Amended and restated membership interests Exchange agreement
Exhibit
7.2
Amended and restated
membership
interests Exchange agreement
This
Membership Interests Exchange Agreement (this "Agreement"),
effective as of the 6th day of January
2017, is made and entered into by and among IM1 Holdings, LLC, a
California limited liability company, and the sole member
(the "Member")
of I|M1, LLC, a California limited liability company
(“IM1”)
and Level Brands, Inc., a North Carolina corporation (“the
“Company”).
Terms not otherwise defined herein shall have the meanings set
forth in the Amended and Restated Operating Agreement of
IM1 (the
“Operating
Agreement”).
RECITALS
A. The
parties hereto entered into a Membership Interests Exchange
Agreement dated January 6, 2017 (the “Original
Agreement”) and other than as set forth in the
Preamble and these Recitals, this Agreement shall contemplate the
original January 6, 2017 date.
B. The
parties now desire to amend and restate the Original Agreement with
respect to certain provisions included in the Original Agreement in
order to correct certain scrivener errors and
otherwise.
C. As
of January 5, 2017, the Member was the owner of one hundred percent
(100%) of the Class A Units (the “Class A
Interests”) and one hundred percent (100%) of the
Class B Units (the “Class B
Interests”, and together with the Class A Interests,
the “Interests”)
in IM1.
D. On
January 6, 2017, the Member transferred all of the Class A
Interests (the “Exchange
Interests”) in IM1 to the Company in exchange for
583,000 shares of the Company's Common Stock (the "Level Common
Stock") such that the Company became the holder of 100% of
the Class A Units, which, collectively, will represent 51% of the
Interests.
AGREEMENT
NOW, THEREFORE, in consideration of the
covenants and agreements set forth in this Agreement and other good
and valuable consideration, the receipt and adequacy of which is
hereby acknowledged by all of the parties, the parties hereto agree
as follows:
1.
Transfer and Acceptance of Exchange Interests.
1.1 Transfer
and Acceptance.
Subject to the terms and conditions of this Agreement, upon the
Closing of this Agreement (as hereinafter defined) the
Member shall assign,
transfer and contribute to the Company, and the Company shall
assume and acquire, all of the
right, title and interest in and to the Exchange
Interests.
1.2 Assumption
of Liabilities. The
Company shall not directly assume any of the debts, liabilities, or
other obligations of IM1. Rather, the Company shall merely hold the
Exchange Interests in IM1 with IM1 in accordance with the terms of
the Amended and Restated Operating Agreement of IM1 (the
“Amended Operating
Agreement”), while continuing to maintain its status
as a separate limited liability company for all legal and
accounting purposes.
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1.3 The
Member and the Company acknowledge and agree that, for federal,
state and local income tax purposes, the transfer of the Exchange
Interests by the Member to the Company will be treated as (i) a
sale by the Member to the Company of an undivided portion of the
assets of IM1 in exchange for the Level Common Stock Consideration
(as defined below), followed immediately by (ii) a contribution by
the Member and the Company to a new tax partnership of their
respective undivided interests in each of such assets of IM1 in a
transfer described in Section 721(a) of the Code. The Member and
the Company agree to consistently treat the transfer of the
Exchange Interests in such manner for all federal, state and local
income tax purposes.
2.
Consideration.
As consideration for
the transfer of the Exchange Interests by the Member to the
Company, the Company shall issue 583,000 shares of Level Common Stock to
the Member (the “Level Common Stock
Consideration”) in accordance with the terms of this
Agreement. The Level Common Stock Consideration shall be paid by
the Company on the day of the Closing by delivery from the Company
to the Member of the certificates representing the Level Common
Stock Consideration in the names and amounts set forth on
Exhibit A hereto;
provided, that (a) the Member hereby directs the Company to deliver
58,300 of the 583,000 shares of the Level Common Stock
Consideration otherwise deliverable to the Member to ▇▇▇ ▇▇▇▇▇▇▇▇,
Trustee of the Hoberman Family Trust, u/t/a dated March 29, 1991,
in consideration of services rendered by ▇▇. ▇▇▇▇▇▇▇▇ to the Member
and (b) the parties understand and acknowledge that on the day of
the Closing, the Company shall send to the transfer agent the
completed documentation necessary for the issuance of the Exchange
Shares, and that it may take a few days to process before the
transfer agent issues the actual share certificates of the Company.
Upon issuance in accordance with the terms of this Agreement, the
shares representing the Level Common Stock Consideration shall be
validly issued, fully paid and non-assessable and shall have been
issued in compliance with all laws and regulations applicable
thereto.
3.
Closing.
3.1 Closing.
The closing of the transfer of the Exchange Interests shall take
place on and this Agreement shall be effective as of January 6,
2017 (the "Closing").
3.2 Deliveries.
3.2.1
By the
Member. At the
Closing, the Member shall deliver the interest
certificate(s), if any, and other applicable instruments evidencing
the transfer of the Exchange Interests to be acquired by the
Company, in form and substance reasonably acceptable to the
Company:
(a) all
consents, authorizations or waivers from parties, as may be
required to be obtained from them in connection with the
consummation of the transactions contemplated hereby;
and
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(b) such
other documents, including the Operating Agreement, duly executed
by the Member and in a form and substance reasonably acceptable to
the Company as shall be reasonably necessary to consummate the
transactions contemplated by this Agreement.
3.2.2
By the Company. At
the Closing, the Company shall deliver such documents, including
the Operating Agreement, duly executed by the Company and in a form
and substance reasonably acceptable to the Member as shall be
reasonably necessary to consummate the transactions contemplated by
this Agreement.
3.2.3
Covenants. Each party hereto shall use its
reasonable best efforts to take or cause to be taken all actions,
and to do or cause to be done all other things, necessary, proper
or advisable in order for such party to fulfill and perform its
respective obligations pursuant to this Agreement and otherwise to
consummate and make effective the transactions contemplated hereby
and thereby.
4.
Representations and
Warranties of the Member.
The Member represents and warrants to the
Company as follows:
4.1 Authority.
The execution and delivery of this Agreement and each instrument
required hereby to be executed and delivered by the Member prior to
or at the Closing, the performance of the Member's obligations
hereunder and thereunder and the consummation by the Member of the
transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of the Member, and
no other proceedings on the part of the Member is necessary to
authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed by the Member, and, assuming this Agreement has been duly
executed by the Company, this Agreement constitutes a valid and
binding agreement of the Member, enforceable against the Member in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
4.2 Consents.
The execution and performance of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance
with the provisions of this Agreement will not (a) conflict with or
violate any statute, ordinance, rule, regulation, judgment, order,
writ, injunction, decree or law applicable to the Member, or by
which the Member is bound, or (b) result in a violation or breach
of or constitute a default (or an event which with or without
notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation of, or result in any loss of any benefit under, any
material contract, agreement or arrangement to which the Member is
a party and which relate to IM1, or the creation of liens on any of
the properties or assets of IM1. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
governmental entity, is required by the Member in connection with
the execution of this Agreement by the Member or the consummation
by him, her or it of the transactions contemplated hereby, except
for such other consents, approvals, orders, authorizations,
registrations, declarations or filings, the failure of which to
obtain would not individually or in the aggregate have a material
adverse effect.
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4.3 Title
to the Exchange Interests. The Member is the sole record and
beneficial owner of the Exchange Interests, free and clear of all
liens, and the Exchange Interests have not been sold, pledged,
assigned or otherwise transferred except pursuant to this
Agreement. There are no outstanding subscriptions, rights, options,
warrants or other agreements obligating the Member to sell or
transfer to any third person any of the Exchange Interests, or any
interest therein. The Member has full power and authority to
exchange, transfer and deliver to the Company the
Exchange Interests.
4.4 Litigation.
There are no actions, suits, proceedings or investigations pending
against the Member or the Exchange Interests (nor has the Member
received notice of any threat thereof) before any court or
governmental agency that questions the validity of this Agreement
or the right of the Member to enter into such agreements, or the
right of the Member to perform its obligations contemplated hereby
and thereby, or that, either individually or in the aggregate, if
determined adversely to such Member, would materially detract from
the value of the Exchange Interests or would otherwise be likely to
prevent or materially impede, interfere with, hinder or delay the
transactions contemplated hereby.
4.5 Accredited
Investor. The Member is an “accredited
investor,” as such term is defined in Regulation D
promulgated under the Securities Act of 1933, or is otherwise
experienced in investments and business matters, has made
investments of a speculative nature and has such knowledge and
experience in financial, tax and other business matters as to
enable him to evaluate the merits and risks of, and to make an
informed investment decision with respect to, this Agreement. The
Member understands that his acquisition of the shares of Level
Common Stock is a speculative, illiquid investment, and the Member
represents that he, she or it is able to bear the risk of such
investment for an indefinite period, and can afford a complete loss
thereof.
4.6 Access
to Counsel. The Member acknowledges that, in executing this
Agreement, he, she or it has had the opportunity to seek the advice
of independent legal and/or tax counsel, and has read and
understood all of the terms and provisions of this
Agreement.
5.
Representations and
Warranties of the Company.
5.1 Authority.
The Company is a corporation duly organized and validly existing
under the laws of the State of Florida and has the requisite power
and authority to execute and deliver this Agreement, to acquire the
Exchange Interests and issue the shares representing the Level
Common Stock Consideration, as applicable, and to carry out the
provisions of this Agreement.
5.2 Corporate
Action. All necessary actions on the part of the Company
necessary for the authorization, execution and delivery of this
Agreement and the other agreements and transactions contemplated
herein, the performance of all obligations of the Company hereunder
and thereunder and the authorization, issuance and delivery of the
shares representing the Level Common Stock Consideration being
transferred to the Member hereunder have been taken and this
Agreement and the other agreements contemplated herein constitute
valid and legally binding obligations of the Company, enforceable
in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
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5.3. Consents.
The execution and performance of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance
with the provisions of this Agreement will not (a) conflict with or
violate any statute, ordinance, rule, regulation, judgment, order,
writ, injunction, decree or law applicable to the Company, or by
which the Company is bound, or (b) result in a violation or breach
of or constitute a default (or an event which with or without
notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation of, or result in any loss of any benefit under, any
material contract, agreement or arrangement to which the Company is
a party, or the creation of liens on any of the properties or
assets of the Company. No consent, approval, order or authorization
of, or registration, declaration or filing with, any governmental
entity, is required by the Company in connection with the execution
of this Agreement by the Company or the consummation by it of the
transactions contemplated hereby, except for such other consents,
approvals, orders, authorizations, registrations, declarations or
filings, the failure of which to obtain would not individually or
in the aggregate have a material adverse effect.
5.4 Litigation.
There are no actions, suits, proceedings or investigations pending
against the Company (nor has the Company received notice of any
threat thereof) before any court or governmental agency that
questions the validity of this Agreement or the right of the
Company to enter into such agreements, or to perform its
obligations contemplated hereby and thereby, or that, either
individually or in the aggregate, if determined adversely to such
Company, would materially detract from the value of the shares
representing the Level Common Stock Consideration or would
otherwise be likely to prevent or materially impede, interfere
with, hinder or delay the transactions contemplated
hereby.
5.5 Level
Common Stock Consideration. The shares representing the
Level Common Stock Consideration, when issued, sold and delivered
in accordance with the terms hereof for the consideration expressed
herein, will be duly and validly issued, fully paid and
non-assessable and free of any liens, other than restrictions on
transfer under the applicable federal and state securities laws.
The shares representing the Level Common Stock Consideration issued
hereunder will be issued in compliance with all applicable federal
and state securities laws. The Company has retained an independent
third party to assist in preparing an appraisal. The Chief
Financial Officer of the Company has directed and maintained full
responsibility and oversight over the third party’s work,
including evaluation of the adequacy of the work for its purposes,
and has taken full responsibility for the results of the third
party’s work. Subsequently the Company determined the per
share value of the Level Common Stock is $0.85 per share (the
“Appraised
Value”). The Company represents and warrants that (a)
the Appraised Value is reasonable and (b) the Company will treat
the Appraised Value as the value of Level Common Stock
Consideration as of the date of grant for all purposes, including
all state, local and federal tax purposes, and will take no action
that may result in the Appraised Value being challenged. All
parties to this Agreement have discussed and concur on the
Appraised Value indicated above.
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5.6 Purchase
for Investment. The Exchange Interests being acquired by the
Company are being acquired for investment for the Company’s
own account and not with a view to the distribution of any part
thereof (or participation therein) in violation of securities laws.
The Company is an “accredited investor,” as such term
is defined in Regulation D promulgated under the Securities Act of
1933, or is otherwise experienced in investments and business
matters, has made investments of a speculative nature and has such
knowledge and experience in financial, tax and other business
matters as to enable it to evaluate the merits and risks of, and to
make an informed investment decision with respect to, this
Agreement. The Company agrees and acknowledges that the Exchange
Interests being acquired by it are subject to restrictions on
transfer and other restrictions and limitations contained in the
Amended Operating Agreement. The Company acknowledges that it has
reviewed the Amended Operating Agreement and all other documents
relating to the Exchanged Interests and fully understands the
rights, restrictions and obligations set forth
therein.
6.
Registration
Rights. Prior to the
initiation by the Company of any public offering of its securities
or of the securities of any of its subsidiaries, the Company will
provide the Member (and, if applicable, its affiliates) with
customary registration rights pursuant to a customary registration
rights agreement on mutually agreeable terms.
7.
Miscellaneous.
7.1 Survival.
Unless otherwise set forth in this Agreement, the representations
and warranties of the parties contained in or made pursuant to this
Agreement shall survive the execution and delivery of this
Agreement and the Closing for a period of one (1) year following
the Closing; provided that the representations and warranties of
the Company set forth in Section 5.5 of this Agreement shall
survive until thirty (30) days following the expiration of the
statute of limitations (including any statute of limitations for
tax) applicable thereto (giving effect to any extension or tolling
thereof). All covenants and other agreements of the same shall
survive the execution and delivery of this Agreement and the
Closing until such time as they are fully performed.
7.2 Severability.
If any provision of this Agreement is found to be invalid or
unenforceable, then the remainder of this Agreement will have full
force and effect, and the invalid provision will be modified, or
partially enforced, to the maximum extent permitted to effectuate
its original objective.
7.3 Specific
Performance. The parties agree that irreparable harm for
which monetary damages, even if available, would not be an adequate
remedy, would occur in the event that the parties do not perform
the provisions of this Agreement (including the Company failing to
deliver the Level Common Stock and to take the other actions
required of it hereunder) in accordance with its specified terms or
otherwise breach such provisions. It is accordingly agreed that the
parties shall be entitled to specific performance and other
equitable relief to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof (including
enforcement by the Member of the Company’s obligation to
deliver the Level Common Stock), this being in addition to any
other remedy to which they are entitled at law or in equity. Each
of the parties agrees that it will not oppose the granting of an
injunction, specific performance and other equitable relief on the
basis that the party seeking the injunction, specific performance
and other equitable relief has an adequate remedy of
law.
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7.4 Waiver.
The failure by either party to insist upon or enforce strict
performance by the other party of any term of this Agreement, or to
exercise any right or remedy hereunder, will not be construed as a
wavier or relinquishment to any extent of that party's right to
assert or rely upon any such provisions, rights, or remedies in
that or any other instance; rather, the same will remain in full
force and effect.
7.5
Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one
agreement.
7.6 Governing
Law; Jurisdiction; Venue. This Agreement will be governed by
and construed under the laws of the State of California without
regard to its conflict of laws principles to the contrary. The
parties irrevocably consent to the jurisdiction and venue of the
state and federal courts located in Los Angeles, California, in
connection with any action relating to this Agreement.
7.7 Attorneys'
Fees; Expenses. The prevailing party will be entitled (in
addition to any and all other remedies) to recover any and all
costs and expenses (including, without limitation, reasonable
attorneys' fees) that it may incur in connection with any legal
action relating to this Agreement.
7.8 Entire
Agreement; Amendments. This Agreement and the documents
referenced herein constitute the entire agreement, and supersede
any and all prior agreements, whether written or oral, with regard
to the Exchange Interests. No amendment, modification or waiver of
any of the provisions of this Agreement will be valid unless set
forth in a written instrument signed by the party to be
bound.
[signature page follows]
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IN WITNESS WHEREOF, the parties have
executed this Agreement as March 24, 2017.
Company:
By:
/s/ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title:
Chief Executive Officer
IM1:
I|M1,
LLC, by
Its
Manager, Level Brands, Inc.,
By:
/s/ ▇▇▇▇▇▇ ▇.
Sumichast
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title:
Chief Executive Officer
Member:
IM1
HOLDINGS, LLC, by
the
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Living Trust, u/t/a
dated
December 10, 1993, its Manager
By:
/s/ ▇▇▇▇
▇▇▇▇▇▇▇▇
Name:
▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
Trustee
By:
/s/ ▇▇▇▇▇
▇▇▇▇▇▇▇
Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇
Title:
Trustee
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Exhibit
A1
|
Member
|
Number of Class A Units Interests Being Contributed
|
Number of Class B Units Interests Being Contributed
|
Number of Shares of Level Common Stock to be Issued
|
|
IM1
Holdings, LLC
|
583,000
|
0
|
583,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9