effect to the intent of the parties expressed therein.

 

5.6               Waiver of Breach . The waiver by either party of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either party.

 

5.7               Governing Law; Jurisdiction; Construction . This Agreement shall be governed by the internal laws of the State of Texas, without regard to any rules of construction that would require application of the laws of another jurisdiction. Any legal proceeding related to this Agreement must be litigated in an appropriate Texas state or federal court sitting in Dallas County, Texas, and both the Company and Employee hereby consent to the exclusive jurisdiction of the State of Texas for this purpose; waive any objection they may now or hereafter have to venue or to convenience of forum and agree that all legal proceedings will be tried in a court of competent jurisdiction in Dallas County, Texas by a judge without a jury. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, accordingly, each party waives the application of any law, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

 

5.8               Tax Compliance .

 

(a)                The Company may withhold from any amounts payable hereunder any amounts required to be withheld under federal, state or local law and any other deductions authorized in writing by Employee.

 

(b)                The intent of the parties is that payments and benefits under this Agreement comply with or be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively “ Section 409A ”), and the Company shall have complete discretion to interpret and construe this Agreement and any associated documents in any manner that establishes an exemption from (or compliance with) the requirements of Section 409A.  If for any reason, such as imprecision in drafting, any provision of this Agreement (or of any award of compensation, including, without limitation, equity compensation or benefits) does not accurately reflect its intended establishment of an exemption from (or compliance with) Section 409A, as demonstrated by consistent interpretations or other evidence of intent, such provision shall be considered ambiguous as to its exemption from (or compliance with) Section 409A and shall be interpreted by the Company in a manner consistent with such intent, as determined in the discretion of the Company.

 

(c)                For purposes of Section 409A, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

 

(d)                With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, Employee, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (i) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (ii) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

(e)                Notwithstanding anything to the contrary in this Agreement, if Employee is a “specified employee” as determined pursuant to Section 409A as of the date of Employee’s “separation from service” as defined in Treasury Regulation Section 1.409A-1(h) (or any successor regulation) and if any payments or entitlements provided for in this Agreement constitute a “deferral of compensation” within the meaning of Section 409A and cannot be paid or provided in the manner provided herein without subjecting Employee to additional tax, interest or penalties under Section 409A, then any such payment or entitlement which is payable during the first six (6) months following Employee’s “separation from service” shall be paid or provided to Employee in a cash lump-sum on the first business day of the seventh (7th) calendar month immediately following the month in which Employee’s “separation from service” occurs or, if earlier, upon Employee’s death. In addition, any payments or benefits due hereunder upon a termination of Employee’s employment which are a “deferral of compensation” within the meaning of Section 409A shall only be payable or provided to Employee (or Employee’s estate) upon a “separation from service” as defined in Section 409A.

 

 

 

 

 

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(f)                 Whenever a payment under this Agreement specifies a payment period with reference to a number of days (for example, “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.  In no event may Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement, to the extent such payment is subject to Code Section 409A.

 

(g)                The Company makes no representation or warranty and shall have no liability to Employee or any other person or entity if any provisions of this Agreement are determined to constitute deferred compensation subject to Code Section 409A but do not satisfy an exemption from, or the conditions of, Code Section 409A.

 

5.9               Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may be executed and delivered by facsimile or other electronic transmission. A complete, accurate, fully-executed PDF or other facsimile copy of this Agreement may be used in place of an original for all purposes.

 

[Signature Page Follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF , the parties have executed this Agreement as of the day and year first written above.

 

 

  COMPANY: 
   
  FREEDOM LEAF INC.,
  a Nevada corporation
   
   
  By: /s/ Clifford Perry                              
  Name: Clifford Perry
  Title: Chief Executive Officer
   
   
  EMPLOYEE:
   
  NGOC QUANG (DANIEL) NGUYEN
   
  /s/ Ngoc Quang Nguyen                   
  Ngoc Quang Nguyen
   

 

 

 

 

 

 

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SCHEDULE A

   

FORM OF RESTRICTED STOCK AGREEMENT

 

FREEDOM LEAF INC.

 

RESTRICTED STOCK AGREEMENT

 

This Restricted Stock Agreement (the “ Agreement ”) is made as of [_], 2019 (the “ Effective Date ”) by and between Freedom Leaf Inc., a Nevada corporation (the “ Company ”), and Ngoc Quang (Daniel) Nguyen (“ Grantee ”).

 

Grant . In consideration of Grantee’s performance of services for the Company, the Company hereby agrees to grant restricted shares (the “ Restricted Stock ”) of the Company’s Common Stock, par value $0.001 per share (“ Common Stock ”) to Grantee, subject to the conditions of this Agreement. As used in this Agreement, the term “ Shares ” shall mean the Restricted Stock granted under this Agreement, and all securities received (i) in replacement of the Restricted Stock, (ii) as a result of stock dividends or stock splits with respect to the Restricted Stock, and (iii) in replacement of the Restricted Stock in a merger, recapitalization, reorganization or similar corporate transaction.

 

Award and Vesting of Shares.

 

Award . The Restricted Stock shall be awarded to Grantee in the following amounts, at the following times and upon the following conditions, provided that the Continuous Service of Grantee continues through and on the applicable Award Date:

 

  Shares of Restricted Stock Award Date
     
  The First Award (as defined below). 60 days after the Effective Date of Grantee’s Employment Agreement with the Company (the “ First Award Date ”)
     
  The Second Award (as defined below). 12 months after the Effective Date of Grantee’s Employment Agreement with the Company (the “ Second Award Date ”)

 

The Restricted Stock will be issued by the Company to the Grantee on the First Award Date and on the Second Award Date in accordance with this Agreement and will not otherwise be issued or held in escrow or otherwise be outstanding prior to their issuance under this Agreement.

 

Vesting . The First Award of Restricted Stock will vest in accordance with the following vesting schedule: (i) 40.74% of the Shares shall vest in Grantee’s favor on the occurrence of the Milestone (as defined below) (the “ Milestone Vesting Date ”); (ii) 29.63% of the Shares shall vest in Grantee’s favor on the 12-month anniversary of the First Award Date (the “ First Vesting Date ”) provided that the Continuous Service of Grantee continues through such date; and (iii) 29.63% of the Shares shall vest in Grantee’s favor on the 24-month anniversary of the First Award Date (the “ Second Vesting Date ”) provided that the Continuous Service of Grantee continues through such date. The Second Award of Restricted Stock shall fully vest in Grantee’s favor immediately upon its grant on the Second Award Date (such date, together with the Milestone Vesting Date, the First Vesting Date and the Second Vesting Date, each a “ Vesting Date ” with respect to the applicable Shares of Restricted Stock).

 

 

 

 

 

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Acceleration of Vesting . Except as otherwise provided in this Section 2(C) and in Section 4 of this Agreement, there shall be no proportionate or partial vesting of Shares of Restricted Stock in or during the months, days or periods prior to each Vesting Date, and all vesting of Shares of Restricted Stock shall occur only on the applicable Vesting Date.

 

Acceleration of Vesting Upon Change in Control . In the event that a Change in Control of the Company occurs during Grantee’s Continuous Service, the Shares of Restricted Stock subject to this Agreement shall become immediately vested in Grantee’s favor as of the date of the Change in Control.

 

Acceleration of Vesting at Company Discretion . Notwithstanding any other term or provision of this Agreement, the Board of Directors of the Company (the “ Board ”) shall be authorized, in its sole discretion, based upon its review and evaluation of the performance of Grantee and of the Company, to accelerate the vesting of any Shares of Restricted Stock under this Agreement, at such times and upon such terms and conditions as the Board shall deem advisable.

 

Adjustment to Number of Shares . In the event of a forward or reverse stock split of the issued and outstanding Shares of Common Stock of the Company, a Common Stock dividend or distribution, an asset distribution, recapitalization, reorganization or similar transaction by the Company which would customarily result in an adjustment to the number of Shares of Common Stock issuable or outstanding under other outstanding securities of the Company, then the number of Shares subject to vesting and issuance under this Agreement will automatically be adjusted upward or downward, as the case may be, proportionately and appropriately.

 

Definitions . For purposes of this Agreement, the following terms shall have the meanings indicated:

 

Cause ” means (a) Grantee’s material breach of any agreement between Grantee and the Company; (b) Grantee’s material failure to comply with the Company’s written policies or rules that result in material injury to the Company; (c) Grantee’s conviction of, or Grantee’s plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State; (d) Grantee’s gross negligence or willful misconduct in connection with the provision of services for the Company; or (e) Grantee’s failure to cooperate in good faith with a governmental or internal investigation of the Company or its managers, officers or employees.

 

Change of Control ” means the sale of all or substantially all of the outstanding Shares of capital stock, assets or business of the Company, by merger, consolidation, sale of assets or otherwise (other than a merger or consolidation in which all or substantially all of the individuals and entities who were beneficial owners of the Company’s voting securities immediately prior to such transaction beneficially own, directly or indirectly, more than 50% (determined on an as- converted basis) of the outstanding securities entitled to vote generally in the election of directors of the resulting, surviving or acquiring corporation in such transaction).

 

Common Stock Value ” means an amount per share of Common Stock equal to the arithmetic average of the volume-weighted average (rounded to two decimal places) trading price per share of Common Stock for the thirty (30) full trading days ended on and including the trading day prior to the applicable Award Date, using trading prices reported on the OTCQB based on all trades in Common Stock on the OTCQB during the primary trading sessions from 9:30 a.m., New York Time, to 4:00 p.m., New York Time (and not an average of the daily averages during such thirty (30) trading days).

 

 

 

 

 

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Continuous Service ” means the uninterrupted provision of services as an employee, consultant, advisor, officer, or director of the Company or any Related Entity.

 

First Award ” means that number of Shares of Restricted Stock amounting to $8,938,750 in the aggregate, calculated based on the Common Stock Value as determined on the First Award Date; provided, that if such calculation shall result in a fractional Share, such fraction shall be disregarded.

 

Master Agreement ” means that certain Master Manufacturing Agreement, dated as of November 13, 2017, by and between ECS Labs LLC and CBD LIFE SA DE CV (as amended, restated, supplemented or modified from time to time).

 

Milestone ” means the occurrence of an extension of the Master Agreement through December 31, 2020.

 

Net Operating Income ” means the difference of gross income less cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes and other expenses, each determined on a generally accepted accounting principles basis of accounting.

 

Non-Vested Shares ” means any Shares of the Restricted Stock subject to this Agreement that have not become vested pursuant to this Section 2.

 

Second Award ” means that number of Shares of Restricted Stock amounting to an aggregate amount equal to 20.83125% of the Net Operating Income received by the Company from the Effective Date until the Second Award Date pursuant to the Master Agreement, as calculated based on the Common Stock Value as determined on the Second Award Date; provided, that if such calculation shall result in a fractional Share, such fraction shall be disregarded.

 

Related Entity ” means the Company’s wholly-owned subsidiaries on or after the Effective Date, including without limitation ECS Labs LLC, a Texas limited liability company and/or its wholly-owned subsidiaries, and any other wholly-owned subsidiaries of the Company.

 

Vested Shares ” means any Shares of the Restricted Stock subject to this Agreement that have become vested pursuant to this Section 2.

         

 

 

 

 

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Delivery of Restricted Stock.

 

Issuance of Stock Certificates and Legends. One or more stock certificates evidencing the Restricted Stock shall be issued in the name of Grantee but shall be held and retained by the Company until the Vesting Date on which the Shares (or a portion thereof) subject to this Restricted Stock award become Vested Shares pursuant to Section 2 hereof, subject to the provisions of Section 4 hereof. All such stock certificates shall bear the following legends, along with such other legends that the Board shall deem necessary and appropriate or which are otherwise required or indicated pursuant to any applicable stockholders agreement:

 

THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THAT CERTAIN RESTRICTED STOCK AGREEMENT BY AND BETWEEN MR. DANIEL NGUYEN AND FREEDOM LEAF INC. (THE “COMPANY”), DATED AS OF JUNE [____], 2019 (A COPY OF WHICH IS ON FILE WITH THE COMPANY; THE “RSA”). EXCEPT AS OTHERWISE PROVIDED IN THE RSA, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER.

 

THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VOTING REQUIREMENTS AND OTHER RESTRICTIONS SET FORTH IN A VOTING AGREEMENT BETWEEN THE HOLDER OF THIS CERTIFICATE AND CERTAIN OTHER PARTIES. TRANSFER OF THE COMMON STOCK IS SUBJECT TO THE RESTRICTIONS CONTAINED IN SUCH AGREEMENT.

 

THE COMPANY WILL FURNISH TO EACH HOLDER WHO SO REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF WHICH THE COMPANY IS AUTHORIZED TO ISSUE AND OF THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. ANY SUCH REQUEST IS TO BE ADDRESSED TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.

 

Stop-Transfer Instructions . Grantee agrees that, to ensure compliance with the restrictions imposed by this Agreement, the Company may issue appropriate “stop-transfer” instructions to its transfer agent, if any, and if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

 

Stock Powers. Grantee shall deposit with the Company stock powers or other instruments of transfer or assignment, duly endorsed in blank with signature(s) guaranteed, corresponding to each certificate representing Shares of Restricted Stock until such Shares become Vested Shares. If Grantee shall fail to provide the Company with any such stock power or other instrument of transfer or assignment, Grantee hereby irrevocably appoints the Secretary of the Company as his attorney-in-fact, with full power of appointment and substitution, to execute and deliver any such power or other instrument which may be necessary to effectuate the transfer of the Restricted Stock (or assignment of distributions thereon) on the books and records of the Company.

 

Refusal to Transfer . The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares, or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.

 

 

 

 

 

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Delivery of Stock Certificates. On or after each Vesting Date, upon written request to the Company by Grantee, the Company shall promptly cause a new certificate or certificates to be issued to Grantee for and with respect to all Shares that become Vested Shares on that Vesting Date, which certificate(s) shall be delivered to Grantee as soon as administratively practicable after the date of receipt by the Company of Grantee’s written request. The new certificate or certificates shall continue to bear those legends and endorsements that the Company shall deem necessary or appropriate (including those relating to restrictions on transferability and/or obligations and restrictions under applicable securities laws).

 

Issuance Without Certificates. If the Company is authorized to issue Shares without certificates, then the Company may, in the discretion of the Board, issue Shares pursuant to this Agreement without certificates, in which case any references in this Agreement to certificates shall instead refer to whatever evidence may be issued to reflect Grantee’s ownership of the Shares subject to the terms and conditions of this Agreement.

 

Forfeiture of Non-Vested Shares . If Grantee’s Continuous Service with the Company and the Related Entities is terminated for any reason, all Non-Vested Shares shall be forfeited immediately upon such termination of Continuous Service and revert back to the Company without any payment to Grantee. The Board shall have the power and authority to enforce on behalf of the Company any rights of the Company under this Agreement in the event of Grantee’s forfeiture of Non-Vested Shares pursuant to this Section 4.

 

Rights with Respect to Restricted Stock.

 

General. Except as otherwise provided in this Agreement, Grantee shall have, with respect to all of the Shares of Restricted Stock, whether Vested Shares or Non-Vested Shares, all of the rights of a holder of Shares of Common Stock of the Company, including without limitation (i) the right to vote such Restricted Stock, (ii) the right to receive dividends, if any, as may be declared on the Restricted Stock from time to time, and (iii) the rights available to all holders of Shares of Common Stock of the Company upon any merger, consolidation, reorganization, liquidation or dissolution, stock split-up, stock dividend or recapitalization undertaken by the Company; provided, however, that all of such rights shall be subject to the terms, provisions, conditions and restrictions set forth in this Agreement (including without limitation conditions under which all such rights shall be forfeited). Any Shares issued to Grantee as a dividend with respect to Shares of Restricted Stock shall have the same status and bear the same legend as the Shares of Restricted Stock and shall be held by the Company, if the Shares of Restricted Stock that such dividend is attributed to is being so held, unless otherwise determined by the Board.

 

No Restrictions on Certain Transactions. Notwithstanding any term or provision of this Agreement to the contrary, the existence of this Agreement, or of any outstanding Restricted Stock awarded hereunder, shall not affect in any manner the right, power or authority of the Company to make, authorize or consummate: (i) any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business; (ii) any merger, consolidation or similar transaction by or of the Company; (iii) any offer, issue or sale by the Company of any capital stock of the Company, including any equity or debt securities, or preferred or preference stock that would rank prior to or on parity with the Restricted Stock and/or that would include, have or possess other rights, benefits and/or preferences superior to those that the Restricted Stock includes, has or possesses, or any warrants, options or rights with respect to any of the foregoing; (iv) the dissolution or liquidation of the Company; (v) any sale, transfer or assignment of all or any part of the stock, assets or business of the Company; or (vi) any other corporate transaction, act or proceeding (whether of a similar character or otherwise).

 

Transferability. Unless otherwise determined by the Board, the Shares of Restricted Stock are not transferable unless and until the later of (i) the date that is twelve (12) months after the date hereof and (ii) the date such Shares become Vested Shares in accordance with this Agreement, otherwise than by will or under the applicable laws of descent and distribution. The terms of this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Grantee. Except as otherwise permitted pursuant to the first sentence of this Section 5(C), any attempt to effect a Transfer of any Shares of Restricted Stock prior to the date on which the Shares become Vested Shares shall be void ab initio . For purposes of this Agreement, “ Transfer ” shall mean any sale, transfer, encumbrance, gift, donation, assignment, pledge, hypothecation, or other disposition, whether similar or dissimilar to those previously enumerated, whether voluntary or involuntary, and including, but not limited to, any disposition by operation of law, by court order, by judicial process, or by foreclosure, levy or attachment.

 

 

 

 

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Representations and Warranties of Grantee. Grantee hereby represents and warrants to the Company that:

 

Terms of this Agreement . Grantee has received a copy of this Agreement, has read and understands the terms of this Agreement, and agrees to be bound by its terms and conditions.

 

Acceptance of Shares for Own Account for Investment . Grantee is acquiring the Shares for Grantee’s own account for investment purposes only and not with a view to, or for sale in connection with, a distribution of the Shares within the meaning of the Securities Act of 1933, as amended (the “ Securities Act ”). Grantee has no present intention of selling or otherwise disposing of all or any portion of the Shares.

 

Access to Information . Grantee has had access to all information regarding the Company and its present and prospective business, assets, liabilities and financial condition that Grantee reasonably considers important in making the decision to acquire the Shares, and Grantee has had ample opportunity to ask questions of the Company’s representatives concerning such matters and this investment.

 

Understanding of Risks . Grantee is fully aware of: (i) the highly speculative nature of the investment in the Shares; (ii) the financial hazards involved; (iii) the lack of liquidity of the Shares and the restrictions on transferability of the Shares (e.g., that Grantee may not be able to sell or dispose of the Shares or use them as collateral for loans); (iv) the qualifications and backgrounds of the management of the Company; and (v) the tax consequences of an investment in the Shares. Grantee is capable of evaluating the merits and risks of this investment, has the ability to protect Grantee’s own interests in this transaction and is financially capable of bearing a total loss of this investment.

 

Accredited Investor . Grantee is an “accredited investor” pursuant to Rule 501(a) of Regulation D under the Securities Act.

 

No General Solicitation . At no time was Grantee presented with or solicited by any publicly issued newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and issue of the Shares.

 

Compliance with Securities Laws. Grantee understands and acknowledges that the Shares have not been registered with the Securities and Exchange Commission (the “ SEC ”) under the Securities Act and that, notwithstanding any other provision of this Agreement to the contrary, the issuance of any Shares is expressly conditioned upon compliance with the Securities Act and all applicable state securities laws. Grantee agrees to cooperate in good faith (but at no material cost to Grantee) with the Company to ensure compliance with such laws.

 

No Transfers Unless Registered or Exempt . Grantee understands that Grantee may not transfer any Shares unless such Shares are registered under the Securities Act and qualified under applicable state securities laws or unless, in the good faith opinion of counsel to the Company, exemptions from such registration and qualification requirements are available. Grantee understands that only the Company may file a registration statement with the SEC and that the Company is under no obligation to do so with respect to the Shares. Grantee has also been advised that exemptions from registration and qualification may not be available or may not permit Grantee to transfer all or any of the Shares in the amounts or at the times proposed by Grantee.

 

SEC Rule 144 . In addition, Grantee has been advised that SEC Rule 144 promulgated under the Securities Act, which permits certain limited sales of unregistered securities, may not always be available with respect to the Shares and, in any event, requires that the Shares be held for a minimum of six months, and in certain cases one (1) year, after they have been acquired before they may be resold under Rule 144. Grantee understands that Rule 144 may indefinitely restrict transfer of the Shares so long as Grantee remains an “affiliate” of the Company or if “current public information” about the Company (as defined in Rule 144) is not publicly available.

 

 

 

 

 

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Market Standoff Agreement . Grantee agrees in connection with any registration of the Company’s securities that, upon the request of the Company or the underwriters managing any public offering of the Company’s securities, Grantee shall not sell or otherwise dispose of any Shares without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) after the effective date of such registration that is requested by such underwriters and subject to all restrictions as the Company or the underwriters may specify. Grantee further agrees to enter into any agreement reasonably required by the underwriters to implement the foregoing.

 

Tax Matters; Section 83(b) Election .

 

Section 83(b) Election. If Grantee properly elects, within thirty (30) days of the applicable Award Date, to include in gross income for federal income tax purposes an amount equal to the fair market value (as of the applicable Award Date) of the Restricted Stock pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the “ Code ”), Grantee shall make arrangements satisfactory to the Company to pay to the Company any federal, state or local income taxes required to be withheld with respect to the Restricted Stock. If Grantee shall fail to make such tax payments as are required, the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind (including without limitation, the withholding of any Shares that otherwise would be issued to Grantee under this Agreement) otherwise due to Grantee any federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Stock.

 

No Section 83(b) Election. If Grantee does not properly make the election described in paragraph 7(A) above, Grantee shall, no later than the date or dates as of which the restrictions referred to in this Agreement hereof shall lapse, pay to the Company, or make arrangements satisfactory to the Board for payment of, any federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Stock (including without limitation the vesting thereof), and the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind (including without limitation, the withholding of any Shares that otherwise would be distributed to Grantee under this Agreement) otherwise due to Grantee any federal, state, or local taxes of any kind required by law to be withheld with respect to the Restricted Stock.

 

Satisfaction of Withholding Requirements. Grantee may satisfy the withholding requirements with respect to the Restricted Stock pursuant to any one or combination of the following methods: (a) payment in cash; or (b) if and to the extent permitted by the Board, payment by surrendering unrestricted previously held Shares which have a value equal to the required withholding amount or the withholding of Shares that otherwise would be deliverable to Grantee pursuant to this Award. Grantee may surrender Shares either by attestation or by delivery of a certificate or certificates for Shares duly endorsed for transfer to the Company, and if required with medallion level signature guarantee by a member firm of a national stock exchange, by a national or state bank (or guaranteed or notarized in such other manner as the Board may require).

 

Grantee’s Responsibilities for Tax Consequences. Tax consequences on Grantee (including without limitation federal, state, local and foreign income tax consequences) with respect to the Restricted Stock (including without limitation the grant, vesting and/or forfeiture thereof) are the sole responsibility of Grantee. Grantee shall consult with his or her own personal accountant(s) and/or tax advisor(s) regarding these matters, the making of a Section 83(b) election, and Grantee’s filing, withholding and payment (or tax liability) obligations.

 

Amendment, Modification & Assignment; Non-Transferability. This Agreement may only be modified or amended in a writing signed by both the Company and the Grantee. No promises, assurances, commitments, agreements, undertakings or representations, whether oral, written, electronic or otherwise, and whether express or implied, with respect to the subject matter hereof, have been made by either party which are not set forth expressly in this Agreement. Unless otherwise consented to in writing by the Company, in its sole discretion, this Agreement (and Grantee’s rights hereunder) may not be assigned, and the obligations of Grantee hereunder may not be delegated, in whole or in part. The rights and obligations created hereunder shall be binding on Grantee and his heirs and legal representatives and on the successors and assigns of the Company.

 

Complete Agreement. This Agreement (together with those agreements and documents expressly referred to herein, but only for the purposes referred to herein) embody the complete and entire agreement and understanding between the parties with respect to the subject matter hereof, and supersede any and all prior promises, assurances, commitments, agreements, undertakings or representations, whether oral, written, electronic or otherwise, and whether express or implied, which may relate to the subject matter hereof in any way.

 

 

 

 

 

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Miscellaneous .

 

No Right to (Continued) Employment or Service. This Agreement and the grants of Restricted Stock hereunder shall not shall confer, or be construed to confer, upon Grantee any right to employment or service, or continued employment or service, with the Company or any Related Entity.

 

No Limit on Other Compensation Arrangements. Nothing contained in this Agreement shall preclude the Company or any Related Entity from adopting or continuing in effect other or additional compensation plans, agreements or arrangements, and any such plans, agreements and arrangements may be either generally applicable or applicable only in specific cases or to specific persons.

 

Severability. If any term or provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or under any applicable law, rule or regulation, then such provision shall be construed or deemed amended to conform to applicable law (or if such provision cannot be so construed or deemed amended without materially altering the purpose or intent of this Agreement and the grants of Restricted Stock to Grantee hereunder, such provision shall be stricken as to such jurisdiction and the remainder of this Agreement and the award hereunder shall remain in full force and effect).

 

No Trust or Fund Created. Neither this Agreement nor the grants of Restricted Stock hereunder shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Related Entity and Grantee or any other person. To the extent that Grantee or any other person acquires a right to receive payments from the Company or any Related Entity pursuant to this Agreement, such right shall be no greater than the right of any unsecured general creditor of the Company.

 

Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada (without reference to the conflict of laws rules or principles thereof).

 

Interpretation. Grantee accepts the Restricted Stock subject to all of the terms, provisions and restrictions of this Agreement. The undersigned Grantee hereby accepts as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Agreement.

 

Headings. Section, paragraph and other headings and captions are provided solely as a convenience to facilitate reference. Such headings and captions shall not be deemed in any way material or relevant to the construction, meaning or interpretation of this Agreement or any term or provision hereof.

 

 

 

 

 

 

 

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Notices. Any and all notices provided for in this Agreement shall be given in writing and shall be deemed given to a party at the earlier of (a) when actually delivered to such party, or (b) when mailed to such party by registered or certified mail (return receipt requested) or sent to such party by courier, confirmed by receipt, and addressed to such party at the address designated below for such party as follows (subject to the right of either party to designate some other address at any time hereafter in a notice satisfying the requirements of this Section 8(H)):

 

  If to the Company: Freedom Leaf Inc.
    3571 E. Sunset Road, Suite 420
    Las Vegas, NV 89120
     
  with a copy to: Kleinberg, Kaplan, Wolff & Cohen, P.C.
    551 Fifth Avenue
    New York, NY 10176
    Telecopy: (212) 986-8866
    Telephone: (212) 880-9869
    Email: jain@kkwc.com
    Attention: Jonathan Ain
     
  If to Grantee: Ngoc Quang (Daniel) Nguyen:
    ____________________________________
    ____________________________________
    Telephone: ___________________________
    Email: _______________________________
     
  with a copy to: Saunders Koechel & Sharp LLP
    Attention: John Koechel
    5404 Birchman Avenue
    Fort Worth, Texas 76107
    Telecopy: 303.396.0243
    Telephone: 214.923.7577
    Email: koechel@skandslegal.com

 

Section 409A.

 

It is intended that the Restricted Stock awarded pursuant to this Agreement be exempt from Section 409A of the Code (“ Section 409A ”) because it is believed that the Agreement does not provide for a deferral of compensation and accordingly that the Agreement does not constitute a nonqualified deferred compensation plan within the meaning of Section 409A. The provisions of this Agreement shall be interpreted in a manner consistent with this intention, and the provisions of this Agreement shall not be amended, adjusted, assumed or substituted for, converted or otherwise modified without Grantee’s prior written consent if and to the extent that the Company believes or reasonably should believe that such amendment, adjustment, assumption or substitution, conversion or modification would cause the award to violate the requirements of Section 409A.

 

 

 

 

 

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In the event that either the Company or Grantee believes, at any time, that any benefit or right under this Agreement is subject to Section 409A, and does not comply with the requirements of Section 409A, it shall promptly advise the other and the Company and Grantee shall negotiate reasonably and in good faith to amend the terms of such benefits and rights, if such an amendment may be made in a commercially reasonable manner, such that they comply with Section 409A with the most limited possible economic effect on Grantee and on the Company.

 

Notwithstanding the foregoing, the Company does not make any representation to Grantee that the Shares of Restricted Stock awarded pursuant to this Agreement are exempt from, or satisfies, the requirements of Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless Grantee or any beneficiary for any tax, additional tax, interest or penalties that Grantee or any beneficiary may incur in the event that any provision of this Agreement, or any amendment or modification thereof or any other action taken with respect thereto that either is consented to by Grantee or that the Company reasonably believes should not result in a violation of Section 409A, is deemed to violate any of the requirements of Section 409A

 

Non-Waiver of Breach. The waiver by any party hereto of the other party’s prompt and complete performance, or breach or violation, of any term or provision of this Agreement shall be effected solely in a writing signed by such party, and shall not operate nor be construed as a waiver of any subsequent breach or violation, and the waiver by any party hereto to exercise any right or remedy which he or it may possess shall not operate nor be construed as the waiver of such right or remedy by such party, or as a bar to the exercise of such right or remedy by such party, upon the occurrence of any subsequent breach or violation.

 

Reliance on Counsel and Advisors. Grantee acknowledges that Kleinberg, Kaplan, Wolff & Cohen, P.C., is representing only the Company in this transaction. Grantee acknowledges that he or she has had the opportunity to review this Agreement, including all attachments hereto, and the transactions contemplated by this Agreement with his or her own legal counsel, tax advisors and other advisors. Grantee is relying solely on his or her own counsel and advisors and not on any statements or representations of the Company or its agents for legal or other advice with respect to this investment or the transactions contemplated by this Agreement.

 

Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same agreement. This Agreement may be executed and delivered by facsimile or other electronic transmission. A complete, accurate, fully-executed PDF or other facsimile copy of this Agreement may be used in place of an original for all purposes.

 

( signature page follows )

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have executed this Agreement as of the date first written above.

 

NGOC QUANG (DANIEL) NGUYEN

 

 

 

 

_______________________________________ 


Signature

 

 

 

FREEDOM LEAF INC.

 

By: ___________________________________

 

Name: _________________________________

 

Title: __________________________________

 

 

 

 

 

 

 

 

 

 

 

 

  20  

 

Exhibit 10.5

 

EMPLOYMENT AGREEMENT

(Alex Frias)

 

This EMPLOYMENT AGREEMENT (this “ Agreement ”) is made and entered into as of this 31 st day of May, 2019 (the “ Effective Date ”), by and between Freedom Leaf Inc., a Nevada corporation (the “ Company ”), and Alex Frias, an individual (“ Employee ”).

 

In consideration of the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and Employee, it is hereby agreed as follows:

 

ARTICLE I
EMPLOYMENT

 

1.1                Employment . The Company agrees to, and does hereby, employ Employee, and Employee agrees to, and does hereby accept such employment, upon the terms and subject to the conditions set forth in this Agreement. Employee represents and warrants to the Company that (A) Employee has the legal capacity to execute and perform this Agreement, (B) this Agreement is a valid and binding agreement enforceable against Employee according to its terms, and (C) the execution and performance of this Agreement by Employee does not violate the terms of any existing agreement or understanding to which Employee is a party or by which Employee otherwise may be bound. Effective as of the Effective Date, the Company agrees to continue to employ Employee as an employee of the Company as further set forth in Section 1.2, and Employee agrees to continue his employment by the Company, for the period commencing on the Effective Date and continuing until the two (2) year anniversary of the Effective Date unless earlier terminated in accordance with Article III below.

 

1.2               Position and Duties . Employee shall devote Employee’s entire business time, loyalty, attention and energies exclusively to the business interests of the Company while employed by the Company, will not engage in any other employment activities for any direct or indirect remuneration and shall perform his duties and responsibilities diligently and to the best of his ability.

 

ARTICLE II
COMPENSATION AND OTHER BENEFITS

 

2.1               Base Salary . As compensation for Employee’s services hereunder and in consideration of Employee’s other agreements hereunder, during the term of employment, the Company shall pay Employee a base salary equal to $100,000 per annum (“ Base Salary ”), subject to withholding and customary payroll deductions. The Base Salary shall be payable in accordance with the customary payroll practices of the Company.

 

2.2               Incentive Bonuses . In addition to the Base Salary, provided Employee is actively providing service to the Company hereunder, and subject to Article III, Employee shall receive the following incentive bonuses (collectively, the “ Incentive Bonuses ”):

 

(a)                Cash Incentives . Employee will be entitled to receive: (i) on the date that is thirty (30) days after the Effective Date, a cash bonus equal to $800,000; (ii) on the date that is one-hundred and twenty (120) days after the Effective Date, a cash bonus equal to $800,000, (iii) on the date that is twelve (12) months after the Effective Date, a cash bonus equal to 10.00125% of the Net Operating Income (as defined below) received by the Company from the Effective Date until the one-year anniversary of the Effective Date pursuant to that certain Master Manufacturing Agreement, dated as of November 13, 2017, by and between ECS Labs LLC and CBD LIFE SA DE CV (as amended, restated, modified or supplemented from time to time, the “ Master Agreement ”); and (iv) any other cash bonus awards approved by the Board of Directors of the Company (the “ Board ”); provided, however, upon any termination of this Agreement prior to the Expiration Date (as defined below), Employee shall remit to the Company a cash amount equal to the Excess Amount upon demand by the Company, and if the Excess Amount is not so repaid within ninety (90) days of such demand, the Company shall have the right to take any and all action to effectuate such remittance.

 

(b)                Equity Incentives . Subject to the approval of the Board and stockholders of the Company, Employee shall receive (i) on the date that is sixty (60) days after the Effective Date, an equity award equal to approximately $7,138,750 of the Company’s restricted common stock, as calculated based on the Common Stock Value (as defined below), subject to Employee’s execution of that certain restricted stock agreement set forth on Schedule A attached hereto (the “ RSA ”), (ii) on the date that is twelve (12) months from the Effective Date, an equity award equal to approximately 16.66875% of the Net Operating Income received by the Company from the Effective Date until the one-year anniversary of the Effective Date pursuant to the Master Agreement as calculated based on the Common Stock Value, subject to Employee’s execution of the RSA; and (iii) any other equity incentive awards approved by the Board.

 

 

 

 

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2.3               Benefit Plans . During the term of Employee’s employment with the Company, Employee will be eligible to participate in the Company’s retirement plans that are qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), if any, and in the Company’s employee welfare benefit plans that are available to any other executive employees of the Company (the “ Plans ”), in accordance with and subject to the terms and conditions thereof. The terms and conditions of the Plans, as expressed in the Plan documents, will control including, but not limited to, the Company’s ability to amend, modify or terminate any of those programs as it determines appropriate in accordance with the Plans’ terms. During the term of Employee’s employment with the Company, the Company shall pay to maintain Employee’s existing health insurance plan or provide health insurance with substantially similar coverage to Employee’s existing health insurance plan.

 

2.4               Expenses . The Company shall reimburse Employee for all expenses reasonably incurred in the course of the performance of Employee’s duties and responsibilities pursuant to this Agreement and consistent with the Company’s policies with respect to travel, entertainment and miscellaneous expenses; provided, that any single expenditure in excess of $5,000 shall require the approval of the Board.

 

2.5               Vacation . In any year, Employee shall be entitled to take reasonable vacation provided that such vacation does not prevent him from adequately performing his duties under this Agreement.

 

2.6               Withholding . All payments to be made by the Company hereunder will be subject to any withholding requirements.

 

2.7               Certain Definitions . As used in this Section 2:

 

(a)                Common Stock Value ” means an amount per share of Common Stock equal to the arithmetic average of the volume-weighted average (rounded to two decimal places) trading price per share of Common Stock for the thirty (30) full trading days ended on and including the trading day prior to the applicable determination date, using trading prices reported on the OTCQB based on all trades in Common Stock on the OTCQB during the primary trading sessions from 9:30 a.m., New York Time, to 4:00 p.m., New York Time (and not an average of the daily averages during such thirty (30) trading days).

 

(b)                Excess Amount ” means the product obtained by multiplying (i) the gross amount received by Employee pursuant to Section 2.2(a) of this Agreement, by (ii) the Remaining Service Period.

 

(c)                Net Operating Income ” shall mean the difference of gross income less cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes and other expenses, each determined on a generally accepted accounting principles basis of accounting.

 

(d)                Remaining Service Period ” means the quotient obtained by dividing (i) that number of days between the effective date of any termination of this Agreement and the Expiration Date (not including the effective date of such termination, but including the Expiration Date), by (ii) 731.

 

ARTICLE III
TERMINATION; EQUITY

 

3.1               Term . Employee’s employment shall commence on the Effective Date and shall continue until the two (2) year anniversary of the Effective Date (the “ Expiration Date ”), unless earlier terminated pursuant to the terms of this Agreement.

 

3.2               Right to Terminate; Automatic Termination .

 

(a)                Termination for Cause . The Company shall be entitled to terminate this Agreement for Cause (as defined below) effective immediately in the event of (a) Employee’s material breach of any agreement between Employee and the Company; (b) Employee’s conviction of, or Employee’s plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State, provided, however, that such felony is not related to the manufacture, sale or possession of cannabis or any components thereof; (c) Employee’s gross negligence or willful misconduct in connection with the provision of services for the Company; or (d) Employee’s failure to cooperate in good faith with a governmental or internal investigation of the Company or its managers, officers or employees (collectively, “ Cause ”); provided, however, that if any such event by its nature is capable of being cured with no adverse effect to the Company, and Employee is taking reasonable and diligent steps to cure such event, then such termination shall be effective only if such event remains uncured for a period of thirty calendar days after the Company provides written notice to Employee setting forth the nature of the event constituting Cause hereunder.

 

(b)                Termination Upon Death or Disability . Subject to Section 3.3, Employee’s employment and the Company’s obligations under this Agreement, unless specifically stated otherwise herein, shall terminate: (i) automatically, effective immediately and without any notice being necessary, upon Employee’s death; and (ii) in the event of any Disability of Employee, by the Company giving notice of termination to Employee. As used in this Section 3.2(b), “ Disability ” shall mean that (A) Employee is unable, by reason of an injury, a sickness or accident, to perform Employee’s duties under this Agreement for an aggregate of sixty (60) days in any consecutive six (6) month period, or (B) Employee has a guardian of the person or estate appointed by a court of competent jurisdiction.

 

 

 

 

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3.3               Rights Upon Termination . If Employee’s employment is terminated pursuant to Section 3.2, or if Employee quits employment, notwithstanding the terms of this Agreement, Employee or Employee’s estate shall have no further rights against the Company hereunder, except for the right to receive, (i) any earned but unpaid Base Salary and Incentive Bonuses, (ii) reimbursement of expenses to which Employee is entitled pursuant to Section 2.4, and (iii) Employee shall be deemed to resign from any board to which Employee has been appointed or nominated by or on behalf of the Company.

 

3.4               No Automatic Cross-Default . This Agreement is being executed simultaneously with that certain Membership Interest Purchase Agreement, by and between, inter alia, the Company and Employee (the “ Purchase Agreement ”). Each of the Company and Employee acknowledge and agree that this Agreement, the RSA and the Purchase Agreement each create independent rights and obligations, are supported by adequate consideration and stand on their own. Accordingly, (i) a default by Employee or the Company under this Agreement shall not cause an automatic cross-default by Employee or the Company under the Restricted Stock Agreement and/or the Purchase Agreement, and (ii) a default by Employee or the Company under the Restricted Stock Agreement and/or the Purchase Agreement shall not cause an automatic cross-default under this Agreement. Notwithstanding the foregoing, nothing in this Section 3.4 shall preclude or otherwise limit either party from asserting any claim or right against the other party or from taking any other action under each of this Agreement, the RSA and/or the Purchase Agreement based upon the same act or omission by the other party that creates an alleged default under any one of the aforesaid agreements.

 

ARTICLE IV
CONFIDENTIALITY; NON-SOLICITATION

 

4.1               Confidential Information .

 

(a)                Company Information . Employee agrees that during and after his employment with the Company, he will hold in the strictest confidence, and will not (except for the benefit of the Company during his employment or for limited use by Employee’s accountants, financial planners, attorneys and other professional consultants), as required by applicable law, a court order or an order or request of a relevant regulatory authority or in order to enforce a claim against the Company (including, without limitation, under this Agreement), use or disclose to any person, firm, corporation or other entity any Company Confidential Information. Employee understands that “ Company Confidential Information ” means any non-public information that relates to the actual or anticipated business, research or development of the Company, or to the Company’s technical data, trade secrets, or know-how, including, but not limited to, research, product plans, or other information regarding the Company’s products or services and markets therefor; customer lists and customer contact information, their buying histories, and preferences (including, but not limited to, such information relating to customers of the Company on which Employee called or with which Employee may become acquainted during the term of his employment); personnel information (including, but not limited to, information regarding employees’ skills and performance); information about vendors, supplier and business partners; software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, and hardware configuration information; and marketing, finances, and/or other business information; provided , however , that Company Confidential Information does not include any of the foregoing items to the extent the same have become publicly known and made generally available through no wrongful act of Employee or of others. Employee understands that nothing in this Agreement is intended to limit employees’ rights to discuss the terms, wages, and working conditions of their employment, as protected by applicable law.

 

(b)                Third Party Information . Employee recognizes that the Company may have received and in the future may receive from third parties associated with the Company, e.g., the Company’s customers, suppliers, licensors, licensees, partners, or collaborators (“ Associated Third Parties ”), their confidential or proprietary information (“ Associated Third Party Confidential Information ”). By way of example, and not as an exhaustive list, Associated Third Party Confidential Information may include the habits or practices of Associated Third Parties, the technology of Associated Third Parties, requirements of Associated Third Parties, and information related to the business conducted between the Company and such Associated Third Parties. Employee agrees at all times during his employment with the Company and thereafter to hold in the strictest confidence, and not to use or to disclose to any person, firm, corporation, or other entity any Associated Third Party Confidential Information, except as necessary in carrying out his work for the Company consistent with the Company’s agreement with such Associated Third Parties or as required by applicable law, a court order or an order or request of a relevant regulatory authority. Employee further agrees to comply with any and all Company policies and guidelines that may be adopted from time to time during the term of his employment regarding Associated Third Parties and Associated Third Party Confidential Information. Employee understands that his unauthorized use or disclosure of Associated Third Party Confidential Information or violation during his employment of any Company policies will lead to disciplinary action, up to and including immediate termination and legal action by the Company. Third Party Confidential Information does not include any of the foregoing items to the extent the same have become publicly known and made generally available through no wrongful act of Employee or of others. Employee understands that nothing in this Agreement is intended to limit employees’ rights to discuss the terms, wages, and working conditions of their employment, as protected by applicable law.

 

 

 

 

 

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4.2               Inventions .

 

(a)                Inventions Retained and Licensed . Employee represents and warrants that there are no inventions, discoveries, original works of authorship, developments, improvements, and trade secrets that were conceived in whole or in part by Employee prior to his employment with the Company or any of its subsidiaries and to which he has any right, title, or interest, and which relate to the Company’s proposed business, products, or research and development (collectively, “ Prior Inventions ”). Notwithstanding the foregoing, if, in the course of his employment with the Company, Employee incorporates into or uses in connection with any product, process, service, technology, or other work by or on behalf of the Company any Prior Invention, Employee hereby grants to the Company a non-exclusive, royalty-free, fully paid-up, irrevocable, perpetual, worldwide license, with the right to grant and authorize sublicenses, to make, have made, modify, use, import, offer for sale, and sell such Prior Invention as part of or in connection with such product, process, service, technology, or other work, and to practice any method related thereto.

 

(b)                Assignment of Inventions . Employee agrees that he will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assigns to the Company, or its designee, all his right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs, discoveries, ideas, trademarks, or trade secrets, whether or not patentable or registrable under patent, copyright, or similar laws, which Employee may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time Employee is in the employ of the Company or any of its subsidiaries (including during his off-duty hours), or with the use of Company’s equipment, supplies, facilities, or Company Confidential Information, except as provided in Section 4.1 (collectively referred to as “ Inventions ”). Employee further acknowledges that all original works of authorship that are made by him (solely or jointly with others) within the scope of and during the period of his employment with the Company and that are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act. Employee understands and agrees that the decision whether or not to commercialize or market any Inventions is within the Company’s sole discretion and for the Company’s sole benefit, and that no royalty or other consideration will be due to Employee as a result of the Company’s efforts to commercialize or market any such Inventions.

 

(c)                Maintenance of Records . Employee agrees to keep and maintain adequate, current, accurate, and authentic written records of all Inventions made by him (solely or jointly with others) during the term of his employment with the Company. The records will be in the form of notes, sketches, drawings, electronic files, reports, or any other format that may be specified by the Company. The records are and will be available to and remain the sole property of the Company at all times.

 

(d)                Patent and Copyright Registrations . Employee agrees to reasonably assist the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in the Inventions and any rights relating thereto in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, and all other instruments that the Company shall deem proper or necessary in order to apply for, register, obtain, maintain, defend, and enforce such rights, and in order to assign and convey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title, and interest in and to such Inventions and any rights relating thereto, and testifying in a suit or other proceeding relating to such Inventions and any rights relating thereto. Employee further agrees that his obligation to execute or cause to be executed, when it is in his power to do so, any such instrument or papers shall continue after the termination of this Agreement. If the Company is unable because of Employee’s mental or physical incapacity or for any other reason to secure Employee’s signature with respect to any Inventions, including, without limitation, to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering such Inventions, then Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney in fact, to act for and in his behalf and stead, to execute and file any papers and oaths, and to do all other lawfully permitted acts with respect to such Inventions with the same legal force and effect as if executed by the Employee.

 

4.3               Conflicting Employment .

 

(a)                Current Obligations . Employee agrees that during the term of his employment with the Company, he will not engage in or undertake any other employment, occupation, consulting relationship, or commitment that is directly related to the business in which the Company is now involved or becomes involved or a business which Employee understands the Company to actively have plans to become involved, nor will Employee engage in any other activities that interfere with his ability to fully and satisfactorily perform his duties to the Company, except as may otherwise be agreed in writing by and between Employee and the Company.

 

 

 

 

 

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(b)                Prior Relationships . Without limiting Section 4.3(a), Employee represents that he has no other agreements, relationships, or commitments to any other person or entity that conflict with his obligations to the Company under this Agreement or his ability to become employed and perform the services for which he is being employed by the Company. Employee further agrees that if he has signed a confidentiality agreement or similar type of agreement with any former employer or other entity, he will comply with the terms of any such agreement to the extent that its terms are lawful under applicable law. Employee represents and warrants that after undertaking a careful search (including, but not limited to, searches of his computers, cell phones, electronic devices, and documents), he has returned all property and confidential information belonging to all prior employers. Moreover, he agrees to fully indemnify the Company, its directors, managers, officers, agents, employees, investors, shareholders, members, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns for all verdicts, judgments, settlements, and other losses incurred by any of them resulting from Employee’s breach of his obligations under any agreement to which he is a party or obligation to which he is bound, as well as any reasonable attorneys’ fees and costs if the plaintiff is the prevailing party in such an action, except as prohibited by law.

 

4.4               Returning Company Documents . Upon separation from employment with the Company or upon written demand by the Company during his employment, Employee will immediately deliver to the Company, and will not keep in his possession, recreate, or deliver to anyone else, any and all Company property, including, but not limited to, Company Confidential Information, Associated Third Party Confidential Information, as well as all devices and equipment belonging to the Company or its subsidiaries (including, but not limited to, computers, handheld electronic devices, telephone equipment, and other electronic devices), Company credit cards, records, data, notes, notebooks, reports, files, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, photographs, charts, any other documents and property, and reproductions of any and all of the aforementioned items that were developed by Employee pursuant to his employment with the Company, obtained by him in connection with his employment with the Company, or otherwise belonging to the Company, its successors, or assigns, including, without limitation, those records maintained pursuant to Section 4.2(c). Employee also consents to an exit interview to confirm his compliance with this Article IV.

 

4.5               Notification of New Employer . In the event that Employee leaves the employ of the Company, Employee hereby grants consent to notification by the Company to his new employer about his obligations under this Agreement including information to his new employer concerning the enforceability of this Agreement.

 

4.6               Non-Solicitation .

 

(a)                Solicitation of Employees . Employee agrees that for a period of two (2) years immediately following the documented date of termination of his relationship with the Company for any reason, whether voluntary or involuntary, with or without cause, Employee shall not either directly or indirectly solicit any employees of the Company or any of its subsidiaries to leave their employment, or attempt to solicit employees of the Company or any of its subsidiaries to leave their employment, either for Employee or for any other person or entity with which Employee is then employed or otherwise affiliated.

 

(b)                Solicitation of Customers, Suppliers, etc . Employee agrees that for a period of two (2) years immediately following the documented date of termination of his relationship with the Company for any reason, whether voluntary or involuntary, with or without cause, Employee shall not either directly or indirectly (i) request or advise any customer, supplier or any other person or entity known to be associated with the Company or any of its affiliates or subsidiaries, to withdraw, curtail or cancel or in any other way lessen its use of the business services of the Company or any of its affiliates or subsidiaries or (ii) for the purpose of conducting or engaging in any business directly or indirectly competitive with the Company (whether individually or on behalf of Employee’s affiliates or new employer) call upon, solicit, advise, sign, hire, interfere with, or otherwise do or conduct, or attempt to do or conduct, business with any person or entity covered by any written or oral agreement with the Company or any of its affiliates or subsidiaries, or take away or interfere or attempt to interfere with any Company business custom, business trade, or business patronage of the Company or any of its affiliates or subsidiaries.

 

4.7               Non-Compete . Employee agrees that for a period of one (1) year immediately following the documented date of termination of his relationship with the Company for any reason, whether voluntary or involuntary, Employee shall not either directly or indirectly in the geographical areas that the Company does business or has done business at the time of the Employee’s termination, engage or assist others in engaging in any business or enterprise (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) that is competitive with the Company’s business, including but not limited to any business or enterprise that develops, manufactures, markets, licenses, sells or provides any product or service that competes with any product or service developed, manufactured, marketed, licensed, sold or provided, or planned to be developed, manufactured, marketed, licensed, sold or provided, by the Company while Employee was employed by the Company. If Employee violates the provisions of any of the preceding paragraphs of this Section 4, Employee shall continue to be bound by the restrictions set forth in such paragraph until a period of one (1) year has expired without any violation of such provisions.

 

4.8               Representations . Employee agrees to execute any proper oath or verify any proper document reasonably required to carry out the terms of this Agreement. Employee represents that his performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by Employee in confidence or in trust prior to his employment by the Company or any of its subsidiaries. Employee hereby represents and warrants that he has not entered into, and Employee will not enter into, any oral or written agreement in conflict herewith.

 

 

 

 

 

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4.9               Non-Disparagement . During Employee’s employment with the Company and for a period of three (3) years thereafter, Employee agrees, to the fullest extent permissible by law, not intentionally to make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal, direct or indirect communications that are or could be harmful to or reflect negatively on the Company or its subsidiaries or that are otherwise disparaging of the Company or its subsidiaries and/or their businesses, or any of its or their subsidiaries, past, present or future officers, directors, managers, employees, equity holders, members, advisors, agents, policies, procedures, practices, services, products, decision-making, conduct, professionalism or compliance with standards of any of the foregoing provided that the foregoing is not intended to prohibit truthful statements made by the Employee in his capacity as an officer or employee of a competitor after his employment with the Company has terminated, provided that Employee continues to comply with his confidentiality obligations under this Agreement. The provisions of this Section 4.9 are in addition to any other written agreements on this subject that Employee may have with the Company or any of its subsidiaries, and are not meant to, and do not excuse any, additional obligations that Employee may have under such agreements. Nothing in this Section shall be construed to limit Employee’s ability to cooperate with the investigation of any government agency of competent jurisdiction or to bring or defend against any legal claim. In any civil litigation arising out of or related to this Agreement, the parties shall cooperate to seek a protective order consistent with this Section and Section 4.1 above.

 

ARTICLE V
GENERAL PROVISIONS

 

5.1               Notices . Any and all notices provided for in this Agreement shall be given in writing and shall be deemed given to a party at the earlier of (a) when actually delivered to such party, or (b) when mailed to such party by registered or certified mail (return receipt requested) or sent to such party by courier, confirmed by receipt, and addressed to such party at the address designated below for such party as follows (or to such other address for such party as such party may have substituted by notice to the other party pursuant to this Section 5.1):

 

  If to the Company: Freedom Leaf Inc.
    3571 E. Sunset Road, Suite 420
    Las Vegas, NV 89120
     
  with a copy to: Kleinberg, Kaplan, Wolff & Cohen, P.C.
    551 Fifth Avenue
    New York, NY 10176
    Telecopy: (212) 986-8866
    Telephone: (212) 880-9869
    Email: jain@kkwc.com
    Attention: Jonathan Ain
     
  If to Employee: Alex Frias
    [REDACTED]

  

5.2               Entire Agreement; Survival . This Agreement contains the entire understanding and the full and complete agreement of the parties and supersedes and replaces any prior understandings and agreements among the parties with respect to the subject matter hereof. The provisions of this Agreement shall survive the termination of this Agreement, or of Employee’s employment for any reason, to the extent necessary to enable the parties to enforce their respective rights.

 

5.3               Amendment; Headings and References . This Agreement may be altered, amended or modified only in writing, signed by Employee and the Company, except that either party hereto may update its address set forth in Section 5.1 by providing a notice of the updated address in the manner set forth in Section 5.1. Headings included in this Agreement are for convenience only and are not intended to limit or expand the rights of the parties hereto. References to Sections herein shall mean sections of the text of this Agreement, unless otherwise indicated.

 

 

 

 

 

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5.4               Assignability . This Agreement and the rights and duties set forth herein may not be assigned by either of the parties without the express written prior consent of the other party. This Agreement shall be binding on, and inure to the benefit of, each party and such party’s respective heirs, legal representatives, successors and assigns.

 

5.5               Severability . If any court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then such invalidity or unenforceability shall have no effect on the other provisions hereof, which shall remain valid, binding and enforceable and in full force and effect, and such invalid or unenforceable provision shall be construed in a manner so as to give the maximum valid and enforceable effect to the intent of the parties expressed therein.

 

5.6               Waiver of Breach . The waiver by either party of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either party.

 

5.7               Governing Law; Jurisdiction; Construction . This Agreement shall be governed by the internal laws of the State of Texas, without regard to any rules of construction that would require application of the laws of another jurisdiction. Any legal proceeding related to this Agreement must be litigated in an appropriate Texas state or federal court sitting in Dallas County, Texas, and both the Company and Employee hereby consent to the exclusive jurisdiction of the State of Texas for this purpose; waive any objection they may now or hereafter have to venue or to convenience of forum and agree that all legal proceedings will be tried in a court of competent jurisdiction in Dallas County, Texas by a judge without a jury. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, accordingly, each party waives the application of any law, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

 

5.8               Tax Compliance .

 

(a)                The Company may withhold from any amounts payable hereunder any amounts required to be withheld under federal, state or local law and any other deductions authorized in writing by Employee.

 

(b)                The intent of the parties is that payments and benefits under this Agreement comply with or be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively “ Section 409A ”), and the Company shall have complete discretion to interpret and construe this Agreement and any associated documents in any manner that establishes an exemption from (or compliance with) the requirements of Section 409A.  If for any reason, such as imprecision in drafting, any provision of this Agreement (or of any award of compensation, including, without limitation, equity compensation or benefits) does not accurately reflect its intended establishment of an exemption from (or compliance with) Section 409A, as demonstrated by consistent interpretations or other evidence of intent, such provision shall be considered ambiguous as to its exemption from (or compliance with) Section 409A and shall be interpreted by the Company in a manner consistent with such intent, as determined in the discretion of the Company.

 

(c)                For purposes of Section 409A, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

 

(d)                With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, Employee, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (i) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (ii) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

(e)                Notwithstanding anything to the contrary in this Agreement, if Employee is a “specified employee” as determined pursuant to Section 409A as of the date of Employee’s “separation from service” as defined in Treasury Regulation Section 1.409A-1(h) (or any successor regulation) and if any payments or entitlements provided for in this Agreement constitute a “deferral of compensation” within the meaning of Section 409A and cannot be paid or provided in the manner provided herein without subjecting Employee to additional tax, interest or penalties under Section 409A, then any such payment or entitlement which is payable during the first six (6) months following Employee’s “separation from service” shall be paid or provided to Employee in a cash lump-sum on the first business day of the seventh (7th) calendar month immediately following the month in which Employee’s “separation from service” occurs or, if earlier, upon Employee’s death. In addition, any payments or benefits due hereunder upon a termination of Employee’s employment which are a “deferral of compensation” within the meaning of Section 409A shall only be payable or provided to Employee (or Employee’s estate) upon a “separation from service” as defined in Section 409A.

 

 

 

 

 

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(f)                 Whenever a payment under this Agreement specifies a payment period with reference to a number of days (for example, “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.  In no event may Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement, to the extent such payment is subject to Code Section 409A.

 

(g)                The Company makes no representation or warranty and shall have no liability to Employee or any other person or entity if any provisions of this Agreement are determined to constitute deferred compensation subject to Code Section 409A but do not satisfy an exemption from, or the conditions of, Code Section 409A.

 

5.9               Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may be executed and delivered by facsimile or other electronic transmission. A complete, accurate, fully-executed PDF or other facsimile copy of this Agreement may be used in place of an original for all purposes.

 

[Signature Page Follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF , the parties have executed this Agreement as of the day and year first written above.

 

 

  COMPANY: 
   
  FREEDOM LEAF INC.,
  a Nevada corporation
   
   
  By: /s/ Clifford Perry                              
  Name: Clifford Perry
  Title: Chief Executive Officer
   
   
  EMPLOYEE:
   
  ALEX FRIAS
   
  /s/ Alex Frias                                
  Alex Frias
   

 

 

 

 

 

 

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Schedule A

   

FORM OF RESTRICTED STOCK AGREEMENT

 

FREEDOM LEAF INC.

 

RESTRICTED STOCK AGREEMENT

 

This Restricted Stock Agreement (the “ Agreement ”) is made as of [_], 2019 (the “ Effective Date ”) by and between Freedom Leaf Inc., a Nevada corporation (the “ Company ”), and Alex Frias (“ Grantee ”).

 

Grant . In consideration of Grantee’s performance of services for the Company, the Company hereby agrees to grant restricted shares (the “ Restricted Stock ”) of the Company’s Common Stock, par value $0.001 per share (“ Common Stock ”) to Grantee, subject to the conditions of this Agreement. As used in this Agreement, the term “ Shares ” shall mean the Restricted Stock granted under this Agreement, and all securities received (i) in replacement of the Restricted Stock, (ii) as a result of stock dividends or stock splits with respect to the Restricted Stock, and (iii) in replacement of the Restricted Stock in a merger, recapitalization, reorganization or similar corporate transaction.

 

Award and Vesting of Shares.

 

Award . The Restricted Stock shall be awarded to Grantee in the following amounts, at the following times and upon the following conditions, provided that the Continuous Service of Grantee continues through and on the applicable Award Date:

 

  Shares of Restricted Stock Award Date
     
  The First Award (as defined below). 60 days after the Effective Date of Grantee’s Employment Agreement with the Company (the “ First Award Date ”)
     
  The Second Award (as defined below). 12 months after the Effective Date of Grantee’s Employment Agreement with the Company (the “ Second Award Date ”)

 

The Restricted Stock will be issued by the Company to the Grantee on the First Award Date and on the Second Award Date in accordance with this Agreement and will not otherwise be issued or held in escrow or otherwise be outstanding prior to their issuance under this Agreement.

 

Vesting . The First Award of Restricted Stock will vest in accordance with the following vesting schedule: (i) 40.74% of the Shares shall vest in Grantee’s favor on the occurrence of the Milestone (as defined below) (the “ Milestone Vesting Date ”); (ii) 29.63% of the Shares shall vest in Grantee’s favor on the 12-month anniversary of the First Award Date (the “ First Vesting Date ”) provided that the Continuous Service of Grantee continues through such date; and (iii) 29.63% of the Shares shall vest in Grantee’s favor on the 24-month anniversary of the First Award Date (the “ Second Vesting Date ”) provided that the Continuous Service of Grantee continues through such date. The Second Award of Restricted Stock shall fully vest in Grantee’s favor immediately upon its grant on the Second Award Date (such date, together with the Milestone Vesting Date, the First Vesting Date and the Second Vesting Date, each a “ Vesting Date ” with respect to the applicable Shares of Restricted Stock).

 

 

 

 

 

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Acceleration of Vesting . Except as otherwise provided in this Section 2(C) and in Section 4 of this Agreement, there shall be no proportionate or partial vesting of Shares of Restricted Stock in or during the months, days or periods prior to each Vesting Date, and all vesting of Shares of Restricted Stock shall occur only on the applicable Vesting Date.

 

Acceleration of Vesting Upon Change in Control . In the event that a Change in Control of the Company occurs during Grantee’s Continuous Service, the Shares of Restricted Stock subject to this Agreement shall become immediately vested in Grantee’s favor as of the date of the Change in Control.

 

Acceleration of Vesting at Company Discretion . Notwithstanding any other term or provision of this Agreement, the Board of Directors of the Company (the “ Board ”) shall be authorized, in its sole discretion, based upon its review and evaluation of the performance of Grantee and of the Company, to accelerate the vesting of any Shares of Restricted Stock under this Agreement, at such times and upon such terms and conditions as the Board shall deem advisable.

 

Adjustment to Number of Shares . In the event of a forward or reverse stock split of the issued and outstanding Shares of Common Stock of the Company, a Common Stock dividend or distribution, an asset distribution, recapitalization, reorganization or similar transaction by the Company which would customarily result in an adjustment to the number of Shares of Common Stock issuable or outstanding under other outstanding securities of the Company, then the number of Shares subject to vesting and issuance under this Agreement will automatically be adjusted upward or downward, as the case may be, proportionately and appropriately.

 

Definitions . For purposes of this Agreement, the following terms shall have the meanings indicated:

 

Cause ” means (a) Grantee’s material breach of any agreement between Grantee and the Company; (b) Grantee’s material failure to comply with the Company’s written policies or rules that result in material injury to the Company; (c) Grantee’s conviction of, or Grantee’s plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State; (d) Grantee’s gross negligence or willful misconduct in connection with the provision of services for the Company; or (e) Grantee’s failure to cooperate in good faith with a governmental or internal investigation of the Company or its managers, officers or employees.

 

Change of Control ” means the sale of all or substantially all of the outstanding Shares of capital stock, assets or business of the Company, by merger, consolidation, sale of assets or otherwise (other than a merger or consolidation in which all or substantially all of the individuals and entities who were beneficial owners of the Company’s voting securities immediately prior to such transaction beneficially own, directly or indirectly, more than 50% (determined on an as- converted basis) of the outstanding securities entitled to vote generally in the election of directors of the resulting, surviving or acquiring corporation in such transaction).

 

Common Stock Value ” means an amount per share of Common Stock equal to the arithmetic average of the volume-weighted average (rounded to two decimal places) trading price per share of Common Stock for the thirty (30) full trading days ended on and including the trading day prior to the applicable Award Date, using trading prices reported on the OTCQB based on all trades in Common Stock on the OTCQB during the primary trading sessions from 9:30 a.m., New York Time, to 4:00 p.m., New York Time (and not an average of the daily averages during such thirty (30) trading days).

 

 

 

 

 

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Continuous Service ” means the uninterrupted provision of services as an employee, consultant, advisor, officer, or director of the Company or any Related Entity.

 

First Award ” means that number of Shares of Restricted Stock amounting to $7,138,750 in the aggregate, calculated based on the Common Stock Value as determined on the First Award Date; provided, that if such calculation shall result in a fractional Share, such fraction shall be disregarded.

 

Master Agreement ” means that certain Master Manufacturing Agreement, dated as of November 13, 2017, by and between ECS Labs LLC and CBD LIFE SA DE CV (as amended, restated, supplemented or modified from time to time).

 

Milestone ” means the occurrence of an extension of the Master Agreement through December 31, 2020.

 

Net Operating Income ” means the difference of gross income less cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes and other expenses, each determined on a generally accepted accounting principles basis of accounting.

 

Non-Vested Shares ” means any Shares of the Restricted Stock subject to this Agreement that have not become vested pursuant to this Section 2.

 

Second Award ” means that number of Shares of Restricted Stock amounting to an aggregate amount equal to 16.66875% of the Net Operating Income received by the Company from the Effective Date until the Second Award Date pursuant to the Master Agreement, as calculated based on the Common Stock Value as determined on the Second Award Date; provided, that if such calculation shall result in a fractional Share, such fraction shall be disregarded.

 

Related Entity ” means the Company’s wholly-owned subsidiaries on or after the Effective Date, including without limitation ECS Labs LLC, a Texas limited liability company and/or its wholly-owned subsidiaries, and any other wholly-owned subsidiaries of the Company.

 

Vested Shares ” means any Shares of the Restricted Stock subject to this Agreement that have become vested pursuant to this Section 2.

         

 

 

 

 

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Delivery of Restricted Stock.

 

Issuance of Stock Certificates and Legends. One or more stock certificates evidencing the Restricted Stock shall be issued in the name of Grantee but shall be held and retained by the Company until the Vesting Date on which the Shares (or a portion thereof) subject to this Restricted Stock award become Vested Shares pursuant to Section 2 hereof, subject to the provisions of Section 4 hereof. All such stock certificates shall bear the following legends, along with such other legends that the Board shall deem necessary and appropriate or which are otherwise required or indicated pursuant to any applicable stockholders agreement:

 

THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THAT CERTAIN RESTRICTED STOCK AGREEMENT BY AND BETWEEN MR. ALEX FRIAS AND FREEDOM LEAF INC. (THE “COMPANY”), DATED AS OF JUNE [____], 2019 (A COPY OF WHICH IS ON FILE WITH THE COMPANY; THE “RSA”). EXCEPT AS OTHERWISE PROVIDED IN THE RSA, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER.

 

THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VOTING REQUIREMENTS AND OTHER RESTRICTIONS SET FORTH IN A VOTING AGREEMENT BETWEEN THE HOLDER OF THIS CERTIFICATE AND CERTAIN OTHER PARTIES. TRANSFER OF THE COMMON STOCK IS SUBJECT TO THE RESTRICTIONS CONTAINED IN SUCH AGREEMENT.

 

THE COMPANY WILL FURNISH TO EACH HOLDER WHO SO REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF WHICH THE COMPANY IS AUTHORIZED TO ISSUE AND OF THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. ANY SUCH REQUEST IS TO BE ADDRESSED TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.

 

Stop-Transfer Instructions . Grantee agrees that, to ensure compliance with the restrictions imposed by this Agreement, the Company may issue appropriate “stop-transfer” instructions to its transfer agent, if any, and if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

 

Stock Powers. Grantee shall deposit with the Company stock powers or other instruments of transfer or assignment, duly endorsed in blank with signature(s) guaranteed, corresponding to each certificate representing Shares of Restricted Stock until such Shares become Vested Shares. If Grantee shall fail to provide the Company with any such stock power or other instrument of transfer or assignment, Grantee hereby irrevocably appoints the Secretary of the Company as his attorney-in-fact, with full power of appointment and substitution, to execute and deliver any such power or other instrument which may be necessary to effectuate the transfer of the Restricted Stock (or assignment of distributions thereon) on the books and records of the Company.

 

Refusal to Transfer . The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares, or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.

 

 

 

 

 

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Delivery of Stock Certificates. On or after each Vesting Date, upon written request to the Company by Grantee, the Company shall promptly cause a new certificate or certificates to be issued to Grantee for and with respect to all Shares that become Vested Shares on that Vesting Date, which certificate(s) shall be delivered to Grantee as soon as administratively practicable after the date of receipt by the Company of Grantee’s written request. The new certificate or certificates shall continue to bear those legends and endorsements that the Company shall deem necessary or appropriate (including those relating to restrictions on transferability and/or obligations and restrictions under applicable securities laws).

 

Issuance Without Certificates. If the Company is authorized to issue Shares without certificates, then the Company may, in the discretion of the Board, issue Shares pursuant to this Agreement without certificates, in which case any references in this Agreement to certificates shall instead refer to whatever evidence may be issued to reflect Grantee’s ownership of the Shares subject to the terms and conditions of this Agreement.

 

Forfeiture of Non-Vested Shares . If Grantee’s Continuous Service with the Company and the Related Entities is terminated for any reason, all Non-Vested Shares shall be forfeited immediately upon such termination of Continuous Service and revert back to the Company without any payment to Grantee. The Board shall have the power and authority to enforce on behalf of the Company any rights of the Company under this Agreement in the event of Grantee’s forfeiture of Non-Vested Shares pursuant to this Section 4.

 

Rights with Respect to Restricted Stock.

 

General. Except as otherwise provided in this Agreement, Grantee shall have, with respect to all of the Shares of Restricted Stock, whether Vested Shares or Non-Vested Shares, all of the rights of a holder of Shares of Common Stock of the Company, including without limitation (i) the right to vote such Restricted Stock, (ii) the right to receive dividends, if any, as may be declared on the Restricted Stock from time to time, and (iii) the rights available to all holders of Shares of Common Stock of the Company upon any merger, consolidation, reorganization, liquidation or dissolution, stock split-up, stock dividend or recapitalization undertaken by the Company; provided, however, that all of such rights shall be subject to the terms, provisions, conditions and restrictions set forth in this Agreement (including without limitation conditions under which all such rights shall be forfeited). Any Shares issued to Grantee as a dividend with respect to Shares of Restricted Stock shall have the same status and bear the same legend as the Shares of Restricted Stock and shall be held by the Company, if the Shares of Restricted Stock that such dividend is attributed to is being so held, unless otherwise determined by the Board.

 

No Restrictions on Certain Transactions. Notwithstanding any term or provision of this Agreement to the contrary, the existence of this Agreement, or of any outstanding Restricted Stock awarded hereunder, shall not affect in any manner the right, power or authority of the Company to make, authorize or consummate: (i) any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business; (ii) any merger, consolidation or similar transaction by or of the Company; (iii) any offer, issue or sale by the Company of any capital stock of the Company, including any equity or debt securities, or preferred or preference stock that would rank prior to or on parity with the Restricted Stock and/or that would include, have or possess other rights, benefits and/or preferences superior to those that the Restricted Stock includes, has or possesses, or any warrants, options or rights with respect to any of the foregoing; (iv) the dissolution or liquidation of the Company; (v) any sale, transfer or assignment of all or any part of the stock, assets or business of the Company; or (vi) any other corporate transaction, act or proceeding (whether of a similar character or otherwise).

 

Transferability. Unless otherwise determined by the Board, the Shares of Restricted Stock are not transferable unless and until the later of (i) the date that is twelve (12) months after the date hereof and (ii) the date such Shares become Vested Shares in accordance with this Agreement, otherwise than by will or under the applicable laws of descent and distribution. The terms of this Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Grantee. Except as otherwise permitted pursuant to the first sentence of this Section 5(C), any attempt to effect a Transfer of any Shares of Restricted Stock prior to the date on which the Shares become Vested Shares shall be void ab initio . For purposes of this Agreement, “ Transfer ” shall mean any sale, transfer, encumbrance, gift, donation, assignment, pledge, hypothecation, or other disposition, whether similar or dissimilar to those previously enumerated, whether voluntary or involuntary, and including, but not limited to, any disposition by operation of law, by court order, by judicial process, or by foreclosure, levy or attachment.

 

 

 

 

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Representations and Warranties of Grantee. Grantee hereby represents and warrants to the Company that:

 

Terms of this Agreement . Grantee has received a copy of this Agreement, has read and understands the terms of this Agreement, and agrees to be bound by its terms and conditions.

 

Acceptance of Shares for Own Account for Investment . Grantee is acquiring the Shares for Grantee’s own account for investment purposes only and not with a view to, or for sale in connection with, a distribution of the Shares within the meaning of the Securities Act of 1933, as amended (the “ Securities Act ”). Grantee has no present intention of selling or otherwise disposing of all or any portion of the Shares.

 

Access to Information . Grantee has had access to all information regarding the Company and its present and prospective business, assets, liabilities and financial condition that Grantee reasonably considers important in making the decision to acquire the Shares, and Grantee has had ample opportunity to ask questions of the Company’s representatives concerning such matters and this investment.

 

Understanding of Risks . Grantee is fully aware of: (i) the highly speculative nature of the investment in the Shares; (ii) the financial hazards involved; (iii) the lack of liquidity of the Shares and the restrictions on transferability of the Shares (e.g., that Grantee may not be able to sell or dispose of the Shares or use them as collateral for loans); (iv) the qualifications and backgrounds of the management of the Company; and (v) the tax consequences of an investment in the Shares. Grantee is capable of evaluating the merits and risks of this investment, has the ability to protect Grantee’s own interests in this transaction and is financially capable of bearing a total loss of this investment.

 

Accredited Investor . Grantee is an “accredited investor” pursuant to Rule 501(a) of Regulation D under the Securities Act.

 

No General Solicitation . At no time was Grantee presented with or solicited by any publicly issued newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and issue of the Shares.

 

Compliance with Securities Laws. Grantee understands and acknowledges that the Shares have not been registered with the Securities and Exchange Commission (the “ SEC ”) under the Securities Act and that, notwithstanding any other provision of this Agreement to the contrary, the issuance of any Shares is expressly conditioned upon compliance with the Securities Act and all applicable state securities laws. Grantee agrees to cooperate in good faith (but at no material cost to Grantee) with the Company to ensure compliance with such laws.

 

No Transfers Unless Registered or Exempt . Grantee understands that Grantee may not transfer any Shares unless such Shares are registered under the Securities Act and qualified under applicable state securities laws or unless, in the good faith opinion of counsel to the Company, exemptions from such registration and qualification requirements are available. Grantee understands that only the Company may file a registration statement with the SEC and that the Company is under no obligation to do so with respect to the Shares. Grantee has also been advised that exemptions from registration and qualification may not be available or may not permit Grantee to transfer all or any of the Shares in the amounts or at the times proposed by Grantee.

 

SEC Rule 144 . In addition, Grantee has been advised that SEC Rule 144 promulgated under the Securities Act, which permits certain limited sales of unregistered securities, may not always be available with respect to the Shares and, in any event, requires that the Shares be held for a minimum of six months, and in certain cases one (1) year, after they have been acquired before they may be resold under Rule 144. Grantee understands that Rule 144 may indefinitely restrict transfer of the Shares so long as Grantee remains an “affiliate” of the Company or if “current public information” about the Company (as defined in Rule 144) is not publicly available.

 

 

 

 

 

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Market Standoff Agreement . Grantee agrees in connection with any registration of the Company’s securities that, upon the request of the Company or the underwriters managing any public offering of the Company’s securities, Grantee shall not sell or otherwise dispose of any Shares without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) after the effective date of such registration that is requested by such underwriters and subject to all restrictions as the Company or the underwriters may specify. Grantee further agrees to enter into any agreement reasonably required by the underwriters to implement the foregoing.

 

Tax Matters; Section 83(b) Election .

 

Section 83(b) Election. If Grantee properly elects, within thirty (30) days of the applicable Award Date, to include in gross income for federal income tax purposes an amount equal to the fair market value (as of the applicable Award Date) of the Restricted Stock pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the “ Code ”), Grantee shall make arrangements satisfactory to the Company to pay to the Company any federal, state or local income taxes required to be withheld with respect to the Restricted Stock. If Grantee shall fail to make such tax payments as are required, the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind (including without limitation, the withholding of any Shares that otherwise would be issued to Grantee under this Agreement) otherwise due to Grantee any federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Stock.

 

No Section 83(b) Election. If Grantee does not properly make the election described in paragraph 7(A) above, Grantee shall, no later than the date or dates as of which the restrictions referred to in this Agreement hereof shall lapse, pay to the Company, or make arrangements satisfactory to the Board for payment of, any federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Stock (including without limitation the vesting thereof), and the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind (including without limitation, the withholding of any Shares that otherwise would be distributed to Grantee under this Agreement) otherwise due to Grantee any federal, state, or local taxes of any kind required by law to be withheld with respect to the Restricted Stock.

 

Satisfaction of Withholding Requirements. Grantee may satisfy the withholding requirements with respect to the Restricted Stock pursuant to any one or combination of the following methods: (a) payment in cash; or (b) if and to the extent permitted by the Board, payment by surrendering unrestricted previously held Shares which have a value equal to the required withholding amount or the withholding of Shares that otherwise would be deliverable to Grantee pursuant to this Award. Grantee may surrender Shares either by attestation or by delivery of a certificate or certificates for Shares duly endorsed for transfer to the Company, and if required with medallion level signature guarantee by a member firm of a national stock exchange, by a national or state bank (or guaranteed or notarized in such other manner as the Board may require).

 

Grantee’s Responsibilities for Tax Consequences. Tax consequences on Grantee (including without limitation federal, state, local and foreign income tax consequences) with respect to the Restricted Stock (including without limitation the grant, vesting and/or forfeiture thereof) are the sole responsibility of Grantee. Grantee shall consult with his or her own personal accountant(s) and/or tax advisor(s) regarding these matters, the making of a Section 83(b) election, and Grantee’s filing, withholding and payment (or tax liability) obligations.

 

Amendment, Modification & Assignment; Non-Transferability. This Agreement may only be modified or amended in a writing signed by both the Company and the Grantee. No promises, assurances, commitments, agreements, undertakings or representations, whether oral, written, electronic or otherwise, and whether express or implied, with respect to the subject matter hereof, have been made by either party which are not set forth expressly in this Agreement. Unless otherwise consented to in writing by the Company, in its sole discretion, this Agreement (and Grantee’s rights hereunder) may not be assigned, and the obligations of Grantee hereunder may not be delegated, in whole or in part. The rights and obligations created hereunder shall be binding on Grantee and his heirs and legal representatives and on the successors and assigns of the Company.

 

Complete Agreement. This Agreement (together with those agreements and documents expressly referred to herein, but only for the purposes referred to herein) embody the complete and entire agreement and understanding between the parties with respect to the subject matter hereof, and supersede any and all prior promises, assurances, commitments, agreements, undertakings or representations, whether oral, written, electronic or otherwise, and whether express or implied, which may relate to the subject matter hereof in any way.

 

 

 

 

 

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Miscellaneous .

 

No Right to (Continued) Employment or Service. This Agreement and the grants of Restricted Stock hereunder shall not shall confer, or be construed to confer, upon Grantee any right to employment or service, or continued employment or service, with the Company or any Related Entity.

 

No Limit on Other Compensation Arrangements. Nothing contained in this Agreement shall preclude the Company or any Related Entity from adopting or continuing in effect other or additional compensation plans, agreements or arrangements, and any such plans, agreements and arrangements may be either generally applicable or applicable only in specific cases or to specific persons.

 

Severability. If any term or provision of this Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or under any applicable law, rule or regulation, then such provision shall be construed or deemed amended to conform to applicable law (or if such provision cannot be so construed or deemed amended without materially altering the purpose or intent of this Agreement and the grants of Restricted Stock to Grantee hereunder, such provision shall be stricken as to such jurisdiction and the remainder of this Agreement and the award hereunder shall remain in full force and effect).

 

No Trust or Fund Created. Neither this Agreement nor the grants of Restricted Stock hereunder shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Related Entity and Grantee or any other person. To the extent that Grantee or any other person acquires a right to receive payments from the Company or any Related Entity pursuant to this Agreement, such right shall be no greater than the right of any unsecured general creditor of the Company.

 

Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada (without reference to the conflict of laws rules or principles thereof).

 

Interpretation. Grantee accepts the Restricted Stock subject to all of the terms, provisions and restrictions of this Agreement. The undersigned Grantee hereby accepts as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Agreement.

 

Headings. Section, paragraph and other headings and captions are provided solely as a convenience to facilitate reference. Such headings and captions shall not be deemed in any way material or relevant to the construction, meaning or interpretation of this Agreement or any term or provision hereof.

 

 

 

 

 

 

 

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Notices. Any and all notices provided for in this Agreement shall be given in writing and shall be deemed given to a party at the earlier of (a) when actually delivered to such party, or (b) when mailed to such party by registered or certified mail (return receipt requested) or sent to such party by courier, confirmed by receipt, and addressed to such party at the address designated below for such party as follows (subject to the right of either party to designate some other address at any time hereafter in a notice satisfying the requirements of this Section 8(H)):

 

  If to the Company: Freedom Leaf Inc.
    3571 E. Sunset Road, Suite 420
    Las Vegas, NV 89120
     
  with a copy to: Kleinberg, Kaplan, Wolff & Cohen, P.C.
    551 Fifth Avenue
    New York, NY 10176
    Telecopy: (212) 986-8866
    Telephone: (212) 880-9869
    Email: jain@kkwc.com
    Attention: Jonathan Ain
     
  If to Grantee: Alex Frias:
    ____________________________________
    ____________________________________
    Telephone: ___________________________
    Email: _______________________________
     
  with a copy to: Saunders Koechel & Sharp LLP
    Attention: John Koechel
    5404 Birchman Avenue
    Fort Worth, Texas 76107
    Telecopy: 303.396.0243
    Telephone: 214.923.7577
    Email: koechel@skandslegal.com

 

Section 409A.

 

It is intended that the Restricted Stock awarded pursuant to this Agreement be exempt from Section 409A of the Code (“ Section 409A ”) because it is believed that the Agreement does not provide for a deferral of compensation and accordingly that the Agreement does not constitute a nonqualified deferred compensation plan within the meaning of Section 409A. The provisions of this Agreement shall be interpreted in a manner consistent with this intention, and the provisions of this Agreement shall not be amended, adjusted, assumed or substituted for, converted or otherwise modified without Grantee’s prior written consent if and to the extent that the Company believes or reasonably should believe that such amendment, adjustment, assumption or substitution, conversion or modification would cause the award to violate the requirements of Section 409A.

 

 

 

 

 

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In the event that either the Company or Grantee believes, at any time, that any benefit or right under this Agreement is subject to Section 409A, and does not comply with the requirements of Section 409A, it shall promptly advise the other and the Company and Grantee shall negotiate reasonably and in good faith to amend the terms of such benefits and rights, if such an amendment may be made in a commercially reasonable manner, such that they comply with Section 409A with the most limited possible economic effect on Grantee and on the Company.

 

Notwithstanding the foregoing, the Company does not make any representation to Grantee that the Shares of Restricted Stock awarded pursuant to this Agreement are exempt from, or satisfies, the requirements of Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless Grantee or any beneficiary for any tax, additional tax, interest or penalties that Grantee or any beneficiary may incur in the event that any provision of this Agreement, or any amendment or modification thereof or any other action taken with respect thereto that either is consented to by Grantee or that the Company reasonably believes should not result in a violation of Section 409A, is deemed to violate any of the requirements of Section 409A

 

Non-Waiver of Breach. The waiver by any party hereto of the other party’s prompt and complete performance, or breach or violation, of any term or provision of this Agreement shall be effected solely in a writing signed by such party, and shall not operate nor be construed as a waiver of any subsequent breach or violation, and the waiver by any party hereto to exercise any right or remedy which he or it may possess shall not operate nor be construed as the waiver of such right or remedy by such party, or as a bar to the exercise of such right or remedy by such party, upon the occurrence of any subsequent breach or violation.

 

Reliance on Counsel and Advisors. Grantee acknowledges that Kleinberg, Kaplan, Wolff & Cohen, P.C., is representing only the Company in this transaction. Grantee acknowledges that he or she has had the opportunity to review this Agreement, including all attachments hereto, and the transactions contemplated by this Agreement with his or her own legal counsel, tax advisors and other advisors. Grantee is relying solely on his or her own counsel and advisors and not on any statements or representations of the Company or its agents for legal or other advice with respect to this investment or the transactions contemplated by this Agreement.

 

Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same agreement. This Agreement may be executed and delivered by facsimile or other electronic transmission. A complete, accurate, fully-executed PDF or other facsimile copy of this Agreement may be used in place of an original for all purposes.

 

( signature page follows )

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have executed this Agreement as of the date first written above.

 

 

ALEX FRIAS

 

 

 

 

_______________________________________ 


Signature

 

 

 

FREEDOM LEAF INC.

 

By: ___________________________________

 

Name: _________________________________

 

Title: __________________________________

 

 

 

 

 

 

 

 

 

 

 

 

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Exhibit 10.6

 

EMPLOYMENT AGREEMENT

(Clifford Perry)

 

This EMPLOYMENT AGREEMENT (this “ Agreement ”) is made and entered into as of this 31 st day of May, 2019 (the “ Effective Date ”), by and between Freedom Leaf Inc., a Nevada corporation (the “ Company ”), and Clifford Perry, an individual (“ Employee ”).

 

In consideration of the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and Employee, it is hereby agreed as follows:

 

ARTICLE I
EMPLOYMENT

 

1.1               Employment . The Company agrees to, and does hereby, employ Employee, and Employee agrees to, and does hereby accept such employment, upon the terms and subject to the conditions set forth in this Agreement. Employee represents and warrants to the Company that (A) Employee has the legal capacity to execute and perform this Agreement, (B) this Agreement is a valid and binding agreement enforceable against Employee according to its terms, and (C) the execution and performance of this Agreement by Employee does not violate the terms of any existing agreement or understanding to which Employee is a party or by which Employee otherwise may be bound. Effective as of the Effective Date, the Company agrees to continue to employ Employee as an employee of the Company and as the Director of Corporate Development of the Company as further set forth in Section 1.2, and Employee agrees to continue his employment by the Company, for the period commencing on the Effective Date and continuing until the two (2) year anniversary of the Effective Date unless earlier terminated in accordance with Article III below.

 

1.2               Position and Duties . Employee shall be employed in the position of Director of Corporate Development. Employee shall devote Employee’s entire business time, loyalty, attention and energies exclusively to the business interests of the Company while employed by the Company, will not engage in any other employment activities for any direct or indirect remuneration and shall perform his duties and responsibilities diligently and to the best of his ability.

 

ARTICLE II
COMPENSATION AND OTHER BENEFITS

 

2.1               Base Salary . As compensation for Employee’s services hereunder and in consideration of Employee’s other agreements hereunder, during the term of employment, the Company shall pay Employee a base salary equal to $115,000 per annum (“ Base Salary ”), subject to withholding and customary payroll deductions. The Base Salary shall be payable in accordance with the customary payroll practices of the Company.

 

2.2               Benefit Plans . During the term of Employee’s employment with the Company, Employee will be eligible to participate in the Company’s retirement plans that are qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), if any, and in the Company’s employee welfare benefit plans that are available to any other executive employees of the Company (the “ Plans ”), in accordance with and subject to the terms and conditions thereof. The terms and conditions of the Plans, as expressed in the Plan documents, will control including, but not limited to, the Company’s ability to amend, modify or terminate any of those programs as it determines appropriate in accordance with the Plans’ terms.

 

2.3               Expenses . The Company shall reimburse Employee for all pre-approved expenses reasonably incurred in the course of the performance of Employee’s duties and responsibilities pursuant to this Agreement and consistent with the Company’s policies with respect to travel, entertainment and miscellaneous expenses.

 

 

 

 

 

  1  
 

 

2.4               Vacation . In any year, Employee shall be entitled to take reasonable vacation provided that such vacation does not prevent him from adequately performing his duties under this Agreement.

 

2.5               Withholding . All payments to be made by the Company hereunder will be subject to any withholding requirements.

 

ARTICLE III
TERMINATION; EQUITY

 

3.1               Term . Employee’s employment shall commence on the Effective Date and shall continue until the two (2) year anniversary of the Effective Date (the “ Expiration Date ”), unless earlier terminated pursuant to the terms of this Agreement.

 

3.2               Right to Terminate; Automatic Termination .

 

(a)                Termination for Cause . The Company shall be entitled to terminate this Agreement effective immediately in the event of (a) Employee’s material breach of any agreement between Employee and the Company; (b) Employee’s conviction of, or Employee’s plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State, provided, however, that such felony is not related to the manufacture, sale or possession of cannabis or any components thereof; (c) Employee’s gross negligence or willful misconduct in connection with the provision of services for the Company; or (d) Employee’s failure to cooperate in good faith with a governmental or internal investigation of the Company or its managers, officers or employees (collectively, “ Cause ”); provided, however, that if any such event by its nature is capable of being cured with no adverse effect to the Company, and Employee is taking reasonable and diligent steps to cure such event, then such termination shall be effective only if such event remains uncured for a period of thirty calendar days after the Company provides written notice to Employee setting forth the nature of the event constituting Cause hereunder.

 

(b)                Termination Upon Death or Disability . Subject to Section 3.3, Employee’s employment and the Company’s obligations under this Agreement, unless specifically stated otherwise herein, shall terminate: (i) automatically, effective immediately and without any notice being necessary, upon Employee’s death; and (ii) in the event of any Disability of Employee, by the Company giving notice of termination to Employee. As used in this Section 3.2(b), “ Disability ” shall mean that (A) Employee is unable, by reason of injury, sickness or accident, to perform Employee’s duties under this Agreement for an aggregate of sixty (60) days in any consecutive six (6) month period, or (B) Employee has a guardian of the person or estate appointed by a court of competent jurisdiction.

 

3.3               Rights Upon Termination . If Employee’s employment is terminated pursuant to Section 3.2, or if Employee quits employment, notwithstanding the terms of this Agreement, Employee or Employee’s estate shall have no further rights against the Company hereunder, except for the right to receive, (i) any earned but unpaid Base Salary, (ii) reimbursement of expenses to which Employee is entitled pursuant to Section 2.3, and (iii) Employee shall be deemed to resign from any board to which Employee has been appointed or nominated by or on behalf of the Company.

 

 

 

 

 

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ARTICLE IV
CONFIDENTIALITY; NON-SOLICITATION

 

4.1               Confidential Information .

 

(a)                Company Information . Employee agrees that during and after his employment with the Company, he will hold in the strictest confidence, and will not (except for the benefit of the Company during his employment), as required by applicable law, a court order or an order or request of a relevant regulatory authority or in order to enforce a claim against the Company (including, without limitation, under this Agreement), use or disclose to any person, firm, corporation or other entity any Company Confidential Information. Employee understands that “ Company Confidential Information ” means any non-public information that relates to the actual or anticipated business, research or development of the Company, or to the Company’s technical data, trade secrets, or know-how, including, but not limited to, research, product plans, or other information regarding the Company’s products or services and markets therefor; customer lists and customer contact information, their buying histories, and preferences (including, but not limited to, such information relating to customers of the Company on which Employee called or with which Employee may become acquainted during the term of his employment); personnel information (including, but not limited to, information regarding employees’ skills and performance); information about vendors, supplier and business partners; software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, and hardware configuration information; and marketing, finances, and/or other business information; provided , however , that Company Confidential Information does not include any of the foregoing items to the extent the same have become publicly known and made generally available through no wrongful act of Employee or of others. Employee understands that nothing in this Agreement is intended to limit employees’ rights to discuss the terms, wages, and working conditions of their employment, as protected by applicable law.

 

(b)                Third Party Information . Employee recognizes that the Company may have received and in the future may receive from third parties associated with the Company, e.g., the Company’s customers, suppliers, licensors, licensees, partners, or collaborators (“ Associated Third Parties ”), their confidential or proprietary information (“ Associated Third Party Confidential Information ”). By way of example, and not as an exhaustive list, Associated Third Party Confidential Information may include the habits or practices of Associated Third Parties, the technology of Associated Third Parties, requirements of Associated Third Parties, and information related to the business conducted between the Company and such Associated Third Parties. Employee agrees at all times during his employment with the Company and thereafter to hold in the strictest confidence, and not to use or to disclose to any person, firm, corporation, or other entity any Associated Third Party Confidential Information, except as necessary in carrying out his work for the Company consistent with the Company’s agreement with such Associated Third Parties or as required by applicable law, a court order or an order or request of a relevant regulatory authority. Employee further agrees to comply with any and all Company policies and guidelines that may be adopted from time to time during the term of his employment regarding Associated Third Parties and Associated Third Party Confidential Information. Employee understands that his unauthorized use or disclosure of Associated Third Party Confidential Information or violation during his employment of any Company policies will lead to disciplinary action, up to and including immediate termination and legal action by the Company. Third Party Confidential Information does not include any of the foregoing items to the extent the same have become publicly known and made generally available through no wrongful act of Employee or of others. Employee understands that nothing in this Agreement is intended to limit employees’ rights to discuss the terms, wages, and working conditions of their employment, as protected by applicable law.

 

4.2               Inventions .

 

(a)                Inventions Retained and Licensed . Employee represents and warrants that there are no inventions, discoveries, original works of authorship, developments, improvements, and trade secrets that were conceived in whole or in part by Employee prior to his employment with the Company or any of its subsidiaries and to which he has any right, title, or interest, and which relate to the Company’s proposed business, products, or research and development (collectively, “ Prior Inventions ”). Notwithstanding the foregoing, if, in the course of his employment with the Company, Employee incorporates into or uses in connection with any product, process, service, technology, or other work by or on behalf of the Company any Prior Invention, Employee hereby grants to the Company a non-exclusive, royalty-free, fully paid-up, irrevocable, perpetual, worldwide license, with the right to grant and authorize sublicenses, to make, have made, modify, use, import, offer for sale, and sell such Prior Invention as part of or in connection with such product, process, service, technology, or other work, and to practice any method related thereto.

 

 

 

 

  3  
 

 

(b)                Assignment of Inventions . Employee agrees that he will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assigns to the Company, or its designee, all his right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs, discoveries, ideas, trademarks, or trade secrets, whether or not patentable or registrable under patent, copyright, or similar laws, which Employee may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time Employee is in the employ of the Company or any of its subsidiaries (including during his off-duty hours), or with the use of Company’s equipment, supplies, facilities, or Company Confidential Information, except as provided in Section 4.2(e) (collectively referred to as “ Inventions ”). Employee further acknowledges that all original works of authorship that are made by him (solely or jointly with others) within the scope of and during the period of his employment with the Company and that are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act. Employee understands and agrees that the decision whether or not to commercialize or market any Inventions is within the Company’s sole discretion and for the Company’s sole benefit, and that no royalty or other consideration will be due to Employee as a result of the Company’s efforts to commercialize or market any such Inventions.

 

(c)                Maintenance of Records . Employee agrees to keep and maintain adequate, current, accurate, and authentic written records of all Inventions made by him (solely or jointly with others) during the term of his employment with the Company. The records will be in the form of notes, sketches, drawings, electronic files, reports, or any other format that may be specified by the Company. The records are and will be available to and remain the sole property of the Company at all times.

 

(d)                Patent and Copyright Registrations . Employee agrees to reasonably assist the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in the Inventions and any rights relating thereto in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, and all other instruments that the Company shall deem proper or necessary in order to apply for, register, obtain, maintain, defend, and enforce such rights, and in order to assign and convey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title, and interest in and to such Inventions and any rights relating thereto, and testifying in a suit or other proceeding relating to such Inventions and any rights relating thereto. Employee further agrees that his obligation to execute or cause to be executed, when it is in his power to do so, any such instrument or papers shall continue after the termination of this Agreement. If the Company is unable because of Employee’s mental or physical incapacity or for any other reason to secure Employee’s signature with respect to any Inventions, including, without limitation, to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering such Inventions, then Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney in fact, to act for and in his behalf and stead, to execute and file any papers and oaths, and to do all other lawfully permitted acts with respect to such Inventions with the same legal force and effect as if executed by the Employee.

 

4.3               Conflicting Employment .

 

(a)                Current Obligations . Employee agrees that during the term of his employment with the Company, he will not engage in or undertake any other employment, occupation, consulting relationship, or commitment that is directly related to the business in which the Company is now involved or becomes involved or a business which Employee understands the Company to actively have plans to become involved, nor will Employee engage in any other activities that interfere with his ability to fully and satisfactorily perform his duties to the Company.

 

(b)                Prior Relationships . Without limiting Section 4.3(a), Employee represents that he has no other agreements, relationships, or commitments to any other person or entity that conflict with his obligations to the Company under this Agreement or his ability to become employed and perform the services for which he is being employed by the Company. Employee further agrees that if he has signed a confidentiality agreement or similar type of agreement with any former employer or other entity, he will comply with the terms of any such agreement to the extent that its terms are lawful under applicable law. Employee represents and warrants that after undertaking a careful search (including, but not limited to, searches of his computers, cell phones, electronic devices, and documents), he has returned all property and confidential information belonging to all prior employers. Moreover, he agrees to fully indemnify the Company, its directors, managers, officers, agents, employees, investors, shareholders, members, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns for all verdicts, judgments, settlements, and other losses incurred by any of them resulting from Employee’s breach of his obligations under any agreement to which he is a party or obligation to which he is bound, as well as any reasonable attorneys’ fees and costs if the plaintiff is the prevailing party in such an action, except as prohibited by law.

 

 

 

 

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4.4               Returning Company Documents . Upon separation from employment with the Company or on demand by the Company during his employment, Employee will immediately deliver to the Company, and will not keep in his possession, recreate, or deliver to anyone else, any and all Company property, including, but not limited to, Company Confidential Information, Associated Third Party Confidential Information, as well as all devices and equipment belonging to the Company or its subsidiaries (including, but not limited to, computers, handheld electronic devices, telephone equipment, and other electronic devices), Company credit cards, records, data, notes, notebooks, reports, files, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, photographs, charts, any other documents and property, and reproductions of any and all of the aforementioned items that were developed by Employee pursuant to his employment with the Company, obtained by him in connection with his employment with the Company, or otherwise belonging to the Company, its successors, or assigns, including, without limitation, those records maintained pursuant to Section 4.2(c). Employee also consents to an exit interview to confirm his compliance with this Article IV.

 

4.5               Notification of New Employer . In the event that Employee leaves the employ of the Company, Employee hereby grants consent to notification by the Company to his new employer about his obligations under this Agreement including information to his new employer concerning the enforceability of this Agreement.

 

4.6               Non-Solicitation .

 

(a)                Solicitation of Employees . Employee agrees that for a period of two (2) years immediately following the termination of his relationship with the Company for any reason, whether voluntary or involuntary, with or without cause, Employee shall not either directly or indirectly solicit any employees of the Company or any of its subsidiaries to leave their employment, or attempt to solicit employees of the Company or any of its subsidiaries to leave their employment, either for Employee or for any other person or entity with which Employee is then employed or otherwise affiliated.

 

(b)                Solicitation of Customers, Suppliers, etc . Employee agrees that for a period of two (2) years immediately following the termination of his relationship with the Company for any reason, whether voluntary or involuntary, with or without cause, Employee shall not either directly or indirectly (i) request or advise any customer, supplier or any other person or entity known to be associated with the Company or any of its affiliates or subsidiaries, to withdraw, curtail or cancel or in any other way lessen its use of the business services of the Company or any of its affiliates or subsidiaries or (ii) for the purpose of conducting or engaging in any business directly or indirectly competitive with the Company (whether individually or on behalf of Employee’s affiliates or new employer) call upon, solicit, advise, sign, hire, interfere with, or otherwise do or conduct, or attempt to do or conduct, business with any person or entity covered by any written or oral agreement with the Company or any of its affiliates or subsidiaries, or take away or interfere or attempt to interfere with any Company business custom, business trade, or business patronage of the Company or any of its affiliates or subsidiaries.

 

4.7               Non-Compete . Employee agrees that for a period of one (1) year immediately following the termination of his relationship with the Company for any reason, whether voluntary or involuntary, Employee shall not either directly or indirectly in the geographical areas that the Company does business or has done business at the time of the Employee’s termination, engage or assist others in engaging in any business or enterprise (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) that is competitive with the Company’s business, including but not limited to any business or enterprise that develops, manufactures, markets, licenses, sells or provides any product or service that competes with any product or service developed, manufactured, marketed, licensed, sold or provided, or planned to be developed, manufactured, marketed, licensed, sold or provided, by the Company while Employee was employed by the Company. If Employee violates the provisions of any of the preceding paragraphs of this Section 4, Employee shall continue to be bound by the restrictions set forth in such paragraph until a period of one (1) year has expired without any violation of such provisions.

 

4.8               Representations . Employee agrees to execute any proper oath or verify any proper document reasonably required to carry out the terms of this Agreement. Employee represents that his performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by Employee in confidence or in trust prior to his employment by the Company or any of its subsidiaries. Employee hereby represents and warrants that he has not entered into, and Employee will not enter into, any oral or written agreement in conflict herewith.

 

 

 

 

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4.9               Non-Disparagement . During Employee’s employment with the Company and for a period of three (3) years thereafter, Employee agrees, to the fullest extent permissible by law, not intentionally to make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal, direct or indirect communications that are or could be harmful to or reflect negatively on the Company or its subsidiaries or that are otherwise disparaging of the Company or its subsidiaries and/or their businesses, or any of its or their subsidiaries, past, present or future officers, directors, managers, employees, equity holders, members, advisors, agents, policies, procedures, practices, services, products, decision-making, conduct, professionalism or compliance with standards of any of the foregoing provided that the foregoing is not intended to prohibit truthful statements made by the Employee in his capacity as an officer or employee of a competitor after his employment with the Company has terminated, provided that Employee continues to comply with his confidentiality obligations under this Agreement. The provisions of this Section 4.9 are in addition to any other written agreements on this subject that Employee may have with the Company or any of its subsidiaries, and are not meant to, and do not excuse any, additional obligations that Employee may have under such agreements. Nothing in this Section shall be construed to limit Employee’s ability to cooperate with the investigation of any government agency of competent jurisdiction or to bring or defend against any legal claim. In any civil litigation arising out of or related to this Agreement, the parties shall cooperate to seek a protective order consistent with this Section and Section 4.1 above.

 

4.10           No Transfers . In consideration of the Company’s entering into this Agreement, Employee agrees not to offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of any common stock of the Company until after the 12-month anniversary of the Effective Date.

 

ARTICLE V
GENERAL PROVISIONS

 

5.1               Notices . Any and all notices provided for in this Agreement shall be given in writing and shall be deemed given to a party at the earlier of (a) when actually delivered to such party, or (b) when mailed to such party by registered or certified mail (return receipt requested) or sent to such party by courier, confirmed by receipt, and addressed to such party at the address designated below for such party as follows (or to such other address for such party as such party may have substituted by notice to the other party pursuant to this Section 5.1):

 

  If to the Company: Freedom Leaf Inc.
    3571 E. Sunset Road, Suite 420
    Las Vegas, NV 89120
     
  with a copy to: Kleinberg, Kaplan, Wolff & Cohen, P.C.
    551 Fifth Avenue
    New York, NY 10176
    Telecopy: (212) 986-8866
    Telephone: (212) 880-9869
    Email: jain@kkwc.com
    Attention: Jonathan Ain
     
  If to Employee: Clifford Perry
    3571 E. Sunset Road, Suite 420
    Las Vegas, NV 89120

 

5.2               Entire Agreement; Survival . This Agreement contains the entire understanding and the full and complete agreement of the parties and supersedes and replaces any prior understandings and agreements among the parties with respect to the subject matter hereof. The provisions of this Agreement shall survive the termination of this Agreement, or of Employee’s employment for any reason, to the extent necessary to enable the parties to enforce their respective rights.

 

 

 

 

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5.3               Amendment; Headings and References . This Agreement may be altered, amended or modified only in writing, signed by Employee and the Company, except that either party hereto may update its address set forth in Section 5.1 by providing a notice of the updated address in the manner set forth in Section 5.1. Headings included in this Agreement are for convenience only and are not intended to limit or expand the rights of the parties hereto. References to Sections herein shall mean sections of the text of this Agreement, unless otherwise indicated.

 

5.4               Assignability . This Agreement and the rights and duties set forth herein may not be assigned by either of the parties without the express written consent of the other party. This Agreement shall be binding on, and inure to the benefit of, each party and such party’s respective heirs, legal representatives, successors and assigns.

 

5.5               Severability . If any court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then such invalidity or unenforceability shall have no effect on the other provisions hereof, which shall remain valid, binding and enforceable and in full force and effect, and such invalid or unenforceable provision shall be construed in a manner so as to give the maximum valid and enforceable effect to the intent of the parties expressed therein.

 

5.6               Waiver of Breach . The waiver by either party of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either party.

 

5.7               Governing Law; Jurisdiction; Construction . This Agreement shall be governed by the internal laws of the State of Nevada, without regard to any rules of construction that would require application of the laws of another jurisdiction. Any legal proceeding related to this Agreement must be litigated in an appropriate Nevada state or federal court, and both the Company and Employee hereby consent to the exclusive jurisdiction of the State of Nevada for this purpose; waive any objection they may now or hereafter have to venue or to convenience of forum and agree that all legal proceedings will be tried in a court of competent jurisdiction by a judge without a jury. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, accordingly, each party waives the application of any law, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

 

5.8               Tax Compliance .

 

(a)                The Company may withhold from any amounts payable hereunder any amounts required to be withheld under federal, state or local law and any other deductions authorized by Employee.

 

(b)                The intent of the parties is that payments and benefits under this Agreement comply with or be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively “ Section 409A ”), and the Company shall have complete discretion to interpret and construe this Agreement and any associated documents in any manner that establishes an exemption from (or compliance with) the requirements of Section 409A.  If for any reason, such as imprecision in drafting, any provision of this Agreement (or of any award of compensation, including, without limitation, equity compensation or benefits) does not accurately reflect its intended establishment of an exemption from (or compliance with) Section 409A, as demonstrated by consistent interpretations or other evidence of intent, such provision shall be considered ambiguous as to its exemption from (or compliance with) Section 409A and shall be interpreted by the Company in a manner consistent with such intent, as determined in the discretion of the Company.

 

(c)                For purposes of Section 409A, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

 

 

 

 

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(d)                With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, Employee, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (i) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (ii) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

(e)                Notwithstanding anything to the contrary in this Agreement, if Employee is a “specified employee” as determined pursuant to Section 409A as of the date of Employee’s “separation from service” as defined in Treasury Regulation Section 1.409A-1(h) (or any successor regulation) and if any payments or entitlements provided for in this Agreement constitute a “deferral of compensation” within the meaning of Section 409A and cannot be paid or provided in the manner provided herein without subjecting Employee to additional tax, interest or penalties under Section 409A, then any such payment or entitlement which is payable during the first six (6) months following Employee’s “separation from service” shall be paid or provided to Employee in a cash lump-sum on the first business day of the seventh (7th) calendar month immediately following the month in which Employee’s “separation from service” occurs or, if earlier, upon Employee’s death. In addition, any payments or benefits due hereunder upon a termination of Employee’s employment which are a “deferral of compensation” within the meaning of Section 409A shall only be payable or provided to Employee (or Employee’s estate) upon a “separation from service” as defined in Section 409A.

 

(f)                 Whenever a payment under this Agreement specifies a payment period with reference to a number of days (for example, “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.  In no event may Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement, to the extent such payment is subject to Code Section 409A.

 

(g)                The Company makes no representation or warranty and shall have no liability to Employee or any other person or entity if any provisions of this Agreement are determined to constitute deferred compensation subject to Code Section 409A but do not satisfy an exemption from, or the conditions of, Code Section 409A.

 

5.9               Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may be executed and delivered by facsimile or other electronic transmission.

 

[Signature Page Follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF , the parties have executed this Agreement as of the day and year first written above.

 

  COMPANY: 
   
  FREEDOM LEAF INC.,
  a Nevada corporation
   
   
  By: /s/ Raymond Medeiros                              
  Name: Raymond Medeiros
  Title: Executive Vice President & Corporate Secretary
   
   
  EMPLOYEE:
   
  CLIFFORD PERRY
   
  /s/ Clifford Perry                             
  Clifford Perry
   

 

 

 

 

 

 

 

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Exhibit 10.7

 

EMPLOYMENT AGREEMENT

(Raymond Medeiros)

 

This EMPLOYMENT AGREEMENT (this “ Agreement ”) is made and entered into as of this 31 st day of May, 2019 (the “ Effective Date ”), by and between Freedom Leaf Inc., a Nevada corporation (the “ Company ”), and Raymond Medeiros, an individual (“ Employee ”).

 

In consideration of the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and Employee, it is hereby agreed as follows:

 

ARTICLE I
EMPLOYMENT

 

1.1               Employment . The Company agrees to, and does hereby, employ Employee, and Employee agrees to, and does hereby accept such employment, upon the terms and subject to the conditions set forth in this Agreement. Employee represents and warrants to the Company that (A) Employee has the legal capacity to execute and perform this Agreement, (B) this Agreement is a valid and binding agreement enforceable against Employee according to its terms, and (C) the execution and performance of this Agreement by Employee does not violate the terms of any existing agreement or understanding to which Employee is a party or by which Employee otherwise may be bound. Effective as of the Effective Date, the Company agrees to continue to employ Employee as an employee of the Company and as the Director of Business Development of the Company as further set forth in Section 1.2, and Employee agrees to continue his employment by the Company, for the period commencing on the Effective Date and continuing until the two (2) year anniversary of the Effective Date unless earlier terminated in accordance with Article III below.

 

1.2               Position and Duties . Employee shall be employed in the position of Director of Business Development. Employee shall devote Employee’s entire business time, loyalty, attention and energies exclusively to the business interests of the Company while employed by the Company, will not engage in any other employment activities for any direct or indirect remuneration and shall perform his duties and responsibilities diligently and to the best of his ability.

 

ARTICLE II
COMPENSATION AND OTHER BENEFITS

 

2.1               Base Salary . As compensation for Employee’s services hereunder and in consideration of Employee’s other agreements hereunder, during the term of employment, the Company shall pay Employee a base salary equal to $100,000 per annum (“ Base Salary ”), subject to withholding and customary payroll deductions. The Base Salary shall be payable in accordance with the customary payroll practices of the Company.

 

2.2               Benefit Plans . During the term of Employee’s employment with the Company, Employee will be eligible to participate in the Company’s retirement plans that are qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), if any, and in the Company’s employee welfare benefit plans that are available to any other executive employees of the Company (the “ Plans ”), in accordance with and subject to the terms and conditions thereof. The terms and conditions of the Plans, as expressed in the Plan documents, will control including, but not limited to, the Company’s ability to amend, modify or terminate any of those programs as it determines appropriate in accordance with the Plans’ terms.

 

2.3               Expenses . The Company shall reimburse Employee for all pre-approved expenses reasonably incurred in the course of the performance of Employee’s duties and responsibilities pursuant to this Agreement and consistent with the Company’s policies with respect to travel, entertainment and miscellaneous expenses.

 

 

 

 

 

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2.4               Vacation . In any year, Employee shall be entitled to take reasonable vacation provided that such vacation does not prevent him from adequately performing his duties under this Agreement.

 

2.5               Withholding . All payments to be made by the Company hereunder will be subject to any withholding requirements.

 

ARTICLE III
TERMINATION; EQUITY

 

3.1               Term . Employee’s employment shall commence on the Effective Date and shall continue until the two (2) year anniversary of the Effective Date (the “ Expiration Date ”), unless earlier terminated pursuant to the terms of this Agreement.

 

3.2               Right to Terminate; Automatic Termination .

 

(a)                Termination for Cause . The Company shall be entitled to terminate this Agreement effective immediately in the event of (a) Employee’s material breach of any agreement between Employee and the Company; (b) Employee’s conviction of, or Employee’s plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State, provided, however, that such felony is not related to the manufacture, sale or possession of cannabis or any components thereof; (c) Employee’s gross negligence or willful misconduct in connection with the provision of services for the Company; or (d) Employee’s failure to cooperate in good faith with a governmental or internal investigation of the Company or its managers, officers or employees (collectively, “ Cause ”); provided, however, that if any such event by its nature is capable of being cured with no adverse effect to the Company, and Employee is taking reasonable and diligent steps to cure such event, then such termination shall be effective only if such event remains uncured for a period of thirty calendar days after the Company provides written notice to Employee setting forth the nature of the event constituting Cause hereunder.

 

(b)                Termination Upon Death or Disability . Subject to Section 3.3, Employee’s employment and the Company’s obligations under this Agreement, unless specifically stated otherwise herein, shall terminate: (i) automatically, effective immediately and without any notice being necessary, upon Employee’s death; and (ii) in the event of any Disability of Employee, by the Company giving notice of termination to Employee. As used in this Section 3.2(b), “ Disability ” shall mean that (A) Employee is unable, by reason of injury, sickness or accident, to perform Employee’s duties under this Agreement for an aggregate of sixty (60) days in any consecutive six (6) month period, or (B) Employee has a guardian of the person or estate appointed by a court of competent jurisdiction.

 

3.3               Rights Upon Termination . If Employee’s employment is terminated pursuant to Section 3.2, or if Employee quits employment, notwithstanding the terms of this Agreement, Employee or Employee’s estate shall have no further rights against the Company hereunder, except for the right to receive, (i) any earned but unpaid Base Salary, (ii) reimbursement of expenses to which Employee is entitled pursuant to Section 2.3, and (iii) Employee shall be deemed to resign from any board to which Employee has been appointed or nominated by or on behalf of the Company.

 

 

 

 

 

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ARTICLE IV
CONFIDENTIALITY; NON-SOLICITATION

 

4.1               Confidential Information .

 

(a)                Company Information . Employee agrees that during and after his employment with the Company, he will hold in the strictest confidence, and will not (except for the benefit of the Company during his employment), as required by applicable law, a court order or an order or request of a relevant regulatory authority or in order to enforce a claim against the Company (including, without limitation, under this Agreement), use or disclose to any person, firm, corporation or other entity any Company Confidential Information. Employee understands that “ Company Confidential Information ” means any non-public information that relates to the actual or anticipated business, research or development of the Company, or to the Company’s technical data, trade secrets, or know-how, including, but not limited to, research, product plans, or other information regarding the Company’s products or services and markets therefor; customer lists and customer contact information, their buying histories, and preferences (including, but not limited to, such information relating to customers of the Company on which Employee called or with which Employee may become acquainted during the term of his employment); personnel information (including, but not limited to, information regarding employees’ skills and performance); information about vendors, supplier and business partners; software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, and hardware configuration information; and marketing, finances, and/or other business information; provided , however , that Company Confidential Information does not include any of the foregoing items to the extent the same have become publicly known and made generally available through no wrongful act of Employee or of others. Employee understands that nothing in this Agreement is intended to limit employees’ rights to discuss the terms, wages, and working conditions of their employment, as protected by applicable law.

 

(b)                Third Party Information . Employee recognizes that the Company may have received and in the future may receive from third parties associated with the Company, e.g., the Company’s customers, suppliers, licensors, licensees, partners, or collaborators (“ Associated Third Parties ”), their confidential or proprietary information (“ Associated Third Party Confidential Information ”). By way of example, and not as an exhaustive list, Associated Third Party Confidential Information may include the habits or practices of Associated Third Parties, the technology of Associated Third Parties, requirements of Associated Third Parties, and information related to the business conducted between the Company and such Associated Third Parties. Employee agrees at all times during his employment with the Company and thereafter to hold in the strictest confidence, and not to use or to disclose to any person, firm, corporation, or other entity any Associated Third Party Confidential Information, except as necessary in carrying out his work for the Company consistent with the Company’s agreement with such Associated Third Parties or as required by applicable law, a court order or an order or request of a relevant regulatory authority. Employee further agrees to comply with any and all Company policies and guidelines that may be adopted from time to time during the term of his employment regarding Associated Third Parties and Associated Third Party Confidential Information. Employee understands that his unauthorized use or disclosure of Associated Third Party Confidential Information or violation during his employment of any Company policies will lead to disciplinary action, up to and including immediate termination and legal action by the Company. Third Party Confidential Information does not include any of the foregoing items to the extent the same have become publicly known and made generally available through no wrongful act of Employee or of others. Employee understands that nothing in this Agreement is intended to limit employees’ rights to discuss the terms, wages, and working conditions of their employment, as protected by applicable law.

 

4.2               Inventions .

 

(a)                Inventions Retained and Licensed . Employee represents and warrants that there are no inventions, discoveries, original works of authorship, developments, improvements, and trade secrets that were conceived in whole or in part by Employee prior to his employment with the Company or any of its subsidiaries and to which he has any right, title, or interest, and which relate to the Company’s proposed business, products, or research and development (collectively, “ Prior Inventions ”). Notwithstanding the foregoing, if, in the course of his employment with the Company, Employee incorporates into or uses in connection with any product, process, service, technology, or other work by or on behalf of the Company any Prior Invention, Employee hereby grants to the Company a non-exclusive, royalty-free, fully paid-up, irrevocable, perpetual, worldwide license, with the right to grant and authorize sublicenses, to make, have made, modify, use, import, offer for sale, and sell such Prior Invention as part of or in connection with such product, process, service, technology, or other work, and to practice any method related thereto.

 

 

 

 

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(b)                Assignment of Inventions . Employee agrees that he will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assigns to the Company, or its designee, all his right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs, discoveries, ideas, trademarks, or trade secrets, whether or not patentable or registrable under patent, copyright, or similar laws, which Employee may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time Employee is in the employ of the Company or any of its subsidiaries (including during his off-duty hours), or with the use of Company’s equipment, supplies, facilities, or Company Confidential Information, except as provided in Section 4.2(e) (collectively referred to as “ Inventions ”). Employee further acknowledges that all original works of authorship that are made by him (solely or jointly with others) within the scope of and during the period of his employment with the Company and that are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act. Employee understands and agrees that the decision whether or not to commercialize or market any Inventions is within the Company’s sole discretion and for the Company’s sole benefit, and that no royalty or other consideration will be due to Employee as a result of the Company’s efforts to commercialize or market any such Inventions.

 

(c)                Maintenance of Records . Employee agrees to keep and maintain adequate, current, accurate, and authentic written records of all Inventions made by him (solely or jointly with others) during the term of his employment with the Company. The records will be in the form of notes, sketches, drawings, electronic files, reports, or any other format that may be specified by the Company. The records are and will be available to and remain the sole property of the Company at all times.

 

(d)                Patent and Copyright Registrations . Employee agrees to reasonably assist the Company, or its designee, at the Company’s expense, in every proper way to secure the Company’s rights in the Inventions and any rights relating thereto in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, and all other instruments that the Company shall deem proper or necessary in order to apply for, register, obtain, maintain, defend, and enforce such rights, and in order to assign and convey to the Company, its successors, assigns, and nominees the sole and exclusive rights, title, and interest in and to such Inventions and any rights relating thereto, and testifying in a suit or other proceeding relating to such Inventions and any rights relating thereto. Employee further agrees that his obligation to execute or cause to be executed, when it is in his power to do so, any such instrument or papers shall continue after the termination of this Agreement. If the Company is unable because of Employee’s mental or physical incapacity or for any other reason to secure Employee’s signature with respect to any Inventions, including, without limitation, to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering such Inventions, then Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney in fact, to act for and in his behalf and stead, to execute and file any papers and oaths, and to do all other lawfully permitted acts with respect to such Inventions with the same legal force and effect as if executed by the Employee.

 

4.3               Conflicting Employment .

 

(a)                Current Obligations . Employee agrees that during the term of his employment with the Company, he will not engage in or undertake any other employment, occupation, consulting relationship, or commitment that is directly related to the business in which the Company is now involved or becomes involved or a business which Employee understands the Company to actively have plans to become involved, nor will Employee engage in any other activities that interfere with his ability to fully and satisfactorily perform his duties to the Company.

 

(b)                Prior Relationships . Without limiting Section 4.3(a), Employee represents that he has no other agreements, relationships, or commitments to any other person or entity that conflict with his obligations to the Company under this Agreement or his ability to become employed and perform the services for which he is being employed by the Company. Employee further agrees that if he has signed a confidentiality agreement or similar type of agreement with any former employer or other entity, he will comply with the terms of any such agreement to the extent that its terms are lawful under applicable law. Employee represents and warrants that after undertaking a careful search (including, but not limited to, searches of his computers, cell phones, electronic devices, and documents), he has returned all property and confidential information belonging to all prior employers. Moreover, he agrees to fully indemnify the Company, its directors, managers, officers, agents, employees, investors, shareholders, members, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns for all verdicts, judgments, settlements, and other losses incurred by any of them resulting from Employee’s breach of his obligations under any agreement to which he is a party or obligation to which he is bound, as well as any reasonable attorneys’ fees and costs if the plaintiff is the prevailing party in such an action, except as prohibited by law.

 

 

 

 

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4.4               Returning Company Documents . Upon separation from employment with the Company or on demand by the Company during his employment, Employee will immediately deliver to the Company, and will not keep in his possession, recreate, or deliver to anyone else, any and all Company property, including, but not limited to, Company Confidential Information, Associated Third Party Confidential Information, as well as all devices and equipment belonging to the Company or its subsidiaries (including, but not limited to, computers, handheld electronic devices, telephone equipment, and other electronic devices), Company credit cards, records, data, notes, notebooks, reports, files, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, photographs, charts, any other documents and property, and reproductions of any and all of the aforementioned items that were developed by Employee pursuant to his employment with the Company, obtained by him in connection with his employment with the Company, or otherwise belonging to the Company, its successors, or assigns, including, without limitation, those records maintained pursuant to Section 4.2(c). Employee also consents to an exit interview to confirm his compliance with this Article IV.

 

4.5               Notification of New Employer . In the event that Employee leaves the employ of the Company, Employee hereby grants consent to notification by the Company to his new employer about his obligations under this Agreement including information to his new employer concerning the enforceability of this Agreement.

 

4.6               Non-Solicitation .

 

(a)                Solicitation of Employees . Employee agrees that for a period of two (2) years immediately following the termination of his relationship with the Company for any reason, whether voluntary or involuntary, with or without cause, Employee shall not either directly or indirectly solicit any employees of the Company or any of its subsidiaries to leave their employment, or attempt to solicit employees of the Company or any of its subsidiaries to leave their employment, either for Employee or for any other person or entity with which Employee is then employed or otherwise affiliated.

 

(b)                Solicitation of Customers, Suppliers, etc . Employee agrees that for a period of two (2) years immediately following the termination of his relationship with the Company for any reason, whether voluntary or involuntary, with or without cause, Employee shall not either directly or indirectly (i) request or advise any customer, supplier or any other person or entity known to be associated with the Company or any of its affiliates or subsidiaries, to withdraw, curtail or cancel or in any other way lessen its use of the business services of the Company or any of its affiliates or subsidiaries or (ii) for the purpose of conducting or engaging in any business directly or indirectly competitive with the Company (whether individually or on behalf of Employee’s affiliates or new employer) call upon, solicit, advise, sign, hire, interfere with, or otherwise do or conduct, or attempt to do or conduct, business with any person or entity covered by any written or oral agreement with the Company or any of its affiliates or subsidiaries, or take away or interfere or attempt to interfere with any Company business custom, business trade, or business patronage of the Company or any of its affiliates or subsidiaries.

 

4.7               Non-Compete . Employee agrees that for a period of one (1) year immediately following the termination of his relationship with the Company for any reason, whether voluntary or involuntary, Employee shall not either directly or indirectly in the geographical areas that the Company does business or has done business at the time of the Employee’s termination, engage or assist others in engaging in any business or enterprise (whether as owner, partner, officer, director, employee, consultant, investor, lender or otherwise, except as the holder of not more than 1% of the outstanding stock of a publicly-held company) that is competitive with the Company’s business, including but not limited to any business or enterprise that develops, manufactures, markets, licenses, sells or provides any product or service that competes with any product or service developed, manufactured, marketed, licensed, sold or provided, or planned to be developed, manufactured, marketed, licensed, sold or provided, by the Company while Employee was employed by the Company. If Employee violates the provisions of any of the preceding paragraphs of this Section 4, Employee shall continue to be bound by the restrictions set forth in such paragraph until a period of one (1) year has expired without any violation of such provisions.

 

4.8               Representations . Employee agrees to execute any proper oath or verify any proper document reasonably required to carry out the terms of this Agreement. Employee represents that his performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by Employee in confidence or in trust prior to his employment by the Company or any of its subsidiaries. Employee hereby represents and warrants that he has not entered into, and Employee will not enter into, any oral or written agreement in conflict herewith.

 

 

 

 

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4.9               Non-Disparagement . During Employee’s employment with the Company and for a period of three (3) years thereafter, Employee agrees, to the fullest extent permissible by law, not intentionally to make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal, direct or indirect communications that are or could be harmful to or reflect negatively on the Company or its subsidiaries or that are otherwise disparaging of the Company or its subsidiaries and/or their businesses, or any of its or their subsidiaries, past, present or future officers, directors, managers, employees, equity holders, members, advisors, agents, policies, procedures, practices, services, products, decision-making, conduct, professionalism or compliance with standards of any of the foregoing provided that the foregoing is not intended to prohibit truthful statements made by the Employee in his capacity as an officer or employee of a competitor after his employment with the Company has terminated, provided that Employee continues to comply with his confidentiality obligations under this Agreement. The provisions of this Section 4.9 are in addition to any other written agreements on this subject that Employee may have with the Company or any of its subsidiaries, and are not meant to, and do not excuse any, additional obligations that Employee may have under such agreements. Nothing in this Section shall be construed to limit Employee’s ability to cooperate with the investigation of any government agency of competent jurisdiction or to bring or defend against any legal claim. In any civil litigation arising out of or related to this Agreement, the parties shall cooperate to seek a protective order consistent with this Section and Section 4.1 above.

 

4.10           No Transfers . In consideration of the Company’s entering into this Agreement, Employee agrees not to offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of any common stock of the Company until after the 12-month anniversary of the Effective Date.

 

ARTICLE V
GENERAL PROVISIONS

 

5.1               Notices . Any and all notices provided for in this Agreement shall be given in writing and shall be deemed given to a party at the earlier of (a) when actually delivered to such party, or (b) when mailed to such party by registered or certified mail (return receipt requested) or sent to such party by courier, confirmed by receipt, and addressed to such party at the address designated below for such party as follows (or to such other address for such party as such party may have substituted by notice to the other party pursuant to this Section 5.1):

 

  If to the Company: Freedom Leaf Inc.
    3571 E. Sunset Road, Suite 420
    Las Vegas, NV 89120
     
  with a copy to: Kleinberg, Kaplan, Wolff & Cohen, P.C.
    551 Fifth Avenue
    New York, NY 10176
    Telecopy: (212) 986-8866
    Telephone: (212) 880-9869
    Email: jain@kkwc.com
    Attention: Jonathan Ain
     
  If to Employee: Raymond Medeiros
    [REDACTED]

 

5.2               Entire Agreement; Survival . This Agreement contains the entire understanding and the full and complete agreement of the parties and supersedes and replaces any prior understandings and agreements among the parties with respect to the subject matter hereof. The provisions of this Agreement shall survive the termination of this Agreement, or of Employee’s employment for any reason, to the extent necessary to enable the parties to enforce their respective rights.

 

 

 

 

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5.3               Amendment; Headings and References . This Agreement may be altered, amended or modified only in writing, signed by Employee and the Company, except that either party hereto may update its address set forth in Section 5.1 by providing a notice of the updated address in the manner set forth in Section 5.1. Headings included in this Agreement are for convenience only and are not intended to limit or expand the rights of the parties hereto. References to Sections herein shall mean sections of the text of this Agreement, unless otherwise indicated.

 

5.4               Assignability . This Agreement and the rights and duties set forth herein may not be assigned by either of the parties without the express written consent of the other party. This Agreement shall be binding on, and inure to the benefit of, each party and such party’s respective heirs, legal representatives, successors and assigns.

 

5.5               Severability . If any court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then such invalidity or unenforceability shall have no effect on the other provisions hereof, which shall remain valid, binding and enforceable and in full force and effect, and such invalid or unenforceable provision shall be construed in a manner so as to give the maximum valid and enforceable effect to the intent of the parties expressed therein.

 

5.6               Waiver of Breach . The waiver by either party of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either party.

 

5.7               Governing Law; Jurisdiction; Construction . This Agreement shall be governed by the internal laws of the State of Nevada, without regard to any rules of construction that would require application of the laws of another jurisdiction. Any legal proceeding related to this Agreement must be litigated in an appropriate Nevada state or federal court, and both the Company and Employee hereby consent to the exclusive jurisdiction of the State of Nevada for this purpose; waive any objection they may now or hereafter have to venue or to convenience of forum and agree that all legal proceedings will be tried in a court of competent jurisdiction by a judge without a jury. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, accordingly, each party waives the application of any law, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

 

5.8               Tax Compliance .

 

(a)                The Company may withhold from any amounts payable hereunder any amounts required to be withheld under federal, state or local law and any other deductions authorized by Employee.

 

(b)                The intent of the parties is that payments and benefits under this Agreement comply with or be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively “ Section 409A ”), and the Company shall have complete discretion to interpret and construe this Agreement and any associated documents in any manner that establishes an exemption from (or compliance with) the requirements of Section 409A.  If for any reason, such as imprecision in drafting, any provision of this Agreement (or of any award of compensation, including, without limitation, equity compensation or benefits) does not accurately reflect its intended establishment of an exemption from (or compliance with) Section 409A, as demonstrated by consistent interpretations or other evidence of intent, such provision shall be considered ambiguous as to its exemption from (or compliance with) Section 409A and shall be interpreted by the Company in a manner consistent with such intent, as determined in the discretion of the Company.

 

(c)                For purposes of Section 409A, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

 

 

 

 

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(d)                With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, Employee, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (i) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (ii) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

(e)                Notwithstanding anything to the contrary in this Agreement, if Employee is a “specified employee” as determined pursuant to Section 409A as of the date of Employee’s “separation from service” as defined in Treasury Regulation Section 1.409A-1(h) (or any successor regulation) and if any payments or entitlements provided for in this Agreement constitute a “deferral of compensation” within the meaning of Section 409A and cannot be paid or provided in the manner provided herein without subjecting Employee to additional tax, interest or penalties under Section 409A, then any such payment or entitlement which is payable during the first six (6) months following Employee’s “separation from service” shall be paid or provided to Employee in a cash lump-sum on the first business day of the seventh (7th) calendar month immediately following the month in which Employee’s “separation from service” occurs or, if earlier, upon Employee’s death. In addition, any payments or benefits due hereunder upon a termination of Employee’s employment which are a “deferral of compensation” within the meaning of Section 409A shall only be payable or provided to Employee (or Employee’s estate) upon a “separation from service” as defined in Section 409A.

 

(f)                 Whenever a payment under this Agreement specifies a payment period with reference to a number of days (for example, “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.  In no event may Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement, to the extent such payment is subject to Code Section 409A.

 

(g)                The Company makes no representation or warranty and shall have no liability to Employee or any other person or entity if any provisions of this Agreement are determined to constitute deferred compensation subject to Code Section 409A but do not satisfy an exemption from, or the conditions of, Code Section 409A.

 

5.9               Counterparts . This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may be executed and delivered by facsimile or other electronic transmission.

 

[Signature Page Follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF , the parties have executed this Agreement as of the day and year first written above.

 

  COMPANY: 
   
  FREEDOM LEAF INC.,
  a Nevada corporation
   
   
  By: /s/ Clifford Perry                              
  Name: Clifford Perry
  Title: Chief Executive Officer
   
   
  EMPLOYEE:
   
  RAYMOND MEDEIROS
   
  /s/ Raymond Medeiros                        
  Raymond Medeiros
   

 

 

 

 

 

 

 

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Exhibit 99.1

 

 

Freedom Leaf Inc. (FRLF) Announces Closing of Acquisition of “Green Lotus” Companies

 

LAS VEGAS, NV – June 2, 2019 – Freedom Leaf Inc. (OTCQB: FRLF), a Nevada corporation, d/b/a Freedom Leaf Health, announced today that it closed its acquisition of ECS Labs LLC (the “Acquisition”), including its two wholly-owned operating subsidiaries, which collectively constitute the “Green Lotus” premium hemp oil products brand (collectively, “Green Lotus”) on May 31, 2019.

 

This is a transformative acquisition, which is expected to generate a substantial increase in revenue, while also providing Freedom Leaf with a more robust portfolio of products, enhanced distribution capabilities and penetration in attractive emerging markets worldwide, most notably Mexico. The Acquisition also brings Freedom Leaf a new management team, a low-cost supply chain, access to GMP manufacturing and lab facilities, and a robust sales team. At closing, Carlos Frias, the founder and CEO of Green Lotus, was named the new Chief Executive Officer of Freedom Leaf and joined the Board of Directors. Daniel Nguyen, of Green Lotus, has been named Chief Scientific Officer of Freedom Leaf and has also joined the Board of Directors of Freedom Leaf.

 

In 2018, Green Lotus generated unaudited gross revenue of approximately $2.2mm with positive cash flow, and in the first quarter of 2019, the unaudited gross revenue of Green Lotus reached approximately $1.4mm in the U.S.

 

The purchase price for the transaction was $14mm of Freedom Leaf common stock issued at a price of $0.162, which represented the 30-day volume-weighted average price of Freedom Leaf common stock at the close of trading on May 30, 2019.

 

Effective as of the closing of the Acquisition, Carlos Frias, Daniel Nguyen and Alex Frias (collectively, the “Green Lotus Executives”) entered into two-year employment agreements with Freedom Leaf (collectively, the “Employment Agreements”). Subject to the Green Lotus Executives’ continued provision of services to Freedom Leaf, the Employment Agreements provide for, among other consideration, cash incentives of $6mm and equity incentives of $27mm of Freedom Leaf common stock to be issued at a price representing the 30-day volume weighted average price immediately prior to their grant.

 

For additional details regarding the closing of the Acquisition and the Employment Agreements described above, please reference the Form 8-K to be filed with the U.S. Securities and Exchange Commission. Freedom Leaf was advised by Kleinberg, Kaplan, Wolff & Cohen, P.C. in connection with the transaction.

 

CONFERENCE CALL HIGHLIGHTS

 

 

 

 

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On May 23, 2019, Freedom Leaf hosted a shareholder conference call, which, among other things, communicated the following:

 

· Elimination of Debt & Branded Focus - In order to more efficiently leverage resources and capital to build its family of brands in the U.S. and to establish itself as a leading consumer packaged goods hemp CBD company, Freedom Leaf, as the buyer, exercised its option to terminate a Spanish greenhouse purchase agreement with the seller, which resulted in the elimination of Freedom Leaf’s remaining approximately $4.3mm payment obligation. This liability represented approximately 90% of Freedom Leaf’s $4.8mm in total debt as reported at the end of the third quarter of 2018. In addition to this balance sheet improvement, Freedom Leaf management expects to save approximately $670k over the next year in mortgage payments that would have become due to the seller. Additionally, Freedom Leaf management expects to eliminate approximately $261k of employee costs on an annualized basis for an expected total cash savings of approximately $930k.

 

· Lower Cost Structure - Freedom Leaf expects the Acquisition will substantially lower its existing cost structure. Green Lotus’ historical unaudited Cost of Goods Sold is approximately 30% lower than Freedom Leaf’s, and Freedom Leaf management has already identified a minimum of $250k of annualized non-operating expenses that it anticipates will be eliminated.

 

· Expanded Customer Base - Green Lotus has entered into a multi-year agreement with CBD Life SA De CV (“CBD Life”), one of only a limited number of legal entities to hold CBD importation and distribution permits in Mexico. Green Lotus received an initial $3 million order in December which Freedom Leaf expects to begin fulfilling in June 2019. Green Lotus also recently received a $23mm re-order from CBD Life, which Freedom Leaf management expects to be fulfilled over the next 12 months.

 

· Revenue Guidance - As a result of the Acquisition, Freedom Leaf expects pro forma consolidated revenue of $8-10mm in the U.S. in calendar year 2019, which Freedom Leaf management estimates represents approximately 2.0-3.0x Freedom Leaf’s run rate on a stand-alone basis. On a pro-forma consolidated basis, including the Mexico contract, Freedom Leaf expects consolidated revenues of $30mm+ over the next 12 months.

 

Shareholder Call:

 

30-day replay of the Freedom Leaf shareholder call that occurred on Thursday, May 23, 2019 is available on Freedom Leaf’s website at https://www.freedomleafinc.com/freedom-leaf-shareholder-call-may-23rd/.

 

Green Lotus Acquisition Fact Sheet

 

Green Lotus Acquisition : On May 31, 2019, Freedom Leaf Inc. (“Freedom Leaf”) closed its acquisition of ECS Labs LLC (the “Acquisition”), including its two wholly-owned operating subsidiaries, which collectively constitute the “Green Lotus” premium hemp oil CBD products brand (collectively, “Green Lotus”).

 

Management: The Board of Directors of Freedom Leaf (the “Board”) has named Carlos Frias, the founder and CEO of Green Lotus, as the Chief Executive Officer of Freedom Leaf. Daniel Nguyen will serve as Chief Science Officer of Freedom Leaf. Moving forward, Freedom Leaf’s management team will be based in Dallas, TX, which is the location of Green Lotus’ existing corporate headquarters and manufacturing facilities. Clifford Perry and Raymond Medeiros will assume new roles as Directors of Corporate and Business Development, respectively. After the Acquisition, the Chief Financial Officer (“CFO”) and finance team will be transitioned to Dallas. Freedom Leaf has already begun the process of actively recruiting a Dallas-based CFO. Effective as of the closing of the Acquisition, Freedom Leaf’s Las Vegas based CFO, Larry Ruhe, resigned and his duties were assumed on an interim basis by John Kalkanian. Mr. Kalkanian joins Freedom Leaf after spending the past two years with Origin House as a Divisional Controller and Director of Finance. Mr. Kalkanian has been a CFO and Controller for both public and private companies over the past 25 years and received his MBA from the University of California, Irvine and a BA in Economics from the University of Michigan.

 

 

 

 

 

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Board of Directors: After the closing of the Acquisition, the Board consists of six members, including two members appointed by Merida Capital Partners, (David Goldburg, Chairman of the Board, and Independent Director, Dave Vautrin), two members from Green Lotus (Carlos Frias and Daniel Nguyen) and two members from the existing Freedom Leaf management team (Clifford Perry and Raymond Medeiros). The Board will be focused on executing a core set of strategic priorities to build a pre-eminent consumer packaged goods hemp CBD company, which includes driving revenue growth by continuing to develop a low-cost supply chain, efficient manufacturing process, and an effective sales and marketing team.

 

Products & First Quarter 2019 Revenue : As a result of the Acquisition, Freedom Leaf will sell hemp CBD products under the Green Lotus and IrieCBD brands, which includes tinctures, topicals, gel-caps, vape cartridges, edibles, and beverages currently offered at over 1,500 locations nationwide. In the first calendar quarter of 2019, after giving effect to the Acquisition, the combined companies generated pro forma gross revenue of approximately $2.2mm in the U.S. – approximately $1.4mm of which consists of unaudited revenue attributable to Green Lotus and approximately $835k of which consists of audited revenue attributable to existing Freedom Leaf operations.

 

Cost Savings & Operations : Before the closing of the Acquisition, Freedom Leaf management took steps to terminate its Spanish operations and reduce other expenses, which Freedom Leaf management expects will result in approximately $1.4mm of annualized cost-savings. Effective immediately, IrieCBD’s manufacturing and fulfillment services will be transferred from Oakland, CA to Green Lotus’ existing Dallas facilities. Green Lotus’ historical unaudited Cost of Goods Sold was already approximately 30% lower than Freedom Leaf’s, and Freedom Leaf management expects to identify further cost reduction opportunities after the two businesses are consolidated.

 

Market Penetration in Mexico: Green Lotus has an existing multi-year agreement with CBD Life SA De CV (“CBD Life”), one of only a limited number of legal entities to hold CBD importation and distribution permits in Mexico. Green Lotus already received an initial $3 million order from CBD Life in December under the agreement which Freedom Leaf management expects to begin fulfilling this month. More recently, Green Lotus received a $23mm re-order from CBD Life, which Freedom Leaf management expects to fulfill over the next 12 months.

 

Revenue Guidance: As a result of the Acquisition, Freedom Leaf expects to record pro forma consolidated revenue of $8-10mm in the U.S. in calendar year 2019, which represents approximately 2.0-3.0x Freedom Leaf’s run rate on a stand-alone basis. On a pro-forma consolidated basis, including the existing orders from CBD Life in Mexico, Freedom Leaf management expects to record consolidated revenues of $30mm+ over the next 12 months and to generate positive EBITDA over this timeframe.

 

Contact:

 

Matt Bartlett

matt@freedomleaf.com

 

About Freedom Leaf:

 

Freedom Leaf Inc. is a clean healthcare company with a family of trusted brands that provide premium hemp-derived CBD products for greater health, wellness and longevity. IrieCBD is Freedom Leaf’s flagship brand of consumer health products offering full-spectrum hemp-derived CBD products in liquid, capsule and cream forms to support healthy levels of inflammation, immune system balance, mood and stress management, restful sleep, menstrual discomfort relief, energy boost and to act as a wellness supplement. Freedom Leaf Inc. is a fully reporting and audited publicly traded company trading under the symbol (OTCQB: FRLF). Visit: www.freedomleafinc.com

 

 

 

 

 

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About Green Lotus:

 

Green Lotus is a rapidly-growing Colorado-based premium hemp oil products brand. Founded by brothers Carlos and Alex Frias, Green Lotus manufactures and distributes premium cannabinoid products made from organic industrial hemp. Green Lotus has grown rapidly year-over-year since 2016, catapulted in part by the company’s proprietary formulas and its agile, vertically-integrated supply chain. Green Lotus is veteran-owned and powered by a young, diverse team of advocates dedicated to promoting a world where the healing power of hemp oil is accessible to all people. For more information, visit: www.GreenLotusHemp.com.  #LetsGrowTogether

 

Safe Harbor Statement:

 

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the "safe harbor" created by those sections. Statements in this press release that are not strictly historical are “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally can be identified by phrases such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. Similarly, statements herein that describe Freedom Leaf’s business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements. Factors that could cause or contribute to differences include the uncertainty regarding viability and market acceptance of Freedom Leaf’s products and services, changes in relationships with third parties, and other factors described in Freedom Leaf’s most recent periodic filings with the Securities and Exchange Commission.

 

These risks and uncertainties include, without limitation, changes in general industry or regional market conditions; changes in consumer and customer preferences for our products; loss of business from increased competition; changes in strategic relationships; unfavorable fluctuations in currencies or interest rates in the regions in which we operate; costs or difficulties related to the integration and/or ability to maximize the value of the Acquisition; changes in regulatory conditions; changes in tax laws; import and export duty and tariff rates in or with the countries with which we conduct business; and negative impact of any governmental investigations and associated litigations.

 

 

 

 

 

 

 

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