8-K

0001398432-18-000052.txt : 20180426 0001398432-18-000052.hdr.sgml : 20180426 20180426164256 ACCESSION NUMBER: 0001398432-18-000052 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20180420 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Submission of Matters to a Vote of Security Holders ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20180426 DATE AS OF CHANGE: 20180426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL CANNABIS CORP CENTRAL INDEX KEY: 0001477009 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DETECTIVE, GUARD & ARMORED CAR SERVICES [7381] IRS NUMBER: 208096131 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-54457 FILM NUMBER: 18779218 BUSINESS ADDRESS: STREET 1: 6565 EAST EVANS AVENUE CITY: DENVER STATE: CO ZIP: 80224 BUSINESS PHONE: (719) 748-5603 MAIL ADDRESS: STREET 1: 6565 EAST EVANS AVENUE CITY: DENVER STATE: CO ZIP: 80224 FORMER COMPANY: FORMER CONFORMED NAME: Advanced Cannabis Solutions, Inc. DATE OF NAME CHANGE: 20131023 FORMER COMPANY: FORMER CONFORMED NAME: Promap Corp DATE OF NAME CHANGE: 20091117 8-K 1 a14128.htm 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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): April 20, 2018

GENERAL CANNABIS CORP

(Exact Name of Registrant as Specified in Charter)

Colorado

000-54457

20-8096131

(State or other jurisdiction

of incorporation)

(Commission File Number)

(I.R.S. Employer Identification Number)


6565 E. Evans Avenue Denver, Colorado		80224
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (303) 759-1300

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

[_]

Written communications pursuant to Rule 425 under the Securities Act

[_]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act

[_]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

[_]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Indicate by check mark whether the registrant is an emerging growth company as defined 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 ¨

If an emerging growth company, indicate by check mark 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. ¨

Item 1.01

Entry into a Material Definitive Agreement

On April 20, 2018, General Cannabis Corp (the “Company”) and certain accredited investors (each, a “Purchaser” and, collectively, the “Purchasers”) consummated the initial closing under a promissory note and warrant purchase agreement (the “Purchase Agreement”) and a security agreement (the “Security Agreement”) dated as of April 20, 2018. The total amount of securities issued and sold by the Company pursuant to the Purchase Agreement was $7.5 million of senior secured promissory notes (collectively, the “Notes”) and warrants to purchase an aggregate of 6.0 million shares of common stock of the Company (the “Warrants”). The Notes bear interest at 8.5% per annum and are secured by the Company’s assets pursuant to the terms of the Security Agreement. The Warrants have an exercise price of $2.35 per share and a term of two years. If the shares underlying the Warrants are not registered for resale on a registration statement within six months, the Company will issue an additional warrant to each Purchaser at the same exercise price for one-half of the shares covered by the initial Warrant.

The foregoing description of the Purchase Agreement, the Notes, the Warrants and the Security Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the form of the Purchase Agreement, the form of the Secured Promissory Note, the form of the Security Agreement and the form of the Warrant, which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

Item 2.03

Creation of a Direct Financial Obligation

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.

Item 3.02

Unregistered Sales of Equity Securities

The information set forth in Items 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02.

Item 5.07

Submission of Matters to a Vote of Security Holders

At the annual meeting of the shareholders of the Company held on April 20, 2018, the Company’s shareholders voted on six proposals and cast their votes as described below. The proposals are set forth in the Company’s definitive proxy statement for the annual meeting filed with the Securities and Exchange Commission on March 15, 2018.

Proposal 1. The Company’s shareholders elected five (5) nominees to the board of directors, each to hold office for a one-year term and until the 2019 annual meeting or his successor is duly elected and qualified:


Name	For	Withheld	Broker Non-Votes
Peter Boockvar	13,108,638	611,511	17,995,699
Michael Feinsod	13,108,587	611,562	17,995,699
Robert Frichtel	13,108,927	611,222	17,995,699
Mark Green	13,491,916	228,233	17,995,699
Duncan Levin	13,492,019	228,130	17,995,699

Proposal 2. The Company’s shareholders approved of an increase to the number of shares authorized under the Company’s 2014 Equity Incentive Plan, by 5,000,000 shares, to 15,000,000 shares:


For	Against	Abstain	Broker Non-Votes
11,882,364	1,304,576	533,209	17,995,699

Proposal 3. The Company’s shareholders approved, on an advisory basis, the Company’s executive officer compensation:


For	Against	Abstain	Broker Non-Votes
11,960,237	1,123,017	636,895	17,995,699

Proposal 4. The Company’s shareholders approved, on an advisory basis, having an advisory vote each year on the Company’s executive officer compensative:


One Year	Two Years	Three Years	Abstentions	Broker Non-Votes
8,992,692	4,040,495	303,198	383,764	17,995,699

In light of the foregoing shareholder vote, the Company has determined to conduct a stockholder vote every year on the compensation of the Company’s executive officers until the next required vote on the frequency at which shareholders shall vote on the compensation of the Company’s executive officers.

Proposal 5. The Company’s shareholders ratified the appointment of Hall & Company, Certified Public Accountants & Consultants, Inc., as the independent registered public accounting firm of the Company for the year ending December 31, 2018:


For	Against	Abstain	Broker Non-Votes
29,755,401	378,570	1,581,877	0

Proposal 6. The Company’s shareholders approved an adjournment of the annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the foregoing proposals:


For	Against	Abstain	Broker Non-Votes
12,489,707	825,728	404,714	17,995,699


Item 9.01		Financial Statements and Exhibits.

(d) Exhibits

The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.


Exhibit No.		Description
10.1		Form of Purchase Agreement between General Cannabis Corp and certain investors.
10.2		Form of Secured Promissory Note issued by General Cannabis Corp to certain investors.
10.3		Form of Security Agreement by and between General Cannabis Corp and certain investors.
10.4		Form of Warrant issued by General Cannabis Corp to certain investors.

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 thereunto duly authorized.

Dated: April 26, 2018


	GENERAL CANNABIS CORP


	By:	/s/ Robert L. Frichtel
	Name:	Robert L. Frichtel
	Title:	Chief Executive Officer

EX-10.1 2 exh10_01.htm Exhibit 10.1

Exhibit 10.1

GENERAL CANNABIS CORPORATION

PROMISSORY NOTE AND WARRANT
PURCHASE AGREEMENT

April [●], 2018

GENERAL CANNABIS CORPORATION
PROMISSORY NOTE AND WARRANT
PURCHASE AGREEMENT

This Promissory Note and Warrant Purchase Agreement (the “Agreement”) is made as of the [●] day of April 2018 by and between General Cannabis Corporation, a Colorado corporation (the “Company”), and each of the purchasers listed on Exhibit A attached to this Agreement (each, a “Purchaser” and, collectively, the “Purchasers”).

RECITALS

The Company desires to issue and sell, and each Purchaser desires to purchase, a promissory note in substantially the form attached to this Agreement as Exhibit B (the “Note”), which shall be subject to a security agreement (the “Security Agreement”) in the form attached to this Agreement as Exhibit C, and a warrant to purchase shares of the Company’s $0.001 par value common stock (the “Common Stock”) at $2.35 per share, in the form attached to this Agreement as Exhibit D (the “2018 Warrant” and together with this Agreement, the Notes and the Security Agreement, the “Transaction Documents”). The Notes, the 2018 Warrants and the shares of Common Stock issuable upon conversion or exercise thereof (and the securities issuable upon conversion of such equity securities) are collectively referred to herein as the “Securities.” The Company is issuing up to $7,500,000 principal amount of Notes and the accompanying Warrants (the “Offering”).

AGREEMENT

In consideration of the mutual promises contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties to this Agreement agree as follows:

Purchase and Sale of Notes and Warrants.

(a)

Sale and Issuance of Notes and Warrants. Subject to the terms and conditions of this Agreement, each Purchaser agrees to purchase at the Closing (as defined below) and the Company agrees to sell and issue to each Purchaser (i) a Note in the principal amount set forth opposite such Purchaser’s name on Exhibit A, (ii) subject to the provisions of Section 2 below, a 2018 Warrant to purchase the number of shares of Common Stock equal to (A) the original principal amount of the Note (expressed as a number, rather than a dollar value), each as set forth opposite such Purchaser’s name on Exhibit A, multiplied by (B) 80.0%. Each Warrant shall be exercisable for a period of two (2) years after the Closing. The aggregate purchase price of each Note and Warrant shall be the amount set forth opposite such Purchaser’s name on Exhibit A. Each Purchaser shall purchase such number of Notes having an aggregate minimum purchase price of one hundred thousand dollars ($100,000.00), provided that the Company may elect to accept a lower purchase price at its sole discretion. The Company’s agreements with each of the Purchasers are separate agreements, and the sales of the Notes and Warrants to each of the Purchasers are separate sales.

Closing; Delivery.

(i)

The purchase and sale of the Notes and Warrants shall take place remotely via the exchange of documents and signature on the date hereof, or at such other place as the Company and the Purchasers mutually agree upon, orally or in writing, as soon as practicable following such time that the Purchasers have agreed to purchase at such closing an aggregate amount of principal indebtedness evidenced by the Notes equal to at least $2,000,000 (which time and place are designated as the “Initial Closing”). The Initial Closing shall occur by April 30, 2018 unless extended for a period of up to 60 days at the Company’s discretion. In the event there is more than one closing, the term “Closing” shall apply to each such closing, unless otherwise specified herein.

(ii)

At each Closing, the Company shall deliver to each Purchaser the Note, the Security Agreement and the Warrant to be purchased by such Purchaser against (A) payment of the purchase price therefor by check payable to the Company or by wire transfer to a bank designated by the Company and (B) delivery of counterpart signature pages to this Agreement.

(iii)

Until such time as the aggregate amount of principal indebtedness evidenced by the Notes equals a total of seven million five hundred thousand dollars ($7,500,000.00), the Company may sell additional Notes and Warrants to such persons or entities as determined by the Company, or to any Purchaser who desires to acquire additional Notes and Warrants. The Notes shall only be issued in denominations divisible by one thousand dollars ($1,000.00). All such sales shall be made on the terms and conditions set forth in this Agreement. The Company, in its sole discretion, shall determine the time and place of each Closing subsequent to the Initial Closing. For purposes of this Agreement, and all other agreements contemplated hereby, any additional purchaser so acquiring Notes and Warrants shall be deemed to be a “Purchaser” for purposes of this Agreement, and any notes and warrants so acquired by such additional purchaser shall be deemed to be “Notes”, “Warrants” and “Securities” as applicable.

Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser that, except as set forth on a Schedule of Exceptions delivered separately by the Company to each Purchaser, which exceptions shall be deemed to be representations and warranties as if made hereunder:

(a)

Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business or properties.

(b)

Authorization. The Transaction Documents have been duly authorized by the Board of Directors of the Company; however, no stockholder approval has been obtained. The Transaction Documents when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

(c)

Effect of Agreement. The execution, delivery and performance by the Company of the Transaction Documents to which it is a party, will not violate the charter documents, bylaws or formation documents as applicable of the Company or any law to which the Company is subject, or any judgment, award or decree or any material indenture, material agreement or other material instrument to which the Company is a party, or by which the Company or its properties or assets are bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under, any such indenture, agreement or other instrument, or result in the creation or imposition of any lien of any nature whatsoever upon any of the properties or assets of the Company, except to the extent the effect thereof will not be materially adverse to the Company’s ability to fulfill its obligations under the Transaction Documents to which it is a party.

(d)

Legal Proceedings. There is no order or action pending, or, to the knowledge of the Company, threatened against or affecting the Company in connection with the Company’s performance hereunder. There is no matter as to which the Company, or, to the knowledge of the Company, any affiliate of the Company has received any notice, claim or assertion which otherwise has been threatened against or affecting the Company in connection its performance hereunder.

(e)

Seniority of Note. The Company represents that upon receipt of the funds from this Offering and the application thereof as contemplated in this Agreement, the Notes shall be senior in terms of priority on liquidation to all other existing debt obligations of the Company (the “Remaining Debt”).

(f)

Other Representations. Each of the representations and warranties of the Company (together with any related Schedule of Exceptions thereto) made in the Notes and the Security Agreement is hereby incorporated herein by reference (as though fully restated herein) and is hereby made to, and in favor of, each Purchaser.

Representations and Warranties of the Purchasers. Each Purchaser hereby represents and warrants to the Company that:

(a)

Authorization. Such Purchaser has full power and authority to enter into this Agreement. This Agreement, when executed and delivered by the Purchaser, will constitute a valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies.

(b)

Purchase Entirely for Own Account. This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that the Securities to be acquired by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities. The Purchaser has not been formed for the specific purpose of acquiring any of the Securities.

(c)

Knowledge. The Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities.

(d)

Restricted Securities. The Purchaser understands that the Securities have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein. The Purchaser understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission (the “SEC”) and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser acknowledges that the Company has no obligation to register or qualify the Securities for resale, except as set forth in Section 5 below. The Purchaser further acknowledges

that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy.

(e)

No Public Market. The Purchaser understands that there is no public market now for the Notes and Warrants and only a limited market exists for the Company’s Common Stock and the Company has made no assurances that a significant public market will ever exist for the Securities.

(f)

Legends. The Purchaser understands that the Securities, and any securities issued in respect thereof or exchange therefor, may bear one or all of the following legends:

(i)

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

(ii)

Any legend required by the Blue Sky laws of any state to the extent such laws are applicable to the securities represented by the certificate so legended.

(g)

Accredited Investor. The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act and has completed the investor questionnaire attached as Exhibit A1.

Covenants of the Company and Purchasers

(a)

The Company agrees to file with the SEC as soon as reasonably practicable following the date of this Agreement a registration statement on Form S-3 or such other form (including a post-effective amendment to a registration statement) under the Securities Act then available to the Company (the “Registration Statement”) providing for the resale of the shares of Common Stock issuable upon exercise of the Warrants (the “Registrable Securities”). The Company shall use its commercially reasonable efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable after the initial filing thereof. Any Registration Statement shall provide for the resale from time to time, and pursuant to any method or combination of methods legally available by the Purchasers of any and all Registrable Securities. The Company shall use its commercially reasonable efforts to maintain the effectiveness of the Registration Statement; provided, however, that failure to do so shall not constitute a breach under this Section 5.

(b)

The Company shall pay all registration expenses in connection with the registration of the Registrable Shares pursuant to this Agreement. Each Purchaser participating in a registration pursuant to this Section 5 shall bear such Purchaser’s proportionate share (based on the total number of Registrable Shares sold in such registration) of all discounts and commissions payable to underwriters or brokers and all transfer taxes and transfer fees in connection with a registration of Registrable Shares pursuant to this Agreement.

(c)

If the Company’s Registration Statement registering the resale of the Registrable Shares is not declared effective by the SEC on or prior to October 31, 2018, then each Purchaser’s sole remedy shall be to receive an additional warrant to purchase a number of shares of Common Stock equal to 50.0% of the number of shares of Common Stock issuable under the 2018 Warrant issued to such Purchaser pursuant to Section 1(a)(ii) of this Agreement, on substantially the same terms and conditions to the 2018 Warrant.

(d)

It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 5 with respect to Registrable Securities of any selling Purchaser that such selling Purchaser shall furnish to the Company such information as reasonably requested by the Company to effect the registration of such Purchaser’s Registrable Securities, including information regarding such selling Purchaser, the Registrable Securities held by it, and the intended method of disposition, as well as in connection with any sale of Registrable Securities by the Purchasers.

Conditions of the Purchasers’ Obligations at Closing. The obligations of each Purchaser to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

(a)

Representations, Warranties and Covenants. The representations and warranties of the Company contained in Section 3 (including those incorporated by reference) shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing and the Company shall have complied with all covenants in this Agreement, the Security Agreement, the Note and the other agreements and documents contemplated hereby to be complied with as of or prior to the Closing.

(b)

Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing.

Conditions of the Company’s Obligations at Closing. The obligations of the Company to each Purchaser under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

(a)

Representations, Warranties and Covenants. The representations and warranties of each Purchaser contained in Section 4 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing and the Purchaser shall have complied with all covenants in this Agreement, the Security Agreement, the Note and the other agreements and documents contemplated hereby to be complied with as of or prior to the Closing.

(b)

Miscellaneous and Other Covenants.

(a)

Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

(b)

Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Colorado without giving effect to principles of conflicts of law.

(c)

Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

(d)

Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

(e)

Notices. Any notice required or permitted by this Agreement or the Note shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier, overnight delivery service or confirmed facsimile, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below or as subsequently modified by written notice. The Company covenants that in the event that any Purchaser gives notice of their exercise of the Warrants, the Company will promptly notify all other Purchasers of such exercise.

(f)

Finder’s Fee. Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. Each Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which each Purchaser or any of its officers, employees, or representatives is responsible. The Company agrees to indemnify and hold harmless each Purchaser from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.

(g)

Amendments and Waivers. Any term of this Agreement may be amended or waived only with the written consent of the Company and the holders of at least a majority in interest of the Notes. Any amendment or waiver effected in accordance with this Section 8(g) shall be binding upon each Purchaser and each transferee of the Securities, each future holder of all such Securities, and the Company.

(h)

Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith, in order to maintain the economic position enjoyed by each party as close as possible to that under the provision rendered unenforceable. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

(i)

Entire Agreement. This Agreement, and the Exhibits hereto and the other documents referred to herein and therein constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled.

(j)

Exculpation Among Purchasers. Each Purchaser acknowledges that it is not relying upon any person, firm or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Purchaser agrees that no Purchaser nor the respective controlling persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the Securities.

(k)

Stockholders, Officers and Directors Not Liable. In no event shall any stockholder, officer or director of the Company be liable for any amounts due or payable pursuant to the Note.

(l)

Loss of Note. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of the Note or any Note exchanged for it, and indemnity satisfactory to the Company (in case of loss, theft or destruction) or surrender and cancellation of such Note (in case of mutilation), the Company will make and deliver to Purchaser in lieu of such Note a new Note of like tenor.

(m)

Expenses. Each of the Parties shall be responsible for their respective expenses and costs incurred in connection with the negotiation, documentation and execution of this Agreement and the other agreements, and documents contemplated herein and therein; provided, however, at the time of the Closing of the transactions contemplated herein, the Company shall pay the fees and expenses of the counsel to the Purchasers hereunder, as a group, in an amount not to exceed $10,000.

[SIGNATURE PAGE FOLLOWS]

The parties have executed this Promissory Note and Warrant Purchase Agreement as of the date first written above.


	GENERAL CANNABIS CORPORATION:


	By:
	Name:
	Title:

	Address:	6565 E. Evans Avenue
		Denver, Colorado 80224

	Facsimile Number: (303) 997-1972




	PURCHASER:

	[Name]

	By:

EXHIBIT A

Purchasers


Name of Purchaser	Aggregate Principal Amount







Total:	$7,500,000

EXHIBIT A1

FORM OF INVESTOR QUESTIONNAIRE

GENERAL CANNABIS CORPORATION

For Individual Investors Only

(All individual investors must INITIAL where appropriate. Where there are joint investors both parties must INITIAL):


Initial			I certify that I have a “net worth” of at least $1 million either individually or through aggregating my individual holdings and those in which I have a joint, community property or other similar shared ownership interest with my spouse. For purposes of calculating net worth under this paragraph, (i) the primary residence shall not be included as an asset, (ii) to the extent that the indebtedness that is secured by the primary residence is in excess of the fair market value of the primary residence, the excess amount shall be included as a liability, and (iii) if the amount of outstanding indebtedness that is secured by the primary residence exceeds the amount outstanding 60 days prior to the execution of this Agreement, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability.








Initial			I certify that I have had an annual gross income for the past two years of at least $200,000 (or $300,000 jointly with my spouse) and expect my income (or joint income, as appropriate) to reach the same level in the current year

For Non-Individual Investors

(all Non-Individual Investors must INITIAL where appropriate):


Initial			The undersigned certifies that it is a partnership, corporation, limited liability company or business trust that is 100% owned by persons who meet either of the criteria for Individual Investors, above.
Initial

Initial			The undersigned certifies that it is a partnership, corporation, limited liability company or business trust that has total assets of at least $5 million and was not formed for the purpose of investing in Company.
Initial

Initial			The undersigned certifies that it is an employee benefit plan whose investment decision is made by a plan fiduciary (as defined in ERISA §3(21)) that is a bank, savings and loan association, insurance company or registered investment adviser.



Initial			The undersigned certifies that it is an employee benefit plan whose total assets exceed $5,000,000 as of the date of the Agreement.
Initial

Initial			The undersigned certifies that it is a self-directed employee benefit plan whose investment decisions are made solely by persons who meet either of the criteria for Individual Investors, above.
Initial

Initial			The undersigned certifies that it is a U.S. bank, U.S. savings and loan association or other similar U.S. institution acting in its individual or fiduciary capacity.
Initial

Initial			The undersigned certifies that it is a broker-dealer registered pursuant to §15 of the Securities Exchange Act of 1934.

Initial			The undersigned certifies that it is an organization described in §501(c)(3) of the Internal Revenue Code with total assets exceeding $5,000,000 and not formed for the specific purpose of investing in Company.
Initial

Initial			The undersigned certifies that it is a trust with total assets of at least $5,000,000, not formed for the specific purpose of investing in Company, and whose purchase is directed by a person with such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.




Initial			The undersigned certifies that it is a plan established and maintained by a state or its political subdivisions, or any agency or instrumentality thereof, for the benefit of its employees, and which has total assets in excess of $5,000,000.



Initial			The undersigned certifies that it is an insurance company as defined in §2(a)(13) of the Securities Act of 1933, as amended, or a registered investment company.
Initial

GENERAL CANNABIS CORPORATION

Investor Questionnaire

(Must be completed by Purchaser)

Section A - Individual Purchaser Information

Purchaser Name(s): ________________________________________________________________________

Individual executing Profile or Trustee: _________________________________________________________

Social Security Numbers / Federal I.D. Number: _______________________________________________________________________________________

Date of Birth: _________________ Marital Status: _________________

Joint Party Date of Birth:_________________

Investment Experience (Years): ___________

Annual Income: _________________

Net Worth: ________________

Home Street Address: ______________________________________________________________________

Home City, State & Zip Code: ________________________________________________________________

Home Phone: ________________________ Home Fax: _____________________

Home Email: _______________________________

Employer: ______________________________________________________________________________

Employer Street Address: __________________________________________________________________

Employer City, State & Zip Code: ____________________________________________________________

Bus. Phone: __________________________ Bus. Fax: _______________________

Bus. Email: ________________________________

Type of Business: ________________________________________________________________________

Please check if you are a FINRA member or affiliate of a FINRA member firm: _______

Section B – Entity Purchaser Information

Purchaser Name(s): ________________________________________________________________________

Authorized Individual executing Profile or Trustee: _______________________________________________________________________

Social Security Numbers / Federal I.D. Number: _______________________________________________________________________

Investment Experience (Years): ___________

Annual Income: _______________

Net Worth: ________________

Was the Trust formed for the specific purpose of purchasing the Units?

[ ] Yes [ ] No

Principal Purpose (Trust)______________________________________

Type of Business: ______________________________________________________________________

Street Address: ________________________________________________________________________

City, State & Zip Code: __________________________________________________________________

Phone: ________________________ Fax: ________________________

Email: __________________________

Section C – Form of Payment – Check or Wire Transfer

____ Check payable to “GENERAL CANNABIS CORPORATION”

____ Wire funds from my outside account according to the “To subscribe for Units of Notes and Warrants to Purchase Shares of Common Stock in the private offering of GENERAL CANNABIS CORPORATION”

Section E – Securities Delivery Instructions (check one)

____ Please deliver my securities to the address listed in the above Investor Questionnaire.

____ Please deliver my securities to the below address:

______________________________________


Purchaser Signature(s)			Date

Purchaser Signature(s)			Date

EXHIBIT B

Form of Note

[see attached]

EXHIBIT C

Form of Security Agreement

[see attached]

EXHIBIT D

Form of Warrant

[see attached]

EX-10.2 3 exh10_02.htm Exhibit 10.2

Exhibit 10.2

THIS NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

FORM OF
SECURED PROMISSORY NOTE

(Dated April [●], 2018)

FOR VALUE RECEIVED, and subject to the terms and conditions set forth herein, General Cannabis Corporation, a Colorado corporation (the “Borrower”), hereby unconditionally promises to pay to the order of _________________ or his assigns (the “Noteholder”, and together with the Borrower, the “Parties”), the principal amount of $[Principal Amount of Loan] (the “Loan”), together with all accrued interest thereon, as provided in this Promissory Note (the “Note”) in United States currency. This Note and other notes of like tenor (the “Other Notes” and, together with this Note, the “Notes”) are being delivered under the terms of a promissory note and warrant purchase agreement, dated as of April [●], 2018 (“Purchase Agreement”).

Definitions. Capitalized terms used herein shall have the meanings set forth in this Section 1.

“Affiliate” means as to any Person, any other Person that, directly or indirectly through one or more intermediaries, is in control of, is controlled by, or is under common control with, such Person.

“Applicable Rate” means the rate equal to 8.5% per annum; provided that same shall be increased to the lesser of 18% and the highest allowable rate upon an Event of Default.

“Borrower” has the meaning set forth in the introductory paragraph.

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in the State of Colorado are authorized or required by law to close.

“Commitment Period” means the period from the date hereof to the Maturity Date.

“Debt” of the Borrower, means all (a) indebtedness for borrowed money; (b) obligations for the deferred purchase price of property or services, except trade payables arising in the ordinary course of business; (c) obligations evidenced by notes, bonds, debentures or other similar instruments; (d) obligations as lessee under capital leases; (e) obligations in respect of any interest rate swaps, currency exchange agreements, commodity swaps, caps, collar agreements or similar arrangements entered into by the Borrower providing for protection against fluctuations in interest rates, currency exchange rates or commodity prices or the exchange of nominal interest obligations, either generally or under specific contingencies; (f) obligations under acceptance facilities and letters of credit; (g) guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person, or otherwise to assure a creditor against loss, in each case, in respect of indebtedness set out in clauses (a) through (f) of a Person other than the Borrower; and (h) indebtedness set out in clauses (a) through (g) of any Person other than Borrower secured by any lien on any asset of the Borrower, whether or not such indebtedness has been assumed by the Borrower.

“Default” means any of the events specified in Section 9 which constitutes an Event of Default or which, upon the giving of notice, the lapse of time, or both pursuant to Section 9 would, unless cured or waived, become an Event of Default.

“Event of Default” has the meaning set forth in Section 9.

“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time.

“Governmental Authority” means the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, municipal or any other level, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of, or pertaining to, government (including any supranational bodies such as the European Union or the European Central Bank).

“Intellectual Property” means any and all intellectual property, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, all rights therein, and all rights to sue at law or in equity for any past, present, or future infringement, violation, misuse, misappropriation or other impairment thereof, whether arising under US, multinational or foreign laws or otherwise, including the right to receive injunctive relief and all proceeds and damages therefrom.

“Interest” shall be payable at the rate of 8.5% per annum and shall by payable quarterly. The Noteholder shall by entitled to at least 12 month’s interest even if the Company prepays the Note.

“Law” as to any Person, means any law (including common law), statute, ordinance, treaty, rule, regulation, policy or requirement of any Governmental Authority and authoritative interpretations thereon, whether now or hereafter in effect, in each case, applicable to or binding on such Person or any of its properties or to which such Person or any of its properties is subject.

“Lien” means any mortgage, pledge, hypothecation, encumbrance, lien (statutory or other), charge or other security interest.

“Loan” has the meaning set forth in the introductory paragraph.

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, properties, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of the Borrower; (b) the validity or enforceability of the Note or Security Agreement; (c) the perfection or priority of any Lien purported to be created under the Security Agreement; (d) the rights or remedies of the Noteholder hereunder or under the Security Agreement; or (e) the Borrower’s ability to perform any of its material payment obligations hereunder or under the Security Agreement.

“Maturity Date” means May 1, 2019.

“Note” has the meaning set forth in the introductory paragraph.

“Noteholder” has the meaning set forth in the introductory paragraph.

“Order” as to any Person, means any order, decree, judgment, writ, injunction, settlement agreement, requirement or determination of an arbitrator or a court or other Governmental Authority, in each case, applicable to or binding on such Person or any of its properties or to which such Person or any of its properties is subject.

“Other Notes” has the meaning set forth in the introductory paragraph.

“Parties” has the meaning set forth in the introductory paragraph.

“Permitted Debt” means Debt (a) existing or arising under this Note and the Other Notes and any refinancing thereof; (b) ordinary trade payables, consistent with past practice; (c) existing as of the date of this Note; (d) which may be deemed to exist with respect to swap contracts; (e) owed in respect of any netting services, overdrafts and related liabilities arising from treasury, depository and cash management services in connection with any automated clearinghouse transfers of funds; and (f) unsecured insurance premiums owing in the ordinary course of business.

“Person” means any individual, corporation, limited liability company, trust, joint venture, association, company, limited or general partnership, unincorporated organization, Governmental Authority or other entity.

“Security Agreement” means the Security Agreement, dated as of the date hereof, by and between the Borrower and Noteholder, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms.

Final Payment Date; Optional Prepayments.

2.1

Final Payment Date. The aggregate unpaid principal amount of the Loan, all accrued and unpaid interest and all other amounts payable under this Note shall be due and payable on the Maturity Date.

2.2

Optional Prepayment. The Borrower, at its discretion, may prepay the Loan in whole or in part at any time or from time to time without penalty or premium by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment, provided, however, that one year of interest as calculated under this Note shall be paid in the event that the accrued interest is less than one year of interest. No prepaid amount may be reborrowed.

Use of Proceeds; Priority; Security Agreement.

3.1

The proceeds to the Company under this Note (and the Other Notes) shall be first be used on the date of issuance of this Note to pay any and all expenses of the offering of this Note (and the Other Notes).

3.2

After giving effect to the payments required under Section 3.1 above, the proceeds to the Company under this Note (and the Other Notes) shall be used to fund the Company’s working capital.

3.3

This Note evidences senior secured indebtedness of the Company and shall be pari passu with the Other Notes and shall have priority in right of payment, enforcement and collection over any and all other Debt of the Company, whether existing as of the date of issuance of this Note or incurred thereafter. So long as this Note is outstanding, the Company shall not incur any Debt except for Permitted Debt, unless otherwise first consented to in writing by the holder of this Note (and all of the Other Notes).

3.4

The Borrower’s performance of its obligations hereunder is, and shall be, secured by a first priority security interest in the collateral specified in the Security Agreement.

Interest.

4.1

Interest Rate. The outstanding principal amount of the Loan made hereunder shall bear interest at the Applicable Rate from the date the Loan was made until the Loan is paid in full, whether at maturity, upon acceleration, by prepayment or otherwise.

4.2

Computation of Interest. All computations of interest shall be made on the basis of a year of 360 days, as the case may be, and the actual number of days elapsed. Interest shall accrue on the Loan on the day on which such Loan is made, and shall not accrue on the Loan for the day on which it is paid.

4.3

Interest Rate Limitation. If at any time and for any reason whatsoever, the interest rate payable on the Loan shall exceed the maximum rate of interest permitted to be charged by the Noteholder to the Borrower under applicable Law, such interest rate shall be reduced automatically to the maximum rate of interest permitted to be charged under applicable Law and that portion of each sum paid attributable to that portion of such interest rate that exceeds the maximum rate of interest permitted by applicable Law shall be deemed a voluntary prepayment of principal.

Payment Mechanics.

5.1

Manner and Date of Payments. All payments of interest and principal shall be made in lawful money of the United States of America no later than 5:00 PM MST on the date on which such payment is due by cashier’s check, certified check or by wire transfer of immediately available funds to the Noteholder’s account at a bank specified by the Noteholder in writing to the Borrower from time to time. Interest shall be due and payable quarterly in arrears on each of July 1, 2018, October 1, 2018, January 1, 2019 and April 1, 2019 (or, if not a Business Day, the next succeeding Business Day).

5.2

Application of Payments. All payments made hereunder shall be applied first to the payment of any fees or charges outstanding hereunder, second to accrued interest, and third to the payment of the principal amount outstanding under the Note.

5.3

Business Day Convention. Whenever any payment to be made hereunder shall be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension will be taken into account in calculating the amount of interest payable under this Note.

5.4

Rescission of Payments. If at any time any payment made by the Borrower under this Note is rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Borrower’s obligation to make such payment shall be reinstated as though such payment had not been made.

Representations and Warranties. The Borrower hereby represents and warrants to the Noteholder on the date hereof as follows:

6.1

Existence; Compliance With Laws. The Borrower is (a) a corporation duly incorporated, validly existing and in good standing under the laws of the state of its jurisdiction of organization and has the requisite power and authority, and the legal right, to own, lease and operate its properties and assets and to conduct its business as it is now being conducted and (b) in compliance with all Laws and Orders except to the extent that the failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. All of the authorized, issued and outstanding securities of the Borrower, including the Warrants, have been, to the extent applicable, duly authorized and are validly issued, fully paid and nonassessable and issued in compliance with all applicable laws.

6.2

Power and Authority. The Borrower has the power and authority, and the legal right, to execute and deliver this Note and the Security Agreement and to perform its obligations hereunder and thereunder.

6.3

Authorization; Execution and Delivery. The execution and delivery of this Note and the Security Agreement by the Borrower and the performance of its obligations hereunder and thereunder have been duly authorized by all necessary corporate action in accordance with all applicable Laws. The Borrower has duly executed and delivered this Note and the Security Agreement.

6.4

No Approvals. No consent or authorization of, filing with, notice to or other act by, or in respect of, any Governmental Authority or any other Person is required in order for the Borrower to execute, deliver, or perform any of its obligations under this Note or the Security Agreement.

6.5

No Violations. The execution and delivery of this Note and the Security Agreement and the consummation by the Borrower of the transactions contemplated hereby and thereby do not and will not (a) violate any provision of the Borrower’s organizational documents; (b) violate any Law or Order applicable to the Borrower or by which any of its properties or assets may be bound; or (c) constitute a default under any material agreement or contract by which the Borrower may be bound.

6.6

Enforceability. Each of the Note and the Security Agreement is a valid, legal and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

6.7

No Litigation. No action, suit, litigation, investigation or proceeding of, or before, any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its property or assets (a) with respect to the Note, the Security Agreement or any of the transactions contemplated hereby or thereby or (b) that would be expected to materially adversely affect the Borrower’s financial condition or the ability of the Borrower to perform its obligations under the Note or the Security Agreement.

6.8

USA PATRIOT Act, OFAC and Other Regulations

(a)

Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates or any of their respective officers or directors has engaged in any transaction, investment, undertaking or activity that conceals the identity, source or destination of the proceeds from any category of prohibited offenses designated by the Organization for Economic Co-operation and Development’s Financial Action Task Force on Money Laundering.

(b)

Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates or any of their respective officers or directors is a Person that is, or is owned or controlled by Persons that are: (i) the subject of any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“Sanctions”), or (ii) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions, including Cuba, Iran, North Korea, Sudan and Syria.

(c)

Neither the Borrower nor, to the knowledge of the Borrower any of its Affiliates or any of their respective officers or directors acting or benefiting in any capacity in connection with the Loan conducts any business or engages in making or receiving any contribution of goods, services or money to or for the benefit of any Person, or in any country or territory, that is the subject of any Sanctions.

6.9

SEC Reports; Financial Statements.

(a)

The Borrower has filed with the Securities and Exchange Commission (“SEC”) all reports that were required to be filed by the Borrower (the “Borrower SEC Reports”) under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), since January 1, 2017. Each of the Borrower SEC Reports, at the time of its filing or being furnished complied, or if not yet filed or furnished, will comply, in all material respects with the applicable requirements of the Exchange Act, the Securities Act and the Sarbanes-Oxley Act, and any rules and regulations promulgated thereunder applicable to the Borrower SEC Reports. As of their respective dates (or, if amended prior to the date hereof, as of the date of such amendment), the Borrower SEC Reports did not, and any Borrower SEC Reports filed with or furnished to the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.

(b)

Each of the audited consolidated balance sheets, statements of income, changes in stockholders’ equity and cash flows of the Borrower included in or incorporated by reference into the Borrower SEC Reports (including any related notes and schedules) (A) have been prepared in accordance with GAAP applied on a consistent basis during the periods involved; (B) present fairly, in all material respects, the consolidated financial position of the Borrower as at the dates thereof and the consolidated results of income, changes in stockholders’ equity and cash flows of the Borrower for the periods then ended; and (C) accurately reflect in all material respects the books of account and other financial records of the Borrower.

(c)

The Borrower does not have any Liabilities except for Liabilities reflected or reserved against on the Borrower’s consolidated audited balance sheet as of December 31, 2017 (or the notes thereto) and not heretofore paid or discharged or Liabilities that would not, individually or in the aggregate, reasonably be likely to have a Material Adverse Effect.

6.10

No Material Adverse Effect. Since December 31, 2017, no development or event has occurred that has had or would reasonably be expected to have a Material Adverse Effect.

6.11

Absence of Undisclosed Liabilities. The Borrower is not obligated under any obligation or liability (whether accrued, absolute, contingent, liquidated or otherwise, whether due or to become due), except to the extent that such obligation or liability (i) is reflected or disclosed in its most recent financial statements or (ii) was incurred after December 31, 2017 in the ordinary course of business (and not as a result of a breach, tort or infringement) and is not individually or in the aggregate material to the business. The Borrower is not nor at any time has been a party to any bankruptcy proceedings, whether voluntary or involuntary, actual or threatened, or has made an assignment of its assets for the benefit of any creditor or otherwise.

6.12

Schedules of Debt. Schedule 6.12(a) hereto sets forth all currently existing Debt of the Company.

6.13

Title to Properties and Assets; Liens, Etc. The Borrower has good and marketable title to all of the assets owned by the Borrower or a valid right to lease or license all of the assets leased or licensed by the Borrower, as applicable, in each case, subject to no Liens. All material tangible personal property included within the assets is in good operating condition and repair (ordinary wear and tear excepted) and is reasonably fit and usable for the purpose for which it is proposed to be used by the Borrower after Closing. Immediately after giving effect to the Closing, the Borrower will own or have the right to use all assets of every kind and description necessary to enable the Borrower to continue to conduct its business in a manner consistent with the manner in which the business has been operated historically in the ordinary course of business.

6.14

Intellectual Property Matters. The Borrower owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as currently conducted or proposed to be conducted. No material claim has been asserted and is pending by any Person challenging the use, validity or effectiveness of any Intellectual Property, nor is the Borrower aware of any valid basis for any such claim. The use of Intellectual Property by the Borrower does not materially infringe on the rights of any Person.

6.15

Tax Matters. The Borrower has filed, has caused to be filed or has been included in all federal, state and other tax returns that are required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties, and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority; no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. The Borrower is not party to any tax sharing agreement.

6.16

Brokers’ Fees. The Borrower has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Note.

6.17

Other Representations. Each of the representations and warranties of the Company (together with any related Schedule of Exceptions thereto) made in the Purchase Agreement and the Security Agreement is hereby incorporated herein by reference (as though fully restated herein) and is hereby made to, and in favor of, each Purchaser.

Affirmative Covenants. Until all amounts outstanding in this Note have been paid in full, in addition to the other covenants of the Company set forth above, the Borrower shall:

7.1

Maintenance of Existence. (a) Preserve, renew and maintain in full force and effect its corporate or organizational existence and (b) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

7.2

Compliance. Comply with (a) all of the terms and provisions of its organizational documents; (b) its obligations under its material contracts and agreements, including this Note, the Purchase Agreement and the Security Agreement; and (c) all Laws and Orders applicable to it and its business, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

7.3

Payment Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings, and reserves in conformity with GAAP with respect thereto have been provided on its books.

7.4

Notice of Events of Default. As soon as possible and in any event within two (2) Business Days after it becomes aware that a Default or an Event of Default has occurred, notify the Noteholder in writing of the nature and extent of such Default or Event of Default and the action, if any, it has taken or proposes to take with respect to such Default or Event of Default.

7.5

Further Assurances. Upon the request of the Noteholder, promptly execute and deliver such further instruments and do or cause to be done such further acts as may be necessary or advisable to carry out the intent and purposes of this Note and the Security Agreement.

Negative Covenants. Until all amounts outstanding under this Note have been paid in full, in addition to the other covenants set forth above, the Borrower shall not:

8.1

Indebtedness. Incur, create or assume any Debt, other than Permitted Debt.

8.2

Liens. Incur, create, assume or suffer to exist any Lien on any of its property or assets, whether now owned or hereinafter acquired except for (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings; (b) non-consensual Liens arising by operation of law, arising in the ordinary course of business, and for amounts which are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings; and (c) Liens created pursuant to the Security Agreement.

8.3

Compliance With Certain Regulations

(a)

Engage in, or knowingly permit any of its Affiliates to engage in, any transaction, investment, undertaking or activity that conceals the identity, source or destination of the proceeds from any category of prohibited offenses designated by the Organization for Economic Co-operation and Development’s Financial Action Task Force on Money Laundering.

(b)

Use, directly or indirectly, the proceeds of the Loans, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, (x) to fund any activities or business of or with any Person, or in any country or territory, that, is, or whose government is, the subject of Sanctions at the time of such funding, or (y) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Loans, whether as underwriter, advisor, investor, or otherwise).

Events of Default. The occurrence and continuance of any of the following shall constitute an Event of Default hereunder:

9.1

Failure to Pay. The Borrower fails to pay (a) any principal amount of the Loan when due or (b) interest or any other amount when due and, in each case, such failure continues for five (5) days after written notice to the Borrower.

9.2

Breach of Representations and Warranties. Any representation or warranty made or deemed made by the Borrower to the Noteholder herein, the Purchase Agreement or in the Security Agreement is incorrect in any material respect on the date as of which such representation or warranty was made or deemed made.

9.3

Breach of Covenants. The Borrower fails to observe or perform (a) any covenant, condition or agreement contained in Section 7 or 8 of this Note or (b) any other material covenant, obligation, condition or agreement contained in this Note, the Purchase Agreement or the Security Agreement and such failure continues for ten (10) days after written notice to the Borrower.

9.4

Bankruptcy.

(a)

the Borrower commences any case, proceeding or other action (i) under any existing or future Law relating to bankruptcy, insolvency, reorganization or other relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts or (ii) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower makes a general assignment for the benefit of its creditors;

(b)

there is commenced against the Borrower any case, proceeding or other action of a nature referred to in Section 9.4(a) above which (i) results in the entry of an order for relief or any such adjudication or appointment or (ii) remains undismissed, undischarged or unbonded for a period of sixty (60) days;

(c)

there is commenced against the Borrower any case, proceeding or other action seeking issuance of a warrant of attachment, execution or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which has not been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof;

(d)

the Borrower takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in Section 9.4(a), Section 9.4(b) or Section 9.4(c), above; or

(e)

the Borrower is generally not, or shall be unable to, or admits in writing its inability to, pay its debts as they become due.

10.

Remedies. Upon the occurrence of any Event of Default and at any time thereafter during the continuance of such Event of Default, the Noteholder may at its option, by written notice to the Borrower (a) terminate its commitment to make any Loan hereunder; (b) declare the entire principal amount of this Note, together with all accrued interest thereon and all other amounts payable hereunder, immediately due and payable; and/or (c) exercise any or all of its rights, powers or remedies under the Security Agreement or applicable Law; provided, however that, if an Event of Default described in Section 9.4 shall occur, the principal of and accrued interest on the Loan shall become immediately due and payable without any notice, declaration or other act on the part of the Noteholder.

11.

Miscellaneous.

11.1

Notices.

(a)

All notices, requests or other communications required or permitted to be delivered hereunder shall be delivered in writing, in each case to the address specified below or to such other address as such Party may from time to time specify in writing in compliance with this provision:

(i)

If to the Borrower:
General Cannabis Corporation.
565 East Evans Ave.
Denver, CO 80224
Corporate Phone: 303-759-1300
Email: robert@generalcann.com

Attention: Robert Frichtel

with a copy (which shall not constitute notice) to:

Morrison & Foerster LLP
425 Market St.
San Francisco, CA 94105
Telephone: (415) 268-7000
Facsimile: (415) 268-7522
Attention: Murray A. Indick, Esq.
Email: mindick@mofo.com

(ii)

If to the Noteholder:

[ADDRESS]
Attn: [NAME OF CONTACT]
Telephone: [NUMBER],
Facsimile: [NUMBER]
E-mail: [ADDRESS]

with a copy (which shall not constitute notice) to:

(b)

Notices if (i) mailed by certified or registered mail or sent by hand or overnight courier service shall be deemed to have been given when received; (ii) sent by facsimile during the recipient’s normal business hours shall be deemed to have been given when sent (and if sent after normal business hours shall be deemed to have been given at the opening of the recipient’s business on the next business day); and (iii) sent by e-mail shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgment).

11.2

Expenses. Each of the Parties shall be responsible for their respective expenses and costs incurred in connection with the negotiation, documentation and execution of this Note and the Security Agreement, and all other documents contemplated herein and therein, except as set forth in Section 8(m) of the Purchase Agreement.

11.3

Governing Law. This Note and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Note, the Security Agreement and the transactions contemplated hereby and thereby shall be governed by the laws of the State of Colorado.

11.4

Submission to Jurisdiction

(a)

The Borrower hereby irrevocably and unconditionally (i) agrees that any legal action, suit or proceeding arising out of or relating to this Note or the Security Agreement may be brought in the courts of the State of Colorado or of the United States of America for the District of Colorado and (ii) submits to the exclusive jurisdiction of any such court in any such action, suit or proceeding. Final judgment against the Borrower in any action, suit or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment.

(b)

Nothing in this Section 11.4 shall affect the right of the Noteholder to (i) commence legal proceedings or otherwise sue the Borrower in any other court having jurisdiction over the Borrower or (ii) serve process upon the Borrower in any manner authorized by the laws of any such jurisdiction.

11.5

Venue. The Borrower irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Note or the Security Agreement in any court referred to in Section 11.4 and the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

11.6

Waiver of Jury Trial. THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO THIS NOTE, THE SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY.

11.7

Counterparts; Integration; Effectiveness. This Note, the Security Agreement and any amendments, waivers, consents or supplements hereto and thereto may be executed in counterparts, each of which shall constitute an original, but all taken together shall constitute a single contract. This Note and the Security Agreement constitutes the entire contract between the Parties with respect to the subject matter hereof and supersede all previous agreements and understandings, oral or written, with respect thereto. Delivery of an executed counterpart of a signature page to this Note or the Security Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Note or the Security Agreement, as applicable.

11.8

Successors and Assigns. This Note may be assigned or transferred by the Noteholder to any Person, subject to compliance with applicable Law, including the Securities Act and applicable Blue Sky laws. The Borrower may not assign or transfer this Note or any of its rights hereunder without the prior written consent of the Noteholder. This Note shall inure to the benefit of, and be binding upon, the Parties and their permitted assigns.

11.9

Waiver of Notice. The Borrower hereby waives demand for payment, presentment for payment, protest, notice of payment, notice of dishonor, notice of nonpayment, notice of acceleration of maturity and diligence in taking any action to collect sums owing hereunder.

11.10

USA PATRIOT Act. The Noteholder hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify, and record information that identifies the Borrower, which information includes the name of the Borrower and other information that will allow the Noteholder to identify the Borrower in accordance with the US PATRIOT Act, and the Borrower agrees to provide such information from time to time to the Noteholder.

11.11

Interpretation. For purposes of this Note (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Note as a whole. The definitions given for any defined terms in this Note shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. Unless the context otherwise requires, references herein: (x) to Exhibits and Sections mean the Exhibits and Sections of this Note; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof; and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Note shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

11.12

Amendments and Waivers. No term of this Note may be waived, modified or amended except by an instrument in writing signed by both of the parties hereto. Any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given.

11.13

Headings. The headings of the various Sections and subsections herein are for reference only and shall not define, modify, expand or limit any of the terms or provisions hereof.

11.14

No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising on the part of the Noteholder, of any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

11.15

Electronic Execution. The words “execution,” “signed,” “signature,” and words of similar import in the Note shall be deemed to include electronic or digital signatures or the keeping of records in electronic form, each of which shall be of the same effect, validity and enforceability as manually executed signatures or a paper-based recordkeeping system, as the case may be, to the extent and as provided for under applicable law, including the Electronic Signatures in Global and National Commerce Act of 2000 (15 USC § 7001 et seq.), the Electronic Signatures and Records Act of 1999 (N.Y. State Tech. Law §§ 301-309), or any other similar state laws based on the Uniform Electronic Transactions Act.

11.16

Severability. If any term or provision of this Note or the Security Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Note or the Security Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Note so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Borrower has executed this Secured Promissory Note as of April [●], 2018.


	GENERAL CANNABIS CORPORATION:

	By:
		Name:
		Title:


By its acceptance of this Note, the Noteholder acknowledges and agrees to be bound by the provisions of this Agreement


NOTEHOLDER

[Signature Page to Secured Promissory Note]

EX-10.3 4 exh10_03.htm Exhibit 10.3

Exhibit 10.3

FORM OF
SECURITY AGREEMENT

This SECURITY AGREEMENT, dated as of April [●], 2018 (this “Agreement”), made by and between GENERAL CANNABIS CORPORATION, a Colorado corporation (the “Grantor”), in favor _______________, (the “Secured Party”).

WHEREAS, on the date hereof, the Secured Party has made loans to the Grantor (the “Loans”), evidenced by that certain Promissory Note of even date herewith (as amended, supplemented or otherwise modified from time to time, the “Note”), as purchased under the terms of the Promissory Note and Warrant Purchase Agreement of even date herewith (“Purchase Agreement”). Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Note;

WHEREAS, this Agreement is given by the Grantor in favor of the Secured Party to secure the payment and performance of all of the Secured Obligations;

WHEREAS, this Security Agreement is one of a series of Security Agreements entered into with all other purchasers of the Notes who shall all share the benefits of this Security Agreement on a pari passu basis based on the pro rata amount of the outstanding principal and interest of their respective Loans at the time of any enforcement of this Security Agreement (“Pro Rata Loan Amounts”); and

WHEREAS, it is a condition to the obligations of the Lender that the Grantor execute and deliver this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

Definitions.

(a)

Unless otherwise specified herein, all references to Sections herein are to Sections of this Agreement.

(b)

Unless otherwise defined herein, terms used herein that are defined in the UCC shall have the meanings assigned to them in the UCC. However, if a term is defined in Article 9 of the UCC differently than in another Article of the UCC, the term has the meaning specified in Article 9.

(c)

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

“Collateral” has the meaning set forth in Section 2.

“Event of Default” has the meaning set forth in the Note.

“First Priority” means, with respect to any lien and security interest purported to be created in any Collateral pursuant to this Agreement, such lien and security interest is the most senior lien to which such Collateral is subject (subject only to liens permitted under the Note).

“Proceeds” means “proceeds” as such term is defined in section 9102 of the UCC and, in any event, shall include, without limitation, all dividends or other income from the Collateral, collections thereon or distributions with respect thereto.

“Secured Obligations” has the meaning set forth in Section 3.

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of Colorado or, when the laws of any other state govern the method or manner of the perfection or enforcement of any security interest in any of the Collateral, the Uniform Commercial Code as in effect from time to time in such state.

Grant of Security Interest. The Grantor hereby pledges and grants to the Secured Party, and hereby creates a continuing First Priority lien and security interest in favor of the Secured Party in and to, all of the Grantor’s right, title and interest in and to each and every asset of the Grantor, including all tangible and intangible property, all cash, real property, leases, contracts, accounts, receivables, claims and intellectual properties of each and every kind, whether now owned or hereafter acquired (collectively, the “Collateral”). The First Priority lien shall be pari passu and allocated on a pro rata basis among the Lenders based on the Pro Rata Loan Amounts.

Secured Obligations. The Collateral secures the due and prompt payment and performance of the obligations of the Grantor from time to time arising under the Note, the Purchase Agreement and this Agreement (such obligations collectively called the “Secured Obligations”).

Perfection of Security Interest and Further Assurances.

(a)

The Grantor shall, from time to time, as may be required by the Secured Party with respect to all Collateral, take all actions as may be requested by the Secured Party to perfect the security interest of the Secured Party in the Collateral.

(b)

The Grantor hereby irrevocably authorizes the Secured Party at any time and from time to time to file in any relevant jurisdiction any financing statements and amendments thereto that contain the information required by Article 9 of the UCC of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Collateral.

(c)

The Grantor agrees that at any time and from time to time, at the expense of the Grantor, the Grantor will promptly execute and deliver all further instruments and documents, obtain such agreements from third parties, and take all further action, that may be necessary or desirable, or that the Secured Party may reasonably request, in order to perfect and protect any security interest granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder or under any other agreement with respect to any Collateral.

(d)

The Grantor shall not relocate any tangible property comprising the Collateral and shall take all reasonable steps to keep same in marketable condition. The Grantor shall not grant any other security interests in the Collateral without the prior consent of the Secured Party.

Remedies Upon Default. If any Event of Default shall have occurred and be continuing:

(a)

The Secured Party, without any other notice to or demand upon the Grantor, may assert all rights and remedies of a secured party under the UCC or other applicable law, including, without limitation, the right to take possession of, hold, collect, sell, lease, deliver, grant options to purchase or otherwise retain, liquidate or dispose of all or any portion of the Collateral.

(b)

Any cash held by the Secured Party as Collateral and all cash Proceeds received by the Secured Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in whole or in part by the Secured Party to the payment of expenses incurred by the Secured Party in connection with the foregoing or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Secured Party hereunder.

No Waiver and Cumulative Remedies. The Secured Party shall not by any act (except by a written instrument), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. All rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies provided by law.

Amendments. None of the terms or provisions of this Agreement may be amended, modified, supplemented, terminated or waived, and no consent to any departure by the Grantor therefrom shall be effective unless the same shall be in writing and signed by the Secured Party and the Grantor, and then such amendment, modification, supplement, waiver or consent shall be effective only in the specific instance and for the specific purpose for which made or given.

Addresses For Notices. All notices and other communications provided for in this Agreement shall be in writing and shall be given in the manner and become effective as set forth in the Note, and addressed to the respective parties at their addresses as specified on the signature pages hereof or as to either party at such other address as shall be designated by such party in a written notice to each other party.

Continuing Security Interest; Further Actions. This Agreement shall create a continuing First Priority lien and security interest in the Collateral and shall (a) subject to this Agreement,, remain in full force and effect until payment and performance in full of the Secured Obligations, (b) be binding upon the Grantor, its successors and assigns, and (c) inure to the benefit of the Secured Party and its successors, transferees and assigns.

10.

Termination; Release. On the date on which all Secured Obligations have been paid and performed in full, the Secured Party will, at the request and sole expense of the Grantor, (a) duly assign, transfer and deliver to or at the direction of the Grantor (without recourse and without any representation or warranty) such of the Collateral as may then remain in the possession of the Secured Party, together with any monies at the time held by the Secured Party hereunder, and (b) execute and deliver to the Grantor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement.

11.

Fees. The Grantor shall be responsible for all costs incurred by the Secured Party in enforcing its rights hereunder, including reasonable attorneys’ fees.

12.

Governing Law. This Agreement and the Note and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement or the Note and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the laws of the State of Colorado. The other provisions of the Note are incorporated herein, mutatis mutandis, as if a part hereof.

13.

Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement. This Agreement and the Note constitute the entire contract among the parties with respect to the subject matter hereof and supersede all previous agreements and understandings, oral or written, with respect thereto.

[SIGNATURE PAGE FOLLOWS]

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


	GENERAL CANNABIS CORPORATION:


	By:
	Name:
	Title:

	Address for Notices: 6565 E. Evans Avenue Denver, Colorado 80224



	SECURED PARTY:

	By:
	Name:
	Title:


	Address for Notices:

[Signature Page to Security Agreement]

EX-10.4 5 exh10_04.htm Exhibit 10.4

Exhibit 10.4

NEITHER THIS WARRANT NOR THE SECURITIES FOR WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.


Warrant 2018-N-__	Issue Date: April [•], 2018

GENERAL CANNABIS CORPORATION

SERIES 2018 WARRANT

TO PURCHASE SHARES OF COMMON STOCK

THIS SERIES 2018 WARRANT (the “Warrant”) certifies that, for value received, ________________ or his assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business of the twenty-fourth (24^th) month after the Initial Exercise Date (the “Expiration Date”) but not thereafter, to subscribe for and purchase from General Cannabis Corporation, a Colorado corporation, (the “Company”), up to [ ] shares (as subject to adjustment hereunder, the “Warrant Shares”) of the Company’s $0.001 par value common stock, (“Common Stock”). The purchase price of one share of Common Stock under this Warrant shall be equal to $2.35 per share, subject to adjustment hereunder (the “Exercise Price”).

The Holder may exercise this Warrant, in whole or in part, upon surrender of this Warrant, with the exercise form annexed hereto duly executed, at the office of the Company, or such other office as the Company shall notify the Holder in writing, together with a certified or bank cashier's check payable to the order of the Company in the amount of the Exercise Price multiplied by the number of shares of Common Stock being purchased; provided, that the Holder may exercise this Warrant in whole or part utilizing all or a portion of the amounts owed by the Company to the Holder pursuant to the Note issued with this and other warrants under the terms of the Promissory Note and Warrant Purchase Agreement, dated as of April [●], 2018 (the “Purchase Agreement”).

“Principal Market” shall include the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTCQB (or any successors to any of the foregoing) (whichever is at the time the principal trading exchange or market for the Common Stock), or any securities exchange or other securities market on which the Common Stock is then being listed, quoted or traded. The Company will from time to time take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of the Warrant, will be listed on the Principal Market on which other shares of Common Stock are then listed, if any.

Pursuant to Section 5 of the Purchase Agreement, the Company has agreed to file with the Securities and Exchange Commission a registration statement on Form S-3 or such other form under the Securities Act of 1933, as amended (the “Securities Act”), providing for the resale of the Warrant Shares and any shares of capital stock or other securities issued or issuable with respect to this Warrant, as a result of any stock split, stock dividend, recapitalization, exchange, or similar event or otherwise.

The person or persons in whose name or names any certificate representing Common Stock is issued hereunder shall be deemed to have become the holder of record of the Common Stock represented thereby as of the close of business on the date on which this Warrant is exercised with respect to such shares, whether or not the transfer books of the Company shall be closed. Until such time as this Warrant is exercised or terminates, the Exercise Price payable and the number and character of securities issuable upon exercise of this Warrant are subject to adjustment as hereinafter provided.

The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Form of Exercise (attached hereto as Exhibit A), the Holder (together with the Holder’s affiliates, and any other person or entity acting as a group together with the Holder or any of the Holder’s affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock equivalents), subject to a limitation on conversion or exercise analogous to the limitation

contained herein, beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 4 applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Form of Exercise (attached hereto as Exhibit A) shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Upon the written or oral request of a Holder, the Company shall within two trading days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.9% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4 by an amount determined by the Holder in its sole discretion. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

The Company covenants that it will at all times reserve and keep available a number of its authorized Common Stock, free from all preemptive rights, which will be sufficient to permit the exercise of this Warrant. The Company further covenants that such shares as may be issued pursuant to the exercise of this Warrant will, upon issuance, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges. Unless previously exercised, this Warrant shall expire at 5:00 p.m. Eastern Standard Time, on the Expiration Date and shall be void thereafter or can be extended at the Company’s discretion.

In the event that the Common Stock closes at a price of at least $8.00 per share for 15 consecutive trading days, the Company may give the Holder notice of the Company’s intention to redeem this Warrant. During the 10 day period following such notice, the Holder may exercise such Warrant. Following such 10 day period, the Company shall pay the Holder a price of $.01 per share that this Warrant is exercisable for and the Holder shall have no further right to exercise this Warrant.

In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 7 (in each case, after taking into consideration any prior adjustments pursuant to this Section 7). If the Company shall, at any time or from time to time after the Initial Exercise Date, issue or sell, or is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to an Exercise Price equal to the lowest price per share at which any such share of Common Stock has been issued or sold (or is deemed to have been issued or sold); provided, that if such issuance or sale (or deemed issuance or sale) was without consideration, then the Company shall be deemed to have received an aggregate of $0.01 of consideration for all such shares so issued or deemed to be issued. This section shall not be applicable to any issuance of options issued pursuant to the Company’s existing stock option plan.

If the Company subdivides its outstanding Common Stock, by split-up or otherwise, or combines its outstanding Common Stock, the Exercise Price then applicable to shares covered by this Warrant shall forthwith be proportionately decreased in the case of a subdivision, or proportionately increased in the case of a combination.

This Warrant shall terminate, if not earlier exercised, in the event of an Acquisition (as defined herein). In the event the Company is proposed to be acquired, the Company shall provide the Holder with all information with respect to the Acquisition that is otherwise provided to shareholders of the Company at such time and from time to time during the pendency of the Acquisition, including (but not limited to) the proposed price to be paid in the proposed Acquisition. The Holder shall have the right to exercise this Warrant on or prior to the closing date with respect to the proposed Acquisition; if the Warrant is not exercised on or prior to such closing date, the Warrant shall expire upon the occurrence of the closing of the Acquisition. For the purpose of this Warrant, “Acquisition” means any sale or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.

10.

If a voluntary or involuntary dissolution, liquidation or winding up of the Company (other than in connection with a merger or consolidation of the Company) is at any time proposed during the term of this Warrant, the Company shall give written notice to the Holder at least ten calendar days prior to the record date of the proposed transaction. The notice shall contain: (1) the date on which the transaction is to take place; (2) the record date (which must be at least ten days after the giving of the notice) as of which holders of the Common Stock entitled to receive distributions as a result of the transaction shall be determined; (3) a brief description of the transaction; (4) a brief description of the distributions, if any, to be made to holders of the Common Stock as a result of the transaction; and (5) an estimate of the fair market value of the distributions. On the date of the transaction, if it actually occurs, this Warrant and all rights existing under this Warrant shall terminate.

11.

In no event shall any fractional share of Common Stock of the Company be issued upon any exercise of this Warrant. If, upon exercise of this Warrant as an entirety, the Holder would, except as provided in this Section 11, be entitled to receive a fractional share of Common Stock, then the Company shall issue the next higher number of full Common Stock, issuing a full share with respect to such fractional share. If this Warrant is exercised at one time for less than the maximum number of Common Stock purchasable upon the exercise hereof, the Company shall issue to the Holder a new warrant of like tenor and date representing the number of Common Stock equal to the difference between the number of shares purchasable upon full exercise of this Warrant and the number of shares that were purchased upon the exercise of this Warrant.

12.

No adjustments in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price, provided however, that any adjustments which by reason of this Section 12 are not required to be made shall be carried forward and taken into account in any subsequent adjustment.

13.

Whenever the Purchase Price is adjusted, as herein provided, the Company shall promptly deliver to the Holder a certificate setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

14.

If at any time prior to the expiration or exercise of this Warrant, the Company shall pay any dividend or make any distribution upon its Common Stock or shall make any subdivision or combination of, or other change in its Common Stock, the Company shall cause notice thereof to be mailed, first class, postage prepaid, to Holder at least ten calendar days prior to the record date set for determining the holders of Common Stock who shall participate in such dividend, distribution, subdivision, combination or other change. Such notice shall also specify the record date as of which holders of Common Stock who shall participate in such dividend or distribution is to be determined. Failure to give such notice, or any defect therein, shall not affect the legality or validity of any dividend or distribution.

15.

The Company will maintain a register containing the names and addresses of the Holder and any assignees of this Warrant. Holder may change its address as shown on the warrant register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered by confirmed facsimile or telecopy or by a recognized overnight courier, addressed to Holder at the address shown on the warrant register.

16.

This Warrant has not been registered under the Securities Act or any state securities laws (“State Acts”) or regulations in reliance upon exemptions under the Securities Act, and exemptions under the State Acts. Subject to compliance with the Securities Act and State Acts, this Warrant and all rights hereunder are transferable in whole or in part, at the office of the Company at which this Warrant is exercisable, upon surrender of this Warrant together with the assignment hereof properly endorsed.

17.

In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company may issue a new warrant of like tenor and denomination and deliver the same (a) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant, or (b) in lieu of any Warrant lost, stolen, or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of such Warrant (including a reasonably detailed affidavit with respect to the circumstances of any loss, theft, or destruction) and of indemnity with sufficient surety satisfactory to the Company.

18.

Unless a current registration statement under the Securities Act shall be in effect with respect to Common Stock to be issued upon exercise of this Warrant, the Holder, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, and at the time of any proposed transfer of Common Stock acquired upon exercise hereof, the Company may require Holder to make such representations, and may place such legends on certificates representing Common Stock issuable upon exercise of this Warrant, as may be reasonably required in the opinion of counsel to the Company to permit such Common Stock to be issued without such registration.

19.

This Warrant does not entitle Holder to any of the rights of a stockholder of the Company.

20.

Nothing expressed in this Agreement and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties to this Agreement any covenant, condition, stipulation, promise, or agreement contained herein, and all covenants, conditions, stipulations, promises and agreements contained herein shall be for the sole and exclusive benefit of the parties hereto and their respective successors and assigns.

21.

The provisions and terms of this Warrant shall be construed in accordance with the laws of the State of Colorado.

[SIGNATURE PAGE TO FOLLOW]

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.


	GENERAL CANNABIS CORPORATION:

	By:
		Name:
		Title:

EXHIBIT A

FORM OF EXERCISE

Date: ____________________

To: GENERAL CANNABIS CORPORATION/[TRANSFER AGENT]

The undersigned hereby subscribes for _______ shares of common stock of General Cannabis Corporation covered by this Warrant and hereby delivers $___________ in full payment of the purchase price thereof as follows:

[ ] in lawful money of the United States;

[ ] through the forgiveness of principal due and owing under the Note in such amount.

The certificate(s) for such shares should be issued in the name of the undersigned or as otherwise indicated below:



	Signature:


	Printed Name


	Name for Registration, if different


	Street Address


	City, State and Zip Code


	Social Security Number

EXHIBIT B

FORM OF ASSIGNMENT

For Value Received, the undersigned hereby sells, assigns and transfers unto the assignee(s) set forth below the within Warrant certificate of General Cannabis Corporation; together with all right, title and interest therein, and hereby irrevocably constitutes and appoints ___________________________________ attorney, to transfer the said Warrant on the books of the within-named Company with respect to the number of Common Stock set forth below, with full power of substitution in the premises.

Name(s) of

Assignee(s)

Social Security or other Identifying Number(s) of Assignee(s)

Address

No. of Shares

Dated: ______________________________




	Signature

	NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WARRANT IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.


	Print Name and Title