Item 5.02 Departure
of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.
Resignation
of Executive Chairman and Director
As
previously disclosed in a current report on Form 8-K filed on January 27, 2023, Fresh Vine Wine, Inc. (the “Company”) entered
into a Global Mutual Compromise, Release and Settlement Agreement (the “Settlement Agreement”) dated January 27, 2023 with
Janelle Anderson, Damian Novak and Rick Nechio.
Effective
February 20, 2023, and as contemplated by the Settlement Agreement, Damian Novak resigned as Executive Chairman of the Company and removed
himself from his management duties with the Company. Mr. Novak continues to serve as director of the Company. Pursuant to the Settlement
Agreement, Mr. Novak has agreed to resign from the Company’s Board of Directors (the “Board”) promptly following completion
of pending capital raising efforts involving a contemplated subscription rights offering. A registration statement (Registration No.
333-269082) relating the contemplated rights offering has been filed with the Securities and Exchange Commission (“SEC”).
Also
pursuant to the Settlement Agreement, Rick Nechio, the Company’s interim Chief Executive Officer resigned from the Board effective
February 20, 2023. Mr. Nechio continues to serve as interim Chief Executive Officer of the Company while the Company searches for a permanent
principal executive officer.
Mr.
Nechio’s resignation from the Board was not due to a disagreement with the Company on any matter relating to the Company’s
operations, policies or practices.
Appointment
of Non-Executive Board Chair; Appointment of Director
Effective
February 20, 2023, the Board appointed Michael Pruitt to serve as Non-Executive Chair of the Board.
Appointment
of Director
Effective
February 20, 2023, the Board elected Michelle Hawkins Whetstone as a director of the Company to fill the vacancy resulting from Rick
Nechio’s resignation from the Board.
Ms.
Whetstone, age 55, is a native of Napa Valley, California with 35 years of experience in the hospitality industry and over 15 years of
experience in the wine industry. Since 2009, Ms. Whetstone has partnered with Jamey Whetstone, the Company’s winemaker, to help
grow the Whetstone Wine Cellars wine label. During that time, Ms. Whetstone oversaw the acquisition, restoration, and grand opening of
the historic chateau in the heart of the Napa Valley that serves as Whetstone Wine Cellars’ headquarters and tasting room, and
oversees Whetstone Wine Cellars’ daily business operations and the production of events at the property. Prior to Whetstone Wine
Cellars, Ms. Whetstone owned and operated a design business and furniture retail stores located in Texas and California. Ms. Whetstone
began her career in the travel industry after graduating from Echols International Travel and Transportation School in San Francisco
in 1987, and worked in sales for Thai Airways International and Garuda Indonesia Airlines.
In
connection with her election to the Board, the Company expects to enter into the Company’s standard form indemnification agreement
for directors and officers with Ms. Whetstone. The indemnification agreement clarifies and supplements indemnification provisions already
contained in the Company’s articles of incorporation and bylaws and generally provides that the Company shall indemnify its directors
and officers to the fullest extent permitted by applicable law, subject to certain exceptions, against expenses, judgments, fines and
other amounts actually and reasonably incurred in connection with their service as a director or officer and also provide for rights
to advancement of expenses and contribution.
Ms.
Whetstone is the spouse of Jamey Whetstone, the Company’s winemaker. On June 12, 2019, we entered into a consulting agreement
with Whetstone Consulting, through which our winemaker, Jamey Whetstone, does business, which agreement was subsequently amended on May 15,
2020, amended and restated on March 16, 2021 and further amended and restated on April 13, 2022 (the “Consulting Agreement”).
As
amended and restated, the Consulting Agreement provides the Company with ownership and intellectual property protections for Inventions
(as defined therein) conceived, made or reduced to practice by Whetstone Consulting that relate to the services provided to the Company.
In addition, Whetstone Consulting has agreed, for a period of one year following termination of the Consulting Agreement, not to directly
or indirectly engage or invest in, be employed by, lend credit to, receive compensation from or render services or advice to any person
engaged in a Competing Business located within a twelve-mile radius of a specified Napa, California address. For such purposes, a “Competing
Business” means any business relating to the development, manufacture, marketing and distribution of any product that competes
with any low calorie and/or low sulfite wine products sold or substantially under development by the Company during the one-year restricted
period. The Consulting Agreement does not restrict the acquisition, operation, management, consulting, or other commercial activity by
Whetstone Consulting, directly or indirectly in or with a winery, brewery, spirits, or other alcoholic beverage industry business not
concerning “low calorie” or “low sulfite” products or services. The Consulting Agreement also contains non-solicitation
restrictions applicable to clients, customers, suppliers, licensors, and employees for a period of one year follow the agreement’s
termination, subject to certain exceptions.
Under
the Consulting Agreement, we pay Whetstone Consulting a base consulting fee of $5,000 per month. In addition, the Company has agreed
to pay Whetstone Consulting additional commission-based compensation subject to satisfaction of identified milestones. Specifically,
the Company will pay Whetstone Consulting a $5,000 commission for each non-overlapping 30-day period in which the Company sells Fresh
Vine Wine Products to a minimum threshold number of separate True Food Kitchen locations for sale to customers from their menus. For
such purposes, “Fresh Vine Wine Products” means Client’s wine products developed with the assistance of Whetstone Consulting
pursuant to the Services. Whetstone Consulting will also be entitled to receive a one-time $100,000 commission upon the Company selling
certain volumes of Fresh Vine Wine Products within any given non-overlapping 30-day period to at least a minimum threshold number of
locations of a single fast casual dining restaurant chain, and a one-time $40,000 commission upon the Company selling certain volumes
of Fresh Vine Wine Products within any given non-overlapping 30-day period to at least a minimum threshold number of separate fine dining
establishments.
The
Consulting Agreement has an initial one year term expiring April 13, 2023, but renews automatically for successive one year periods
unless either party provides advance notice of non-renewal to the other. Whetstone Consulting may terminate the Consulting Agreement
at any time by giving us written notice at least 30 days prior to the termination date. We may terminate the Consulting Agreement
at any time.
As
partial compensation for Whetstone Consulting’s services to the Company pursuant to the Company’s original consulting agreement
with Whetstone Consulting, the Company issued to Whetstone Consulting 619,343 shares of the Company’s common stock (the “Whetstone
Shares”). If the Company terminates the Consulting Agreement for “cause,” as such term is defined therein, and such
cause arises or relates to an act or acts directly related to Whetstone Consulting’s ownership interest in the Company, the Company
may elect to purchase all Whetstone Shares then held by Whetstone Consulting at the fair market value.
The
foregoing summary of the indemnification agreement is qualified in all respects to the form of such agreement, a copy of which is incorporated
by reference as Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and incorporated
by reference herein. The foregoing summary of the Consulting Agreement is qualified in all respects by reference to the full text thereof,
a copy of which is filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 19, 2022.