Item
1.01 Entry into a Material Definitive Agreement.
Asset
Acquisition Agreement
On
March 11, 2021, Can B̅ Corp. (the “Company” or “CANB”) entered into an Asset Acquisition Agreement
(“Acquisition Agreement”), which was fully executed on March 17, 2021, with multiple sellers (each, a “Seller”
and, collectively, the “Sellers”), pursuant to which the Sellers agreed to sell certain assets to Company, and to
transfer such assets to Botanical Biotech, LLC, a newly-formed, wholly-owned subsidiary of the Company (“Transferee”
or “BB”). The assets purchased (“BB Assets”) include certain materials and manufacturing equipment; goodwill
associated therewith; and marketing or promotional designs, brochures, advertisements, concepts, literature, books, media rights,
rights against any other person or entity in respect of any of the foregoing and all other promotional properties, in each case
primarily used, developed or acquired by the Sellers for use in connection with the ownership and operation of the BB Assets.
In exchange for the BB Assets, the Company originally agreed to pay the Sellers the fair value of the BB Assets, as determined
by a neutral third-party appraiser selected by the Company and Sellers. Notwithstanding the foregoing, the parties have agreed
that, in lieu of engaging a third party evaluator, the Company will pay the Seller a maximum of $355,056.78, payable half in the
form of cash or cash equivalent and half in the form of restricted shares of common stock of the Company (the “Shares”)
at a price per Share equal to the average closing price of the common stock of the Company during the ten (10) consecutive trading
days immediately preceding the closing.
The
Company has agreed to indemnify the Sellers for certain breaches of covenants, representations and warranties and for claims relating
to the BB Assets following closing. The Sellers jointly and severally have agreed to indemnify Transferee and the Company for
certain breaches of covenants, representations and warranties, claims relating to the BB Assets prior to closing, tax and employment
claims relating to each Seller’s business, and liabilities of the Sellers. The parties have agreed to keep each other’s
confidential information confidential.
Two
of the Sellers, Jordan Schlosser (“Schlosser”) and Bradley Lebsock (“Lebsock”), will be responsible for
overseeing and managing the day-to-day operations of Transferee and reporting the results of such operations to the Company pursuant
to separate services agreements. The Company further agreed that, after agreeing upon a budget for the Transferee with the Schlosser
and Lebsock, the Company will lend up to $200,000 to the Transferee for its working capital.
Lebsock
Agreement
The
Company and BB entered into an employment agreement with Lebsock dated March 11, 2021 (the “Lebsock Agreement”) pursuant
to which Lebsock will serve as the President of BB for a term of three (3) years. The term of the Lebsock Agreement will automatically
renew for an additional 3-year term unless other terminated by either party. Lebsock will receive a base salary equal to $120,000
per year, subject to an annual increase of not less than 3% on each anniversary of the Lebsock Agreement during the term. The
Company also agreed to issue a stock bonus to Lebsock in accordance with the Company’s Incentive Stock Option Plan (“ISOP”)
in an amount of $100,000, and to pay Lebsock a defined percentage of the EBITDA for BB each calendar quarter (“Profit Split”)
according to a mutually agreed performance target (“Target”). EBITDA is defined as the earnings before interest, depreciation,
taxes, depreciation, and amortization and will be paid as reported by the Company’s accountant and as reviewed by the Company’s
auditor. It will be accumulative on a quarter-to-quarter basis, meaning if one quarter has a negative EBITDA, it would be offset
against the following quarter’s positive EBITDA distribution. Lebsock has the option to accept the Profit Split in either
direct cash payment or Shares, or any combination, at Lebsock’s option. Shares would be valued at the prior 10-day closing
price and issued under SEC Rule 144 restriction. The Profit Split will be determined as follows:
a.
If BB achieves >25% of Target for the quarter, the Profit Split will be 90% to the Company and 10% to Lebsock;
b. If >37.5% of Target, the Profit Split will be 80% to the Company and 20% to Lebsock;
c. If >50% of Target, the Profit Split will be 70% to the Company and 30% to Lebsock;
d. If >75% of Target, the Profit Split will be 60% to the Company and 40% to Lebsock;
e. If 100% of Target, the Profit Split will be 50% to the Company and 50% to Lebsock; and
f. If >125% of Target, the Profit Split will be 40% to the Company and 60% to Lebsock.
All
of the Profit Split payments will be put into a distribution pool for distribution as determined by the Company. Lebsock will
also be entitled to participate in any welfare, health and life insurance and pension benefit and incentive programs, including
sick pay and vacation time, as may be adopted from time to time by the Company.
The
Company may terminate Lebsock’s employment under the Lebsock Agreement with or without cause at any time, and Lebsock may
resign under the applicable Lebsock Agreement with or without good reason at any time, by providing written notice to the other
party. If the Lebsock Agreement is terminated by either party, the Lebsock Agreement will terminate without further obligation
by BB or the Company, except Lebsock shall be entitled, if applicable, to all base salary previously earned but not paid, amounts
due under benefit plans and profit sharing plans, and reimbursement of business expenses accrued but unpaid through the date of
termination. Furthermore, should Lebsock be terminated for cause, then all stock options granted to Lebsock, whether vested or
unvested, shall be forfeited by Lebsock and shall terminate.
The
Company agreed to indemnify Lebsock for all claims against him by reason of Lebsock being an officer or employee of BB, as applicable,
pursuant to separate indemnity agreement entered into concurrently with the Lebsock Agreement. Notwithstanding the foregoing,
the Company will not indemnify Lebsock in the event any claim is the result of Lebsock’s gross negligence or willful misconduct,
or in certain other situations. Pursuant to the Lebsock Agreement, Lebsock also agreed to assign to BB all inventions developed
by Lebsock in connection with his services to BB.
Schlosser
Agreement
Effective
March 16, 2021, BB entered into a Consulting Agreement (the “Schlosser Agreement”) with Schlosser pursuant to which
Schlosser has agreed to provide consulting services to BB for a period of 3 months in exchange for compensation equal to $10,000
per month. Schlosser will also be entitled to reimbursement for certain work-related expenses. Pursuant to the Schlosser Agreement,
Schlosser also agreed to assign to BB all inventions developed by Schlosser in connection with his services to BB. The Schlosser
Agreement also contains certain non-compete and confidentiality provisions. Per the Acquisition Agreement, Schlosser was to receive
an employment agreement similar to the Lebsock Agreement; however, BB and Schlosser elected to enter into the Schlosser Agreement
instead.
The
Acquisition Agreement, Lebsock Agreement, and Schlosser Agreement otherwise contain standard representations, warranties and covenants
common in transactions of this type.