FORM OF NOTE CONVERSION AGREEMENT (Bridge Holders)
Exhibit 6.37
FORM OF NOTE CONVERSION AGREEMENT
(Bridge Holders)
THIS NOTE CONVERSION AGREEMENT, dated as
of June __, 2017 (this “Agreement”), by and among
Level Brands, Inc. (the “Company”) and each of the
parties executing below (each a “Noteholder”, and
collectively, the “Noteholders”).
Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in the Note (as defined
herein).
WHEREAS, the Company has previously
issued and sold 8% Convertible Promissory Notes due September 30,
2017 (together, the “Notes”) to the
Noteholders in an aggregate principal amount of
$2,125,000;
WHEREAS, each Noteholder beneficially
owns the aggregate principal amount of Notes set forth opposite its
name in Schedule A
attached hereto;
WHEREAS, pursuant to the original terms
of the Notes, such Notes, together with accrued but unpaid interest
thereon, are convertible into shares of the Company's common stock
at a conversion price of $5.00 per share, subject to
adjustment;
WHEREAS, on May 17, 2017 the Company
reduced the conversion price to $3.95 per share until June 30, 2017
(the "Reduced Conversion
Price"); and
WHEREAS, the Noteholders are desirous of
converting the principal and accrued but unpaid interest due under
the Notes into shares of the Company's common stock at the Reduced
Conversion Price subject to the terms of this
Agreement.
NOW, THEREFORE, in consideration of the
premises and the representations, warranties and agreements
contained herein, the parties hereto agree as follows:
1. Conversion; Lockup
Agreement.
(a)
Contemporaneously with the execution and delivery of this
Agreement, each Noteholder hereby converts the principal and
accrued interest due under the Note through June 30, 2017 into
shares of the Company’s common stock (the “Shares”) at the Reduced
Conversion Price, with all amounts due thereunder being cancelled
and deemed to have been paid in full, including any accrued but
unpaid interest (the “Conversion”). Immediately
following the execution of this Agreement by the parties hereto,
each Noteholder shall tender the original Note to the Company for
cancellation and the Company shall issue the certificate
representing the Shares to the Noteholder. Notwithstanding the
foregoing or anything to the contrary contained herein, upon the
execution of this Agreement by a Noteholder, the full amount of the
principal amount of the Note and the accrued but unpaid interest
due thereunder to such Noteholder shall automatically convert into
the Shares, without any further action required by the Noteholder,
with the delivery of the original Note for cancellation being only
for a matter of administrative maintenance.
(b)
In accordance with the terms and conditions of the Subscription
Agreement by and between the Company and the Noteholder pursuant to
which the Noteholder purchased the Note, as a condition of the
conversion of the Note by the Noteholder, the Noteholder shall
execute and deliver to the Company to be held by it pending the
effectiveness of its registration statement for an initial public
offering of its securities an irrevocable lockup agreement for the
benefit of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ & Co. in the form attached hereto
as Exhibit A and
incorporated herein by such reference, to be dated and released by
the Company at such time as it deems appropriate without any
further action or consent of the Noteholder.
(c)
The parties intend that the issuance of the Shares pursuant to the
terms of this Agreement is an exempt issuance under the Securities
Act of 1933, as amended (the "Securities Act") in reliance on
exemptions provided by Section 3(a)(9) and 4(a)(2) of such act. The
certificate representing the Shares shall bear the following
legends:
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"THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED ("1933
ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO COUNSEL TO LEVEL BRANDS, INC. THAT AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS IS AVAILABLE."
"THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP
AGREEMENT FOR THE BENEFIT OF LEVEL BRANDS, INC. AND ▇▇▇▇▇▇ ▇.
GUNNAR & CO., LLC AND CANNOT BE SOLD, ASSIGNED, TRANSFERRED,
PLEDGED OR OTHERWISE HYPOTHECATED EXCEPT PURSUANT TO THE TERMS OF
SUCH LOCK-UP AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICES OF LEVEL BRANDS, INC."
2. Representations
and Warranties of the Company. The Company represents and
warrants to the Noteholders as of the date hereof as
follows:
(a)
Due Organization.
The Company is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
organization.
(b)
Due Authorization; Binding
Agreement; No Conflicts. The Company has full right, power
and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement has
been duly and validly authorized, executed and delivered by the
Company and (assuming due authorization, execution and delivery by
the Noteholders) constitutes the valid and binding obligation of
the Company enforceable against the Company in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally, and
general equitable principles (whether considered in a proceeding in
equity or at law). Neither this Agreement nor the consummation of
the Conversion will violate, conflict with or result in a breach of
or default under (i) the articles of incorporation or bylaws
of the Company, (ii) any agreement or instrument to which the
Company is a party or by which the Company or any of its assets are
bound, or (iii) any laws, regulations or governmental or
judicial decrees, injunctions or orders applicable to the
Company.
(c)
Validity of Shares.
The Shares issued pursuant to this Agreement, will be duly and
validly issued, fully paid and non-assessable.
3. Representations
and Warranties of the Noteholders. Each Noteholder hereby,
severally and not jointly, represents and warrants to the Company
as of the date hereof as follows:
(a)
Due Organization.
If such Noteholder is a legal entity, it is duly organized and
validly existing under the laws of the jurisdiction of its
organization.
(b)
Due Authorization; Binding
Agreement. Such Noteholder has full right, power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly
and validly authorized, executed and delivered by such Noteholder
and (assuming due authorization, execution and delivery by the
Company) constitutes the valid and binding obligation of such
Noteholder enforceable against such Noteholder in accordance with
its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally,
and general equitable principles (whether considered in a
proceeding in equity or at law).
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(c)
Ownership of the
Notes. Such Noteholder is, and at all times since the
purchase the Note has been, the beneficial owner of its Note, free
and clear of all claims, mortgages, pledges, liens, encumbrances,
options, charges or other security interest that would prevent such
Noteholder’s compliance with its obligations hereunder. Such
Noteholder does not own, beneficially or of record, any Notes of
the Company or securities convertible or exchangeable for Notes of
the Company other than as set forth in Schedule A hereto. Such
Noteholder has the sole right and power to vote and dispose of the
Note, and none of such Note is subject to any voting trust or other
agreement, arrangement or restriction with respect to the voting or
transfer of any of the Note, except for this
Agreement.
(d)
Investment Intent.
The Shares to be acquired by such Noteholder pursuant to this
Agreement shall be acquired for such Noteholder’s own account
and not with a view to, or intention of, distribution thereof in
violation of the Securities Act or any applicable state securities
laws, and such Shares shall not be disposed of in contravention of
the Securities Act or any applicable state securities
laws.
(e)
Accredited
Investor. Such Noteholder is an “accredited
investor” or “institutional accredited investor”
as defined in Rule 501 under Regulation D of the Securities Act.
Such Noteholder is able to bear the economic risk of its investment
in the Shares for an indefinite period of time and acknowledges
that no public market exists for the Shares and that there is no
assurance that a public market will ever develop for the Shares.
The Shares have not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available.
Such Noteholder understands that the tax consequences of the
Conversion may be complex, and accordingly such Noteholder
represents and warrants that it has consulted with its own
independent tax advisor concerning the Conversion and is not
relying on the Company or any of its respective affiliates or
agents, including its counsel and accountants, for any tax advice
regarding the tax consequences of the Conversion or any other
transactions contemplated by this Agreement.
(f)
Information. Such
Noteholder has reviewed, or has had the opportunity to review, with
the assistance of professional and legal advisors of its choosing,
sufficient information and has had sufficient access to the Company
necessary for such Noteholder to decide to convert the Notes for
Shares in accordance with this Agreement.
4. Release.
The Noteholder agrees to release
and discharge the Company, its officers, directors, employees,
affiliates, agents, attorneys, assigns and successors, of and from
any and all actions, causes of action, suits, debts, losses,
accounts, covenants, contracts, agreements, liabilities, damages,
costs, expenses, judgments, claims and other obligations of
whatever kind or nature, known or unknown, arising from, connected
or related to, or caused by any event, occurrence, cause or thing,
of any type whatsoever, arising or existing, or occurring, in whole
or in part, at any time from the beginning of the world through the
date of this Agreement.
5. General
Provisions.
(a)
Closing. The
closing of the transactions contemplated by this Agreement shall
occur simultaneously with the execution and delivery of this
Agreement.
(b)
Amendments, Etc. No
amendment, modification, termination, or waiver of any provision of
this Agreement, and no consent to any departure by any of the
Noteholders or the Company from any provision of this Agreement,
shall be effective unless it shall be in writing and signed and
delivered by the party sought to be bound, and then it shall be
effective only in the specific instance and for the specific
purpose for which it is given.
(c)
Disclosure. Nothing
contained in this Agreement shall be construed to limit the Company
or any Noteholder from making such disclosures as may be required
by law.
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(d)
Notice. All notices
and other communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return
receipt requested) or delivered by an express courier (with
confirmation) to the Company at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: CFO, and to each Noteholder at
their last known address (or at such other address for a party as
shall be specified by like notice).
(e)
Severability. Any
term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable the remaining terms and
provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement
in any other jurisdiction.
(f)
Governing Law. This
Agreement shall be governed by, and construed in accordance with,
the laws of the State of North Carolina.
(g)
Entire Agreement.
This Agreement embodies the entire agreement and understanding of
the Noteholders and the Company with respect to the subject matter
hereof and thereof, and supersedes all prior agreements or
understandings, with respect to the subject matter of this
Agreement.
(h)
Specific Performance;
Enforcement. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain
damages for which it would not have an adequate remedy at law for
money damages, and therefore, each of the parties hereto agrees
that in the event of any such breach the aggrieved party shall be
entitled to the remedy of specific performance of such covenants
and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled at law or
in equity. The parties agree that they shall be entitled to enforce
specifically the terms and provisions of this Agreement in addition
to any other remedy to which they may entitled at law or in
equity.
(i) Counterparts;
Facsimile. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, and
shall become effective when counterparts have been signed by each
of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
This Agreement may be executed by facsimile signatures of the
parties hereto.
(j) Expenses.
All fees and expenses with respect to the negotiation of this
Agreement and the consummation of the transactions contemplated
hereby shall be borne by the party incurring such fees and
expenses. Neither the Company nor any Noteholder is a party to any
agreement, whether written or oral, which provides for the payment
of any brokerage or finder’s fees or commissions to any
broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other person with respect to the
transactions contemplated by this Agreement.
IN WITNESS WHEREOF, the Company and each
Noteholder has caused this Agreement to be executed on its behalf
as of the date first written above.
By:
________________________
Name:
▇▇▇▇ ▇▇▇▇▇▇▇
Title:
Chief Operating Officer
and
Chief Financial Officer
Noteholder:
Name:
Title:
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Tax ID
____________
Conversion
Details:
Principal Amount:
$_______
Accrued
Interest: $_______
Total
Conversion: $______
Shares
After Conversion: ________
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Exhibit
A
LOCK-UP
LETTER AGREEMENT
▇▇▇▇▇▇
▇▇▇▇▇▇ & Co., LLC
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
As
Representative of the several Underwriters named on Schedule 1 to
the Underwriting Agreement referenced below
Ladies
and Gentlemen:
The
undersigned understands that you (the “Representative”)
and certain other firms (the “Underwriters”)
propose to enter into an Underwriting Agreement (the
“Underwriting
Agreement”) providing for the purchase by the
Underwriters of shares (the “Stock”) of
Common Stock, par value $0.001 per share (the “Common
Stock”), of Level Brands, Inc., a North Carolina
corporation (the “Company”), and
that the Underwriters propose to reoffer the Stock to the public
(the “Offering”).
In
consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the
undersigned hereby irrevocably agrees that, without the prior
written consent of the Representative, on behalf of the
Underwriters, the undersigned will not, directly or indirectly, (1)
offer for sale, sell, pledge, or otherwise transfer or dispose of
(or enter into any transaction or device that is designed to, or
could be expected to, result in the transfer or disposition by any
person at any time in the future of) any shares of Common Stock
(including, without limitation, shares of Common Stock that may be
deemed to be beneficially owned by the undersigned in accordance
with the rules and regulations of the Securities and Exchange
Commission and shares of Common Stock that may be issued upon
exercise of any options or warrants) or securities convertible into
or exercisable or exchangeable for Common Stock, (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 shares of Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery
of Common Stock or other securities, in cash or
otherwise, (3) except as
provided for below, make any demand for or exercise any right or
cause to be filed a registration statement, including any
amendments thereto, with respect to the registration of any shares
of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock or any other securities of the
Company, or (4) publicly disclose the intention to do any of the
foregoing for a period commencing on the date hereof and ending on
the 180th day after the date of the Prospectus relating to the
Offering (such 180-day period, the “Lock-Up
Period”).
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The
foregoing paragraph shall not apply to (a) transactions relating to
shares of Common Stock or other securities acquired in the open
market after the completion of the Offering, provided that no filing under Section
16(a) of the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”), shall be required or shall be voluntarily made
in connection with such transfers; (b) bona fide gifts of shares of any class of
the Company’s capital stock or any security convertible into
Common Stock, in each case that are made exclusively between and
among the undersigned or members of the undersigned’s family,
or affiliates of the undersigned, including its partners (if a
partnership) or members (if a limited liability company); (c) any
transfer of shares of Common Stock or any security convertible into
Common Stock by will or intestate succession upon the death of the
undersigned; (d) transfer of shares of Common Stock or any
security convertible into Common Stock to an immediate family
member (for purposes of this Lock-Up Letter Agreement,
“immediate family” shall mean 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; provided that, in the case of clauses (b) - (d) above,
it shall be a condition to any such transfer that (i) the
transferee/donee agrees to be bound by the terms of this Lock-Up
Letter 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 of 1933, as amended, (the “Securities
Act”) and the Exchange
Act) to make, and shall agree to not voluntarily make, any filing
or public announcement of the transfer or disposition prior to the
expiration of the 180-day period referred to above, and
(iii) the undersigned notifies the Representative at least two
business days prior to the proposed transfer or disposition; (e)
the transfer of shares to the Company to satisfy withholding
obligations for any equity award granted pursuant to the terms of
the Company’s stock option/incentive plans, such as upon
exercise, vesting, lapse of substantial risk of forfeiture, or
other similar taxable event, in each case on a
“cashless” or “net exercise” basis (which,
for the avoidance of doubt shall not include “cashless”
exercise programs involving a broker or other third party),
provided
that as a condition of any transfer
pursuant to this clause (e), that if the undersigned is required to
file a report under Section 16(a) of the Exchange Act, reporting a
reduction in beneficial ownership of shares of Common Stock or any
securities convertible into or exercisable or exchangeable for
Common Stock during the Lock-Up Period, the undersigned shall
include a statement in such report, and if applicable an
appropriate disposition transaction code, to the effect that such
transfer is being made as a share delivery or forfeiture in
connection with a net value exercise, or as a forfeiture or sale of
shares solely to cover required tax withholding, as the case may
be; (f) transfers of shares of Common Stock or any
security convertible into or exercisable or exchangeable for Common
Stock pursuant to a bona fide third party tender offer made to all
holders of the Common Stock, merger, consolidation or other similar
transaction involving a change of control (as defined below) of the
Company, 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 Common Stock and any security convertible into or
exercisable or exchangeable for Common Stock shall remain subject
to the restrictions set forth herein;
(g) the exercise of warrants or the exercise of stock
options granted pursuant to the Company’s stock
option/incentive plans or otherwise outstanding on the date hereof;
provided, that the
restrictions shall apply to shares of Common Stock issued upon such
exercise or conversion; (h) the establishment of any contract,
instruction or plan that satisfies all of the requirements of Rule
10b5-1 (a “Rule 10b5-1
Plan”) under the Exchange Act; provided, however, that no sales of Common Stock
or securities convertible into, or exchangeable or exercisable for,
Common Stock, shall be made pursuant to a Rule 10b5-1 Plan prior to
the expiration of the Lock-Up Period; provided further, that the Company is not
required to report the establishment of such Rule 10b5-1 Plan in
any public report or filing with the Commission under the Exchange
Act during the lock-up period and does not otherwise voluntarily
effect any such public filing or report regarding such Rule 10b5-1
Plan; and (i) any demands or requests for, exercise any right with
respect to, or take any action in preparation of, the registration
by the Company under the Securities Act of the undersigned’s
shares of Common Stock, provided that no transfer of the
undersigned’s shares of Common Stock registered pursuant to
the exercise of any such right and no registration statement shall
be filed under the Securities Act with respect to any of the
undersigned’s shares of Common Stock during the Lock-Up
Period. For purposes of clause (f) above, “change of
control” shall mean 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.
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The
undersigned also agrees and consents to the entry of stop transfer
instructions with the Company’s transfer agent and registrar
against the transfer of the undersigned’s securities subject
to this Lock-Up Letter Agreement except in compliance with this
Lock-Up Letter Agreement.
If (i)
during the last 17 days of the Lock-Up Period, the Company issues
an earnings release or material news or a material event relating
to the Company occurs, or (ii) prior to the expiration of the
Lock-Up Period, the Company announces that it will release earnings
results or becomes aware that material news or a material event
will occur during the 16-day period beginning on the last day of
the Lock-Up Period, the restrictions imposed by this Lock-Up Letter
Agreement shall continue to apply until the expiration of the
18-day period beginning on the issuance of the earnings release or
the occurrence of such material news or material event, as
applicable, unless the Representative waives, in writing, such
extension.
The
undersigned agrees that, prior to engaging in any transaction or
taking any other action that is subject to the terms of this
Lock-Up Letter Agreement during the period from the date hereof to
and including the 34th day following the
expiration of the initial Lock-Up Period, the undersigned will give
notice thereof to the Company and will not consummate any such
transaction or take any such action unless it has received written
confirmation from the Company that the Lock-Up Period (as may have
been extended pursuant to the previous paragraph) has
expired.
If the
undersigned is an officer or director of the Company, (i) the
undersigned agrees that the foregoing restrictions shall be equally
applicable to any shares of Common Stock that the undersigned may
purchase in the Offering; (ii) the Representative agrees that, at
least three (3) business days before the effective date of any
release or waiver of the foregoing restrictions in connection with
a transfer of securities subject to this Lock-Up Letter Agreement,
the Representative will notify the Company of the impending release
or waiver; and (iii) the Company has agreed in the Underwriting
Agreement to announce the impending release or waiver by press
release through a major news service at least two (2) business days
before the effective date of the release or waiver. Any release or
waiver granted by the Representative hereunder to any such officer
or director shall only be effective two (2) business days after the
publication date of such press release. The provisions of this
paragraph will not apply if (a) the release or waiver is effected
solely to permit a transfer of securities subject to this Lock-Up
Letter Agreement not for consideration and (b) the transferee has
agreed in writing to be bound by the same terms described in this
securities subject to this Lock-Up Letter Agreement to the extent
and for the duration that such terms remain in effect at the time
of such transfer.
It is
understood that, if the Company notifies the Underwriters that it
does not intend to proceed with the Offering, if the Underwriting
Agreement does not become effective, or if the Underwriting
Agreement (other than the provisions thereof which survive
termination) shall terminate or be terminated prior to payment for
and delivery of the Stock, the undersigned will be released from
its obligations under this Lock-Up Letter Agreement.
The
undersigned understands that the Company and the Underwriters will
proceed with the Offering in reliance on this Lock-Up Letter
Agreement.
Whether
or not the Offering actually occurs depends on a number of factors,
including market conditions. Any Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are
subject to negotiation between the Company and the
Underwriters.
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This
Lock-Up Letter Agreement shall automatically terminate upon the
earliest to occur, if any, of (1) the termination of the
Underwriting Agreement before the sale of any Stock to the
Underwriters or (2) December 31, 2017, in the event that the
Underwriting Agreement has not been executed by that
date.
The
undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Lock-Up Letter
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.
Very
truly yours,
By:______________________________
Name:
Title:
Dated:
_______________, 2017
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