UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No.)
General Cannabis Corp.
(Name of Issuer)
Common Stock, $0.001 par value
(Title of Class of Securities)
36930V100
(CUSIP Number)
Eric B. Woldenberg, Esq.
Pryor Cashman LLP
7 Times Square
New York, NY 10036
(212) 421-4100
(Name,
Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
May 29, 2020
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box ¨.
The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
| CUSIP No. 36930V100 |
| 1 | NAME OF REPORTING PERSONS
Hershey Management I, LLC | |
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | (a)
x (b) ¨ |
| 3 | SEC USE ONLY | |
| 4 |
SOURCE OF FUNDS WC | |
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) | ¨ |
| 6 |
CITIZENSHIP OR PLACE OF ORGANIZATION Delaware | |
|
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER 0 |
| 8 |
SHARED VOTING POWER 3,514,938 | |
| 9 |
SOLE DISPOSITIVE POWER 0 | |
| 10 |
SHARED DISPOSITIVE POWER 3,514,938 |
| 11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,514,938 | |
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | ¨ |
| 13 |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.3% | |
| 14 |
TYPE OF REPORTING PERSON IA | |
| CUSIP No. 36930V100 |
| 1 |
NAME OF REPORTING PERSONS Hershey strategic capital, lp | |
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | (a)
x (b) ¨ |
| 3 | SEC USE ONLY | |
| 4 |
SOURCE OF FUNDS WC | |
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) | ¨ |
| 6 |
CITIZENSHIP OR PLACE OF ORGANIZATION Delaware | |
|
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER 0 |
| 8 |
SHARED VOTING POWER 3,514,938 | |
| 9 |
SOLE DISPOSITIVE POWER 0 | |
| 10 |
SHARED DISPOSITIVE POWER 3,514,938 |
| 11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,514,938 | |
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | ¨ |
| 13 |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.3% | |
| 14 |
TYPE OF REPORTING PERSON PN | |
| CUSIP No. 36930V100 |
| 1 |
NAME OF REPORTING PERSONS Hershey Strategic Capital GP, LLC | |
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | (a)
x (b) ¨ |
| 3 | SEC USE ONLY | |
| 4 |
SOURCE OF FUNDS WC | |
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) | ¨ |
| 6 |
CITIZENSHIP OR PLACE OF ORGANIZATION Delaware | |
|
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER 0 |
| 8 |
SHARED VOTING POWER 3,514,938 | |
| 9 |
SOLE DISPOSITIVE POWER 0 | |
| 10 |
SHARED DISPOSITIVE POWER 3,514,938 |
| 11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,514,938 | |
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | ¨ |
| 13 |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.3% | |
| 14 |
TYPE OF REPORTING PERSON PN | |
| CUSIP No. 36930V100 |
| 1 | NAME OF REPORTING PERSONS Hershey Management IV, LLC | |
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | (a) x (b) ¨ |
| 3 | SEC USE ONLY | |
| 4 |
SOURCE OF FUNDS WC | |
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) | ¨ |
| 6 |
CITIZENSHIP OR PLACE OF ORGANIZATION Delaware | |
|
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER 0 |
| 8 |
SHARED VOTING POWER 6,085,236 | |
| 9 |
SOLE DISPOSITIVE POWER 0 | |
| 10 |
SHARED DISPOSITIVE POWER 6,085,236 |
| 11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 6,085,236 | |
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | ¨ |
| 13 |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.6% | |
| 14 |
TYPE OF REPORTING PERSON OO | |
| CUSIP No. 36930V100 |
| 1 | NAME OF REPORTING PERSONS SHORE VENTURES III, LP | |
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | (a) x (b) ¨ |
| 3 | SEC USE ONLY | |
| 4 |
SOURCE OF FUNDS WC | |
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) | ¨ |
| 6 |
CITIZENSHIP OR PLACE OF ORGANIZATION Delaware | |
|
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER 0 |
| 8 |
SHARED VOTING POWER 6,085,236 | |
| 9 |
SOLE DISPOSITIVE POWER 0 | |
| 10 |
SHARED DISPOSITIVE POWER 6,085,236 |
| 11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 6,085,236 | |
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | ¨ |
| 13 |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 10.6% | |
| 14 |
TYPE OF REPORTING PERSON PN | |
| CUSIP No. 36930V100 |
| 1 | NAME OF REPORTING PERSONS Adam hershey | |
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | (a) x (b) ¨ |
| 3 | SEC USE ONLY | |
| 4 |
SOURCE OF FUNDS WC | |
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) | ¨ |
| 6 |
CITIZENSHIP OR PLACE OF ORGANIZATION Delaware | |
|
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER 0 |
| 8 |
SHARED VOTING POWER 9,600,174 | |
| 9 |
SOLE DISPOSITIVE POWER 0 | |
| 10 |
SHARED DISPOSITIVE POWER 9,600,174 |
| 11 |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 9,600,174 | |
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | ¨ |
| 13 |
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 16.3% | |
| 14 |
TYPE OF REPORTING PERSON IN | |
| CUSIP No. 36930V100 |
Item 1. Security and Issuer.
The title of the class of equity securities to which this statement relates is the common stock, par value $0.001 per share (“Common Stock”), of General Cannabis Corp., a Colorado corporation (the “Issuer”). The Issuer’s principal executive offices are located at 6565 E. Evans Avenue, Denver, Colorado 80224.
Item 2. Identity and Background.
(a) This Statement is a joint filing by Hershey Management I, LLC (“Hershey I”), Hershey Strategic Capital, LP (“HSC LP”), Hershey Strategic Capital GP, LLC (“HSC GP”), Shore Ventures III, LP (“Shore Ventures”), Hershey Management IV, LLC (“Hershey IV”) and Adam Hershey (each of the foregoing, individually, a “Reporting Person”, and collectively the “Reporting Persons”).
Hershey I is the investment advisor of HSC LP. HSC GP is the general partner of HSC LP. Adam Hershey is the sole managing member of both Hershey I and HSC GP. As the investment advisor of HSC LP, Hershey I, which is controlled by Mr. Hershey, has the voting and dispositive power with respect to all of the shares of Common Stock owned by HSC LP.
Hershey IV is the general partner of Shore Ventures. Adam Hershey is the sole managing member of Hershey IV. As the general partner of Shore Ventures, Hershey IV which is controlled by Mr. Hershey, has the voting and dispositive power with respect to all of the shares of Common Stock owned by Shore Ventures.
Each Reporting Person disclaims beneficial ownership of all securities reported herein except to the extent of such Reporting Person’s pecuniary interest therein and other than those securities reported herein as being held directly by such Reporting Person.
(b) The principal office and business address of the Reporting Persons is 6 Pompano Road, Rumson, NJ 07760.
(c) The principal business of the Reporting Persons is to invest in equity and equity-related securities and other securities of any kind or nature. Mr. Hershey is the sole managing member of Hershey I, Hershey IV and HSC GP.
(d) and (e) The Reporting Persons have not, during the last five years, been (a) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or (b) party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which it or he is or was subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
(f) Each of Hershey I, Hershey IV and HSC GP is a Delaware limited liability company. Each of HSC LP and Shore Ventures is a Delaware limited partnership. Adam Hershey is a citizen of the United States.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to a Subscription Agreement, dated as of May 29, 2020 (the “Subscription Agreement”), among the Issuer, HSC LP and Shore Ventures, HSC LP and Shore Ventures purchased from the Issuer an aggregate of 5,485,814 shares of Common Stock and warrants to purchase up to an aggregate of 4,114,360 shares of Common Stock at closings effected on May 29, 2020 and June 3, 2020 for an aggregate purchase price of $2,185,000. Pursuant to the Subscription Agreement, HSC LP and Shore Ventures also committed to purchase from the Issuer an aggregate of 2,046,196 shares of Common Stock and warrants to purchase up to an aggregate of 1,534,647 shares of Common Stock for an aggregate purchase price of $815,000 upon the determination by the State of Colorado’s Marijuana Enforcement Division, on or prior to May 29, 2021, that Adam Hershey is “Approved for Suitability.”
The sources of funds used for the above described purchase by HSC LP and Shore Ventures was the working capital of such entities. None of the funds used in connection with such purchases were borrowed by HSC LP or Shore Ventures.
| CUSIP No. 36930V100 |
Item 4. Purpose of Transaction.
The Reporting Persons consider the securities of the Issuer that they that they beneficially own to be investments made in their ordinary course of business. As described below under Item 6, pursuant to the Subscription Agreement, Adam Hershey has been appointed as a nonvoting observer to the Issuer’s board of directors, and, upon the satisfaction of certain conditions set forth in the Subscription Agreement, it is contemplated that Mr. Hershey (or his designee) will be appointed to serve as a member of the Issuer’s board of directors, and that he (or his designee) will continue to serve as a member of the Issuer’s board of directors until the Issuer’s 2023 annual meeting of stockholders, provided that HSC LP and Shore Ventures continue to hold in aggregate at least one-half of the shares of Common Stock purchased by them in aggregate pursuant to the Subscription Agreement (without giving effect to the exercise of the warrants to purchase shares of Common Stock).
The Reporting Persons intend to review on a continuing basis their investment in the Issuer, including the Issuer’s business, financial condition and operating results, general market and industry conditions and other investment opportunities and, based upon such review, acquire additional shares of Common Stock or other securities of the Issuer, or dispose of the shares of Common Stock or other securities of the Issuer, in each case, in the open market, in privately negotiated transactions or in any other lawful manner.
Except as set forth herein, the Reporting Persons have no present plan or proposal that relates to or would result in any other action specified in clauses (a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) As of the date hereof, the Reporting Persons beneficially own an aggregate of 9,600,174 shares of Common Stock (including 4,114,360 shares of Common Stock issuable upon exercise of warrants issued pursuant to the Subscription Agreement), representing approximately 16.3% of the outstanding shares of Common Stock (based upon 40,281,881 shares of Common Stock outstanding as of May 5, 2020, as reported in the Issuer’s annual report on Form 10-K for the fiscal year ended December 31, 2019, plus the 8,859,117 shares of Common Stock that the Issuer issued on May 25, 2020 in connection with the closing of its acquisition of Dalton Adventures, LLC (as disclosed in a Current Report on Form 8-K that was filed on May 29, 2020), plus the 5,485,814 shares of Common Stock (but not warrants to purchase shares of Common Stock) that have been issued pursuant to the Subscription Agreement). Of the shares of Common Stock owned by the Reporting Persons: (A) 2,008,536 shares of Common Stock (and warrants to purchase up to 1,506,402 shares of Common Stock) are held directly by HSC LP, representing approximately 6.3% of the outstanding shares of Common Stock, as a result of a closing effected under the Subscription Agreement on May 29, 2020; and (B) 3,477,278 shares of Common Stock (and warrants to purchase up to 2,607,958 shares of Common Stock) are held directly by Shore Ventures, representing approximately 10.6% of the outstanding shares of Common Stock, as a result of a closing effected under the Subscription Agreement on June 3, 2020. Pursuant to the Subscription Agreement, HSC LP and Shore Ventures also committed to purchase from the Issuer an aggregate of 2,046,196 shares of Common Stock and warrants to purchase up to an aggregate of 1,534,647 shares of Common Stock for an aggregate purchase price of $815,000 upon the determination by the State of Colorado’s Marijuana Enforcement Division, on or prior to May 29, 2021, that Adam Hershey is “Approved for Suitability.”
(b) As the investment advisor of HSC LP, Hershey I has the power to vote or to direct the vote and to dispose or direct the disposition of all of the securities reported herein that are held directly by HSC LP. As the general partner of Shore Ventures, Hershey IV has the power to vote or to direct the vote and to dispose or direct the disposition of all of the securities reported herein that are held directly by Shore Ventures.
(c) Other than the purchase of shares of Common Stock and warrants to purchase shares of Common Stock effected pursuant to the Subscription Agreement, as reported herein, no transactions in the Common Stock were effected by the Reporting Persons in the last 60 days.
(d) and (e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of Issuer.
Securities Purchase Agreement
As described above, pursuant to the Subscription Agreement, HSC LP purchased from the Issuer 2,008,536 shares of Common Stock and warrants to purchase 1,506,402 shares of Common Stock on May 29, 2020, and Shore Ventures purchased from the Issuer 3,477,278 shares of Common Stock and warrants to purchase 2,607,958 shares of Common Stock on June 3, 2020.
In addition, pursuant to the Subscription Agreement, Adam Hershey has been named as a nonvoting observer to the Issuer’s board of directors, and, upon the satisfaction of certain conditions set forth in the Subscription Agreement, including the determination by the State of Colorado’s Marijuana Enforcement Division that Mr. Hershey is “Approved for Suitability”, Mr. Hershey (or his designee) will be appointed to serve as a member of the Issuer’s board of directors, and he (or his designee) will continue to serve as a member of the Issuer’s board of directors until the Issuer’s 2023 annual meeting of stockholders, provided that HSC LP and Shore Ventures continue to hold in aggregate at least one-half of the shares of Common Stock purchased by them in aggregate pursuant to the Subscription Agreement (without giving effect to the exercise of the warrants to purchase shares of Common Stock).
The Subscription Agreement also provides HSC LP and Shore Ventures with certain participation rights in future financings of the Issuer until June 3, 2021. The Subscription Agreement further provides that the Issuer shall, during the 90-day period ending September 1, 2020 (the “negotiation period”), endeavor to cause the existing holders of the promissory notes of the Issuer having an outstanding balance in the amount of approximately $2,331,000 as of the date hereof that are due on or about January 31, 2021, to extend the maturity date of such notes to a date that is not earlier than January 31, 2022. If, at the end of the negotiation period, all of the existing notes have not been amended to extend the maturity dates thereof, then the Issuer shall issue to HSC LP and Shore Ventures, on a pro rata basis, additional warrants to purchase shares of common stock. Any such additional warrants will be for a number of shares of common stock based on the dollar amount of the outstanding balance (as of the first closing) of the existing notes that were not extended, with each one dollar of existing notes that were not extended representing one share subject to such additional warrant. The exercise price of any such additional warrants will be equal to 100% of the 30-day volume weighted average price of the Issuer’s Common Stock on the last day of the negotiation period, provided that such exercise price shall not be lower than $0.45 per share nor higher than $0.56 per share.
Consultant Agreement
In connection with the transactions contemplated by the Subscription Agreement, the Issuer and Mr. Hershey entered into a Consultant Agreement dated as of June 3, 2020 pursuant to which Mr. Hershey shall serve as a strategic consultant to the Issuer for a period of one year.
During the term of the Consultant Agreement, Mr. Hershey will be paid a monthly rate of $8,333, provided that if the salary of the CEO of the Issuer is returned to the rate paid prior to the Issuer’s salary reductions made in connection with the COVID-19 pandemic (the “COVID-19 Salary Reductions”), then Mr. Hershey’s monthly rate shall increase to $16,667 (with it being expressly understood and agreed that (A) if the salary of the CEO of the Issuer is increased from its current level, but not to 100% of the rate paid prior to the COVID-19 Salary Reductions, Mr. Hershey’s monthly rate shall be increased simultaneously on a proportionate basis, and (B) if the CEO of the Issuer receives any retroactive payments or other remuneration relating to all or any portion of salary that was reduced due to the COVID-19 Salary Reductions, then Mr. Hershey shall receive payments on a pari passu basis with respect to the services performed under the Consultant Agreement at a monthly rate of less than $16,667).
The foregoing summaries of the agreements and instruments are qualified in their entirety by reference to the copies of such agreements and instruments which are incorporated by this reference.
Item 7. Materials to be Filed as Exhibits.
| Exhibit No. | Description | |
| 1. | Subscription Agreement, dated as of May 29, 2020, among the Issuer, Hershey Strategic Capital, LP and Shore Ventures III, LP (incorporated by reference to Exhibit 10.1 of the Issuer’s Current Report on Form 8-K filed June 1, 2020). | |
| 2. | Form of warrant to purchase shares of the common stock of the Issuer (incorporated by reference to Exhibit 10.2 of the Issuer’s Current Report on Form 8-K filed June 1, 2020). | |
| 3. | Consultant Agreement dated as of June 3, 2020 by and between the Issuer and Adam Hershey. | |
| 4. | Joint Filing Agreement, dated June 8, 2020 among the Reporting Persons. |
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.
Dated: June 11, 2020
| HERSHEY MANAGEMENT I, LLC | ||
| By: | /s/ Adam Hershey | |
| Name: | Adam Hershey | |
| Title: | Managing Member | |
| HERSHEY STRATEGIC CAPITAL, LP | ||
| By: | Hershey Strategic Capital GP, LLC, | |
| Its General Partner | ||
| By: | /s/ Adam Hershey | |
| Name: | Adam Hershey | |
| Title: | Managing Member | |
| HERSHEY STRATEGIC CAPITAL GP, LLC | ||
| By: | /s/ Adam Hershey | |
| Name: | Adam Hershey | |
| Title: | Managing Member | |
| HERSHEY MANAGEMENT IV, LLC | ||
| By: | /s/ Adam Hershey | |
| Name: | Adam Hershey | |
| Title: | Managing Member | |
| SHORE VENTURES III, LP | ||
| By: | Hershey Management IV, LLC, | |
| Its General Partner | ||
| By: | /s/ Adam Hershey | |
| Name: | Adam Hershey | |
| Title: | Managing Member | |
| /s/ Adam Hershey | ||
| Adam Hershey | ||
Exhibit 3
CONSULTANT AGREEMENT
This Agreement is entered into as of June 3, 2020, between General Cannabis Corp., a Colorado corporation ("Company"), and Adam Hershey ("Strategic Consultant").
In consideration of the promises and agreements contained herein, the parties agree as follows:
1. Engagement. Subject to the terms and conditions set forth in this Agreement, the Company hereby engages the Strategic Consultant to perform services for the Company as set forth herein, and the Strategic Consultant hereby accepts such engagement.
2. Term. This Agreement shall commence on June 3, 2020 and shall continue for one (1) year from the date this Agreement (the “Initial Term”) is executed, such Initial Term to extend automatically upon its final date for up to two successive one (1) year terms (the “Additional Term”) unless either party provides written notice to the other party of its desire not to renew this Agreement not less than thirty (30) days prior to the end of the then-applicable term. Sections 2 and 11–18 shall survive termination or expiration of this Agreement.
3. Services to Be Performed. During the term of this Agreement, the Strategic Consultant shall perform services required by the Company (the “Services”) as follows:
Sourcing of new M&A deals
Evaluation of M&A deals currently under consideration by the Company
Sourcing and evaluation of strategic capital
Sourcing and evaluation of strategic partnerships or joint ventures
4. Performance of Tasks/Scope of Services. The Strategic Consultant shall have control and discretion over the means and manner of performance of the Services in achieving the result of the work to be performed. The Strategic Consultant shall perform tasks explicitly requested or reasonably required by the Company (the “Scope of Services”) in furtherance of the provision of the Services. If any services, functions or responsibilities not specifically described in this Agreement or among the Scope of Services are required for the proper performance and provision of the Services, they shall be deemed to be included within the Scope of Services to the same extent as if specifically described in this Agreement. The Strategic Consultant shall supply all necessary equipment, materials and supplies and shall not rely on the equipment or offices of the Company for completion of the Services. The Company retains the right to inspect, stop, or alter the work of the Strategic Consultant to assure its conformity with this Agreement.
5. Time Requirements/Reporting Obligations. The Strategic Consultant will not be required to follow or establish a regular or daily work schedule, but shall devote during the term of this Agreement the time, energy and skill necessary to perform the Services and shall, periodically or at any time upon the reasonable request of the Company (but not more frequently than monthly), submit information as to the amount of time worked and scope of work performed. Such submissions shall be made by the Strategic Consultant to the Company’s Chief Executive Officer (the “CEO”), to whom the Strategic Consultant shall report directly.
6. Compensation. During the term of this Agreement, the Strategic Consultant will be paid a monthly rate of $8,333 for the Services, provided that if the salary of the CEO is returned to the rate paid prior to the Company salary reductions made in connection with the COVID-19 pandemic (the “COVID-19 Salary Reductions”) (which, for the avoidance of doubt, is $425,000), then the Strategic Consultant’s monthly rate shall increase to $16,667 (with it being expressly understood and agreed that (A) if the CEO’s salary is increased from its current level, but not to 100% of the rate paid prior to the COVID-19 Salary Reductions, the Strategic Consultant’s monthly rate shall be increased simultaneously on a proportionate basis (i.e., if the CEO’s salary is increased to 90% of the rate paid prior to the COVID-19 Salary Reductions, then the Strategic Consultant’s monthly rate shall simultaneously be increased to $15,000), and (B) if the CEO receives any retroactive payments or other remuneration relating to all or any portion of salary that was reduced due to the COVID-19 Salary Reductions, then the Strategic Consultant shall receive payments on a pari passu basis with respect to the Services at a monthly rate of less than $16,667). The monthly payment described herein shall be paid monthly in advance on the first business day of each month. The parties agree that the Company will not obtain any workers' compensation coverage that covers the Strategic Consultant, and further agree that in no event shall any workers' compensation insurance benefits be paid to the Strategic Consultant by the Company. The Strategic Consultant understands that he is responsible to pay, according to law, the Strategic Consultant's income and other employment taxes and understands that he may be liable for self-employment taxes (Social Security and Medicare) to be paid by the Strategic Consultant according to law. In addition, the Company shall not be liable to the Strategic Consultant for any expenses paid or incurred by the Strategic Consultant unless otherwise agreed to in writing, provided, however, that the Company shall be liable to the Strategic Consultant for expenses reasonably paid or incurred by the Strategic Consultant in the course of the performance of the Services, such expenses to adhere to existing Company expense-related policies where applicable. The foregoing notwithstanding, all travel-related expenses incurred in connection with the Services by the Strategic Consultant must receive the express approval of the CEO to be eligible for reimbursement.
7. Right to Benefits. The Strategic Consultant expressly acknowledges and agrees that the Strategic Consultant is not an employee of the Company, and as such is not entitled to and will have no claim to Company benefits provided to employees, including but not limited to, health benefits, vacation and sick leave benefits, or profit sharing or pension plans (such as 401(k) plans), shares or bonuses.
8. Independent Contractor Status. This Agreement does not constitute a hiring by either party. Under this Agreement, the Strategic Consultant shall have an independent contractor status and shall not be an employee for any purpose, including but not limited to, the application of the Federal Insurance Contribution Act, the Social Security Act, the Federal Unemployment Tax Act, the provisions of the Internal Revenue Code, any state revenue and taxation code relating to income tax withholding at the source of income, workers' compensation, and other benefit payments and third party liability claims. To the extent applicable, the Strategic Consultant shall procure sufficient insurance to cover general liability, personal injury, and property damage. This Agreement shall not be considered or construed to be a partnership or joint venture, and the Company shall not be liable for any obligations incurred by the Strategic Consultant unless specifically authorized in writing. The Strategic Consultant shall act solely as an independent contractor and not as an employee or an agent of the Company. Except as expressly agreed in writing, the Strategic Consultant shall not have any right or authority, express or implied, to assume or create obligations of the Company of any kind, to make any representation or warranty on behalf of the Company, or to enter into contracts or agreements on behalf of the Company or to otherwise bind the Company in any manner.
9. Professional Responsibility. Nothing in this Agreement shall be construed to interfere with or otherwise affect the rendering of Services by the Strategic Consultant in accordance with his independent and professional judgment. The Strategic Consultant shall perform the Services in a good and workmanlike manner and in accordance with generally accepted industry practices.
10. Conflicts of Interest. During the term of this Agreement the Strategic Consultant shall not act as an agent for, consultant to, or as an officer, employee, or other representative of any subcontractor or supplier to the Company, without the prior written consent of the Company. During the term of this Agreement, the Strategic Consultant shall not serve in any of the foregoing capacities for any of the Company's competitors or prospective competitors, without the prior written consent of the Company. The Strategic Consultant hereby warrants that there is no conflict of interest between the Strategic Consultant's other employment, if any, or other contractual obligations, if any, and the activities to be performed hereunder. The Strategic Consultant shall advise the Company if he reasonably believes that a conflict of interest arises in the future during the term of this Agreement. Notwithstanding the foregoing, the parties hereby agree that the limitations set forth in this Section 10 shall not apply to the contemplated involvement by the Strategic Consultant with a medical cannabis dispensary (the identity of which has been disclosed to the Company) that has a pending application with the State of New Jersey, and, in the event of a license award from the State of New Jersey to such company, to the operation by such company of a medical and/or adult use cannabis dispensary license to the maximum extent permitted by applicable law.
11. Work Made for Hire. The Strategic Consultant agrees that the Services, including all tasks, duties, results, inventions and intellectual property developed or performed pursuant to this Agreement, are considered "work made for hire" as defined in 17 U.S.C. Section 101, and that any such work is by virtue of this Agreement assigned to the Company and shall be the sole property of Company for all purposes, including, without limitation, all copyrights, trademarks, trade secrets, patents, industrial rights and all other intellectual property and proprietary rights related thereto, whether existing now or in the future. In the event that any work created by the Strategic Consultant does not qualify as a work made for hire, the Strategic Consultant hereby irrevocably assigns and agrees to assign, without additional consideration, all right, title and interest in and to all such works, whether currently existing or created or developed later, including, without limitation, all copyrights, trademarks, trade secrets, patents, industrial rights and all other intellectual property and proprietary rights related thereto, whether existing now or in the future, effective immediately upon the inception, conception, creation or development thereof. The Strategic Consultant shall (a) disclose promptly to the Company all works in connection with this Agreement, and (b) whether during or after the term of this Agreement with the Company, upon the reasonable request of the Company, agree to execute any and all documents prepared by the Company and to do all other lawful acts reasonably requested by the Company as may be required to establish, document, and protect such rights.
12. Indemnification and Hold Harmless. The Strategic Consultant agrees to indemnify and hold harmless the Company from any and all third party claims by the Strategic Consultant, which may arise out of and in the course of the performance of his duties hereunder. This section shall not affect any other remedies either party may have under this Agreement. The Strategic Consultant expressly waives any and all claims for unemployment benefits and/or workers' compensation benefits, and shall maintain same as necessary in connection with the performance of services required by the Company.
13. Confidentiality/Non-Disclosure. The Strategic Consultant agrees not to disclose or communicate, in any manner, either during or after the term of this Agreement, any proprietary information about the Company, including but not limited to, the names of its customers, marketing strategies, operations, or any other information of any kind which would be deemed confidential, a trade secret, a customer list, or other form of proprietary information of the Company. The Strategic Consultant understands that any breach of this provision, or that of any other Confidentiality and Non-Disclosure Agreement, is a material breach of this Agreement. Upon termination or expiration of this Agreement, the Strategic Consultant shall deliver all records, data, information, and other documents produced or acquired during the performance of this Agreement and all copies thereof to the Company. Such material shall remain the property of the Company.
14. Mutual Non-Disparagement. The Strategic Consultant shall not disparage, defame, or besmirch the reputation, character, image, mission or services of the Company, including their respective current and former officers, directors, employees, agents, lawyers, assigns, insurers, shareholders, affiliates, divisions, subsidiaries, predecessors and successor corporations until twelve (12) months after the later of (i) the end of the term of this Agreement and (ii) the date on which the Strategic Consultant ceases to own (directly or indirectly) more than twenty-five percent (25%) of the number of shares of the common stock of the Company that are owned by the Strategic Consultant (directly or indirectly) on the date of this Agreement (such date, the “Ownership Reduction Date”). The Company and its directors and executive officers shall not disparage, defame, or besmirch the Strategic Consultant’s reputation, character or image until twelve (12) months after the later of (i) the end of the term of this Agreement and (ii) the Ownership Reduction Date. Testimony under oath shall not constitute disparagement.
15. Non-Solicitation. The Strategic Consultant shall not, without the Company’s written permission, during the term of this Agreement and for a period of twelve (12) months immediately following the later of (i) the end of the term of this Agreement and (ii) the Ownership Reduction Date, either directly or indirectly, call on, solicit, or divert, or attempt to call on, solicit, or divert from the Company, any business, employee, customer, or vendor of the Company on whom the Strategic Consultant called or became acquainted with during the term of this Agreement, either for his or her own benefit, or for the benefit of any other person, firm, corporation or organization. For the avoidance of doubt, a general solicitation for employment services shall not constitute a solicitation of employees hereunder.
16. Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes any and all otheragreements, either oral or in writing, between the parties, except for any separately signed Confidentiality, Trade Secret, Non-Compete or Non-Disclosure Agreements to the extent that these terms are not in conflict with those set forth therein.
17. Severability. If any term of this Agreement is invalid or unenforceable under any statute, regulation, ordinance or other rule of law, such term will be deemed reformed or deleted and the remaining provisions will remain in full force and effect.
18. Governing Law and Jurisdiction. This Agreement shall be governed by, and construed under, the laws of the State of Colorado. Jurisdiction and venue for all purposes shall be in the County of Denver, State of Colorado.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above.
| Company: | Strategic Consultant: |
| By: /s/ Steve Gutterman | By: /s/ Adam Hershey |
| Steve Gutterman | Adam Hershey |
| (Print Name) | (Print Name) |
| CEO | |
| Title |
EXHIBIT 4
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them of a statement on Schedule 13D (including amendments thereto) with respect to the Common Stock of the Issuer and further agree that this Joint Filing Agreement be included as an Exhibit to such joint filings.
Date: June 8, 2020
| HERSHEY MANAGEMENT I, LLC | ||
| By: | /s/ Adam Hershey | |
| Name: | Adam Hershey | |
| Title: | Managing Member | |
| HERSHEY STRATEGIC CAPITAL, LP | ||
| By: | Hershey Strategic Capital GP, LLC, | |
| Its General Partner | ||
| By: | /s/ Adam Hershey | |
| Name: | Adam Hershey | |
| Title: | Managing Member | |
| HERSHEY STRATEGIC CAPITAL GP, LLC | ||
| By: | /s/ Adam Hershey | |
| Name: | Adam Hershey | |
| Title: | Managing Member | |
| HERSHEY MANAGEMENT IV, LLC | ||
| By: | /s/ Adam Hershey | |
| Name: | Adam Hershey | |
| Title: | Managing Member | |
| SHORE VENTURES III, LP | ||
| By: | Hershey Management IV, LLC, | |
| Its General Partner | ||
| By: | /s/ Adam Hershey | |
| Name: | Adam Hershey | |
| Title: | Managing Member | |
| /s/ Adam Hershey | ||
| Adam Hershey | ||