# EDGAR Filing Document

**Accession Number:** 0001644903
**File Stem:** 0001437749-25-036497
**Filing Date:** 2025-11
**Character Count:** 102099
**Document Hash:** 958c65f359a76fdc1936955196fa03c0
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001437749-25-036497.hdr.sgml**: 20251128

**ACCESSION NUMBER**: 0001437749-25-036497

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 16

**CONFORMED PERIOD OF REPORT**: 20251128

**ITEM INFORMATION**: Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20251128

**DATE AS OF CHANGE**: 20251128

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** cbdMD, Inc.
- **CENTRAL INDEX KEY:** 0001644903
- **STANDARD INDUSTRIAL CLASSIFICATION:** PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS [2844]
- **ORGANIZATION NAME:** 08 Industrial Applications and Services
- **EIN:** 473414576
- **STATE OF INCORPORATION:** NC
- **FISCAL YEAR END:** 0930

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-38299
- **FILM NUMBER:** 251536569

**BUSINESS ADDRESS:**
- **STREET 1:** 8845 RED OAK BOULEVARD
- **CITY:** CHARLOTTE
- **STATE:** NC
- **ZIP:** 28217
- **BUSINESS PHONE:** 704-445-3060

**MAIL ADDRESS:**
- **STREET 1:** 8845 RED OAK BOULEVARD
- **CITY:** CHARLOTTE
- **STATE:** NC
- **ZIP:** 28217

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Level Brands, Inc.
- **DATE OF NAME CHANGE:** 20170202

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** LEVEL BEAUTY GROUP, INC.
- **DATE OF NAME CHANGE:** 20150611

?xml version='1.0' encoding='ASCII'? ycbd20251128_8k.htm

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**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

**FORM 8-K**

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

**Date of Report (Date of earliest event reported): November 28, 2025**

![cbdmd01.jpg](cbdmd01.jpg)

---

| |
|:---|
| **cbdMD, INC.** |
| *(Exact name of registrant as specified in its charter)* |

---

---

| | | |
|:---|:---|:---|
| **North Carolina** | **001-38299** | **47-3414576** |
| *(State or other jurisdiction of incorporation or organization)* | *(Commission File Number)* | *(I.R.S. Employer Identification No.)* |

---

**2101 Westinghouse Blvd., Suite A, Charlotte, NC 28273**

*(Address of principal executive offices)(Zip Code)*

Registrant's telephone number, including area code: (**704) 445-3060**

*(Former name or former address, if changed since last report)*<br>

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

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| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
| Common Stock | YCBD | NYSE American |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐<br>

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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**Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.**

On November 28, 2025, cbdMD, Inc., a North Carolina corporation (the "Company") entered into an Executive Employment Agreement (the "Agreement") with T. Ronan Kennedy, the Company's Chief Executive Officer and Chief Financial Officer.

The term of the Agreement commenced on November 28, 2025 and expires three years thereafter and may be extended for additional one-year periods unless terminated. The Company will pay Mr. Kennedy a base salary of $340,000. The Company also granted Mr. Kennedy a restricted stock award for 445,000 shares of the Company's common stock pursuant to the Company's 2025 Equity Compensation Plan (the "2025 Plan") disclosed below. The vesting and issuance of the shares is subject to shareholder approval.

The description of the Agreement is not complete and is qualified in its entirety by the full text of the Agreement filed herewith as Exhibit 10.1 which is incorporated by reference into this Item 5.02.

On November 28, 2025, the board of directors of the Company approved the 2025 Plan, as the Company's 2015 Equity Compensation Plan has expired and there is a nominal number of shares available under the Company's 2021 Equity Compensation Plan. Our board of directors will recommend that the 2025 Plan be approved by our shareholders at our upcoming 2026 annual meeting.

The purpose of the 2025 Plan is to enable the Company to offer to its employees, officers, directors and consultants whose past, present and/or potential contributions to the Company and its Subsidiaries have been, are or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. The 2025 Plan reserves 891,316 shares of our common stock for issuance pursuant to the terms of the plan upon the grant of plan options, restricted stock awards, or other stock-based awards granted under the 2025 Plan. The 2025 Plan also contains an "evergreen formula" pursuant to which the number of shares of common stock available for issuance under the 2025 Plan will automatically increase on October 1 of each calendar year during the term of the 2025 Plan, beginning with calendar year 2026, (i) by an amount equal to 2% of the total number of shares of common stock outstanding on September 30 of the such calendar year, up to a maximum of 300,000 shares or (ii) to no more than 10% of the then number of issued and outstanding shares of the Company's common stock as of the date of such increase.

The 2025 Plan will be administered by the Compensation, Corporate Governance and Nominating Committee of our board of directors. Such committee is comprised of independent member of our board of directors in accordance with the rules of the NYSE American LLC, the exchange on which our common stock is presently listed. The Compensation, Corporate Governance and Nominating Committee will determine, from time to time, those of individuals to whom stock awards or plan options will be granted, the terms and provisions of each such grant, the dates such grants will become exercisable, the number of shares subject to each grant, the purchase price of such shares and the form of payment of such purchase price. All other questions relating to the administration of the 2025 Plan and the interpretation of the provisions thereof are to be resolved at the sole discretion of the Compensation, Corporate Governance and Nominating Committee.

The 2025 Plan provides for the grant of restricted stock awards, deferred stock grants, stock appreciation rights, incentive stock options ("ISOs") and non-qualified stock options ("NQOs"). Awards may be made or granted to our employees, officers, directors and consultants who are deemed to have rendered or to be able to render significant services to the Company or our subsidiaries and who are deemed to have contributed or to have the potential to contribute to the success of our company. Any plan option granted under the 2025 Plan must provide for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of such grant, but the exercise price of any ISO granted to an eligible employee owning more than 10% of our common stock must be at least 110% of such fair market value as determined on the date of the grant. No ISOs may be granted to any person who is not an employee of the Company or a subsidiary at the time of grant. The recipient of any grant under the 2025 Plan, and the amount and terms of a specific grant, will be determined by the Compensation, Corporate Governance and Nominating Committee.

------

The term of each plan option will be fixed by the Compensation, Corporate Governance and Nominating Committee; *provided, however*, that an ISO may be granted only within the 10-year period commencing from the date of adoption of the 2025 Plan by our board of directors and may only be exercised within 10 years of the date of grant, or five years in the case of an ISO granted to an optionee who, at the time of grant, owns shares of our common stock possessing more than 10% of the total combined voting power of all classes of stock of the Company. The exercise price per share of common stock purchasable under a plan option will be determined by the Compensation, Corporate Governance and Nominating Committee at the time of grant and may not be less than 100% of the fair market value on the day of grant, or, in the case of a grant of an ISO to a 10% or greater shareholder, not be less than 110% of the fair market value on the date of grant.

Shares of restricted stock may be awarded either alone or in addition to other awards granted under the 2025 Plan. The Compensation, Corporate Governance and Nominating Committee, subject to board of directors authorization, if indicated, may determine the eligible persons to whom, and the time or times at which, grants of restricted stock will be awarded, the number of shares to be awarded, the price (if any) to be paid by the holder, the time or times within which such awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the awards. Restricted stock will constitute issued and outstanding shares of our common stock for all corporate purposes. The holder will have the right to vote such restricted stock, to receive and retain all regular cash dividends and other cash equivalent distributions as the board of directors may in its sole discretion designate, pay or distribute on such restricted stock and to exercise all other rights, powers and privileges of a holder of common stock with respect to such restricted stock, with the exceptions that (i) the holder will not be entitled to delivery of the stock certificate or certificates representing such restricted stock until the restriction period, if any, has expired and unless all other vesting requirements with respect thereto shall have been fulfilled; (ii) the Company will retain custody of the stock certificate or certificates representing the restricted stock during the restriction period; (iii) other than regular cash dividends and other cash equivalent distributions as the board of directors may in its sole discretion designate, pay or distribute, we will retain custody of all distributions made or declared with respect to the restricted stock until such time, if ever, as the restricted stock with respect to which such retained distributions may be made, paid or declared has become vested; (iv) such award has not been forfeited.

Other stock-based awards may be awarded, subject to limitations under applicable law, that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of common stock, as deemed by the Compensation, Corporate Governance and Nominating Committee to be consistent with the purposes of the 2025 Plan, including, without limitation, purchase rights, shares of common stock awarded which are not subject to any restrictions or conditions, or other rights convertible into shares of common stock and awards valued by reference to the value of securities of or the performance of specified subsidiaries. Other stock-based awards may be awarded either alone or in addition to or in tandem with any other awards under the 2025 Plan or any other plan of the Company. Each other stock-based award will be subject to such terms and conditions as may be determined by the Compensation, Corporate Governance and Nominating Committee.

The 2025 Plan became effective on the date of its adoption by our board of directors. To the extent that the 2025 Plan authorizes the award of ISOs, the failure to obtain shareholder approval for the 2025 Plan by November 28, 2025 does not invalidate the 2025 Plan; *provided, however*, that (i) in the absence of such shareholder approval, ISOs may not be awarded under the 2025 Plan and (ii) any ISOs previously awarded under the 2025 Plan will automatically be converted into NQOs upon terms and conditions determined by the Compensation, Corporate Governance and Nominating Committee to reflect, as nearly as is reasonably practicable in its sole determination, the terms and conditions of the ISOs so converted. Furthermore, grants under the 2025 Plan will not vest until shareholder approval is received.

Our board of directors may at any time, and from time to time, amend alter, suspend or discontinue any of the provisions of the 2025 Plan, but no amendment, alteration, suspension or discontinuance may be made that would impair the rights of a holder of any outstanding grant or award under the 2025 without such holder's consent. Unless the 2025 Plan is suspended or terminated by the board of directors, the 2025 Plan will terminate 10 years from the date of its adoption. Any termination of the 2025 Plan will not affect the validity of any options previously granted thereunder.

The foregoing description of the terms and conditions of the 2025 Plan is qualified in its entirety by reference to the 2025 Plan, the form of which is filed as Exhibit 10.2 to this report.

------

**Item 9.01 Financial Statements and Exhibits.**

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| | |
|:---|:---|
| **Exhibit** | **Description** |
| 10.1 | [Executive Employment Agreement dated November 28, 2025 by and between cbdMD, Inc. and T. Ronan Kennedy](ex_893882.htm) |
| 10.2 | [cbdMD, Inc. 2025 Equity Compensation Plan](ex_893883.htm) |
| 104 | Cover Page Interactive Data File (embedded within the inline XBRL document) |

---

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | cbdMD, Inc. | cbdMD, Inc. |
| Date: November 28, 2025 | By: | /*s/ T. Ronan Kennedy* |
|  |  | T. Ronan Kennedy, Chief Executive Officer and Chief Financial Officer |

---

## Exhibit 10.1

**Exhibit 10.1**

**EXECUTIVE EMPLOYMENT AGREEMENT**

**THIS EXECUTIVE EMPLOYMENT AGREEMENT** (this "**<u>Agreement</u>**") is made and entered on November __, 2025 (the "**<u>Effective Date</u>**") between **cbdMD, Inc.**, a North Carolina corporation whose principal place of business is 2102 Westinghouse Blvd., Suite A, Charlotte, NC 28273 (the "**<u>Corporation</u>**") and **T. Ronan Kennedy**, an individual whose address is 2713 Full Circle, Raleigh, NC 27613 (the "**<u>Executive</u>**").

**RECITALS**

**WHEREAS**, the Corporation produces and distributes various high-grade, premium cannabidiol CBD products (the "**<u>Business</u>**").

**WHEREAS**, the Corporation employs the Executive under that certain Executive Employment Agreement dated October 1, 2021 which has expired.

**WHEREAS**, the Corporation desires to continue to employ the Executive and the Executive desires to continue to be employed by the Corporation pursuant to the terms of this Agreement.

**WHEREAS**, the Executive, by virtue of the Executive's employment with the Corporation, will become familiar with and possess with the manner, methods, trade secrets and other confidential information pertaining to the Corporation's business, including the Corporation's client base.

**NOW, THEREFORE**, in consideration of the mutual agreements herein made, the Corporation and the Executive do hereby agree as follows:

1. **<u>Recitals</u>**. The above recitals are true, correct, and are herein incorporated by reference.

2. **<u>Employment</u>**. The Corporation hereby agrees to employ the Executive, and the Executive hereby accepts employment, upon the terms and conditions hereinafter set forth.

3. **<u>Authority and Power During Employment Period</u>**.

a. **<u>Duties and Responsibilities</u>**. During the term of this Agreement, the Executive will serve as Chief Executive Officer and Chief Financial Officer and in this capacity, shall serve as the Corporation's principal executive and financial officer and perform such other or additional duties and responsibilities consistent with Executive's title(s), status, and position as the Chief Executive Officer and Chief Financial Officer and may work remotely and shall report directly to the Corporation's Board of Directors.

b. **<u>Time Devoted</u>**. Throughout the term of the Agreement, the Executive shall devote substantially all of the Executive's business time and attention to the business and affairs of the Corporation consistent with the Executive's senior executive position with the Corporation, except for reasonable vacations and except for illness or incapacity, but nothing in the Agreement shall preclude the Executive from engaging in personal business, including as a corporate director, charitable and community affairs, or other passive investments, provided that such activities do not materially interfere with the regular performance of the Executive's duties and responsibilities under this Agreement.

------

4. **<u>Term</u>**. The Term of employment hereunder will commence on the Effective Date and end on the third (3rd) anniversary of the Effective Date (the "**<u>Term</u>**") and shall automatically be extended for additional one (1) year periods (each a "**<u>Renewal Term</u>**") unless either party provides written notice of non-renewal to the other party at least sixty (60) days before the expiration of the Term or the Renewal Term, as the case may be, or unless this Agreement shall have been terminated pursuant to Section 6 of this Agreement. If the Corporation provides notice of non-renewal, such non-renewal shall be treated as a termination without Cause under Section 6d.

5. **<u>Compensation and Benefits</u>**. During the term of this Agreement the Executive shall be entitled to the following compensation and benefits:

a. **<u>Salary</u>**. The Executive shall be paid a base salary of $340,000 ("**<u>Base Salary</u>**"), payable in accordance with the Corporation's standard payroll policies from time to time for senior executives.

b. **<u>Performance Bonus Opportunities</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Executive shall be eligible to receive quarterly performance bonuses of $35,000 per quarter (or up to $140,000 per annum) (the "  **<u>Performance Bonus</u>** "). The Performance Bonus shall be paid within the first month of the quarter following the quarter in which it is earned. The Performance Bonus shall be based upon Executive's achievement of quarterly performance goals established by the Board upon recommendation by the Corporation's Compensation, Nominating and Corporate Governance Committee (the "  **<u>Committee</u>** "). Such performance goals shall be established by the Board of Directors no later than 30 days after the beginning of each quarter and shall be objective, measurable, and reasonably achievable. If the Board of Directors fails to establish performance goals within such timeframe, the Executive shall be entitled to the full Performance Bonus for that quarter. If the Corporation develops a sustainable business generating positive EBITDA, an escalator shall apply based on the extent of overachievement of the established performance goals. For every 10% positive variance above target performance, the Performance Bonus shall increase by 10%, up to a maximum of 25% above the target bonus (for a total potential annual bonus of up to $175,000).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The determination of the achievement of the quarterly performance goals shall be made by the Committee as soon as practicable following the completion of the Corporation's quarterly financial statements for the applicable fiscal quarter. The payment of each Performance Bonus, if any, shall be made to the Executive within sixty (60) days of such determination.

------

c. **<u>Discretionary Bonus</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Committee shall review the Executive's performance on an annual basis, and in connection with such annual review, the Executive may be entitled to receive an annual discretionary bonus (the "  **<u>Annual Discretionary Bonus</u>**") in such amount as may be determined by the Board of Directors, upon recommendation of the Committee, in its reasonable discretion, taking into account the Executive's performance, the Corporation's financial performance, and market compensation for comparable positions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The Committee shall commence each annual review by the last business day of January of the year following the review year. The Annual Discretionary Bonus, if any, shall be paid to the Executive by the last business day of February of the year following the review year, or, if no Annual Discretionary Bonus is awarded, the Committee shall so notify the Executive in writing of such determination by that same deadline. For example, the Committee review for the year ending December 31, 2025 shall commence no later than January 31, 2026, and, assuming an Annual Discretionary Bonus is to be awarded, the Executive shall be paid the Annual Discretionary Bonus for the year ending December 31, 2025 on or before February 28, 2026. The Annual Discretionary Bonus, if any, may be paid to the Executive in the form of cash, equity awards made under the Corporation's 2021 Equity Compensation Plan or such other compensation plan as may be adopted by the Corporation and its shareholders (collectively, the "  **<u>Plan</u>**") or a combination thereof, as determined by the Committee in its sole discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Any Annual Discretionary Bonus may be granted to the Executive pursuant to the terms and conditions of the Plan or otherwise.

d. **<u>Restricted Stock Award; Stock Options</u>**. As of the Effective Date, the Corporation shall grant to the Executive the restricted stock awards and/or stock options as set forth in the award agreement(s) attached hereto as <u>Exhibit A</u> and incorporated herein by such reference.

e. **<u>Executive Benefits</u>**. The Executive shall be entitled to participate in all benefit programs of the Corporation currently existing or hereafter made available to executive and/or salaried employees including, but not limited to, stock option plans, pension and other retirement plans, group life insurance, hospitalization, surgical and major medical coverage, sick leave, salary continuation, vacation and holidays, long-term disability, and other fringe benefits.

f. **<u>Vacation</u>**. During each fiscal year of the Corporation, the Executive shall be entitled to five weeks of paid vacation.

------

g. **<u>Business Expense Reimbursement</u>**. The Executive shall be entitled to receive proper reimbursement for all reasonable, out of-pocket expenses incurred by the Executive (in accordance with the policies and procedures established by the Corporation) in performing services hereunder, provided the Executive properly accounts therefor.

h. **<u>Termination and</u>**<u> </u>**<u>Clawback Provisions</u>**. The Executive shall continue to receive salary compensation only for the period ending with the effective date of such termination as provided in Section 6. Any rights and benefits the Executive may have in respect of any other compensation shall be determined in accordance with the terms of such other compensation arrangements or such plans or programs. Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with the Corporation which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Corporation pursuant to any such law, government regulation or stock exchange listing requirement).

6. **<u>Termination</u>**.

a. **<u>Death</u>**. If Executive shall die while employed by the Corporation (during the Term of this Agreement or otherwise), except as otherwise provided herein, all of Executive's rights under this Agreement shall terminate following the payment of (1) such amounts of Base Salary that have accrued but remain unpaid; (2) the payment of a pro rata portion of his target bonus amount under the Performance Bonus through the month in which his death occurs; and (3) three additional months of such Base Salary and bonus payments. The Executive's eligible dependents shall also receive continued benefit plan coverage under Section 5(d) for three months from the date of Executive's death.

b. **<u>Disability</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Executive's employment will terminate in the event of his disability, upon the first day of the month following the determination of disability as provided below. Following such a termination, the Executive shall be entitled to compensation in accordance with the Corporation's disability compensation practice for senior executives, including any separate arrangement or policy covering the Executive, but in all events the Executive shall continue to receive his Base Salary, at the annual rate in effect immediately prior to the commencement of disability, for 12 months after the termination. Any amounts provided for in this Section 6b shall not be offset by other long-term disability benefits provided to the Executive by the Corporation or Social Security.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)  **<u>"Disability</u>** ," for the purposes of this Agreement, shall be deemed to have occurred if (A) the Executive is unable, by reason of a physical or mental condition, to perform the essential functions of his duties under this Agreement, even with reasonable accommodation, for an aggregate of one hundred 180 consecutive days or two hundred 240 days in any 12-month period or (B) the Executive has a guardian of the person or estate appointed by a court of competent jurisdiction. The determination of disability under subsection (A) shall be made by a physician mutually agreed upon by the Corporation and the Executive (or its representatives).

------

Anything herein to the contrary notwithstanding, if, following a termination of employment due to disability, the Executive becomes re-employed, whether as an executive or a consultant, any compensation, annual incentive payments or other benefits earned by the Executive from such employment shall be offset against any compensation continuation due to the Executive hereunder.

c. **<u>Termination by the Corporation For Cause</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Nothing herein shall prevent the Corporation from terminating Executive for Cause, as hereinafter defined. The Executive shall continue to receive compensation only for the period ending with the date of such termination as provided in this Section 6c. Any rights and benefits the Executive may have in respect of any other compensation shall be determined in accordance with the terms of such other compensation arrangements or such plans or programs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)  **<u>"Cause</u>**" shall mean (A) committing or participating in an injurious act of fraud, gross neglect, misrepresentation, or embezzlement against the Corporation; (B) committing or participating in any other injurious act or omission in a wanton, willful, reckless, or grossly negligent manner against the Corporation; (C) engaging in a criminal enterprise involving moral turpitude; or (D) conviction for a felony under the laws of the United States or any state thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Notwithstanding anything else contained in this Agreement, this Agreement will not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a notice of termination stating that the Executive committed one of the types of conduct set forth in Section 6c(2) of this Agreement and specifying the particulars thereof and the Executive shall be given a thirty (30) day period to cure such conduct set forth in Section 6c(2).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.  **<u>Termination by the Corporation Other Than For Cause and Not in Connection with a Change of Control</u>** .

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The foregoing notwithstanding, the Corporation may terminate the Executive's employment for whatever reason it deems appropriate; provided, however, that in the event such termination is not based on Cause, as provided in Section 6c above, the Corporation may terminate this Agreement upon giving the Executive thirty (30) days' prior written notice. During such thirty (30) day period, the Executive shall continue to perform the Executive's duties pursuant to this Agreement. Notwithstanding any such termination, the Corporation shall continue to pay to the Executive the Base Salary he would be entitled to receive under this Agreement for the balance of the Term of this Agreement in accordance with the Corporation's regular payroll policies (the "Severance Amount"); provided that, in no event shall the Severance Amount be for less than 12 months of such Base Salary (one-half of the total Base Salary amount) regardless of when such Term or Renewal Term would have ended. Furthermore, in the event of a constructive termination pursuant to Section 6f(3), the Executive shall be entitled to receive the Severance Amount at the Base Salary rate that was in effect immediately prior to the material reduction giving rise to such constructive termination.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) In the event that the Executive's employment with the Corporation is terminated pursuant to this Section 6d, Section 6f, or Section 6g then Section 7a of this Agreement and all references thereto shall be null and void and have no effect as to the Executive and the Corporation. In addition, in the event that the Executive's employment with the Corporation is terminated pursuant to this Section 6d, Section 6f, or Section 6g, any stock options and/or restricted shares granted to the Executive during the Term that are unvested as of the termination date shall immediately accelerate and become fully vested as of the termination date. The Executive shall have up to twelve (12) months following the termination date to exercise any vested stock options in accordance with the applicable equity award agreements.

e. **<u>Voluntary Termination</u>**. If the Executive terminates the Executive's employment on the Executive's own volition (except as provided in Section 6f) prior to the expiration of the Term of this Agreement, including any renewals thereof, such termination shall constitute a voluntary termination and in such event the Executive shall be limited to the same rights and benefits as provided in connection with a termination for Cause as provided in Section 6c.

f. **<u>Constructive Termination of Employment</u>**. A termination by the Corporation without Cause under Section 6d shall be deemed to have occurred upon the occurrence of one or more of the following events without the express written consent of the Executive:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) a material breach of the Agreement by the Corporation; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) failure by a successor company to assume the obligations under the Agreement; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) a material reduction in Executive's Base Salary; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) a material reduction in Executive's title; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) the relocation of Executive's then-principal place of employment; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) a material change in the Executive's duties and responsibilities as described in Section 3a hereof.

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Anything herein to the contrary notwithstanding, the Executive shall give written notice to the Board of Directors of the Corporation that the Executive believes an event has occurred which would result in a Constructive Termination of the Executive's employment under this Section 6f, which written notice shall specify the particular act or acts, on the basis of which the Executive intends to so terminate the Executive's employment, and the Corporation shall then be given the opportunity, within thirty (30) days of its receipt of such notice, to cure said event; provided, however, there shall be no period permitted to cure a second occurrence of the same event and in no event will there be any period to cure following the occurrence of two events described in this Section 6f.

g. **<u>Change in Control</u>**. If at any time during the Term, Executive's employment with the Corporation is terminated by the Corporation not for Cause within one year after the Change of Control (as hereinafter defined) or in the 90 days prior to the Change of Control, the Corporation shall pay to Executive an amount equal to the greater of (i) 1.5 multiplied by Executive's Base Salary that Executive is then earning or (ii) all Executive's Base Salary remaining to be paid to Executive during the Initial Term, including all remaining Performance Bonus, payable in a lump-sum payment on the termination date of Executive's employment hereunder but not earlier than the closing of the Change of Control. For purposes hereof, a "Change of Control" shall mean a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "**<u>Exchange Act</u>**"), whether or not the Corporation is in fact required to comply with that regulation, provided that, without limitation, such a change in control shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned, directly or indirectly, by the shareholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing more than 50% of the combined voting power of the Corporation's then outstanding securities; or (B) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board of Directors and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clauses (A) or (D) of this Section) whose election by the Board of Directors or nomination for election by the Corporation's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority; (C) the Corporation enters into an agreement, the consummation of which would result in the occurrence of a change in control of the Corporation; or (D) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior to it continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) of more than 50% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets.

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7. **<u>Covenant Not To Compete and Non-Disclosure of Information</u>**.

a. **<u>Covenant Not To Compete</u>**. The Executive acknowledges and recognizes the highly competitive nature of the Corporation's Business and the goodwill, continued patronage, and the names and addresses of the Corporation's Clients (as hereinafter defined) constitute a substantial asset of the Corporation having been acquired through considerable time, money and effort. Accordingly, in consideration of the execution of this Agreement, and as except as may specifically otherwise approved by the Corporation's Board of Directors, the Executive agrees to the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) That during the Restricted Period (as hereinafter defined) and within the Restricted Area (as hereinafter defined), the Executive will not, individually or in conjunction with others, directly or indirectly, engage in any Business Activities (as hereinafter defined), whether as an officer, director, proprietor, employer, partner, independent contractor, investor (other than as a holder solely as an investment of less than four and ninety-nine one hundreds percent (4.99%) of the outstanding capital stock of a publicly traded corporation), consultant, advisor, agent or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) That during the Restricted Period and within the Restricted Area, the Executive will not, directly or indirectly, compete with the Corporation by soliciting, inducing or influencing any of the Corporation's Clients which have a business relationship with the Corporation at the time during the Restricted Period to discontinue or reduce the extent of such relationship with the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) That during the Restricted Period and within the Restricted Area, the Executive will not (A) directly or indirectly recruit, solicit or otherwise influence any employee or independent contractor of the Corporation to discontinue such employment or engagement with the Corporation, or (B) employ or seek to employ, or cause or permit any business which competes directly or indirectly with the Business Activities of the Corporation (the "  **<u>Competitive Business</u>**") to employ or seek to employ for any Competitive Business any person who is then (or was at any time within two (2) years prior to the date Executive or the Competitive Business employs or seeks to employ such person) employed by the Corporation (unless as a response to a general solicitation for employment).

b. **<u>Non-Disclosure of Information</u>**. The Executive acknowledges that the Corporation's trade secrets, private or secret processes, methods and ideas, as they exist from time to time, customer lists and information concerning the Corporation's sources, products, services, pricing, training methods, development, technical information, marketing activities and procedures, credit and financial data concerning the Corporation and/or the Corporation's Clients, and (the "**<u>Proprietary Information</u>**") are valuable, special and unique assets of the Corporation, access to and knowledge of which are essential to the performance of the Executive hereunder. In light of the highly competitive nature of the industry in which the Corporation's business is conducted, the Executive agrees that all Proprietary Information, heretofore or in the future obtained by the Executive as a result of the Executive's association with the Corporation shall be considered confidential.

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In recognition of this fact, the Executive agrees that the Executive, during the Restricted Period, will not use or disclose any of such Proprietary Information for the Executive's own purposes or for the benefit of any person or other entity or organization (except the Corporation) under any circumstances unless such Proprietary Information has been publicly disclosed generally or, unless upon written advice of legal counsel reasonably satisfactory to the Corporation, the Executive is legally required to disclose such Proprietary Information. Documents (as hereinafter defined) prepared by the Executive or that come into the Executive's possession during the Executive's association with the Corporation are and remain the property of the Corporation, and when this Agreement terminates, such Documents shall be returned to the Corporation at the Corporation's principal place of business, as provided in the Notice provision (Section 10) of this Agreement.

c. **<u>Documents</u>**. "**<u>Documents</u>**" shall mean all original written, recorded, or graphic matters whatsoever, and any and all copies thereof, including, but not limited to: papers; books; records; tangible things; correspondence; communications; telex messages; memoranda; work-papers; reports; affidavits; statements; summaries; analyses; evaluations; client records and information; agreements; agendas; advertisements; instructions; charges; manuals; brochures; publications; directories; industry lists; schedules; price lists; client lists; statistical records; training manuals; computer printouts; books of account, records and invoices reflecting business operations; all things similar to any of the foregoing however denominated. In all cases where originals are not available, the term "Documents" shall also mean identical copies of original documents or non-identical copies thereof.

d. **<u>Corporation's Clients</u>**. The "**<u>Corporation's Clients</u>**" shall be deemed to be any persons, partnerships, corporations, professional associations or other organizations for or with whom the Corporation has performed Business Activities, including, but not limited to, suppliers or vendors with whom the Corporation has done or is endeavoring to do business.

e. **<u>Restrictive Period</u>**. The "**<u>Restrictive Period</u>**" shall be deemed to be one (1) year following termination of this Agreement.

f. **<u>Restricted Area</u>**. The "**<u>Restricted Area</u>**" shall be deemed to mean the United States.

g. **<u>Business Activities</u>**. "**<u>Business Activities</u>**" shall be deemed to any business activities concerning owning, operating, managing, promoting or soliciting clients for the Corporation's Business, and any additional material activities which the Corporation or any of its affiliates may engage in during any portion of the twelve (12) months prior to the termination of Executive's employment; provided however, Business Activities shall not include any activities by a business which is primarily involved in the marketing, sale or manufacture of products which are deemed a "tobacco product" by the Food and Drug Administration.

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h. **<u>Covenants as Essential Elements of this Agreement</u>**. It is understood by and between the parties hereto that the foregoing covenants contained in Sections 7a and b are essential elements of this Agreement, and that but for the agreement by the Executive to comply with such covenants, the Corporation would not have agreed to enter into this Agreement. Such covenants by the Executive shall be construed to be agreements independent of any other provisions of this Agreement. The existence of any other claim or cause of action, whether predicated on any other provision in this Agreement, or otherwise, as a result of the relationship between the parties shall not constitute a defense to the enforcement of such covenants against the Executive. To the extent that the covenants contained in this Section 7 may later be deemed by a court to be too broad to be enforced with respect to their duration or with respect to any particular activity or geographic area, the court making such determination shall have the power to reduce the duration or scope of the provision, and to add or delete specific words or phrases to or from the provision. The provision as modified shall then be enforced.

i. **<u>Survival After Termination of Agreement</u>**. Notwithstanding anything to the contrary contained in this Agreement, the covenants in Sections 7a and b shall survive the termination of this Agreement and the Executive's employment with the Corporation for the periods specified in those sections except that in the event of Executive's termination under any of Sections 6d, 6f, or 6g, Executive's obligations under Section 7a shall be immediately null and void.

j. **<u>Remedies</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Executive acknowledges and agrees that the Corporation's remedy at law for a breach or threatened breach of any of the provisions of Section 7a or b herein would be inadequate and the breach shall be per se deemed as causing irreparable harm to the Corporation. In recognition of this fact, in the event of a breach by the Executive of any of the provisions of Section 7a or b, the Executive agrees that, in addition to any remedy at law available to the Corporation, including, but not limited to monetary damages, the Corporation may seek appropriate equitable remedies and the Corporation shall be entitled to obtain, and the Executive agrees not to oppose the Corporation's request for equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available to the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The Executive acknowledges that the Corporation may seek injunctive relief for breach or threatened breach of Section 7a or b, subject to the Corporation proving that such relief is necessary and appropriate under applicable law. Nothing herein contained shall be construed as prohibiting the Corporation from pursuing any other remedies available to it for such breach or threatened breach.

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8. **<u>Indemnification</u>**. The Corporation shall indemnify Executive to the fullest extent permitted by the Corporation's Articles of Incorporation, Bylaws, and applicable law against any and all liabilities, costs, and expenses (including reasonable attorneys' fees) incurred in connection with any claim, action, suit, or proceeding in which Executive is involved, or is threatened to be involved, by reason of Executive's service as CEO and CFO. The Corporation shall maintain directors' and officers' liability insurance ("D&O Insurance") covering the Executive throughout the Term and for such period thereafter as the D&O Insurance policy permits coverage for former officers with respect to actions or omissions during the Term. To the extent that any such payments by the Corporation pursuant to this Section 8 may be subject to repayment by the Executive pursuant to the provisions of the Articles of Incorporation, as amended, and/or By-Laws, or pursuant to North Carolina or Federal law, such repayment shall be due and payable by the Executive to the Corporation in accordance with the terms specified in the applicable provision requiring repayment, if any, which relate to such repayment and to the Corporation's affairs for the period prior to the date of termination of the Executive's employment with the Corporation and as to which Executive has been covered by such applicable provisions; provided however under no circumstances shall such repayment period be in excess of two months from the repayment request date.

9. **<u>Withholding</u>**. Anything to the contrary notwithstanding, all payments required to be made by the Corporation hereunder to the Executive or the Executive's estate or beneficiaries shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Corporation may reasonably determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, the Corporation may accept other arrangements pursuant to which it is satisfied that such tax and other payroll obligations will be satisfied in a manner complying with applicable law or regulation (including, without limitation, as set forth in Section 24).

10. **<u>Notices</u>**. Any notice required or permitted to be given under the terms of this Agreement shall be sufficient if in writing and if sent postage prepaid by registered or certified mail, return receipt requested; by overnight delivery; by courier; or by confirmed telecopy, in the case of the Executive to the Executive's last place of business or residence as shown on the records of the Corporation, or in the case of the Corporation to its principal office as set forth in the first paragraph of this Agreement, or at such other place as it may designate.

11. **<u>Waiver</u>**. Unless agreed in writing, the failure of either party, at any time, to require performance by the other of any provisions hereunder shall not affect its right thereafter to enforce the same, nor shall a waiver by either party of any breach of any provision hereof be taken or held to be a waiver of any other preceding or succeeding breach of any term or provision of this Agreement. No extension of time for the performance of any obligation or act shall be deemed to be an extension of time for the performance of any other obligation or act hereunder.

12. **<u>Completeness and Modification</u>**. This Agreement constitutes the entire understanding between the parties hereto superseding all prior and contemporaneous agreements or understandings among the parties hereto concerning the Agreement. This Agreement may be amended, modified, superseded or canceled, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by the parties or, in the case of a waiver, by the party to be charged.

13. **<u>Counterparts</u>**. This Agreement may be executed in two or more counterparts, and by actual, electronic or PDF signature, each of which shall be deemed an original but all of which shall constitute but one agreement.

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14. **<u>Binding Effect/Assignment</u>**. This Agreement shall be binding upon the parties hereto, their heirs, legal representatives, successors and assigns. This Agreement shall not be assignable by either party without the prior written consent of the other party, except that the Corporation may assign this Agreement in connection with a merger, consolidation, or sale of all or substantially all of its assets, provided that the assignee assumes all obligations under this Agreement.

15. **<u>Governing Law</u>**. This Agreement shall become valid when executed and accepted by the Corporation. The parties agree that it shall be deemed made and entered into in the State of North Carolina and shall be governed and construed under and in accordance with the laws of the State of North Carolina. Anything in this Agreement to the contrary notwithstanding, the Executive shall conduct the Executive's business in a lawful manner and faithfully comply with applicable laws or regulations of the state, city or other political subdivision in which the Executive is located.

16. **<u>Further Assurances</u>**. All parties hereto shall execute and deliver such other instruments and do such other acts as may be necessary to carry out the intent and purposes of this Agreement.

17. **<u>Headings</u>**. The headings of the sections are for convenience only and shall not control or affect the meaning or construction or limit the scope or intent of any of the provisions of this Agreement.

18. **<u>Survival</u>**. Any termination of this Agreement shall not, however, affect the ongoing provisions of this Agreement which shall survive such termination in accordance with their terms.

19. **<u>Severability</u>**. The invalidity or unenforceability, in whole or in part, of any covenant, promise or undertaking, or any section, subsection, paragraph, sentence, clause, phrase or word or of any provision of this Agreement shall not affect the validity or enforceability of the remaining portions thereof.

20. **<u>Enforcement</u>**. Should it become necessary for any party to institute legal action to enforce the terms and conditions of this Agreement, each party shall bear its own attorneys' fees, expenses and costs, except that if the Executive substantially prevails in defending against claims brought by the Corporation under Sections 7a or 7b, the Corporation shall reimburse the Executive's reasonable attorneys' fees at all trial and appellate levels, expenses and costs.

21. **<u>Venue</u>**. The Corporation and Executive acknowledge and agree that any case or controversy arising either, directly or indirectly, under or in connection with this Agreement may be brought in the U.S. District Court for Eastern District of North Carolina, or if such court lacks jurisdiction, the state courts of North Carolina in and for Wake County, North Carolina, and each party consents to the jurisdiction such courts.

22. **<u>Construction.</u>** This Agreement shall be construed within the fair meaning of each of its terms and not against the party drafting the document.

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23. **<u>Role of Counsel</u>**. The Executive acknowledges his understanding that this Agreement was prepared at the request of the Corporation by Nason Yeager, Gerson, Harris & Fumero, P.A., its counsel, and that such firm did not represent the Executive in conjunction with this Agreement or any of the related transactions. The Executive acknowledges that he has been advised to obtain the advice of independent counsel of his choosing prior to his execution of this Agreement and has been given reasonable time to do so.

24. **<u>Section 409A</u>**.

a. It is intended that this Agreement and the payments hereunder are exempt from or comply with the requirements of Internal Revenue Code, Section 409A and the Treasury Regulations and guidance promulgated thereunder (collectively, "**<u>Section 409A</u>**"). In the event that any payment or benefit (or portion thereof) provided pursuant to this Agreement is subject to Section 409A, the applicable terms of this Agreement shall be interpreted in a manner that complies with Section 409A to the fullest extent possible and does not reduce or limit the payment due to Executive. For purposes of Code Section 409A, the Executive's right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. The Company shall use its reasonable business efforts to in good faith reform such provision to comply with Code Section 409A; <u>provided</u>, that to the maximum extent practicable, the original intent and economic benefit to Executive and the Company of the applicable provision shall be maintained. The Company shall timely use its reasonable business efforts to amend any plan or program in which Executive participates to bring it in compliance with Section 409A.

b. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (1) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (2) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (3) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Internal Revenue Code solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (4) such payments shall be made on or before the last day of Executive's taxable year following the taxable year in which the expense was incurred.

**THE EXECUTIVE ACKNOWLEDGES THAT THE EXECUTIVE HAS READ ALL OF THE TERMS OF THIS AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY ITS TERMS AND CONDITIONS.**

[Signature Page on Next Page]

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

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| |
|:---|
| **THE CORPORATION**:<br>cbdMD, Inc. |
| By:  |
| Scott G. Stephen<br> Chairman of the Board of Directors |
| **THE EXECUTIVE** |
| T. Ronan Kennedy |

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**<u>EXHIBIT A</u>**

Award Agreement(s)

A

## Exhibit 10.2

**Exhibit 10.2**

**cbdMD, INC.**

**2025 EQUITY COMPENSATION PLAN**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.** **Purpose.** 

1.1 <u>Purpose</u>. The purpose of this 2025 Equity Compensation Plan is to enable the Company to offer to its employees, officers, directors and consultants whose past, present and/or potential contributions to the Company and its Subsidiaries have been, are or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. The types of long-term incentive Awards that may be provided under the Plan will enable the Company to respond to changes in compensation practices, tax laws, accounting regulations and the size and diversity of its businesses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.** **Definitions.** 

2.1 <u>Definitions</u>. For purposes of the Plan, the following terms shall be defined as set forth below:

(a) "**<u>Agreement</u>**" means the agreement between the Company and the Holder setting forth the terms and conditions of an Award under the Plan.

(b) **<u>Award</u>**" means Stock Options, Restricted Stock and/or other Stock Based Awards awarded under the Plan.

(c) "**<u>Board</u>**" means the Board of Directors of the Company.

(d) "**<u>Code</u>**" means the Internal Revenue Code of 1986, as amended from time to time.

(e) "**<u>Committee</u>**" means the Compensation, Corporate Governance and Nominating Committee of the Board or any other committee of the Board that the Board may designate to administer the Plan or any portion thereof. If no Committee is so designated, then all references in this Plan to "Committee" shall mean the Board.

(f) "**<u>Common Stock</u>**" means the common stock of the Company, $0.001 par value per share.

(g) "**<u>Company</u>**" means cbdMD, Inc., a corporation organized under the laws of the State of North Carolina.

(h) "**<u>Disability</u>**" means a physical or mental condition that renders a Holder unable to perform the essential functions of their position with or without reasonable accommodation for a period of (i) 180 consecutive days, or (ii) 270 days in any 365-day period, as determined by the Committee in good faith based on medical evidence. The Committee may establish additional procedures for disability determinations consistent with applicable law.

(i) "**<u>Effective Date</u>**" means the date set forth in Section 11.1, below.

(j) "**<u>Fair Market Value</u>**", unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, means, as of any given date: (i) if the Common Stock is listed on a national securities exchange, the closing price of the Common Stock in the principal trading market for the Common Stock on such date, as reported by the exchange (or on the last preceding trading date if such security was not traded on such date); (ii) if the Common Stock is not listed on a national securities exchange, but is traded in the over-the-counter market, the average of the closing bid and ask prices for the Common Stock on such date, as reported by OTC Markets Inc. or similar publisher of such quotations; and (iii) if the fair market value of the Common Stock cannot be determined pursuant to clause (i) or (ii) above, such price as the Committee shall determine in good faith, based on a reasonable valuation method consistent with Section 409A of the Code and applicable regulations.

(k) "**<u>Holder</u>**" means a person who has received an Award under the Plan.

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(l) "**<u>Incentive Stock Option</u>**" means any Stock Option intended to be and designated as an "incentive stock option" within the meaning of Section 422 of the Code.

(m) "**<u>Nonqualified Stock Option</u>**" means any Stock Option that is not an Incentive Stock Option.

(n) "**<u>Normal Retirement</u>**" means retirement from active employment with the Company or any Subsidiary, other than for Cause or due to death or Disability, of a Holder who: (i) has reached the age of 65; (ii) has reached the age of 62 and has completed five years of continuous service with the Company or any Subsidiary; or (iii) has reached the age of 60 and has completed 10 years of continuous service with the Company or any Subsidiary.

(o) "**<u>Other Stock-Based Award</u>**" means an Award under Section 8, below, that is valued in whole or in part by reference to, or is otherwise based upon, Common Stock.

(p) "**<u>Parent</u>**" means any present or future "parent corporation" of the Company, as such term is defined in Section 424(e) of the Code.

(q) "**<u>Plan</u>**" means the cbdMD, Inc. 2025 Equity Compensation Plan, as hereinafter amended from time to time.

(r) "**<u>Repurchase Value</u>**" shall mean (i) the Fair Market Value (as of the date of the repurchase) in the event the Award to be repurchased under Section 9.2 is comprised of shares of Common Stock, and (ii) the excess, if any, of the Fair Market Value (as of the date of repurchase) over the Exercise Price in the event the Award is a Stock Option; in each case, multiplied by the number of shares subject to the Award.

(s) "**<u>Restricted Stock</u>**" means Common Stock, received under an Award made pursuant to Section 7, below that is subject to restrictions under said Section 7.

(t) "**<u>Stock Option</u>**" or "**<u>Option</u>**" means any option to purchase shares of Common Stock that is granted pursuant to the Plan.

(u) "**<u>Subsidiary</u>**" means any present or future "subsidiary corporation" of the Company, as such term is defined in Section 424(f) of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.** **Administration.** 

3.1 <u>Committee Membership</u>. The Plan shall be administered by the Committee, the Board or a committee designated by the Board (provided that the Committee shall consist of at least two members). Committee members shall serve for such term as the Board may in each case determine, and shall be subject to removal at any time by the Board. To the extent the Company is subject to Section 16 of the Exchange Act, Committee members shall be "non-employee directors" as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended ("**<u>Exchange Act</u>**"). Committee members shall also qualify as "independent directors" under the applicable listing standards of any national securities exchange on which the Company's securities are listed. The Committee shall conduct itself in conformance with the provisions of the Compensation, Corporate Governance and Nominating Committee Charter.

3.2 <u>Powers of Committee</u>. The Committee shall have the authority and responsibility to recommend to the Board for approval, Awards for Board members, executive officers, non-executive employees and consultants of the Company, pursuant to the terms of the Plan: (i) Stock Options, (ii) Restricted Stock, and/or (iii) Other Stock-Based Awards. For purposes of illustration and not of limitation, the Committee shall have the authority (subject to the express provisions of this Plan):

(a) to select the officers, employees, directors and consultants of the Company or any Subsidiary to whom Stock Options, Restricted Stock, and/or Other Stock-Based Awards may from time to time be awarded hereunder.

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(b) to determine the terms and conditions, not inconsistent with the terms of the Plan or requisite Board approval, of any Award granted hereunder including, but not limited to, number of shares, share exercise price or types of consideration paid upon exercise of Stock Options (provided that the exercise price for any Stock Option shall not be less than 100% of the Fair Market Value on the date of grant, or 110% for Incentive Stock Options granted to a 10% shareholder as required by Section 422(b)(6) of the Code) and the purchase price of Common Stock awarded under the Plan (which may include, subject to applicable law and with appropriate documentation, a Holder's conversion of deferred salary or other bona fide indebtedness of the Company to the Holder), such as other securities of the Company or other property, any restrictions or limitations, and any vesting, exchange, surrender, cancellation, acceleration, termination, exercise or forfeiture provisions, as the Committee shall determine;

(c) to determine any specified performance goals or such other factors or criteria which need to be attained for the vesting of an Award granted hereunder;

(d) to determine the terms and conditions under which Awards granted hereunder are to operate on a tandem basis and/or in conjunction with or apart from other equity awarded under this Plan and cash Awards made by the Company or any Subsidiary outside of this Plan; and

(e) to determine the extent and circumstances under which Common Stock and other amounts payable with respect to an Award hereunder shall be deferred that may be either automatic or at the election of the Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.3** **Interpretation of Plan.** 

3.3.1 <u>Committee Authority</u>. Subject to Section 10, below, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (and to determine the form and substance of all Agreements relating thereto), and to otherwise supervise the administration of the Plan. Subject to Section 10, below, all decisions made by the Committee pursuant to the provisions of the Plan shall be made in the Committee's sole discretion, subject to Board authorization if indicated, and shall be final and binding upon all persons, including the Company, its Subsidiaries and Holders.

3.3.2 <u>Incentive Stock Options</u>. Anything in the Plan to the contrary notwithstanding, no term or provision of the Plan relating to Incentive Stock Options or any Agreement providing for Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the Holder(s) affected, to disqualify any Incentive Stock Option under such Section 422.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.** **Stock Subject to Plan.** 

4.1 <u>Number of Shares</u>. The total number of shares of Common Stock reserved and available for issuance under the Plan shall be 891,316 shares, subject to adjustment as provided in Sections 4.2 and 4.3. Shares of Common Stock under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares. The number of shares of Common Stock available for issuance under the Plan shall automatically increase on October 1 of each calendar year during the term of the Plan, beginning with calendar year 2026, by an amount equal to 2% of the total number of shares of Common Stock of the Company issued and outstanding on September 30 of such calendar year, but in no event shall any such annual increase (a) exceed 300,000 shares of Common Stock or (b) increase the total number of shares of Common Stock available for issuance under the Plan to more than 10% of the then number of issued and outstanding shares of the Company's Common Stock as of the date of such increase. If any share of Common Stock that have been granted pursuant to a Stock Option ceases to be subject to a Stock Option, or if any shares of Common Stock that are subject to any Restricted Stock, Deferred Stock Award, or Other Stock-Based Award granted hereunder are forfeited or any such Award otherwise terminates without a payment being made to the Holder in the form of Common Stock, such shares shall again be available for distribution in connection with future grants and Awards under the Plan.

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4.2 <u>Adjustment Upon Changes in Capitalization, Etc</u>. In the event of any dividend (other than a cash dividend) payable on shares of Common Stock, stock split, reverse stock split, combination or exchange of shares, or other similar event (not addressed in Section 4.3, below) occurring after the grant of an Award, which results in a change in the shares of Common Stock of the Company as a whole, (i) the number of shares issuable in connection with any such Award and the purchase price thereof, if any, shall be proportionately adjusted to reflect the occurrence of any such event and (ii) the Committee shall determine whether such change requires an adjustment in the aggregate number of shares reserved for issuance under the Plan or to retain the number of shares reserved and available under the Plan in their sole discretion. Any adjustment required by this Section 4.2 shall be made by the Committee, in good faith, subject to Board authorization if indicated, whose determination will be final, binding and conclusive.

4.3 <u>Certain Mergers and Similar Transactions</u>. In the event of (a) a dissolution or liquidation of the Company, (b) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the shareholders of the Company or their relative stock holdings and the Awards granted under this Plan are assumed, converted or replaced by the successor corporation, which assumption will be binding on all Awardees, (c) a merger in which the Company is the surviving corporation but after which the shareholders of the Company immediately prior to such merger (other than any shareholder that merges, or which owns or controls another corporation that merges, with the Company in such merger) cease to own their shares or other equity interest in the Company, (d) the sale of substantially all of the assets of the Company, or (e) the acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender offer or similar transaction, any or all outstanding Awards may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on all Awardees. In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Awardees as was provided to shareholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares of the Company held by the Holder, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Holder. In the event such successor corporation (if any) refuses or otherwise declines to assume or substitute Awards, as provided above, (i) the vesting of any or all Awards granted pursuant to this Plan will accelerate immediately prior to the effective date of a transaction described in this Section 4.3 and (ii) any or all Options granted pursuant to this Plan will become exercisable in full prior to the consummation of such event at such time and on such conditions as the Committee determines. If such Options are not exercised prior to the consummation of the corporate transaction, they shall terminate at such time as determined by the Committee. Subject to any greater rights granted to Awardees under the foregoing provisions of this Section 4.3, in the event of the occurrence of any transaction described in this Section 4.3, any outstanding Awards will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation, or sale of assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.** **Eligibility.** 

Awards may be made or granted to employees, officers, directors and consultants who are deemed to have rendered or to be able to render significant services to the Company or its Subsidiaries and who are deemed to have contributed or to have the potential to contribute to the success of the Company. No Incentive Stock Option shall be granted to any person who is not an employee of the Company or a Subsidiary at the time of grant. Notwithstanding anything to the contrary contained in the Plan, Awards covered or to be covered under a registration statement on Form S-8 which may be filed with the United States Securities and Exchange Commission may be made under the Plan only if (a) they are made to natural persons, (b) who provide bona fide services to the Company or its Subsidiaries, and (c) the services are not in connection with the offer and sale of securities in a capital raising transaction, and do not directly or indirectly promote or maintain a market for the Company's securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.** **Stock Options.** 

6.1 <u>Grant and Exercise</u>. Stock Options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Nonqualified Stock Options. Any Stock Option granted under the Plan shall contain such terms, not inconsistent with this Plan, or with respect to Incentive Stock Options, not inconsistent with the Plan and the Code, as the Committee may from time to time approve. The Committee shall have the authority to grant Incentive Stock Options or Non-qualified Stock Options, or both types of Stock Options, which may be granted alone or in addition to other Awards granted under the Plan. To the extent that any Stock Option intended to qualify as an Incentive Stock Option does not so qualify, it shall constitute a separate Nonqualified Stock Option.

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6.2 <u>Terms and Conditions</u>. Stock Options granted under the Plan shall be subject to the following terms and conditions:

(a) <u>Option Term</u>. The term of each Stock Option shall be fixed by the Committee; provided, however, that an Incentive Stock Option may be granted only within the ten-year period commencing from the Effective Date and may only be exercised within ten years of the date of grant (or five years in the case of an Incentive Stock Option granted to an optionee who, at the time of grant, owns Common Stock possessing more than 10% of the total combined voting power of all classes of stock of the Company ("**<u>10% Shareholder</u>**").

(b) <u>Exercise Price</u>. The exercise price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant and may not be less than 100% of the Fair Market Value on the day of grant; provided, however, that the exercise price of an Incentive Stock Option granted to a 10% Shareholder shall not be less than 110% of the Fair Market Value on the date of grant.

(c) <u>Exercisability</u>. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee and as set forth in Section 9, below. If the Committee provides, in its discretion, that any Stock Option is exercisable only in installments, i.e., that it vests over time, the Committee may waive such installment exercise provisions at any time at or after the time of grant in whole or in part, based upon such factors as the Committee shall determine.

(d) <u>Method of Exercise</u>. Subject to whatever installment, exercise and waiting period provisions are applicable in a particular case, Stock Options may be exercised in whole or in part at any time during the term of the Option, by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price, which shall be in cash or, if provided in the Agreement, either in shares of Common Stock (including Restricted Stock and other contingent Awards under this Plan) or partly in cash and partly in such Common Stock, or such other means which the Committee determines are consistent with the Plan's purpose and applicable law. Cash payments shall be made by wire transfer, certified or bank check or personal check, in each case payable to the order of the Company; provided, however, that the Company shall not be required to deliver shares of Common Stock with respect to which an Option is exercised until the Company has confirmed the receipt of good and available funds in payment of the purchase price thereof. The Company may issue shares in book-entry form in lieu of physical certificates. Payments in the form of Common Stock shall be valued at the Fair Market Value on the date prior to the date of exercise. Such payments shall be made by delivery of stock certificates in negotiable form that are effective to transfer good and valid title thereto to the Company, free of any liens or encumbrances. A Holder shall have none of the rights of a shareholder with respect to the shares subject to the Option until such shares shall be transferred to the Holder upon the exercise of the Option.

(e) <u>Transferability</u>. Except as may be set forth in the Agreement, no Stock Option shall be transferable by the Holder other than by will or by the laws of descent and distribution, and all Stock Options shall be exercisable, during the Holder's lifetime, only by the Holder (or, to the extent of legal incapacity or incompetency, the Holder's guardian or legal representative).

(f) <u>Termination by Reason of Death</u>. If a Holder's employment by the Company or a Subsidiary terminates by reason of death, any Stock Option held by such Holder, unless otherwise determined by the Committee at the time of grant and set forth in the Agreement, shall thereupon automatically terminate, except that the portion of such Stock Option that has vested on the date of death may thereafter be exercised by the legal representative of the estate, by the legatee of the Holder under the will of the Holder, or by the beneficiary designated by the Holder in accordance with applicable law, for a period of one year (or such other greater or lesser period as the Committee may specify at grant) from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter.

(g) <u>Termination by Reason of Disability</u>. If a Holder's employment by the Company or any Subsidiary terminates by reason of Disability, any Stock Option held by such Holder, unless otherwise determined by the Committee at the time of grant and set forth in the Agreement, shall there upon automatically terminate, except that the portion of such Stock Option that has vested on the date of termination may thereafter be exercised by the Holder for a period of one year (or such other greater or lesser period as the Committee may specify at the time of grant) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is the shorter.

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(h) <u>Other Termination</u>. Subject to the provisions of Section 12, below, and unless otherwise determined by the Committee at the time of grant and set forth in the Agreement, if a Holder is an employee of the Company or a Subsidiary at the time of grant and if such Holder's employment by the Company or any Subsidiary terminates for any reason other than death or Disability, the Stock Option shall thereupon automatically terminate, except that if the Holder's employment is terminated by the Company or a Subsidiary without cause (as defined in the applicable Agreement or, if not defined, for reasons other than willful misconduct, gross negligence, fraud, or material breach) or due to Normal Retirement, then the portion of such Stock Option that has vested on the date of termination of employment may be exercised for the lesser of three months after termination of employment or the balance of such Stock Option's term.

(i) <u>Additional Incentive Stock Option Limitation</u>. In the case of an Incentive Stock Option, the aggregate Fair Market Value (on the date of grant of the Option) with respect to which Incentive Stock Options become exercisable for the first time by a Holder during any calendar year (under all such plans of the Company and its Parent and Subsidiary) shall not exceed $100,000.

(j) <u>Buyout and Settlement Provisions</u>. The Committee may at any time, subject to Board authorization, if indicated, offer to repurchase a Stock Option previously granted, based upon such terms and conditions as the Committee shall establish and communicate to the Holder at the time that such offer is made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.** **Restricted Stock.** 

7.1 <u>Grant</u>. Shares of Restricted Stock may be awarded either alone or in addition to other Awards granted under the Plan. The Committee, subject to Board authorization, if indicated, shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock will be awarded, the number of shares to be awarded, the price (if any) to be paid by the Holder, the time or times within which such Awards may be subject to forfeiture ("**<u>Restriction Period</u>**"), the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the Awards.

7.2 <u>Terms and Conditions</u>. Each Restricted Stock Award shall be subject to the following terms and conditions:

(a) <u>Certificates</u>. Restricted Stock, when issued, will be represented by a stock certificate or certificates registered in the name of the Holder to whom such Restricted Stock shall have been awarded. During the Restriction Period, any certificates or book-entry shares representing the Restricted Stock and any securities constituting Retained Distributions (as defined below) shall bear a legend or notation to the effect that ownership of the Restricted Stock (and such Retained Distributions), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms and conditions provided in the Plan and the Agreement. If physical certificates are issued, such certificates shall be deposited by the Holder with the Company, together with stock powers or other instruments of assignment, each endorsed in blank, which will permit transfer to the Company of all or any portion of the Restricted Stock and any securities constituting Retained Distributions that shall be forfeited or that shall not become vested in accordance with the Plan and the Agreement. If shares are held in book-entry form, the Company shall implement appropriate stop-transfer instructions or other mechanisms to enforce the restrictions.

(b) <u>Rights of Holder</u>. Restricted Stock shall constitute issued and outstanding shares of Common Stock for all corporate purposes. The Holder will have the right to vote such Restricted Stock, to receive and retain all regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute on such Restricted Stock and to exercise all other rights, powers and privileges of a holder of Common Stock with respect to such Restricted Stock, with the exceptions that (i) the Holder will not be entitled to delivery of the stock certificate or certificates representing such Restricted Stock until the Restriction Period shall have expired and unless all other vesting requirements with respect thereto shall have been fulfilled; (ii) the Company will retain custody of the stock certificate or certificates representing the Restricted Stock during the Restriction Period; (iii) other than regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute, the Company will retain custody of all distributions ("**<u>Retained Distributions</u>**") made or declared with respect to the Restricted Stock (and such Retained Distributions will be subject to the same restrictions, terms and conditions as are applicable to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to which such Retained Distributions shall have been made, paid or declared shall have become vested and with respect to which the Restriction Period shall have expired; (iv) a breach of any of the restrictions, terms or conditions contained in this Plan or the Agreement or otherwise established by the Committee with respect to any Restricted Stock or Retained Distributions will cause a forfeiture of such Restricted Stock and any Retained Distributions with respect thereto.

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(c) <u>Vesting; Forfeiture</u>. Upon the expiration of the Restriction Period with respect to each Award of Restricted Stock and the satisfaction of any other applicable restrictions, terms and conditions (i) all or part of such Restricted Stock shall become vested in accordance with the terms of the Agreement, subject to Section 9, below, and (ii) any Retained Distributions with respect to such Restricted Stock shall become vested to the extent that the Restricted Stock related thereto shall have become vested, subject to Section 9, below. Any such Restricted Stock and Retained Distributions that do not vest shall be forfeited to the Company and the Holder shall not thereafter have any rights with respect to such Restricted Stock and Retained Distributions that shall have been so forfeited.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.** **Other Stock-Based Awards.** 

Other Stock-Based Awards may be awarded, subject to limitations under applicable law, that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, purchase rights, shares of Common Stock awarded which are not subject to any restrictions or conditions, or other rights convertible into shares of Common Stock and Awards valued by reference to the value of securities of or the performance of specified Subsidiaries. Other Stock-Based Awards may be awarded either alone or in addition to or in tandem with any other Awards under this Plan or any other plan of the Company. Each other Stock-Based Award shall be subject to such terms and conditions as may be determined by the Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.** **Accelerated Vesting and Exercisability.** 

9.1 <u>Non-Approved Transactions</u>. If any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities in one or more transactions, and the Board does not authorize or otherwise approve such acquisition, then the vesting periods of any and all Stock Options and other Awards granted and outstanding under the Plan shall be accelerated and all such Stock Options and Awards will immediately and entirely vest, and the respective holders thereof will have the immediate right to purchase and/or receive any and all Common Stock subject to such Stock Options and Awards on the terms set forth in this Plan and the respective agreements respecting such Stock Options and Awards.

9.2 <u>Approved Transactions</u>. The Committee may, subject to Board authorization, if indicated, in the event of an acquisition of substantially all of the Company's assets or at least 50% of the combined voting power of the Company's then outstanding securities in one or more transactions (including by way of merger or reorganization) which has been approved by the Company's Board of Directors, (i) accelerate the vesting of any and all Stock Options and other Awards granted and outstanding under the Plan, and (ii) require a Holder of any Award granted under this Plan to relinquish such Award to the Company upon the tender by the Company to Holder of cash in an amount equal to the Repurchase Value of such Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.** **Amendment and Termination.** 

The Board may at any time, and from time to time, amend, alter, suspend or discontinue any of the provisions of the Plan, but no amendment, alteration, suspension or discontinuance shall be made that would materially and adversely impair the rights of a Holder under any Agreement theretofore entered into hereunder, without the Holder's written consent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.** **Term of Plan.** 

11.1 <u>Effective Date</u>. The Plan shall become effective at such time as the Plan is approved and adopted by the Company's Board of Directors (the "**<u>Effective Date</u>**"), subject to the following provisions:

(a) to the extent that the Plan authorizes the Award of Incentive Stock Options, shareholder approval for the Plan shall be obtained within 12 months of the Effective Date;

(b) the failure to obtain shareholder approval for the Plan as contemplated by subparagraph (a) of this Section 11 shall not invalidate the Plan; provided, however, that (i) in the absence of such shareholder approval, Incentive Stock Options may not be awarded under the Plan and (ii) any Incentive Stock Options theretofore awarded under the Plan shall be converted into Non-Qualified Options upon terms and conditions determined by the Committee to reflect, as nearly as is reasonably practicable in its sole determination, the terms and conditions of the Incentive Stock Options being so converted; and

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(c) no Award granted under the Plan shall vest until the Plan is approved by the Company's shareholders.

11.2 <u>Termination Date</u>. Unless otherwise terminated by the Board, this Plan shall continue to remain effective until the earlier of ten (10) years from the Effective Date or such time as no further Awards may be granted and all Awards granted under the Plan are no longer outstanding. Notwithstanding the foregoing, grants of Incentive Stock Options may be made only during the ten-year period following the Effective Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.** **General Provisions.** 

12.1 <u>Written Agreements</u>. Each Award granted under the Plan shall be confirmed by, and shall be subject to the terms, of the Agreement executed by the Company and the Holder. The Committee may terminate any Award made under the Plan if the Agreement relating thereto is not executed and returned to the Company within 10 days after the Agreement has been delivered to the Holder for his or her execution.

12.2 <u>Unfunded Status of Plan</u>. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Holder by the Company, nothing contained herein shall give any such Holder any rights that are greater than those of a general creditor of the Company.

12.3 <u>Employees</u>.

(a) <u>Engaging in Competition with the Company; Disclosure of Confidential Information</u>. If a Holder's employment with the Company or a Subsidiary is terminated for any reason whatsoever, and within three months after the date thereof such Holder either (i) accepts employment with any competitor of, or otherwise engages in competition with, the Company or (ii) discloses to anyone outside the Company or uses any confidential information or material of the Company in violation of the Company's policies or any agreement between the Holder and the Company, the Committee, in its sole discretion, may require such Holder to return to the Company the economic value of any Award that was realized or obtained by such Holder at any time during the period beginning on that date that is six months prior to the date such Holder's employment with the Company is terminated.

(b) <u>Termination for Cause</u>. The Committee may, if a Holder's employment with the Company or a Subsidiary is terminated for cause (as defined in the applicable Agreement or, if not defined therein, for willful misconduct, gross negligence, fraud, or material breach of the Holder's obligations to the Company), annul any Award granted under this Plan to such employee and, in such event, the Committee, in its sole discretion, may require such Holder to return to the Company the economic value of any Award that was realized or obtained by such Holder at any time during the twelve-month period prior to the date such Holder's employment with the Company is terminated, provided that such forfeiture and clawback provisions comply with Section 409A of the Internal Revenue Code and applicable North Carolina employment law.

(c) <u>No Right of Employment</u>. Nothing contained in the Plan or in any Award hereunder shall be deemed to confer upon any Holder who is an employee of the Company or any Subsidiary any right to continued employment with the Company or any Subsidiary, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment of any Holder who is an employee at any time.

12.4. <u>Investment Representations; Company Policy</u>. The Committee may require each person acquiring shares of Common Stock pursuant to a Stock Option or other Award under the Plan to represent to and agree with the Company in writing that the Holder is acquiring the shares for investment without a view to distribution thereof. Each person acquiring shares of Common Stock pursuant to a Stock Option or other Award under the Plan shall be required to abide by all policies of the Company in effect at the time of such acquisition and thereafter with respect to the ownership and trading of the Company's securities.

12.5 <u>Additional Incentive Arrangements</u>. Nothing contained in the Plan shall prevent the Board from adopting such other or additional incentive arrangements as it may deem desirable, including, but not limited to, the granting of Stock Options and the Awarding of Common Stock and cash otherwise than under the Plan; and such arrangements may be either generally applicable or applicable only in specific cases.

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12.6 <u>Withholding Taxes</u>. Not later than the date as of which an amount must first be included in the gross income of the Holder for Federal income tax purposes with respect to any option or other Award under the Plan, the Holder shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any Federal, state and local taxes of any kind required by law to be withheld or paid with respect to such amount. If permitted by the Committee, tax withholding or payment obligations may be settled with Common Stock, including Common Stock that is part of the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditioned upon such payment or arrangements and the Company or the Holder's employer (if not the Company) shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Holder from the Company or any Subsidiary.

12.7 <u>Governing Law</u>. The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of North Carolina.

12.8 <u>Other Benefit Plans</u>. Any Award granted under the Plan shall not be deemed compensation for purposes of computing benefits under any retirement plan of the Company or any Subsidiary and shall not affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation (unless required by specific reference in any such other plan to Awards under this Plan).

12.9 <u>Non-Transferability</u>. Except as otherwise expressly provided in the Plan or the Agreement, no right or benefit under the Plan may be alienated, sold, assigned, hypothecated, pledged, exchanged, transferred, encumbered or charged, and any attempt to alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same shall be void.

12.10 <u>Applicable Laws</u>. The obligations of the Company with respect to all Stock Options and Awards under the Plan shall be subject to (i) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, the Securities Act of 1933, as amended (the "**<u>Securities Act</u>**"), and (ii) the rules and regulations of any securities exchange on which the Common Stock may be listed or quoted.

12.11 <u>Conflicts.</u> If any of the terms or provisions of the Plan or an Agreement conflict with the requirements of Section 422 of the Code, then such terms or provisions shall be deemed inoperative to the extent they so conflict with such requirements. Additionally, if this Plan or any Agreement does not contain any provision required to be included herein under Section 422 of the Code, such provision shall be deemed to be incorporated herein and therein with the same force and effect as if such provision had been set out at length herein and therein. If any of the terms or provisions of any Agreement conflict with any terms or provisions of the Plan, then such terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of the Plan. Additionally, if any Agreement does not contain any provision required to be included therein under the Plan, such provision shall be deemed to be incorporated therein with the same force and effect as if such provision had been set out at length therein.

12.12 <u>Non-Registered Stock</u>. The shares of Common Stock to be distributed under this Plan have not been, as of the Effective Date, registered under the Securities Act or any applicable state or foreign securities laws and the Company has no obligation to any Holder to register the Common Stock or to assist the Holder in obtaining an exemption from the various registration requirements, or to list the Common Stock on a national securities exchange or any other trading or quotation system.

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**<u>Plan Amendments</u>**

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| | | | |
|:---|:---|:---|:---|
| **Date Approved by Board** | **Date Approved by Shareholders, if necessary** | **Sections Amended** | **Description of Amendment(s)** |

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