SECURITY AGREEMENT
Exhibit 10.2
Execution Version
This
Security Agreement (the “Security
Agreement”) dated as of December 4, 2018 by and
between CURE BASED DEVELOPMENT, LLC, a Nevada limited liability
company (the “Company”),
and LEVEL BRANDS, INC., a North Carolina corporation (the
“Holder”).
This Note is being entered into in accordance with the terms and
conditions of that certain Agreement and Plan of Merger dated
December 3, 2018 by and among the Holder, AcqCo, LLC, a North
Carolina limited liability company and a wholly owned subsidiary of
the Holder, cbdMD LLC, a North Carolina limited liability company
and wholly owned subsidiary of the Holder, and the Company (the
“Merger
Agreement”).
BACKGROUND
The
Company is issuing the Holder a Senior Secured Promissory Note in
the aggregate principal amount of $2,000,000 (the
“Note”).
In order to induce Holder to lend the funds represented by the Note
to the Company, the Company has agreed to pledge and grant a
security interest in the collateral described herein to the Holder
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the
premises and for other good and valuable consideration the receipt
of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
All capitalized terms used herein which are not defined shall have
the meanings given to them in the Note.
2. Pledge and Grant of
Security Interest. To secure the full and punctual payment
and performance of all indebtedness obligations and liabilities of
the Company to Holder under the Note (the “Indebtedness”),
the Company hereby transfers, pledges, assigns, hypothecates,
transfers and grants to the Holder a security interest in the
personal property described on Schedule A annexed hereto
(collectively, the “Collateral”).
3. Representations and
Warranties of the Company. The Company represents and
warrants to the Holder (which representations and warranties shall
be deemed to continue to be made until all of the Indebtedness has
been paid in full in cash) that:
(a) The execution,
delivery and performance by the Company of this Security Agreement
and the pledge of the Collateral hereunder do not and will not
result in any violation of any agreement, indenture, instrument,
license, judgment, decree, order, law, statute, ordinance or other
governmental rule or regulation applicable to the
Company;
(b) This Security
Agreement constitutes the legal, valid, and binding obligation of
the Company enforceable against the Company in accordance with its
terms;
(c) No consent or
approval of any person, corporation, governmental body, regulatory
authority or other entity, is or will be necessary for the
execution, delivery and performance of this Security Agreement or,
the exercise by the Holder of any rights with respect to the
Collateral or for the pledge and assignment of, and the grant of a
security interest in, the Collateral hereunder;
(d) There are no
pending or, to the best of the Company’s knowledge,
threatened actions or proceedings before any court, judicial body,
administrative agency or arbitrator which may materially adversely
affect the Collateral;
(e) The Company has the
requisite power and authority to enter into this Security Agreement
and to pledge and assign the Collateral to Holder in accordance
with the terms of this Security Agreement;
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Execution Version
(f) The Company owns
each item of the Collateral set forth on Schedule A and, except for the
pledge and security interest granted to Holder hereunder, the
Collateral is free and clear of any other security interest,
pledge, claim, lien, charge, hypothecation, assignment, offset or
encumbrance whatsoever, except as otherwise set forth on
Schedule A
(collectively, “Liens”);
and
(g) The pledge and
assignment of the Collateral and the grant of a security interest
under this Security Agreement vests in the Holder all rights of the
Company in the Collateral as contemplated by this Security
Agreement.
4. Affirmative
Covenants. Until such time as all of the Indebtedness has
been paid in full in cash, the Company shall:
(a) Defend the
Collateral against the claims and demands of all other parties and
keep the Collateral free from all Liens and except for the Liens
granted to Holder under this Security Agreement or in the ordinary
course of business;
(b) In the event the
Company comes into possession of any portion of the Collateral in
violation of the terms of this Security Agreement, hold the same in
trust for Holder and deliver to Holder such Collateral in the form
received no later than two (2) business days following the
Company’s receipt thereof;
(c) In the event any
portion of the Collateral is held by a third party, take all action
that Holder may request so as to maintain the validity,
enforceability, perfection and priority of Holder’s security
interest in the Collateral;
(d) Within two (2)
business days of receipt thereof by the Company, deliver to Holder
all notices and statements relating to the Collateral received by
the Company or any third party holding the Collateral;
(e) Notify Holder
promptly of (a) any adverse event relating to the Collateral or any
adverse change in the value of the Collateral and (b) the
Company’s intention to commence a voluntary case under any
state or federal bankruptcy laws (as now or hereafter in
effect);
(f) At the written
request of Holder at any time and from time to time, at the
Company’s sole expense, promptly take such action and execute
and deliver such control agreements (and cause any financial
institution and/or brokerage company at which any of the Collateral
is maintained to enter into one or more control agreements in favor
of and on terms satisfactory to Holder) and further instruments and
documents as Holder may reasonably request in order to more fully
perfect, evidence or effectuate the pledge and assignment hereunder
and the security interest granted hereby and to enable Holder to
exercise and enforce its rights and remedies hereunder. Holder is
hereby authorized to file one or more financing or continuation
statements under the Uniform Commercial Code of North Carolina (as
in effect from time to time, the “UCC”)
relating to the Collateral, naming Holder as “secured
party”;
(g) Furnish to Holder
such other information relating to the Collateral as Holder may
from time to time reasonably request;
(h)
Conduct its
business in the ordinary course of business consistent with past
practice in all material respects and in compliance in all material
respects with all applicable Laws (as that term is defined in the
Merger Agreement), use commercially reasonable efforts to preserve
intact its business organization and goodwill, keep available the
services of its present managers, officers, employees and
independent contractors, and preserve the goodwill and business
relationships with customers, suppliers, licensors, licensees and
others having business relationships with it; or
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(i) Except
as required by applicable law, the Company shall not sell, pledge,
assign, dispose of, transfer, lease, securitize, or encumber any
businesses, properties or assets of the Company outside of the
ordinary course of business consistent with past practices without
the prior written consent of the Holder (which consent shall not be
unreasonably withheld, conditioned or delayed) and which consent
shall not be required in the event that the withholding of the
Holder’s consent would cause a Material Adverse Effect (as
that term is defined in the Merger Agreement).
5. Events of
Default.
The
term “Event of
Default” wherever used herein shall mean the
occurrence of any one or more of the following events:
(a) An “Event of
Default” under the Note shall have occurred and shall not
have been cured during any applicable cure or grace
period;
(b) The Company’s
failure to comply with or perform any of its undertakings or
obligations under this Security Agreement or the Note which failure
has not been cured by the Company within ten (10) days of written
notice; or
(c) Any representation,
warranty, statement or covenant made or furnished to Holder by or
on behalf of the Company in connection with this Security Agreement
or the Note proves to have been false in any material respect when
made or furnished or is breached, violated or not complied with and
which failure has not been cured by the Company within ten (10)
days of written notice.
6. Remedies.
Upon
the occurrence of an Event of Default, the Holder may:
(a) Demand, collect,
receipt for, settle, compromise, adjust, xxx for, foreclose,
realize upon the Collateral (or any part thereof) and/or otherwise
deal with the Collateral in any and all respects as the holder
thereof, in each case as Holder may determine in its sole
discretion;
(b) Transfer the
Collateral into its names or into the names of its nominee or
nominees;
(c) Subject to the
requirements of applicable law, sell, assign and deliver the whole
or, from time to time any part of the Collateral, with or without
demand, advertisement or notice of the time or place of sale or
adjournment thereof or otherwise (all of which are hereby waived,
except such notice as is required by applicable law and cannot be
waived), for such price or prices and on such terms as Holder in
its sole discretion may determine.
In
addition to the foregoing, Holder shall have all of the rights and
remedies of a secured party under applicable law and the
UCC.
7. Proceeds of
Collateral Agreement. The proceeds of any disposition of the
Collateral under this Security Agreement shall be applied as
follows:
(a) First, to the payment of all costs,
expenses and charges of Holder and to the reimbursement of Holder
for the prior payment of such costs, expenses and charges incurred
in connection with the care and safekeeping of the Collateral
(including, without limitation, the expenses of any sale or any
other disposition of any of the Collateral), the expenses of any
taking, attorneys’ fees and expenses, court costs, any other
fees or expenses incurred or expenditures or advances made by
Holder in the protection, enforcement or exercise of its rights,
powers or remedies hereunder, with interest on any such
reimbursement at the rate prescribed in the Note from the date of
payment;
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Execution Version
(b) Second, to the payment of the Note, in
whole or in part, in such order as Holder may elect, whether or not
such Note is then due;
(c) Third, to such persons, firms
corporations or other entities as required by applicable law
including, without limitation the UCC; and
(d) Fourth, to the extent of any surplus to
the Company or as a court of competent jurisdiction may
direct.
In the
event that the proceeds of any collection, recovery, receipt,
appropriation, realization or sale are insufficient to satisfy the
Note, the Company shall be liable for the deficiency together with
interest thereon at the rate prescribed in the Note plus the costs
and fees of any attorneys employed by Holder to collect such
deficiency.
8. No Waiver.
Any and all of Holder’s rights with respect to the Liens
granted under this Security Agreement shall continue unimpaired,
and the Company shall be and remain obligated in accordance with
the terms hereof, notwithstanding (a) the bankruptcy, insolvency or
reorganization of the Company, (b) the release or substitution of
any item of the Collateral at any time, or of any rights or
interests therein, or (c) any delay, extension of time, renewal,
compromise or other indulgence granted by Holder in reference to
the Note. The Company hereby waives all notice of any such delay,
extension, release, substitution, renewal, compromise or other
indulgence, and hereby consents to be bound hereby as fully and
effectively as if the Company had expressly agreed thereto in
advance. No delay or extension of time by Holder in exercising any
power of sale, option or other right or remedy hereunder, and no
failure by Holder to give notice or make demand, shall constitute a
waiver thereof, or limit, impair or prejudice Holder’s right
to take any action against the Company or to exercise any other
power of sale, option or any other right or remedy.
9. Captions.
All captions in this Security Agreement are included herein for
convenience of reference only and shall not constitute part of this
Security Agreement for any other purpose.
10. Miscellaneous.
(a) This Security
Agreement constitutes the entire and final agreement among the
parties with respect to the subject matter hereof and may not be
changed, terminated or otherwise varied except by a writing duly
executed by the parties hereto.
(b) No waiver of any
term or condition of this Security Agreement, whether by delay,
omission or otherwise, shall be effective unless in writing and
signed by the party sought to be charged, and then such waiver
shall be effective only in the specific instance and for the
purpose for which given.
(c) In the event that
any provision of this Security Agreement or the application thereof
to the Company or any circumstance in any jurisdiction governing
this Security Agreement shall, to any extent, be invalid or
unenforceable under any applicable statute, regulation, or rule of
law, such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform
to such statute, regulation or rule of law, and the remainder of
this Security Agreement and the application of any such invalid or
unenforceable provision to parties, jurisdictions, or circumstances
other than to whom or to which it is held invalid or unenforceable
shall not be affected thereby, nor shall same affect the validity
or enforceability of any other provision of this Security
Agreement.
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Execution Version
(d) This Security
Agreement shall be binding upon the Company, and the
Company’s successors and assigns, and shall inure to the
benefit of Holder and its successors and assigns.
(e) Any notice or other
communication required or permitted pursuant to this Security
Agreement shall be given in accordance with the notice provisions
of the Note.
(f) This Security
Agreement shall be governed by and construed and enforced in all
respects in accordance with the laws of the State of North
Carolina.
(g) EACH PARTY HERETO
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS SECURITY
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED
OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
OR ANY OTHER AGREEMENT EXECUTED OR DELIVERED BY THEM IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HERETO
HEREBY AGREES AND CONSENTS THAT ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT
ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH
PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
(h) THE PARTIES HERETO
EXPRESSLY CONSENT TO THE JURISDICTION AND VENUE OF EACH COURT OF
COMPETENT JURISDICTION LOCATED IN THE STATE OF NORTH CAROLINA FOR
ALL PURPOSES IN CONNECTION WITH THIS SECURITY AGREEMENT. ANY
JUDICIAL PROCEEDING BY THE PARTIES AGAINST ANY OTHER PARTY
INVOLVING, DIRECTLY OR INDIRECTLY ANY MATTER OR CLAIM IN ANY WAY
ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS SECURITY
AGREEMENT SHALL BE BROUGHT IN A STATE OR FEDERAL COURT LOCATED IN
CHARLOTEE, NORTH CAORLINA. THE PARTIES HERETO WAIVES ANY OBJECTION
TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREON AND SHALL
NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR
BASED UPON FORUM NON CONVENIENS.
(i) This Security
Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which when taken
together shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed an
original signature hereto.
(j) This Security
Agreement shall be governed by and construed under the law of the
State of North Carolina (the "Jurisdiction")
without regard to the Jurisdiction's conflict of laws principles,
except to the extent that the UCC requires the application of the
law of a different Jurisdiction.
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Execution Version
IN WITNESS WHEREOF, the parties have
duly executed this Security Agreement as of the day and year first
written above.
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CURE
BASED DEVELOPMENT, LLC
By:/s/ R. Xxxxx
Xxxxxxx
R.
Xxxxx Xxxxxxx, Manager
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HOLDER
By:
/s/ Xxxx X.
Xxxxxxx
Xxxx X.
Xxxxxxx, Chief Financial Officer
and
Chief Operating Officer
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SECURITY
AGREEMENT DATED DECEMBER 4, 2018
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SCHEDULE
A
Description of Collateral
All
assets, copyrights, trademarks, intellectual property, and any
patents pending.
