FORM OF LEAK-OUT AGREEMENT
Exhibit
10.1
FORM OF LEAK-OUT AGREEMENT
December 20,
2018
0000
Xxxxxx Xxxx
Xxxxx
000
Xxxxxxxxx,
XX 00000
Re:
Agreement and Plan
of Merger dated December 3, 2018 (the “Merger
Agreement”) by and among Level Brands, Inc., a North
Carolina corporation (the “Parent”),
AcqCo LLC, a North Carolina limited liability company and a wholly
owned subsidiary of the Parent (“Merger
Sub”), cbdMD LLC, a North Carolina limited liability
company and wholly owned subsidiary of the Parent
(“Sub
LLC”) and Cure Based Development, LLC, a Nevada
limited liability company (the “Company”).
Ladies
and Gentlemen:
The
undersigned is a Member of the Company and upon the Closing of the
Mergers, the undersigned received certain contractual rights to
receive shares of Parent Common Stock in the amounts and upon the
events set forth Merger Agreement. In consideration of the
execution of the Merger Agreement by the Company and the
consummation of the Mergers, and for other good and valuable
consideration, the undersigned hereby irrevocably agrees that,
without the prior written consent of the Parent, the undersigned
agrees that following the issuance of the Parent Common Stock to
the undersigned [and the vesting of the Second Tranche Shares in
accordance with the terms of the Merger Agreement], and subject to
compliance with Rule 144 promulgated under the Securities Act of
1933, as amended (the “Securities
Act”) and the terms and conditions of the Merger
Agreement, to limit the offer for sale, sell, pledge, or otherwise
transfer or dispose of (or enter into any transaction or device
that is designed to, or could be expected to, result in the
transfer or disposition by any person at any time in the future of)
any Parent Common Stock; or (2) enter into any swap or other
derivatives transaction that transfers to another, in whole or in
part, any of the economic benefits or risks of ownership of any
shares of Parent Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery
of shares of Parent Common Stock or other securities, in cash or
otherwise (clauses (1) and (2) collectively, a “Transfer”),
to the lesser of (i) the
volume limitations set forth in Rule 144(e) of the Securities Act,
or (ii) twenty percent (20%) of such shares in any ninety (90) day
period (the “Leak-Out”).
The
foregoing paragraphs shall not apply to:
(a) bona
fide gifts of shares of Parent Common Stock or any security
convertible into shares of Parent Common Stock, in each case that
are made exclusively between and among the undersigned or members
of the undersigned’s Immediate Family or Affiliates of the
undersigned, including its partners (if a partnership) or members
(if a limited liability company); or
(b) any
Transfer of shares of Parent Common Stock or any security
convertible into shares of Parent Common Stock by will or intestate
succession upon the death of the undersigned.
Provided that, in the case of clauses (a) and (b) above, it
shall be a condition to any such transaction that (i) the
transferee/donee agrees to be bound by the terms of this Leak-Out
Agreement (including, without limitation, the restrictions set
forth in the preceding sentence) to the same extent as if the
transferee/donee were a party hereto, (ii) each party (donor,
donee, transferor or transferee) shall not be required by law
(including without limitation the disclosure requirements of the
Securities Act and the Securities Exchange Act of 1934, as amended
(the “Exchange
Act”)) to make, and shall
agree to not voluntarily make, any filing or public announcement of
the transfer or disposition prior, and (iii) the undersigned
notifies the Parent at least five (5) business days prior to the
proposed transfer or disposition;
1
Exhibit
10.1
(c) transfers
of shares of Parent Common Stock or any security convertible into
or exercisable or exchangeable for shares of Parent Common Stock
pursuant to a bona fide third party tender offer made to all
holders of the Parent Common Stock, merger, consolidation or other
similar transaction involving a Change of Control of the Parent,
including voting in favor of any such transaction or taking any
other action in connection with such transaction, provided that in the event that such
merger, tender offer or other transaction is not completed, the
shares of Parent Common Stock and any security convertible into or
exercisable or exchangeable for shares of Parent Common Stock shall
remain subject to the restrictions set forth herein.
When
used herein:
“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act;
“Change of
Control” means the consummation of any bona fide third
party tender offer, merger, purchase, consolidation or other
similar transaction the result of which is that any
“person” (as defined in Section 13(d)(3) of the
Exchange Act), or group of persons, becomes the beneficial owner
(as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of a
majority of total voting power of the voting stock of the
Company;
“Immediate
Family” means any
relationship by blood, marriage or adoption, not more remote than
first cousin) or any trust, limited partnership, limited liability
company or other entity for the direct or indirect benefit of the
undersigned or any immediate family member of the
undersigned; and
“Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
The
undersigned hereby agrees that each outstanding certificate
representing the shares of Parent Common Stock shall, in addition
to any other legends as may be required in compliance with the
Merger Agreement and Federal securities laws, bear a legend reading
substantially as follows:
“THE SALE OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A LEAK OUT AGREEMENT DATED DECEMBER 20, 2018 BY AND
BETWEEN LEVEL BRANDS, INC. AND THE SHAREHOLDER LISTED ON THE FACE
HEREOF. NO TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF
LEVEL BRANDS, INC. UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE
WITH THE TERMS OF SUCH LEAK-OUT AGREEMENT WHICH ARE SATISFACTORY TO
LEVEL BRANDS, INC. IN ITS SOLE
DISCRETION.”
A copy
of this Agreement shall be filed with Parent's transfer agent of
record.
The
undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Leak-Out Agreement and
that, upon request, the undersigned will execute any additional
documents necessary in connection with the enforcement hereof. Any
obligations of the undersigned shall be binding upon the heirs,
personal representative, successors and assigns of the undersigned.
All terms not otherwise defined herein shall have the same meaning
as in the Merger Agreement.
2
Exhibit
10.1
The
undersigned further acknowledges his understanding that this
Agreement was prepared at the request of the Parent by Xxxxxxxx Law
Group LLP, its counsel, and that such firm did not represent the
Company or the undersigned in conjunction with this Agreement, the
Mergers or any of the related transactions. The undersigned, as
further evidenced by his signature below, acknowledges that he has
had the opportunity to obtain the advice of independent counsel of
his choosing prior to his execution of this Agreement and that he
has availed himself of this opportunity to the extent he deemed
necessary and advisable.
Very
truly yours,
By:______________________________
Name:
Title:
3
