Exhibit 10.5

 

EMPLOYMENT AGREEMENT

(Alex Frias)

 

This EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of this
31st day of May, 2019 (the “Effective Date”), by and between Freedom Leaf Inc.,
a Nevada corporation (the “Company”), and Alex Frias, an individual
(“Employee”).

 

In consideration of the mutual agreements and covenants contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by the Company and Employee, it is hereby agreed as
follows:

 

ARTICLE I
EMPLOYMENT

 

1.1              Employment. The Company agrees to, and does hereby, employ
Employee, and Employee agrees to, and does hereby accept such employment, upon
the terms and subject to the conditions set forth in this Agreement. Employee
represents and warrants to the Company that (A) Employee has the legal capacity
to execute and perform this Agreement, (B) this Agreement is a valid and binding
agreement enforceable against Employee according to its terms, and (C) the
execution and performance of this Agreement by Employee does not violate the
terms of any existing agreement or understanding to which Employee is a party or
by which Employee otherwise may be bound. Effective as of the Effective Date,
the Company agrees to continue to employ Employee as an employee of the Company
as further set forth in Section 1.2, and Employee agrees to continue his
employment by the Company, for the period commencing on the Effective Date and
continuing until the two (2) year anniversary of the Effective Date unless
earlier terminated in accordance with Article III below.

 

1.2              Position and Duties. Employee shall devote Employee’s entire
business time, loyalty, attention and energies exclusively to the business
interests of the Company while employed by the Company, will not engage in any
other employment activities for any direct or indirect remuneration and shall
perform his duties and responsibilities diligently and to the best of his
ability.

 

ARTICLE II
COMPENSATION AND OTHER BENEFITS

 

2.1              Base Salary. As compensation for Employee’s services hereunder
and in consideration of Employee’s other agreements hereunder, during the term
of employment, the Company shall pay Employee a base salary equal to $100,000
per annum (“Base Salary”), subject to withholding and customary payroll
deductions. The Base Salary shall be payable in accordance with the customary
payroll practices of the Company.

 

2.2              Incentive Bonuses. In addition to the Base Salary, provided
Employee is actively providing service to the Company hereunder, and subject to
Article III, Employee shall receive the following incentive bonuses
(collectively, the “Incentive Bonuses”):

 

(a)               Cash Incentives. Employee will be entitled to receive: (i) on
the date that is thirty (30) days after the Effective Date, a cash bonus equal
to $800,000; (ii) on the date that is one-hundred and twenty (120) days after
the Effective Date, a cash bonus equal to $800,000, (iii) on the date that is
twelve (12) months after the Effective Date, a cash bonus equal to 10.00125% of
the Net Operating Income (as defined below) received by the Company from the
Effective Date until the one-year anniversary of the Effective Date pursuant to
that certain Master Manufacturing Agreement, dated as of November 13, 2017, by
and between ECS Labs LLC and CBD LIFE SA DE CV (as amended, restated, modified
or supplemented from time to time, the “Master Agreement”); and (iv) any other
cash bonus awards approved by the Board of Directors of the Company (the
“Board”); provided, however, upon any termination of this Agreement prior to the
Expiration Date (as defined below), Employee shall remit to the Company a cash
amount equal to the Excess Amount upon demand by the Company, and if the Excess
Amount is not so repaid within ninety (90) days of such demand, the Company
shall have the right to take any and all action to effectuate such remittance.

 

(b)               Equity Incentives. Subject to the approval of the Board and
stockholders of the Company, Employee shall receive (i) on the date that is
sixty (60) days after the Effective Date, an equity award equal to approximately
$7,138,750 of the Company’s restricted common stock, as calculated based on the
Common Stock Value (as defined below), subject to Employee’s execution of that
certain restricted stock agreement set forth on Schedule A attached hereto (the
“RSA”), (ii) on the date that is twelve (12) months from the Effective Date, an
equity award equal to approximately 16.66875% of the Net Operating Income
received by the Company from the Effective Date until the one-year anniversary
of the Effective Date pursuant to the Master Agreement as calculated based on
the Common Stock Value, subject to Employee’s execution of the RSA; and (iii)
any other equity incentive awards approved by the Board.

 

 

 

 

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2.3              Benefit Plans. During the term of Employee’s employment with
the Company, Employee will be eligible to participate in the Company’s
retirement plans that are qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the “Code”), if any, and in the Company’s employee
welfare benefit plans that are available to any other executive employees of the
Company (the “Plans”), in accordance with and subject to the terms and
conditions thereof. The terms and conditions of the Plans, as expressed in the
Plan documents, will control including, but not limited to, the Company’s
ability to amend, modify or terminate any of those programs as it determines
appropriate in accordance with the Plans’ terms. During the term of Employee’s
employment with the Company, the Company shall pay to maintain Employee’s
existing health insurance plan or provide health insurance with substantially
similar coverage to Employee’s existing health insurance plan.

 

2.4              Expenses. The Company shall reimburse Employee for all expenses
reasonably incurred in the course of the performance of Employee’s duties and
responsibilities pursuant to this Agreement and consistent with the Company’s
policies with respect to travel, entertainment and miscellaneous expenses;
provided, that any single expenditure in excess of $5,000 shall require the
approval of the Board.

 

2.5              Vacation. In any year, Employee shall be entitled to take
reasonable vacation provided that such vacation does not prevent him from
adequately performing his duties under this Agreement.

 

2.6              Withholding. All payments to be made by the Company hereunder
will be subject to any withholding requirements.

 

2.7              Certain Definitions. As used in this Section 2:

 

(a)               “Common Stock Value” means an amount per share of Common Stock
equal to the arithmetic average of the volume-weighted average (rounded to two
decimal places) trading price per share of Common Stock for the thirty (30) full
trading days ended on and including the trading day prior to the applicable
determination date, using trading prices reported on the OTCQB based on all
trades in Common Stock on the OTCQB during the primary trading sessions from
9:30 a.m., New York Time, to 4:00 p.m., New York Time (and not an average of the
daily averages during such thirty (30) trading days).

 

(b)               “Excess Amount” means the product obtained by multiplying (i)
the gross amount received by Employee pursuant to Section 2.2(a) of this
Agreement, by (ii) the Remaining Service Period.

 

(c)               “Net Operating Income” shall mean the difference of gross
income less cost of goods sold, selling, general and administrative expenses,
operating expenses, depreciation, interest, taxes and other expenses, each
determined on a generally accepted accounting principles basis of accounting.

 

(d)               “Remaining Service Period” means the quotient obtained by
dividing (i) that number of days between the effective date of any termination
of this Agreement and the Expiration Date (not including the effective date of
such termination, but including the Expiration Date), by (ii) 731.

 

ARTICLE III
TERMINATION; EQUITY

 

3.1              Term. Employee’s employment shall commence on the Effective
Date and shall continue until the two (2) year anniversary of the Effective Date
(the “Expiration Date”), unless earlier terminated pursuant to the terms of this
Agreement.

 

3.2              Right to Terminate; Automatic Termination.

 

(a)               Termination for Cause. The Company shall be entitled to
terminate this Agreement for Cause (as defined below) effective immediately in
the event of (a) Employee’s material breach of any agreement between Employee
and the Company; (b) Employee’s conviction of, or Employee’s plea of “guilty” or
“no contest” to, a felony under the laws of the United States or any State,
provided, however, that such felony is not related to the manufacture, sale or
possession of cannabis or any components thereof; (c) Employee’s gross
negligence or willful misconduct in connection with the provision of services
for the Company; or (d) Employee’s failure to cooperate in good faith with a
governmental or internal investigation of the Company or its managers, officers
or employees (collectively, “Cause”); provided, however, that if any such event
by its nature is capable of being cured with no adverse effect to the Company,
and Employee is taking reasonable and diligent steps to cure such event, then
such termination shall be effective only if such event remains uncured for a
period of thirty calendar days after the Company provides written notice to
Employee setting forth the nature of the event constituting Cause hereunder.

 

(b)               Termination Upon Death or Disability. Subject to Section 3.3,
Employee’s employment and the Company’s obligations under this Agreement, unless
specifically stated otherwise herein, shall terminate: (i) automatically,
effective immediately and without any notice being necessary, upon Employee’s
death; and (ii) in the event of any Disability of Employee, by the Company
giving notice of termination to Employee. As used in this Section 3.2(b),
“Disability” shall mean that (A) Employee is unable, by reason of an injury, a
sickness or accident, to perform Employee’s duties under this Agreement for an
aggregate of sixty (60) days in any consecutive six (6) month period, or (B)
Employee has a guardian of the person or estate appointed by a court of
competent jurisdiction.

 

 

 

 

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3.3              Rights Upon Termination. If Employee’s employment is terminated
pursuant to Section 3.2, or if Employee quits employment, notwithstanding the
terms of this Agreement, Employee or Employee’s estate shall have no further
rights against the Company hereunder, except for the right to receive, (i) any
earned but unpaid Base Salary and Incentive Bonuses, (ii) reimbursement of
expenses to which Employee is entitled pursuant to Section 2.4, and (iii)
Employee shall be deemed to resign from any board to which Employee has been
appointed or nominated by or on behalf of the Company.

 

3.4              No Automatic Cross-Default. This Agreement is being executed
simultaneously with that certain Membership Interest Purchase Agreement, by and
between, inter alia, the Company and Employee (the “Purchase Agreement”). Each
of the Company and Employee acknowledge and agree that this Agreement, the RSA
and the Purchase Agreement each create independent rights and obligations, are
supported by adequate consideration and stand on their own. Accordingly, (i) a
default by Employee or the Company under this Agreement shall not cause an
automatic cross-default by Employee or the Company under the Restricted Stock
Agreement and/or the Purchase Agreement, and (ii) a default by Employee or the
Company under the Restricted Stock Agreement and/or the Purchase Agreement shall
not cause an automatic cross-default under this Agreement. Notwithstanding the
foregoing, nothing in this Section 3.4 shall preclude or otherwise limit either
party from asserting any claim or right against the other party or from taking
any other action under each of this Agreement, the RSA and/or the Purchase
Agreement based upon the same act or omission by the other party that creates an
alleged default under any one of the aforesaid agreements.

 

ARTICLE IV
CONFIDENTIALITY; NON-SOLICITATION

 

4.1              Confidential Information.

 

(a)               Company Information. Employee agrees that during and after his
employment with the Company, he will hold in the strictest confidence, and will
not (except for the benefit of the Company during his employment or for limited
use by Employee’s accountants, financial planners, attorneys and other
professional consultants), as required by applicable law, a court order or an
order or request of a relevant regulatory authority or in order to enforce a
claim against the Company (including, without limitation, under this Agreement),
use or disclose to any person, firm, corporation or other entity any Company
Confidential Information. Employee understands that “Company Confidential
Information” means any non-public information that relates to the actual or
anticipated business, research or development of the Company, or to the
Company’s technical data, trade secrets, or know-how, including, but not limited
to, research, product plans, or other information regarding the Company’s
products or services and markets therefor; customer lists and customer contact
information, their buying histories, and preferences (including, but not limited
to, such information relating to customers of the Company on which Employee
called or with which Employee may become acquainted during the term of his
employment); personnel information (including, but not limited to, information
regarding employees’ skills and performance); information about vendors,
supplier and business partners; software, developments, inventions, processes,
formulas, technology, designs, drawings, engineering, and hardware configuration
information; and marketing, finances, and/or other business information;
provided, however, that Company Confidential Information does not include any of
the foregoing items to the extent the same have become publicly known and made
generally available through no wrongful act of Employee or of others. Employee
understands that nothing in this Agreement is intended to limit employees’
rights to discuss the terms, wages, and working conditions of their employment,
as protected by applicable law.

 

(b)               Third Party Information. Employee recognizes that the Company
may have received and in the future may receive from third parties associated
with the Company, e.g., the Company’s customers, suppliers, licensors,
licensees, partners, or collaborators (“Associated Third Parties”), their
confidential or proprietary information (“Associated Third Party Confidential
Information”). By way of example, and not as an exhaustive list, Associated
Third Party Confidential Information may include the habits or practices of
Associated Third Parties, the technology of Associated Third Parties,
requirements of Associated Third Parties, and information related to the
business conducted between the Company and such Associated Third Parties.
Employee agrees at all times during his employment with the Company and
thereafter to hold in the strictest confidence, and not to use or to disclose to
any person, firm, corporation, or other entity any Associated Third Party
Confidential Information, except as necessary in carrying out his work for the
Company consistent with the Company’s agreement with such Associated Third
Parties or as required by applicable law, a court order or an order or request
of a relevant regulatory authority. Employee further agrees to comply with any
and all Company policies and guidelines that may be adopted from time to time
during the term of his employment regarding Associated Third Parties and
Associated Third Party Confidential Information. Employee understands that his
unauthorized use or disclosure of Associated Third Party Confidential
Information or violation during his employment of any Company policies will lead
to disciplinary action, up to and including immediate termination and legal
action by the Company. Third Party Confidential Information does not include any
of the foregoing items to the extent the same have become publicly known and
made generally available through no wrongful act of Employee or of others.
Employee understands that nothing in this Agreement is intended to limit
employees’ rights to discuss the terms, wages, and working conditions of their
employment, as protected by applicable law.

 

 

 

 

 

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4.2              Inventions.

 

(a)               Inventions Retained and Licensed. Employee represents and
warrants that there are no inventions, discoveries, original works of
authorship, developments, improvements, and trade secrets that were conceived in
whole or in part by Employee prior to his employment with the Company or any of
its subsidiaries and to which he has any right, title, or interest, and which
relate to the Company’s proposed business, products, or research and development
(collectively, “Prior Inventions”). Notwithstanding the foregoing, if, in the
course of his employment with the Company, Employee incorporates into or uses in
connection with any product, process, service, technology, or other work by or
on behalf of the Company any Prior Invention, Employee hereby grants to the
Company a non-exclusive, royalty-free, fully paid-up, irrevocable, perpetual,
worldwide license, with the right to grant and authorize sublicenses, to make,
have made, modify, use, import, offer for sale, and sell such Prior Invention as
part of or in connection with such product, process, service, technology, or
other work, and to practice any method related thereto.

 

(b)               Assignment of Inventions. Employee agrees that he will
promptly make full written disclosure to the Company, will hold in trust for the
sole right and benefit of the Company, and hereby assigns to the Company, or its
designee, all his right, title, and interest in and to any and all inventions,
original works of authorship, developments, concepts, improvements, designs,
discoveries, ideas, trademarks, or trade secrets, whether or not patentable or
registrable under patent, copyright, or similar laws, which Employee may solely
or jointly conceive or develop or reduce to practice, or cause to be conceived
or developed or reduced to practice, during the period of time Employee is in
the employ of the Company or any of its subsidiaries (including during his
off-duty hours), or with the use of Company’s equipment, supplies, facilities,
or Company Confidential Information, except as provided in Section 4.1
(collectively referred to as “Inventions”). Employee further acknowledges that
all original works of authorship that are made by him (solely or jointly with
others) within the scope of and during the period of his employment with the
Company and that are protectable by copyright are “works made for hire,” as that
term is defined in the United States Copyright Act. Employee understands and
agrees that the decision whether or not to commercialize or market any
Inventions is within the Company’s sole discretion and for the Company’s sole
benefit, and that no royalty or other consideration will be due to Employee as a
result of the Company’s efforts to commercialize or market any such Inventions.

 

(c)               Maintenance of Records. Employee agrees to keep and maintain
adequate, current, accurate, and authentic written records of all Inventions
made by him (solely or jointly with others) during the term of his employment
with the Company. The records will be in the form of notes, sketches, drawings,
electronic files, reports, or any other format that may be specified by the
Company. The records are and will be available to and remain the sole property
of the Company at all times.

 

(d)               Patent and Copyright Registrations. Employee agrees to
reasonably assist the Company, or its designee, at the Company’s expense, in
every proper way to secure the Company’s rights in the Inventions and any rights
relating thereto in any and all countries, including the disclosure to the
Company of all pertinent information and data with respect thereto, the
execution of all applications, specifications, oaths, assignments, and all other
instruments that the Company shall deem proper or necessary in order to apply
for, register, obtain, maintain, defend, and enforce such rights, and in order
to assign and convey to the Company, its successors, assigns, and nominees the
sole and exclusive rights, title, and interest in and to such Inventions and any
rights relating thereto, and testifying in a suit or other proceeding relating
to such Inventions and any rights relating thereto. Employee further agrees that
his obligation to execute or cause to be executed, when it is in his power to do
so, any such instrument or papers shall continue after the termination of this
Agreement. If the Company is unable because of Employee’s mental or physical
incapacity or for any other reason to secure Employee’s signature with respect
to any Inventions, including, without limitation, to apply for or to pursue any
application for any United States or foreign patents or copyright registrations
covering such Inventions, then Employee hereby irrevocably designates and
appoints the Company and its duly authorized officers and agents as his agent
and attorney in fact, to act for and in his behalf and stead, to execute and
file any papers and oaths, and to do all other lawfully permitted acts with
respect to such Inventions with the same legal force and effect as if executed
by the Employee.

 

4.3              Conflicting Employment.

 

(a)               Current Obligations. Employee agrees that during the term of
his employment with the Company, he will not engage in or undertake any other
employment, occupation, consulting relationship, or commitment that is directly
related to the business in which the Company is now involved or becomes involved
or a business which Employee understands the Company to actively have plans to
become involved, nor will Employee engage in any other activities that interfere
with his ability to fully and satisfactorily perform his duties to the Company,
except as may otherwise be agreed in writing by and between Employee and the
Company.

 

 

 

 

 

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(b)               Prior Relationships. Without limiting Section 4.3(a), Employee
represents that he has no other agreements, relationships, or commitments to any
other person or entity that conflict with his obligations to the Company under
this Agreement or his ability to become employed and perform the services for
which he is being employed by the Company. Employee further agrees that if he
has signed a confidentiality agreement or similar type of agreement with any
former employer or other entity, he will comply with the terms of any such
agreement to the extent that its terms are lawful under applicable law. Employee
represents and warrants that after undertaking a careful search (including, but
not limited to, searches of his computers, cell phones, electronic devices, and
documents), he has returned all property and confidential information belonging
to all prior employers. Moreover, he agrees to fully indemnify the Company, its
directors, managers, officers, agents, employees, investors, shareholders,
members, administrators, affiliates, divisions, subsidiaries, predecessor and
successor corporations, and assigns for all verdicts, judgments, settlements,
and other losses incurred by any of them resulting from Employee’s breach of his
obligations under any agreement to which he is a party or obligation to which he
is bound, as well as any reasonable attorneys’ fees and costs if the plaintiff
is the prevailing party in such an action, except as prohibited by law.

 

4.4              Returning Company Documents. Upon separation from employment
with the Company or upon written demand by the Company during his employment,
Employee will immediately deliver to the Company, and will not keep in his
possession, recreate, or deliver to anyone else, any and all Company property,
including, but not limited to, Company Confidential Information, Associated
Third Party Confidential Information, as well as all devices and equipment
belonging to the Company or its subsidiaries (including, but not limited to,
computers, handheld electronic devices, telephone equipment, and other
electronic devices), Company credit cards, records, data, notes, notebooks,
reports, files, proposals, lists, correspondence, specifications, drawings,
blueprints, sketches, materials, photographs, charts, any other documents and
property, and reproductions of any and all of the aforementioned items that were
developed by Employee pursuant to his employment with the Company, obtained by
him in connection with his employment with the Company, or otherwise belonging
to the Company, its successors, or assigns, including, without limitation, those
records maintained pursuant to Section 4.2(c). Employee also consents to an exit
interview to confirm his compliance with this Article IV.

 

4.5              Notification of New Employer. In the event that Employee leaves
the employ of the Company, Employee hereby grants consent to notification by the
Company to his new employer about his obligations under this Agreement including
information to his new employer concerning the enforceability of this Agreement.

 

4.6              Non-Solicitation.

 

(a)               Solicitation of Employees. Employee agrees that for a period
of two (2) years immediately following the documented date of termination of his
relationship with the Company for any reason, whether voluntary or involuntary,
with or without cause, Employee shall not either directly or indirectly solicit
any employees of the Company or any of its subsidiaries to leave their
employment, or attempt to solicit employees of the Company or any of its
subsidiaries to leave their employment, either for Employee or for any other
person or entity with which Employee is then employed or otherwise affiliated.

 

(b)               Solicitation of Customers, Suppliers, etc. Employee agrees
that for a period of two (2) years immediately following the documented date of
termination of his relationship with the Company for any reason, whether
voluntary or involuntary, with or without cause, Employee shall not either
directly or indirectly (i) request or advise any customer, supplier or any other
person or entity known to be associated with the Company or any of its
affiliates or subsidiaries, to withdraw, curtail or cancel or in any other way
lessen its use of the business services of the Company or any of its affiliates
or subsidiaries or (ii) for the purpose of conducting or engaging in any
business directly or indirectly competitive with the Company (whether
individually or on behalf of Employee’s affiliates or new employer) call upon,
solicit, advise, sign, hire, interfere with, or otherwise do or conduct, or
attempt to do or conduct, business with any person or entity covered by any
written or oral agreement with the Company or any of its affiliates or
subsidiaries, or take away or interfere or attempt to interfere with any Company
business custom, business trade, or business patronage of the Company or any of
its affiliates or subsidiaries.

 

4.7              Non-Compete. Employee agrees that for a period of one (1) year
immediately following the documented date of termination of his relationship
with the Company for any reason, whether voluntary or involuntary, Employee
shall not either directly or indirectly in the geographical areas that the
Company does business or has done business at the time of the Employee’s
termination, engage or assist others in engaging in any business or enterprise
(whether as owner, partner, officer, director, employee, consultant, investor,
lender or otherwise, except as the holder of not more than 1% of the outstanding
stock of a publicly-held company) that is competitive with the Company’s
business, including but not limited to any business or enterprise that develops,
manufactures, markets, licenses, sells or provides any product or service that
competes with any product or service developed, manufactured, marketed,
licensed, sold or provided, or planned to be developed, manufactured, marketed,
licensed, sold or provided, by the Company while Employee was employed by the
Company. If Employee violates the provisions of any of the preceding paragraphs
of this Section 4, Employee shall continue to be bound by the restrictions set
forth in such paragraph until a period of one (1) year has expired without any
violation of such provisions.

 

4.8              Representations. Employee agrees to execute any proper oath or
verify any proper document reasonably required to carry out the terms of this
Agreement. Employee represents that his performance of all the terms of this
Agreement will not breach any agreement to keep in confidence proprietary
information acquired by Employee in confidence or in trust prior to his
employment by the Company or any of its subsidiaries. Employee hereby represents
and warrants that he has not entered into, and Employee will not enter into, any
oral or written agreement in conflict herewith.

 

 

 

 

 

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4.9              Non-Disparagement. During Employee’s employment with the
Company and for a period of three (3) years thereafter, Employee agrees, to the
fullest extent permissible by law, not intentionally to make, directly or
indirectly, any public or private statements, gestures, signs, signals or other
verbal or nonverbal, direct or indirect communications that are or could be
harmful to or reflect negatively on the Company or its subsidiaries or that are
otherwise disparaging of the Company or its subsidiaries and/or their
businesses, or any of its or their subsidiaries, past, present or future
officers, directors, managers, employees, equity holders, members, advisors,
agents, policies, procedures, practices, services, products, decision-making,
conduct, professionalism or compliance with standards of any of the foregoing
provided that the foregoing is not intended to prohibit truthful statements made
by the Employee in his capacity as an officer or employee of a competitor after
his employment with the Company has terminated, provided that Employee continues
to comply with his confidentiality obligations under this Agreement. The
provisions of this Section 4.9 are in addition to any other written agreements
on this subject that Employee may have with the Company or any of its
subsidiaries, and are not meant to, and do not excuse any, additional
obligations that Employee may have under such agreements. Nothing in this
Section shall be construed to limit Employee’s ability to cooperate with the
investigation of any government agency of competent jurisdiction or to bring or
defend against any legal claim. In any civil litigation arising out of or
related to this Agreement, the parties shall cooperate to seek a protective
order consistent with this Section and Section 4.1 above.

 

ARTICLE V
GENERAL PROVISIONS

 

5.1              Notices. Any and all notices provided for in this Agreement
shall be given in writing and shall be deemed given to a party at the earlier of
(a) when actually delivered to such party, or (b) when mailed to such party by
registered or certified mail (return receipt requested) or sent to such party by
courier, confirmed by receipt, and addressed to such party at the address
designated below for such party as follows (or to such other address for such
party as such party may have substituted by notice to the other party pursuant
to this Section 5.1):

 

  If to the Company: Freedom Leaf Inc.     3571 E. Sunset Road, Suite 420    
Las Vegas, NV 89120         with a copy to: Kleinberg, Kaplan, Wolff & Cohen,
P.C.     551 Fifth Avenue     New York, NY 10176     Telecopy: (212) 986-8866  
  Telephone: (212) 880-9869     Email: jain@kkwc.com     Attention: Jonathan Ain
        If to Employee: Alex Frias     [REDACTED]

  

5.2              Entire Agreement; Survival. This Agreement contains the entire
understanding and the full and complete agreement of the parties and supersedes
and replaces any prior understandings and agreements among the parties with
respect to the subject matter hereof. The provisions of this Agreement shall
survive the termination of this Agreement, or of Employee’s employment for any
reason, to the extent necessary to enable the parties to enforce their
respective rights.

 

5.3              Amendment; Headings and References. This Agreement may be
altered, amended or modified only in writing, signed by Employee and the
Company, except that either party hereto may update its address set forth in
Section 5.1 by providing a notice of the updated address in the manner set forth
in Section 5.1. Headings included in this Agreement are for convenience only and
are not intended to limit or expand the rights of the parties hereto. References
to Sections herein shall mean sections of the text of this Agreement, unless
otherwise indicated.

 

 

 

 

 

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5.4              Assignability. This Agreement and the rights and duties set
forth herein may not be assigned by either of the parties without the express
written prior consent of the other party. This Agreement shall be binding on,
and inure to the benefit of, each party and such party’s respective heirs, legal
representatives, successors and assigns.

 

5.5              Severability. If any court of competent jurisdiction determines
that any provision of this Agreement is invalid or unenforceable, then such
invalidity or unenforceability shall have no effect on the other provisions
hereof, which shall remain valid, binding and enforceable and in full force and
effect, and such invalid or unenforceable provision shall be construed in a
manner so as to give the maximum valid and enforceable effect to the intent of
the parties expressed therein.

 

5.6              Waiver of Breach. The waiver by either party of the breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by either party.

 

5.7              Governing Law; Jurisdiction; Construction. This Agreement shall
be governed by the internal laws of the State of Texas, without regard to any
rules of construction that would require application of the laws of another
jurisdiction. Any legal proceeding related to this Agreement must be litigated
in an appropriate Texas state or federal court sitting in Dallas County, Texas,
and both the Company and Employee hereby consent to the exclusive jurisdiction
of the State of Texas for this purpose; waive any objection they may now or
hereafter have to venue or to convenience of forum and agree that all legal
proceedings will be tried in a court of competent jurisdiction in Dallas County,
Texas by a judge without a jury. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, accordingly, each party waives the application of any law, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.

 

5.8              Tax Compliance.

 

(a)               The Company may withhold from any amounts payable hereunder
any amounts required to be withheld under federal, state or local law and any
other deductions authorized in writing by Employee.

 

(b)               The intent of the parties is that payments and benefits under
this Agreement comply with or be exempt from Section 409A of the Code and the
regulations and guidance promulgated thereunder (collectively “Section 409A”),
and the Company shall have complete discretion to interpret and construe this
Agreement and any associated documents in any manner that establishes an
exemption from (or compliance with) the requirements of Section 409A.  If for
any reason, such as imprecision in drafting, any provision of this Agreement (or
of any award of compensation, including, without limitation, equity compensation
or benefits) does not accurately reflect its intended establishment of an
exemption from (or compliance with) Section 409A, as demonstrated by consistent
interpretations or other evidence of intent, such provision shall be considered
ambiguous as to its exemption from (or compliance with) Section 409A and shall
be interpreted by the Company in a manner consistent with such intent, as
determined in the discretion of the Company.

 

(c)               For purposes of Section 409A, the right to a series of
installment payments under this Agreement shall be treated as a right to a
series of separate payments.

 

(d)               With respect to any reimbursement of expenses of, or any
provision of in-kind benefits to, Employee, as specified under this Agreement,
such reimbursement of expenses or provision of in-kind benefits shall be subject
to the following conditions: (i) the expenses eligible for reimbursement or the
amount of in-kind benefits provided in one taxable year shall not affect the
expenses eligible for reimbursement or the amount of in-kind benefits provided
in any other taxable year, except for any medical reimbursement arrangement
providing for the reimbursement of expenses referred to in Section 105(b) of the
Code; (ii) the reimbursement of an eligible expense shall be made no later than
the end of the year after the year in which such expense was incurred; and
(iii) the right to reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit.

 

(e)               Notwithstanding anything to the contrary in this Agreement, if
Employee is a “specified employee” as determined pursuant to Section 409A as of
the date of Employee’s “separation from service” as defined in Treasury
Regulation Section 1.409A-1(h) (or any successor regulation) and if any payments
or entitlements provided for in this Agreement constitute a “deferral of
compensation” within the meaning of Section 409A and cannot be paid or provided
in the manner provided herein without subjecting Employee to additional tax,
interest or penalties under Section 409A, then any such payment or entitlement
which is payable during the first six (6) months following Employee’s
“separation from service” shall be paid or provided to Employee in a cash
lump-sum on the first business day of the seventh (7th) calendar month
immediately following the month in which Employee’s “separation from service”
occurs or, if earlier, upon Employee’s death. In addition, any payments or
benefits due hereunder upon a termination of Employee’s employment which are a
“deferral of compensation” within the meaning of Section 409A shall only be
payable or provided to Employee (or Employee’s estate) upon a “separation from
service” as defined in Section 409A.

 

 

 

 

 

 7 

 

 

(f)                Whenever a payment under this Agreement specifies a payment
period with reference to a number of days (for example, “payment shall be made
within thirty (30) days following the date of termination”), the actual date of
payment within the specified period shall be within the sole discretion of the
Company.  In no event may Employee, directly or indirectly, designate the
calendar year of any payment to be made under this Agreement, to the extent such
payment is subject to Code Section 409A.

 

(g)               The Company makes no representation or warranty and shall have
no liability to Employee or any other person or entity if any provisions of this
Agreement are determined to constitute deferred compensation subject to Code
Section 409A but do not satisfy an exemption from, or the conditions of, Code
Section 409A.

 

5.9              Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement may be executed
and delivered by facsimile or other electronic transmission. A complete,
accurate, fully-executed PDF or other facsimile copy of this Agreement may be
used in place of an original for all purposes.

 

[Signature Page Follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 8 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.

 

 

  COMPANY:        FREEDOM LEAF INC.,   a Nevada corporation           By: /s/
Clifford Perry                                 Name: Clifford Perry   Title:
Chief Executive Officer           EMPLOYEE:       ALEX FRIAS       /s/ Alex
Frias                                   Alex Frias    

 

 

 

 

 

 

 9 

 

  

Schedule A

  

FORM OF RESTRICTED STOCK AGREEMENT

 

FREEDOM LEAF INC.

 

RESTRICTED STOCK AGREEMENT

 

This Restricted Stock Agreement (the “Agreement”) is made as of [_], 2019 (the
“Effective Date”) by and between Freedom Leaf Inc., a Nevada corporation (the
“Company”), and Alex Frias (“Grantee”).

 

Grant. In consideration of Grantee’s performance of services for the Company,
the Company hereby agrees to grant restricted shares (the “Restricted Stock”) of
the Company’s Common Stock, par value $0.001 per share (“Common Stock”) to
Grantee, subject to the conditions of this Agreement. As used in this Agreement,
the term “Shares” shall mean the Restricted Stock granted under this Agreement,
and all securities received (i) in replacement of the Restricted Stock, (ii) as
a result of stock dividends or stock splits with respect to the Restricted
Stock, and (iii) in replacement of the Restricted Stock in a merger,
recapitalization, reorganization or similar corporate transaction.

 

Award and Vesting of Shares.

 

Award. The Restricted Stock shall be awarded to Grantee in the following
amounts, at the following times and upon the following conditions, provided that
the Continuous Service of Grantee continues through and on the applicable Award
Date:

 

  Shares of Restricted Stock Award Date         The First Award (as defined
below). 60 days after the Effective Date of Grantee’s Employment Agreement with
the Company (the “First Award Date”)         The Second Award (as defined
below). 12 months after the Effective Date of Grantee’s Employment Agreement
with the Company (the “Second Award Date”)

 

The Restricted Stock will be issued by the Company to the Grantee on the First
Award Date and on the Second Award Date in accordance with this Agreement and
will not otherwise be issued or held in escrow or otherwise be outstanding prior
to their issuance under this Agreement.

 

Vesting. The First Award of Restricted Stock will vest in accordance with the
following vesting schedule: (i) 40.74% of the Shares shall vest in Grantee’s
favor on the occurrence of the Milestone (as defined below) (the “Milestone
Vesting Date”); (ii) 29.63% of the Shares shall vest in Grantee’s favor on the
12-month anniversary of the First Award Date (the “First Vesting Date”) provided
that the Continuous Service of Grantee continues through such date; and (iii)
29.63% of the Shares shall vest in Grantee’s favor on the 24-month anniversary
of the First Award Date (the “Second Vesting Date”) provided that the Continuous
Service of Grantee continues through such date. The Second Award of Restricted
Stock shall fully vest in Grantee’s favor immediately upon its grant on the
Second Award Date (such date, together with the Milestone Vesting Date, the
First Vesting Date and the Second Vesting Date, each a “Vesting Date” with
respect to the applicable Shares of Restricted Stock).

 

 

 

 

 

 10 

 

 

Acceleration of Vesting. Except as otherwise provided in this Section 2(C) and
in Section 4 of this Agreement, there shall be no proportionate or partial
vesting of Shares of Restricted Stock in or during the months, days or periods
prior to each Vesting Date, and all vesting of Shares of Restricted Stock shall
occur only on the applicable Vesting Date.

 

Acceleration of Vesting Upon Change in Control. In the event that a Change in
Control of the Company occurs during Grantee’s Continuous Service, the Shares of
Restricted Stock subject to this Agreement shall become immediately vested in
Grantee’s favor as of the date of the Change in Control.

 

Acceleration of Vesting at Company Discretion. Notwithstanding any other term or
provision of this Agreement, the Board of Directors of the Company (the “Board”)
shall be authorized, in its sole discretion, based upon its review and
evaluation of the performance of Grantee and of the Company, to accelerate the
vesting of any Shares of Restricted Stock under this Agreement, at such times
and upon such terms and conditions as the Board shall deem advisable.

 

Adjustment to Number of Shares. In the event of a forward or reverse stock split
of the issued and outstanding Shares of Common Stock of the Company, a Common
Stock dividend or distribution, an asset distribution, recapitalization,
reorganization or similar transaction by the Company which would customarily
result in an adjustment to the number of Shares of Common Stock issuable or
outstanding under other outstanding securities of the Company, then the number
of Shares subject to vesting and issuance under this Agreement will
automatically be adjusted upward or downward, as the case may be,
proportionately and appropriately.

 

Definitions. For purposes of this Agreement, the following terms shall have the
meanings indicated:

 

“Cause” means (a) Grantee’s material breach of any agreement between Grantee and
the Company; (b) Grantee’s material failure to comply with the Company’s written
policies or rules that result in material injury to the Company; (c) Grantee’s
conviction of, or Grantee’s plea of “guilty” or “no contest” to, a felony under
the laws of the United States or any State; (d) Grantee’s gross negligence or
willful misconduct in connection with the provision of services for the Company;
or (e) Grantee’s failure to cooperate in good faith with a governmental or
internal investigation of the Company or its managers, officers or employees.

 

“Change of Control” means the sale of all or substantially all of the
outstanding Shares of capital stock, assets or business of the Company, by
merger, consolidation, sale of assets or otherwise (other than a merger or
consolidation in which all or substantially all of the individuals and entities
who were beneficial owners of the Company’s voting securities immediately prior
to such transaction beneficially own, directly or indirectly, more than 50%
(determined on an as- converted basis) of the outstanding securities entitled to
vote generally in the election of directors of the resulting, surviving or
acquiring corporation in such transaction).

 

“Common Stock Value” means an amount per share of Common Stock equal to the
arithmetic average of the volume-weighted average (rounded to two decimal
places) trading price per share of Common Stock for the thirty (30) full trading
days ended on and including the trading day prior to the applicable Award Date,
using trading prices reported on the OTCQB based on all trades in Common Stock
on the OTCQB during the primary trading sessions from 9:30 a.m., New York Time,
to 4:00 p.m., New York Time (and not an average of the daily averages during
such thirty (30) trading days).

 

 

 

 

 

 11 

 

 

“Continuous Service” means the uninterrupted provision of services as an
employee, consultant, advisor, officer, or director of the Company or any
Related Entity.

 

“First Award” means that number of Shares of Restricted Stock amounting to
$7,138,750 in the aggregate, calculated based on the Common Stock Value as
determined on the First Award Date; provided, that if such calculation shall
result in a fractional Share, such fraction shall be disregarded.

 

“Master Agreement” means that certain Master Manufacturing Agreement, dated as
of November 13, 2017, by and between ECS Labs LLC and CBD LIFE SA DE CV (as
amended, restated, supplemented or modified from time to time).

 

“Milestone” means the occurrence of an extension of the Master Agreement through
December 31, 2020.

 

“Net Operating Income” means the difference of gross income less cost of goods
sold, selling, general and administrative expenses, operating expenses,
depreciation, interest, taxes and other expenses, each determined on a generally
accepted accounting principles basis of accounting.

 

“Non-Vested Shares” means any Shares of the Restricted Stock subject to this
Agreement that have not become vested pursuant to this Section 2.

 

“Second Award” means that number of Shares of Restricted Stock amounting to an
aggregate amount equal to 16.66875% of the Net Operating Income received by the
Company from the Effective Date until the Second Award Date pursuant to the
Master Agreement, as calculated based on the Common Stock Value as determined on
the Second Award Date; provided, that if such calculation shall result in a
fractional Share, such fraction shall be disregarded.

 

“Related Entity” means the Company’s wholly-owned subsidiaries on or after the
Effective Date, including without limitation ECS Labs LLC, a Texas limited
liability company and/or its wholly-owned subsidiaries, and any other
wholly-owned subsidiaries of the Company.

 

“Vested Shares” means any Shares of the Restricted Stock subject to this
Agreement that have become vested pursuant to this Section 2.

         

 

 

 

 

 12 

 

 

Delivery of Restricted Stock.

 

Issuance of Stock Certificates and Legends. One or more stock certificates
evidencing the Restricted Stock shall be issued in the name of Grantee but shall
be held and retained by the Company until the Vesting Date on which the Shares
(or a portion thereof) subject to this Restricted Stock award become Vested
Shares pursuant to Section 2 hereof, subject to the provisions of Section 4
hereof. All such stock certificates shall bear the following legends, along with
such other legends that the Board shall deem necessary and appropriate or which
are otherwise required or indicated pursuant to any applicable stockholders
agreement:

 

THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION COMPLIES WITH THE PROVISIONS OF THAT CERTAIN RESTRICTED STOCK
AGREEMENT BY AND BETWEEN MR. ALEX FRIAS AND FREEDOM LEAF INC. (THE “COMPANY”),
DATED AS OF JUNE [____], 2019 (A COPY OF WHICH IS ON FILE WITH THE COMPANY; THE
“RSA”). EXCEPT AS OTHERWISE PROVIDED IN THE RSA, NO TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE COMMON STOCK REPRESENTED BY
THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR (B) IF
THE COMPANY HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE
HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES
AND REGULATIONS IN EFFECT THEREUNDER.

 

THE COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VOTING
REQUIREMENTS AND OTHER RESTRICTIONS SET FORTH IN A VOTING AGREEMENT BETWEEN THE
HOLDER OF THIS CERTIFICATE AND CERTAIN OTHER PARTIES. TRANSFER OF THE COMMON
STOCK IS SUBJECT TO THE RESTRICTIONS CONTAINED IN SUCH AGREEMENT.

 

THE COMPANY WILL FURNISH TO EACH HOLDER WHO SO REQUESTS A STATEMENT OF THE
POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF WHICH THE COMPANY IS
AUTHORIZED TO ISSUE AND OF THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF
SUCH PREFERENCES AND/OR RIGHTS. ANY SUCH REQUEST IS TO BE ADDRESSED TO THE
COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.

 

Stop-Transfer Instructions. Grantee agrees that, to ensure compliance with the
restrictions imposed by this Agreement, the Company may issue appropriate
“stop-transfer” instructions to its transfer agent, if any, and if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.

 

Stock Powers. Grantee shall deposit with the Company stock powers or other
instruments of transfer or assignment, duly endorsed in blank with signature(s)
guaranteed, corresponding to each certificate representing Shares of Restricted
Stock until such Shares become Vested Shares. If Grantee shall fail to provide
the Company with any such stock power or other instrument of transfer or
assignment, Grantee hereby irrevocably appoints the Secretary of the Company as
his attorney-in-fact, with full power of appointment and substitution, to
execute and deliver any such power or other instrument which may be necessary to
effectuate the transfer of the Restricted Stock (or assignment of distributions
thereon) on the books and records of the Company.

 

Refusal to Transfer. The Company shall not be required (i) to transfer on its
books any Shares that have been sold or otherwise transferred in violation of
any of the provisions of this Agreement or (ii) to treat as owner of such
Shares, or to accord the right to vote or pay dividends to any purchaser or
other transferee to whom such Shares have been so transferred.

 

 

 

 

 

 13 

 

 

Delivery of Stock Certificates. On or after each Vesting Date, upon written
request to the Company by Grantee, the Company shall promptly cause a new
certificate or certificates to be issued to Grantee for and with respect to all
Shares that become Vested Shares on that Vesting Date, which certificate(s)
shall be delivered to Grantee as soon as administratively practicable after the
date of receipt by the Company of Grantee’s written request. The new certificate
or certificates shall continue to bear those legends and endorsements that the
Company shall deem necessary or appropriate (including those relating to
restrictions on transferability and/or obligations and restrictions under
applicable securities laws).

 

Issuance Without Certificates. If the Company is authorized to issue Shares
without certificates, then the Company may, in the discretion of the Board,
issue Shares pursuant to this Agreement without certificates, in which case any
references in this Agreement to certificates shall instead refer to whatever
evidence may be issued to reflect Grantee’s ownership of the Shares subject to
the terms and conditions of this Agreement.

 

Forfeiture of Non-Vested Shares. If Grantee’s Continuous Service with the
Company and the Related Entities is terminated for any reason, all Non-Vested
Shares shall be forfeited immediately upon such termination of Continuous
Service and revert back to the Company without any payment to Grantee. The Board
shall have the power and authority to enforce on behalf of the Company any
rights of the Company under this Agreement in the event of Grantee’s forfeiture
of Non-Vested Shares pursuant to this Section 4.

 

Rights with Respect to Restricted Stock.

 

General. Except as otherwise provided in this Agreement, Grantee shall have,
with respect to all of the Shares of Restricted Stock, whether Vested Shares or
Non-Vested Shares, all of the rights of a holder of Shares of Common Stock of
the Company, including without limitation (i) the right to vote such Restricted
Stock, (ii) the right to receive dividends, if any, as may be declared on the
Restricted Stock from time to time, and (iii) the rights available to all
holders of Shares of Common Stock of the Company upon any merger, consolidation,
reorganization, liquidation or dissolution, stock split-up, stock dividend or
recapitalization undertaken by the Company; provided, however, that all of such
rights shall be subject to the terms, provisions, conditions and restrictions
set forth in this Agreement (including without limitation conditions under which
all such rights shall be forfeited). Any Shares issued to Grantee as a dividend
with respect to Shares of Restricted Stock shall have the same status and bear
the same legend as the Shares of Restricted Stock and shall be held by the
Company, if the Shares of Restricted Stock that such dividend is attributed to
is being so held, unless otherwise determined by the Board.

 

No Restrictions on Certain Transactions. Notwithstanding any term or provision
of this Agreement to the contrary, the existence of this Agreement, or of any
outstanding Restricted Stock awarded hereunder, shall not affect in any manner
the right, power or authority of the Company to make, authorize or consummate:
(i) any or all adjustments, recapitalizations, reorganizations or other changes
in the Company’s capital structure or its business; (ii) any merger,
consolidation or similar transaction by or of the Company; (iii) any offer,
issue or sale by the Company of any capital stock of the Company, including any
equity or debt securities, or preferred or preference stock that would rank
prior to or on parity with the Restricted Stock and/or that would include, have
or possess other rights, benefits and/or preferences superior to those that the
Restricted Stock includes, has or possesses, or any warrants, options or rights
with respect to any of the foregoing; (iv) the dissolution or liquidation of the
Company; (v) any sale, transfer or assignment of all or any part of the stock,
assets or business of the Company; or (vi) any other corporate transaction, act
or proceeding (whether of a similar character or otherwise).

 

Transferability. Unless otherwise determined by the Board, the Shares of
Restricted Stock are not transferable unless and until the later of (i) the date
that is twelve (12) months after the date hereof and (ii) the date such Shares
become Vested Shares in accordance with this Agreement, otherwise than by will
or under the applicable laws of descent and distribution. The terms of this
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of Grantee. Except as otherwise permitted pursuant to the first
sentence of this Section 5(C), any attempt to effect a Transfer of any Shares of
Restricted Stock prior to the date on which the Shares become Vested Shares
shall be void ab initio. For purposes of this Agreement, “Transfer” shall mean
any sale, transfer, encumbrance, gift, donation, assignment, pledge,
hypothecation, or other disposition, whether similar or dissimilar to those
previously enumerated, whether voluntary or involuntary, and including, but not
limited to, any disposition by operation of law, by court order, by judicial
process, or by foreclosure, levy or attachment.

 

 

 

 

 14 

 

 

Representations and Warranties of Grantee. Grantee hereby represents and
warrants to the Company that:

 

Terms of this Agreement. Grantee has received a copy of this Agreement, has read
and understands the terms of this Agreement, and agrees to be bound by its terms
and conditions.

 

Acceptance of Shares for Own Account for Investment. Grantee is acquiring the
Shares for Grantee’s own account for investment purposes only and not with a
view to, or for sale in connection with, a distribution of the Shares within the
meaning of the Securities Act of 1933, as amended (the “Securities Act”).
Grantee has no present intention of selling or otherwise disposing of all or any
portion of the Shares.

 

Access to Information. Grantee has had access to all information regarding the
Company and its present and prospective business, assets, liabilities and
financial condition that Grantee reasonably considers important in making the
decision to acquire the Shares, and Grantee has had ample opportunity to ask
questions of the Company’s representatives concerning such matters and this
investment.

 

Understanding of Risks. Grantee is fully aware of: (i) the highly speculative
nature of the investment in the Shares; (ii) the financial hazards involved;
(iii) the lack of liquidity of the Shares and the restrictions on
transferability of the Shares (e.g., that Grantee may not be able to sell or
dispose of the Shares or use them as collateral for loans); (iv) the
qualifications and backgrounds of the management of the Company; and (v) the tax
consequences of an investment in the Shares. Grantee is capable of evaluating
the merits and risks of this investment, has the ability to protect Grantee’s
own interests in this transaction and is financially capable of bearing a total
loss of this investment.

 

Accredited Investor. Grantee is an “accredited investor” pursuant to Rule 501(a)
of Regulation D under the Securities Act.

 

No General Solicitation. At no time was Grantee presented with or solicited by
any publicly issued newspaper, mail, radio, television or other form of general
advertising or solicitation in connection with the offer, sale and issue of the
Shares.

 

Compliance with Securities Laws. Grantee understands and acknowledges that the
Shares have not been registered with the Securities and Exchange Commission (the
“SEC”) under the Securities Act and that, notwithstanding any other provision of
this Agreement to the contrary, the issuance of any Shares is expressly
conditioned upon compliance with the Securities Act and all applicable state
securities laws. Grantee agrees to cooperate in good faith (but at no material
cost to Grantee) with the Company to ensure compliance with such laws.

 

No Transfers Unless Registered or Exempt. Grantee understands that Grantee may
not transfer any Shares unless such Shares are registered under the Securities
Act and qualified under applicable state securities laws or unless, in the good
faith opinion of counsel to the Company, exemptions from such registration and
qualification requirements are available. Grantee understands that only the
Company may file a registration statement with the SEC and that the Company is
under no obligation to do so with respect to the Shares. Grantee has also been
advised that exemptions from registration and qualification may not be available
or may not permit Grantee to transfer all or any of the Shares in the amounts or
at the times proposed by Grantee.

 

SEC Rule 144. In addition, Grantee has been advised that SEC Rule 144
promulgated under the Securities Act, which permits certain limited sales of
unregistered securities, may not always be available with respect to the Shares
and, in any event, requires that the Shares be held for a minimum of six months,
and in certain cases one (1) year, after they have been acquired before they may
be resold under Rule 144. Grantee understands that Rule 144 may indefinitely
restrict transfer of the Shares so long as Grantee remains an “affiliate” of the
Company or if “current public information” about the Company (as defined in Rule
144) is not publicly available.

 

 

 

 

 

 15 

 

 

Market Standoff Agreement. Grantee agrees in connection with any registration of
the Company’s securities that, upon the request of the Company or the
underwriters managing any public offering of the Company’s securities, Grantee
shall not sell or otherwise dispose of any Shares without the prior written
consent of the Company or such underwriters, as the case may be, for such period
of time (not to exceed one hundred eighty (180) days) after the effective date
of such registration that is requested by such underwriters and subject to all
restrictions as the Company or the underwriters may specify. Grantee further
agrees to enter into any agreement reasonably required by the underwriters to
implement the foregoing.

 

Tax Matters; Section 83(b) Election.

 

Section 83(b) Election. If Grantee properly elects, within thirty (30) days of
the applicable Award Date, to include in gross income for federal income tax
purposes an amount equal to the fair market value (as of the applicable Award
Date) of the Restricted Stock pursuant to Section 83(b) of the Internal Revenue
Code of 1986, as amended (the “Code”), Grantee shall make arrangements
satisfactory to the Company to pay to the Company any federal, state or local
income taxes required to be withheld with respect to the Restricted Stock. If
Grantee shall fail to make such tax payments as are required, the Company shall,
to the extent permitted by law, have the right to deduct from any payment of any
kind (including without limitation, the withholding of any Shares that otherwise
would be issued to Grantee under this Agreement) otherwise due to Grantee any
federal, state or local taxes of any kind required by law to be withheld with
respect to the Restricted Stock.

 

No Section 83(b) Election. If Grantee does not properly make the election
described in paragraph 7(A) above, Grantee shall, no later than the date or
dates as of which the restrictions referred to in this Agreement hereof shall
lapse, pay to the Company, or make arrangements satisfactory to the Board for
payment of, any federal, state or local taxes of any kind required by law to be
withheld with respect to the Restricted Stock (including without limitation the
vesting thereof), and the Company shall, to the extent permitted by law, have
the right to deduct from any payment of any kind (including without limitation,
the withholding of any Shares that otherwise would be distributed to Grantee
under this Agreement) otherwise due to Grantee any federal, state, or local
taxes of any kind required by law to be withheld with respect to the Restricted
Stock.

 

Satisfaction of Withholding Requirements. Grantee may satisfy the withholding
requirements with respect to the Restricted Stock pursuant to any one or
combination of the following methods: (a) payment in cash; or (b) if and to the
extent permitted by the Board, payment by surrendering unrestricted previously
held Shares which have a value equal to the required withholding amount or the
withholding of Shares that otherwise would be deliverable to Grantee pursuant to
this Award. Grantee may surrender Shares either by attestation or by delivery of
a certificate or certificates for Shares duly endorsed for transfer to the
Company, and if required with medallion level signature guarantee by a member
firm of a national stock exchange, by a national or state bank (or guaranteed or
notarized in such other manner as the Board may require).

 

Grantee’s Responsibilities for Tax Consequences. Tax consequences on Grantee
(including without limitation federal, state, local and foreign income tax
consequences) with respect to the Restricted Stock (including without limitation
the grant, vesting and/or forfeiture thereof) are the sole responsibility of
Grantee. Grantee shall consult with his or her own personal accountant(s) and/or
tax advisor(s) regarding these matters, the making of a Section 83(b) election,
and Grantee’s filing, withholding and payment (or tax liability) obligations.

 

Amendment, Modification & Assignment; Non-Transferability. This Agreement may
only be modified or amended in a writing signed by both the Company and the
Grantee. No promises, assurances, commitments, agreements, undertakings or
representations, whether oral, written, electronic or otherwise, and whether
express or implied, with respect to the subject matter hereof, have been made by
either party which are not set forth expressly in this Agreement. Unless
otherwise consented to in writing by the Company, in its sole discretion, this
Agreement (and Grantee’s rights hereunder) may not be assigned, and the
obligations of Grantee hereunder may not be delegated, in whole or in part. The
rights and obligations created hereunder shall be binding on Grantee and his
heirs and legal representatives and on the successors and assigns of the
Company.

 

Complete Agreement. This Agreement (together with those agreements and documents
expressly referred to herein, but only for the purposes referred to herein)
embody the complete and entire agreement and understanding between the parties
with respect to the subject matter hereof, and supersede any and all prior
promises, assurances, commitments, agreements, undertakings or representations,
whether oral, written, electronic or otherwise, and whether express or implied,
which may relate to the subject matter hereof in any way.

 

 

 

 

 

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Miscellaneous.

 

No Right to (Continued) Employment or Service. This Agreement and the grants of
Restricted Stock hereunder shall not shall confer, or be construed to confer,
upon Grantee any right to employment or service, or continued employment or
service, with the Company or any Related Entity.

 

No Limit on Other Compensation Arrangements. Nothing contained in this Agreement
shall preclude the Company or any Related Entity from adopting or continuing in
effect other or additional compensation plans, agreements or arrangements, and
any such plans, agreements and arrangements may be either generally applicable
or applicable only in specific cases or to specific persons.

 

Severability. If any term or provision of this Agreement is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or under any
applicable law, rule or regulation, then such provision shall be construed or
deemed amended to conform to applicable law (or if such provision cannot be so
construed or deemed amended without materially altering the purpose or intent of
this Agreement and the grants of Restricted Stock to Grantee hereunder, such
provision shall be stricken as to such jurisdiction and the remainder of this
Agreement and the award hereunder shall remain in full force and effect).

 

No Trust or Fund Created. Neither this Agreement nor the grants of Restricted
Stock hereunder shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Company or any Related
Entity and Grantee or any other person. To the extent that Grantee or any other
person acquires a right to receive payments from the Company or any Related
Entity pursuant to this Agreement, such right shall be no greater than the right
of any unsecured general creditor of the Company.

 

Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Nevada (without reference to
the conflict of laws rules or principles thereof).

 

Interpretation. Grantee accepts the Restricted Stock subject to all of the
terms, provisions and restrictions of this Agreement. The undersigned Grantee
hereby accepts as binding, conclusive and final all decisions or interpretations
of the Board upon any questions arising under this Agreement.

 

Headings. Section, paragraph and other headings and captions are provided solely
as a convenience to facilitate reference. Such headings and captions shall not
be deemed in any way material or relevant to the construction, meaning or
interpretation of this Agreement or any term or provision hereof.

 

 

 

 

 

 

 

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Notices. Any and all notices provided for in this Agreement shall be given in
writing and shall be deemed given to a party at the earlier of (a) when actually
delivered to such party, or (b) when mailed to such party by registered or
certified mail (return receipt requested) or sent to such party by courier,
confirmed by receipt, and addressed to such party at the address designated
below for such party as follows (subject to the right of either party to
designate some other address at any time hereafter in a notice satisfying the
requirements of this Section 8(H)):

 

  If to the Company: Freedom Leaf Inc.     3571 E. Sunset Road, Suite 420    
Las Vegas, NV 89120         with a copy to: Kleinberg, Kaplan, Wolff & Cohen,
P.C.     551 Fifth Avenue     New York, NY 10176     Telecopy: (212) 986-8866  
  Telephone: (212) 880-9869     Email: jain@kkwc.com     Attention: Jonathan Ain
        If to Grantee: Alex Frias:     ____________________________________    
____________________________________     Telephone: ___________________________
    Email: _______________________________         with a copy to: Saunders
Koechel & Sharp LLP     Attention: John Koechel     5404 Birchman Avenue    
Fort Worth, Texas 76107     Telecopy: 303.396.0243     Telephone: 214.923.7577  
  Email: koechel@skandslegal.com

 

Section 409A.

 

It is intended that the Restricted Stock awarded pursuant to this Agreement be
exempt from Section 409A of the Code (“Section 409A”) because it is believed
that the Agreement does not provide for a deferral of compensation and
accordingly that the Agreement does not constitute a nonqualified deferred
compensation plan within the meaning of Section 409A. The provisions of this
Agreement shall be interpreted in a manner consistent with this intention, and
the provisions of this Agreement shall not be amended, adjusted, assumed or
substituted for, converted or otherwise modified without Grantee’s prior written
consent if and to the extent that the Company believes or reasonably should
believe that such amendment, adjustment, assumption or substitution, conversion
or modification would cause the award to violate the requirements of Section
409A.

 

 

 

 

 

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In the event that either the Company or Grantee believes, at any time, that any
benefit or right under this Agreement is subject to Section 409A, and does not
comply with the requirements of Section 409A, it shall promptly advise the other
and the Company and Grantee shall negotiate reasonably and in good faith to
amend the terms of such benefits and rights, if such an amendment may be made in
a commercially reasonable manner, such that they comply with Section 409A with
the most limited possible economic effect on Grantee and on the Company.

 

Notwithstanding the foregoing, the Company does not make any representation to
Grantee that the Shares of Restricted Stock awarded pursuant to this Agreement
are exempt from, or satisfies, the requirements of Section 409A, and the Company
shall have no liability or other obligation to indemnify or hold harmless
Grantee or any beneficiary for any tax, additional tax, interest or penalties
that Grantee or any beneficiary may incur in the event that any provision of
this Agreement, or any amendment or modification thereof or any other action
taken with respect thereto that either is consented to by Grantee or that the
Company reasonably believes should not result in a violation of Section 409A, is
deemed to violate any of the requirements of Section 409A

 

Non-Waiver of Breach. The waiver by any party hereto of the other party’s prompt
and complete performance, or breach or violation, of any term or provision of
this Agreement shall be effected solely in a writing signed by such party, and
shall not operate nor be construed as a waiver of any subsequent breach or
violation, and the waiver by any party hereto to exercise any right or remedy
which he or it may possess shall not operate nor be construed as the waiver of
such right or remedy by such party, or as a bar to the exercise of such right or
remedy by such party, upon the occurrence of any subsequent breach or violation.

 

Reliance on Counsel and Advisors. Grantee acknowledges that Kleinberg, Kaplan,
Wolff & Cohen, P.C., is representing only the Company in this transaction.
Grantee acknowledges that he or she has had the opportunity to review this
Agreement, including all attachments hereto, and the transactions contemplated
by this Agreement with his or her own legal counsel, tax advisors and other
advisors. Grantee is relying solely on his or her own counsel and advisors and
not on any statements or representations of the Company or its agents for legal
or other advice with respect to this investment or the transactions contemplated
by this Agreement.

 

Counterparts. This Agreement may be executed in one or more counterparts, each
of which will be deemed an original, but all of which together will constitute
one and the same agreement. This Agreement may be executed and delivered by
facsimile or other electronic transmission. A complete, accurate, fully-executed
PDF or other facsimile copy of this Agreement may be used in place of an
original for all purposes.

 

(signature page follows)

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed this Agreement as of the date first written above.

 

 

ALEX FRIAS

 

 

 

 

_______________________________________ 

Signature

 

 

 

FREEDOM LEAF INC.

 

By: ___________________________________

 

Name: _________________________________

 

Title: __________________________________

 

 

 

 

 

 

 

 

 

 

 

 

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