Item 1.01 Entry into a Material Definitive Agreement.
International Spirits and Beverage Group, Inc.
On October 11, 2018, Canbiola, Inc. (the “Company”) entered into a Production and Distribution Agreement (the “P&D Agreement”) with International Spirits and Beverage Group, Inc. (“ISBG”). Pursuant to the P&D Agreement, the Company agreed to produce, package, and sell certain cannabidiol (CBD) infused products, including fruit chews and non-alcoholic beverages (the “Products”), to ISBG. ISBG controls the ingredients, recipes, manufacturing processes and procedures and quality and taste parameters for all Products and is the manufacturer of all such Products. ISBG granted the Company a non-exclusive, non-transferable, revocable right to use the ISBG trademarks associated with the Products solely on, and in association with, the Products and associated packaging.
ISBG will purchase the Products at a 20% discount to the wholesale prices of Products agreed to in the Agreement. In addition, the Company will receive 10% of the gross sales price of any Products distributed by the Company.
ISBG has agreed to indemnify and hold the Company harmless from and against any damages arising from the P&D Agreement. The Company has agreed to indemnify and hold ISBG harmless from and against any damages resulting or arising from any material breach of the P&D Agreement, gross negligence or intentional misconduct by the Company. The P&D Agreement otherwise contains standard representations and warranties.
Stanley L. Teeple
The Company entered into an Employment Agreement dated October 21, 2018 (the “Teeple Agreement”) with Stanley L. Teeple (“Teeple”). Pursuant to the Teeple Agreement, Teeple agreed to serve as the Company’s Chief Financial Officer (“CFO”) and Secretary (“Secretary”) for an initial term of four (4) years.
Steeple will receive $15,000.00 per month base salary, as adjusted pursuant to the Teeple Agreement, and one (1) share of Series A Preferred Stock (the “Preferred Share”). If there is insufficient cash flow to pay Teeple’s salary, the salary may be paid in common shares at a purchase price equal to 110% of the lowest trading price of the day for the five (5) trading days immediately preceding the end of each month. The Preferred Share is considered fully earned upon issuance and one quarter (1/4) of the Preferred Share may be converted by Teeple into shares of Common Stock at the end of each calendar year. Teeple will furthermore be entitled to (i) annual increases to his salary equal to the greater of (a) 3% or (b) the prior year-end annual percentage increase in EBITDA as reported in the Company’s Form 10-K, (ii) additional incentive bonuses in the form of cash or stock, and (iii) benefits offered by the Company such as welfare, health and life insurance, and pension benefit and incentive plans, as well as four (4) weeks paid vacation and five (5) paid sick days each year.
If the Teeple Agreement is terminated due to an acquisition or merge, or by the Company without “cause” or by Teeple with “good reason,” the Company shall pay Teeple (i) Teeple’s base salary through the end of the term of the Teeple Agreement plus 12 months, (ii) an amount equal to the premiums charged by the Company to maintain COBRA benefits continuation coverage for Teeple and his eligible dependents, and (iii) a cash lump sum in the amount of any accrued obligations. The Company also agreed to indemnify Teeple, except for acts constituting negligence or willful misconduct by Teeple. The Teeple Agreement otherwise contains standard representations and warranties.
Marco Alfonsi
The Company entered into an Employment Agreement dated October 21, 2018 (the “Alfonsi Agreement”) with Marco Alfonsi (“Alfonsi”). Pursuant to the Alfonsi Agreement, Alfonsi agreed to continue to serve as the Company’s Chief Executive Officer (“CEO”) and accept appointment as Chairman of the Board of Directors (“Chairman”) for an initial term of four (4) years.
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Alfonsi will receive $15,000.00 per month base salary, as adjusted pursuant to the Alfonsi Agreement. If there is insufficient cash flow to pay Alfonsi’s salary, the salary may be paid in common shares at a purchase price equal to 110% of the lowest trading price of the day for the five (5) trading days immediately preceding the end of each month. Alfonsi will furthermore be entitled to (i) annual increases to his salary equal to the greater of (a) 3% or (b) the prior year-end annual percentage increase in EBITDA as reported in the Company’s Form 10-K, (ii) additional incentive bonuses in the form of cash or stock, and (iii) benefits offered by the Company such as welfare, health and life insurance, and pension benefit and incentive plans, as well as four (4) weeks paid vacation and five (5) paid sick days each year.
Alfonsi, who prior to the execution of the Alfonsi Agreement owned eight (8) shares of Series A Preferred Stock, agreed to return three (3) shares of Series A Preferred Stock to the Company’s treasury. For his remaining Series A Preferred Stock, Alfonsi shall have the right to convert one quarter (1/4) of a Series A Preferred share into shares of Common Stock at the end of each calendar year.
If the Alfonsi Agreement is terminated due to an acquisition or merge, or by the Company without “cause” or by Alfonsi with “good reason,” the Company shall pay Alfonsi (i) Alfonsi’s base salary through the end of the term of the Alfonsi Agreement plus 12 months, (ii) an amount equal to the premiums charged by the Company to maintain COBRA benefits continuation coverage for Alfonsi and his eligible dependents, and (iii) a cash lump sum in the amount of any accrued obligations. The Company also agreed to indemnify Alfonsi, except for acts constituting negligence or willful misconduct by Alfonsi. The Alfonsi Agreement otherwise contains standard representations and warranties.
The foregoing discussion is for summary purposes only and is qualified in its entirety by the actual terms of the aforementioned agreements, which are included herewith as Exhibits.