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): June 13, 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 |
| 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 June 6, 2018, General Cannabis Corp (the “Company”) provided a loan of $600,000 to Dope Media, Inc. (“Dope”) pursuant to the terms of a secured note in the form attached hereto as Exhibit 10.1. The interest on the loan is 10% per annum and the maturity date of the loan is May 31, 2019. Dope’s obligations under the note are secured by all of Dope’s assets pursuant to the terms of the security agreement in the form attached hereto as Exhibit 10.2. In connection with the loan transaction, Dope also issued a warrant to the Company to purchase an aggregate of 1,846,187 shares of Dope’s common stock at an exercise price of $0.3278 per share. The warrant becomes exercisable upon the maturity date of the loan and in connection with certain other transactions involving Dope. The foregoing descriptions of the secured note, the security agreement and the warrant do not purport to be complete and are qualified in their entirety by reference to the full text of the secured note, the security agreement and the warrant which are attached hereto as Exhibits 10.1, 10.2, and 10.3, respectively, and are incorporated herein by reference.
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.
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: June 15, 2018
| GENERAL CANNABIS CORP | |
|
|
|
|
|
|
| By: | /s/ Robert L. Frichtel |
| Name: | Robert L. Frichtel |
| Title: | Chief Executive Officer |
Exhibit 10.1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS.
DOPE MEDIA, INC.
SENIOR SECURED NOTE
US$600,000 | June 13, 2018 |
FOR VALUE RECEIVED, the undersigned, Dope Media, Inc., a corporation organized under the laws of the State of Delaware (the “Company”), hereby promises to pay, on the terms and conditions of this Senior Secured Note (as amended, supplemented or otherwise modified from time to time, this “Note”), to General Cannabis Corp., a corporation organized under the laws of the State of Colorado, or its affiliates (the “Holder”) or order, the principal amount of SIX HUNDRED THOUSAND UNITED STATES DOLLARS ($600,000) (less any repayments of principal, and plus any amounts of capitalized interest, the “Principal Amount”), on the earliest to occur of (a) the Maturity Date or (b) when declared due and payable by the Holder in writing upon the occurrence of an Event of Default.
ARTICLE I.
INTEREST
1.1
Interest. This Note shall bear interest at the Interest Rate on the outstanding Principal Amount. Interest shall be calculated on the basis of a 360-day year and the actual number of days elapsed. Interest shall be payable quarterly in arrears on each March 15, June 15, September 15, and December 15 (or, if any such day is not a Business Day, the next following Business Day). Without limiting the Company’s obligation to pay interest in accordance with the previous sentence, any interest that is not paid in cash when due shall be automatically capitalized and added to the Principal Amount on the date due.
1.2
Default Interest. Upon the occurrence of any Event of Default, upon notice by the Holder to the Company, the outstanding balance of the Principal Amount and any accrued and unpaid interest shall bear interest at the Default Rate from the date of such Event of Default. Such default interest shall be payable on demand, and shall accrue until the earlier of (i) waiver or cure of the applicable Event of Default or (ii) agreement of the Holder to rescind the charging of interest at the Default Rate.
ARTICLE II.
PAYMENT
2.1
Repayment on Maturity Date. A single and final payment of the outstanding Principal Amount and accrued and unpaid interest and other amounts payable hereunder shall be due and payable in full on the Maturity Date.
2.2
Voluntary Prepayment. The Company shall be permitted to prepay this Note without penalty, in whole or in part, at any time and from time to time, upon at least five (5) Business Days advance written notice to the Holder.
2.3
Mandatory Prepayment. The Company shall, no later than five Business Days following the occurrence of any the following events, apply the amount specified to prepay this Note:
(a)
In the event that the Company issues any capital stock or any instrument convertible into or exercisable for any of its capital stock, or incurs any Indebtedness of the type described in clause (a) and (c) of the definition thereof (other than (i) the issuance of additional capital stock through the conversion of existing convertible shares outstanding on the date hereof and (ii) to the Holder or its affiliates), the Company shall apply 100% of the net cash proceeds of such issuance or borrowing (after payment of reasonable third party expenses, fees and taxes relating to such issuance or borrowing) to prepay this Note.
(b)
In the event that any Subsidiary of the Company declares or pays any dividend to the Company, repurchases any capital stock owned by the Company or otherwise makes any payment or distribution to the Company in respect of the Company’s ownership interests in such Subsidiary, the Company shall apply 100% of such dividend or payment to prepay this Note.
(c)
In the event that the Company sells any assets (other than (i) shares or other ownership interests in any Subsidiary and (ii) assets (other than investment assets) that are worn, obsolete, or sold in the ordinary course of business with an aggregate value not to exceed $10,000), the Company shall apply 100% of the net cash proceeds of such sale (after payment of
reasonable third party expenses, fees and taxes relating to such sale) to prepay this Note. In the event that the Company sells any shares or other ownership interests in any Subsidiary, the Company shall apply 100% of the net cash proceeds of such sale (after payment of reasonable third party expenses, fees and taxes relating to such sale) to prepay this Note.
(d)
In the event of a Change of Control, the Company shall prepay 100% of the Principal Amount and accrued and unpaid interest on this Note.
2.4
Amount Payable Upon Prepayment. Except as set forth in Section 4.3, the amount of any prepayment in accordance with Section 2.2 or Section 2.3 shall be applied (a) first, to accrued and unpaid interest and other amounts other than principal payable hereunder and (b) second, to the repayment of the Principal Amount.
2.5
Manner of Payment. Notwithstanding anything to the contrary in this Section 2.5, each payment pursuant to Section 4.3 shall be effective on the date of delivery by the Company to the Holder of the GAAP audit referenced therein. Each payment in cash by the Company on account of the principal of or interest on this Note and any other amount owed to the Holder under this Note shall be made not later than 2:00 p.m. (New York time) on the date specified for payment under this Note to the Holder at its office located at the address for notices as provided in Section 9.2 below, by wire transfer to an account designated by the Holder in writing or as otherwise directed by the Holder, in lawful money of the United States of America in immediately available funds. Any payment received by the Holder after 2:00 p.m. (New York time) shall be deemed received on the next Business Day. Receipt by the Holder at or prior to 2:00 p.m. (New York time) on any Business Day shall be deemed to constitute receipt by the Holder on such Business Day. Amounts repaid or prepaid under this Note may not be reborrowed.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
In order to induce the Holder to enter into this Note, the Company hereby represents and warrants to the Holder that:
3.1
Organization, Qualifications; Corporate Power. The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly licensed or qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which the nature of the business transacted by it or the character of the properties owned or leased by it requires such licensing or qualification except where the failure to be so qualified, licensed or in good standing would not, in the aggregate, cause a Material Adverse Effect. The Company has the requisite power and authority to own and hold its properties, to carry on its business as now conducted and as proposed to be conducted and to execute, issue and deliver this Note. The Company is in material compliance with all of the terms and provisions of its certificate of incorporation and bylaws and any shareholders agreement or similar agreement to which it is a party (the “Constituent Documents”).
3.2
Authorization of Agreements, Etc. The execution, issuance and delivery by the Company of this Note and the performance by the Company of its obligations hereunder have been duly authorized by all requisite corporate action and will not violate any material provision of law, any order of any court or other agency of government, the Constituent Documents or other organizational documents of the Company, or any material provision of any material indenture to which the Company, any of its Subsidiaries or any of their respective properties or assets is bound, or materially conflict with, result in a material breach of or constitute a material default under (with due notice or lapse of time or both) any indenture or other instrument, or result in the creation or imposition of any claim upon any of the properties or assets of the Company, or require the consent of, or the delivery of any notice to, any third party, other than such consents or notices which have been duly obtained or given, as applicable, as of the date of this Note or except as such notice requirements as may be required under state or Federal securities laws.
3.3
Validity. This Note has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally or (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.
3.4
Indebtedness. As of the date first set forth above, neither the Company nor its Subsidiaries has any Indebtedness for borrowed money other than (i) as represented by this Note and (ii) all other Indebtedness set forth on Schedule I attached hereto.
3.5
Approvals. The Company has obtained any required approvals from any governmental entity or other Person to the extent required for the execution and performance of its obligations under this Note.
ARTICLE IV.
COVENANTS; REPRESENTATIONS AND WARRANTIES
4.1
Affirmative Covenants. From the date hereof until all principal and interest owing hereunder have been paid in full the Company shall (and shall, except in the cases of clause (a) and (b), cause its Subsidiaries to):
(a)
Promptly give written notice to the Holder: (i) of any condition or event that constitutes an Event of Default (as defined below) or (ii) of the occurrence of any event that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, and which notice in each case includes a certificate specifying the nature and period of existence of such condition or event, or specifying the notice given or action taken by any such Person and the nature of such claimed default or event of default, event or condition, and what action the Company or its applicable Subsidiary has taken, is taking and proposes to take with respect thereto;
(b)
preserve and maintain in all material respects its and its Subsidiaries’ legal status, rights, franchises and privileges in the jurisdiction of its and their respective organization and qualify and remain qualified as a foreign corporation or other entity, as applicable, in each jurisdiction in which such qualification is necessary or desirable in view of its and their respective businesses and operations or the ownership or lease of its and their respective properties except where the failure to be so qualified or in good standing would not have a Material Adverse Effect;
(c)
comply in all material respects with the requirements of all (i) material applicable laws, rules, regulations and orders of any governmental authority and (ii) material contractual obligations of the Company and its Subsidiaries;
(d)
execute and deliver, or cause to be executed and delivered, upon the reasonable request of the Holder and at the Company’s expense, such additional documents, instruments and agreements as the Holder may determine to be reasonably necessary to carry out the provisions of this Note and the transactions and actions contemplated hereunder;
(e)
maintain proper books of record and account, in which entries that are full, true and correct in all material respects and are in conformity with applicable accounting principles consistently applied shall be made of all material financial transactions and matters involving the assets and business of the Company and its Subsidiaries;
(f)
cooperate with the Holder and its advisors, any other agents, representatives and affiliates with respect to the Holder’s due diligence investigation of the Company and its business;
(g)
reimburse the Holder for any reasonable out-of-pocket expenses, including reasonable fees and disbursements of counsel, (i) incurred in connection with the negotiation, documentation and issuance of this Note in an amount not to exceed $15,000 in the aggregate, or (ii) any enforcement by the Holder of its rights hereunder, within five (5) Business Days of the Holder presenting the Company with an invoice for such expenses;
(h)
at all times maintain a minimum consolidated net cash balance of $100,000 (calculated in accordance with generally accepted accounting principles in the United States), and provide to the Holder each month a statement with respect to the amount of its consolidated net cash balance as of the last day of such month within ten days of such date.
4.2
Negative Covenants. From the date hereof until all principal and interest owning hereunder have been paid in full the Company shall not, and in the case of clauses (a) through (d), the Company shall not permit any of its Subsidiaries to, do or take any action on or following the date hereof with respect to any of the following:
(a)
cease to conduct or carry on the business of the Company or its Subsidiaries substantially as now conducted or as proposed to be conducted or materially change any part of its business activities or take any action which would result in a Material Adverse Effect;
(b)
effect the sale, transfer or license, in a single transaction or a series of transactions, of any material assets with a fair market value in excess of $10,000;
(c)
avoid or seek to avoid the observance or performance of any of the terms of this Note through any reorganization, recapitalization, transfer of assets or other voluntary action;
(d)
(i) liquidate or dissolve, consolidate with, or merge into or with, any other corporation, provided, that this clause (i) shall not prevent a merger or consolidation involving only the Company and one or more of its Subsidiaries pursuant to which the Company is the surviving party or (ii) purchase or otherwise acquire all or substantially all of the capital stock or assets of any Person (or of any division or business unit thereof) other than in the ordinary course of business;
(e)
declare or pay any dividend in respect of any class of its capital stock, or repurchase or agree or commit to repurchase any shares of its capital stock, or make any payment of principal on any Indebtedness ranking junior in right of payment or upon liquidation to this Note;
(f)
incur any Indebtedness for borrowed money in excess of $10,000;
(g)
incur any Liens other than Permitted Liens;
(h)
without the prior written consent of the Holder, enter into any transaction or series of transactions with, or make any payment to, any director, officer or holder of capital stock representing more than five percent (5%) of the voting power in the Company, other than transactions or payments that prior to the date hereof have been disclosed in writing to the Holder.
(i)
Notwithstanding anything to the contrary in the Note or this Article IV, the Holder acknowledges that the Company has engaged Ackrell Capital to assist the Company in raising equity or debt financing, and acknowledges that the continuation of those efforts is in no way restricted by the obligations hereunder; provided, that the obligations under this Note shall be senior to any obligations that arise as a result of such efforts.
4.3
Audit Expense Reimbursement. Upon delivery by July 15, 2018 by the Company to the Holder of an audit covering two years of historic financials prepared in accordance with GAAP and Section 2005.1 of the SEC Financial Reporting Manual (i.e., as though the Company was a registrant), audited by an independent registered public accounting firm compliant with PCAOB and SEC requirements, the Holder will pay $100,000 to the Company. If such audit is delivered after July 15, 2018 and before August 15, 2018, the Holder will pay $50,000 to the Company. No payment will be made for financial statements delivered after August 15, 2018. Payments pursuant to this Section 4.3 will be made by a reduction of the Principal Amount.
ARTICLE V.
EVENTS OF DEFAULT
5.1
Events of Default. The occurrence of any one or more of the following events shall constitute an “Event of Default”:
(a)
the Company shall fail to pay (i) any principal of this Note when due in accordance with the terms hereof or (ii) interest on this Note when due in accordance with the terms hereof and such non-payment continues for a period of 3 Business Days after the due date therefor;
(b)
the Company shall fail to pay any amount (other than principal or interest) which is payable hereunder, when due in accordance with the terms hereof and such failure of payment has continued for 30 days after being notified of such failure by the Holder;
(c)
any representation, warranty, certification or statement made by or on behalf of the Company in this Note or any Ancillary Document shall have been incorrect, misleading or false in any material respect when made and such inaccuracy has continued for 5 Business Days after the earlier of (i) the date on which the Company becomes aware of such inaccuracy and (ii) the date on which the Company has been notified of such inaccuracy in writing by the Holder;
(d)
the Company shall breach any covenant, condition, agreement or provision contained in this Note or any Ancillary Document and such breach has continued for five (5) Business Days after the earlier of (i) the date on which the Company becomes aware of such inaccuracy and (ii) the date on which the Company has been notified of such inaccuracy in writing by the Holder;
(e)
(i) the Company or any of its Subsidiaries shall commence any case, proceeding or other action (a) under any law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (b) 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 (ii) there shall be commenced against the Company or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (a) results in the entry of an order for relief or any such adjudication or appointment or (b) remains undismissed, undischarged or unbonded for a period of 30 days; or (iii) there shall be commenced against the Company or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint 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 shall not have been vacated, discharged or stayed, or bonded pending appeal, within 60 days after the entry thereof; (iv) the Company or any of its Subsidiaries shall (a) make a general assignment for the benefit of its creditors, or (b) shall admit its inability to pay its debts when they become due; (v) there shall be any order, judgment or decree entered against the Company or any of its Subsidiaries decreeing the dissolution or split up of the Company or any of its Subsidiaries and such order shall remain undischarged or unstayed for a period in excess of 60 days; or (vi) the Company or any of its Subsidiaries shall cease to carry on all or any substantial part of its business in the ordinary course;
(f)
after the date hereof any Person or group of Persons (other than Holder or its affiliates) acquires in any manner a majority of the voting power of the Company;
(g)
the failure by the Company or any of its Subsidiaries to promptly forestall or remove any execution, garnishment or attachment of such consequence as shall impair its ability to conduct its business or fulfill its obligations and such execution, garnishment or attachment shall not be vacated within 90 days;
(h)
there is entered against the Company or its Subsidiaries a final judgment or order for the payment of money in an aggregate amount exceeding US$50,000 and such judgment or order shall remain unsatisfied or without a stay in respect thereof for a period of 60 days;
(i)
the Company or any Subsidiary shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received or in respect of any capitalized lease, in each case for which the Company’s or such Subsidiary’s obligations exceed $10,000, or fail to observe or perform any material term, covenant or agreement contained in any material agreement by which it is bound and evidencing or securing borrowed money or credit received or in respect of any such capitalized lease for such period of time or otherwise as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof, or any such holder or holders shall rescind or shall have a right to rescind the purchase of any such obligations; or
5.2
Consequence of Event of Default. Upon the occurrence and during the continuance of an Event of Default, (i) upon notice pursuant to Section 1.2, the outstanding balance of the Principal Amount shall bear interest at the Default Rate from the date of such Event of Default and (ii) the Holder may, by notice in writing to the Company, declare the then outstanding Principal Amount of this Note, together with any accrued and unpaid interest due thereon, to be forthwith due and payable and all such amounts shall be immediately due and payable.
ARTICLE VI.
REGISTRATION AND TRANSFER OF NOTE
6.1
Register. The Holder shall keep at its principal office a register in which the Holder shall provide for the registration of this Note and record the name and address of the Company. The Company shall notify the Holder of any change of name or address and promptly after receiving such notification the Holder shall record such information in such register.
6.2
Transfer. This Note and all rights hereunder may be assigned, pledged, encumbered or otherwise transferred by the Holder without the consent of the Company. This Note and the obligations of the Company hereunder may not be assigned or delegated by the Company.
ARTICLE VII.
DEFINITIONS
7.1
Definitions. In this Note, unless the context otherwise requires, the following words and expressions have the following meanings:
“Ancillary Documents” means (i) that certain Warrant to Purchase Common Stock of the Company, dated as of the date hereof, issued by the Company to the Holder, as the same may be amended or modified from time to time, (ii) the Security Agreement, and (iii) any additional agreements entered into in connection therewith, including any intellectual property security agreement deemed necessary or advisable to effect the pledge of intellectual property rights contemplated by the Security Agreement.
“Business Day” means any day other than a Saturday or a Sunday on which banks in New York, New York are not authorized or required to be closed.
“Change of Control” means the occurrence of (i) a sale or disposition of all or substantially all of the assets of the Company, (i) a sale or disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, (iii) a merger or consolidation of the Company or any Subsidiary and any other entity (other than the Company or a wholly owned Subsidiary of the Company), (iv) any issuance to any Person or group of Persons of capital stock of the Company representing more than 40% of the total voting power or total equity in the Company after the issuance thereof or (v) any transfer of beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under the Securities Exchange Act of 1934, as amended), directly or indirectly, of all or any portion of the outstanding shares of capital stock of the Company, in a single transaction or a series of related transactions, except where the holders of voting stock of the Company immediately prior to such transaction or series of related transactions retain directly or indirectly at least forty percent (40%) of the total voting power or total equity in the Company or the successor or acquiring entity (as applicable).
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Company” has the meaning given such term in the introductory paragraph hereof.
“Default” means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.
“Default Rate” means the rate equal to the Interest Rate plus two percent (2%) per annum.
“Event of Default” has the meaning given such term in Section 5.1.
“Holder” has the meaning given such term in the introductory paragraph hereof.
“Indebtedness” means, with respect to a specified Person, (a) all indebtedness of such Person for borrowed money; (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business irrespective of when paid); (c) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (d) all obligations and liabilities of such Person created or arising under any conditional sales or other title retention agreement with respect to property used and/or acquired by such Person, even though the rights and remedies of the lessor, seller and/or lender thereunder are limited to repossession or sale of such property; (e) all capitalized lease obligations of such Person; (f) all the aggregate mark-to-market exposure of such Person under hedging agreements; (g) all obligations referred to in clauses (a) through (f) of this definition of another Person secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien upon property owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, provided, that the amount of Indebtedness of others that constitutes Indebtedness solely by reason of this clause (g) shall not for purposes of this Agreement exceed the fair market value of the properties or assets subject to such Lien.
“Indemnitees” has the meaning given such term in Section 9.5.
“Indemnified Matters” has the meaning given such term in Section 9.5.
“Interest Rate” means ten percent (10%) per annum.
“Lien” shall mean any lien, mortgage, pledge, security interest, charge, or encumbrance of any kind (including any conditional sale or other title retention agreement or any lease in the nature thereof) and any agreement to give or refrain from giving any lien, mortgage, pledge, security interest, charge, or other encumbrance of any kind.
“Material Adverse Effect” means any event or series of events that, individually or in the aggregate, results in a material adverse change in, or a material adverse effect upon, the operations, business, properties, or condition (financial or otherwise) of Borrower or any Subsidiary of Borrower.
“Maturity Date” means May 31, 2019.
“Note” has the meaning given such term in the introductory paragraph hereof.
“Permitted Liens” means: (a) Liens for taxes, assessments or other governmental charges which are not yet due and payable or are being contested in good faith by appropriate proceedings and as to which the Company has set aside adequate reserves; (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens, in each case, incurred in the ordinary course of business for sums not yet due and payable; (c) Liens (other than any Lien imposed by the Employment Retirement Income Security Act of 1974, as amended) incurred or deposits made in the ordinary course of business (i) in connection with workers’ compensation, unemployment insurance and other types of social security or retirement benefits, or (ii) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal bonds, bids, leases (other than capitalized leases), performance bonds, purchase, construction or sales contracts and other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property; (d) any attachment or judgment Lien provided, that such Lien does not result in an Event of Default hereunder; (e) leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case incidental to, and not interfering with, the ordinary conduct of the business of the Company provided, that such liens do not, in the aggregate, materially detract from the value of such property, (f) Liens of a collection bank on items in the course of collection arising under Section 4-208 of the UCC as in effect in the State of New York or any similar section under any applicable UCC or any similar Requirement of Law of any foreign jurisdiction, (g) Liens (i) arising by reason of zoning restrictions, easements, licenses, reservations, restrictions, covenants, rights-of-way, encroachments, minor defects or irregularities in title (including leasehold title) and other similar encumbrances on the use of real property or (ii) consisting of leases, licenses or subleases granted by a lessor, licensor or sublessor on its property (in each case other than capital leases) otherwise permitted hereunder that, for each of the Liens in clauses (i) and (ii) above, do not, in the aggregate, materially (x) impair the value or marketability of such real property or (y) interfere with the ordinary conduct of the business conducted and proposed to be conducted at such real property, (h) the title and interest of a lessor or sublessor in and to personal property leased or subleased (other than through a capital lease), in each case extending only to such personal property; and (i) rights of setoff or bankers’ Liens upon deposits of cash or broker’s Liens upon securities accounts in favor of financial institutions, banks, or other depository institutions.
“Person” means an individual, corporation, trust, partnership, joint venture, unincorporated organization, government agency or any agency or political subdivision thereof, or other entity.
“Principal Amount” has the meaning given such term in the introductory paragraph hereof.
“SEC” means the U.S. Securities Exchange Commission.
“Security Agreement” means the Security Agreement, dated as of the date hereof, by and between the Company, as “Pledgor” thereunder, and Holder, as “Secured Party” thereunder, as the same may be amended or modified from time to time.
“Subsidiary” means, with respect to any Person, any other Person of which shares of stock or other interests having a majority of the general voting power in electing the board of directors or Persons exercising similar authority are, at the time as of which any determination is being made, beneficially owned, directly or indirectly, by the first Person.
7.2
Headings. Section headings in this Note are included herein for convenience of reference only and shall not constitute a part of this Note for any other purpose.
ARTICLE VIII.
SECURITY
8.1
Security. This Note is secured by the Security Agreement and such other instruments given by the Company to the Holder as may by their terms now or in the future secure or guaranty payment of the indebtedness evidenced by this Note.
8.2
Release of Security Does Not Modify Note. The release of any security for this Note shall not release, modify or affect the liability of the Company hereunder except to the extent expressly stated therein.
ARTICLE IX.
MISCELLANEOUS
9.1
Governing Law. This Note (including any claim or controversy arising out of or relating to this Note) shall be governed by the laws of the State of New York without regard to conflict of law principles that would result in the application of any law other than the law of the State of New York.
9.2
Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered in person, mailed by certified or registered mail, return receipt requested, or sent by fax or electronic mail, addressed as follows:
(a)
if to the Company, at:
Dope Media, Inc.
203 Sixth Avenue North, Suite 200
Seattle, Washington 98109
Attn: George Jage, CEO
Phone: (702) 303-6523
Email: george@dopemagazine.com
(b)
if to the Holder:
General Cannabis Corp.
6565 East Evans Avenue
Denver, CO 80224
Phone: (303) 759-1300
Email: legal@generalcann.com
All such notices or communications shall be deemed to be received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of a nationally recognized overnight courier, on the next Business Day after the date when sent, (c) in the case of facsimile transmission or electronic mail, upon confirmed receipt, and (d) in the case of mailing, on the third Business Day following the date on which the piece of mail containing such communication was posted.
9.3
Amendments; Waivers. This Note may not be amended or modified, and no provisions hereof may be waived, without the written consent of the Company and the Holder. Except as expressly agreed in writing by the Holder, no extension of time for payment of this Note, or any installment hereof, and no alternation, amendment or waiver of any provision of this Note shall release, discharge, modify, change or affect the liability of the Company under this Note.
9.4
Expenses. Following an Event of Default and during the continuation thereof, all of the Holder’s costs of enforcing its rights hereunder, including any costs of collection, administering the Note, addressing any requests for amendments or waivers and any reasonable attorney’s fees in connection therewith, shall be paid by the Company.
9.5
Indemnification. The Company agrees to defend, protect, indemnify and hold harmless the Holder and its Subsidiaries and their officers, directors, trustees, employees, agents and advisors (collectively called the “Indemnitees”) from and against any and all claims, losses, demands, settlements, damages, liabilities, obligations, penalties, fines, fees, reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees, costs and expenses, but excluding income, franchise and similar taxes of an Indemnitee) incurred by such Indemnitees, whether prior to or from and after the date hereof, as a result of or arising from or relating to or in connection with any of the following: (a) the Holder’s furnishing of funds to the Company under this Note, (b) any matter relating to the financing transactions contemplated by this Note, (c) any claim, litigation, investigation or administrative or judicial proceeding in connection with any transaction contemplated in, or consummated under, the Note or (d) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto (collectively, the “Indemnified Matters”); provided, however, that the Company shall not have any obligation to any Indemnitee under this Section 9.5 for any Indemnified Matter to the extent resulting from the bad faith, gross negligence or willful misconduct of such Indemnitee. Such indemnification for all of the foregoing losses, damages, fees, costs and expenses of the Indemnitees shall be due and payable promptly after demand therefor. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section 9.5 may be unenforceable because it is violative of any law or public policy, the Company shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees. This Indemnity shall survive the repayment of the Notes.
9.6
Waiver. The Company hereby waives diligence, presentment, protest and demand, notice of protest, notice of dishonor, notice of nonpayment and any and all other notices and demands in connection with the delivery, acceptance, performance, default or enforcement of this Note. The Company further waives, to the full extent permitted by law, the right to plead any and all statutes of limitations as a defense to any demand on this Note.
9.7
Entire Agreement. This Note constitutes the entire agreement of the Company and the Holder with respect to the subject matter hereof and supersedes all prior agreements and understandings, both oral and written, between the Company and the Holder with respect to the subject matter hereof.
9.8
Counterparts. This Note may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
9.9
Severability. If any provision of this Note shall be declared void or unenforceable by any judicial or administrative authority, the validity of any other provision and of the entire Note shall not be affected thereby.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by its officer or director thereunto duly authorized, on the date first above written.
DOPE MEDIA, INC.
BY: /s/ George Jage
NAME: George Jage
TITLE: Chief Executive Officer
CERTIFICATE OF DOPE MEDIA, INC.
I, George Jage, on behalf of Dope Media, Inc., a corporation organized under the laws of the State of Delaware (the “Company”), in my capacity as an officer of the Company and not in my personal capacity, hereby certify that:
(a)
the representations and warranties of the Company set forth in the Senior Secured Note being issued on the date hereof to General Cannabis Corp. (the “Note”) are true and correct in all respects on and as of the date hereof (except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true and correct as of such earlier date); and
(b)
No Event of Default or default that with the passage of time would constitute an Event of Default exists, or would result from the issuance of the Note or from the application of the proceeds therefrom.
All defined terms used and not otherwise defined herein have the meanings set forth in the Note.
IN WITNESS WHEREOF, I have hereunto set my hand as of the 31st day of May, 2018.
By:
/s/ George Jage
Name: George Jage
Title: Chief Executive Officer
Exhibit 10.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this “Agreement”), dated as of June 13, 2018, is made between Dope Media, Inc., a corporation organized under the laws of the State of Delaware (“Debtor”) and General Cannabis Corp., a corporation organized under the laws of the State of Colorado (“Secured Party”).
Debtor and Secured Party hereby agree as follows:
SECTION 1
Definitions; Interpretation.
(a)
All capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Note.
(b)
As used in this Agreement, the following terms shall have the following meanings:
“Collateral” has the meaning set forth in Section 2.
“Documents” means this Agreement, the Note, the Warrant and all other certificates, documents, agreements and instruments delivered to Secured Party under the Note or in connection with the Obligations.
“Event of Default” has the meaning set forth in Section 7.
“Lien” means any mortgage, deed of trust, pledge, security interest, assignment, deposit arrangement, charge or encumbrance, lien, or other type of preferential arrangement.
“Note” means that certain Senior Secured Note dated June 13, 2018 made by Debtor in favor of Secured Party, as amended, modified, renewed, extended or replaced from time to time.
“Obligations” means the indebtedness, liabilities and other obligations of Debtor to Secured Party under or in connection with this Agreement, the Note and the other Documents, including, without limitation, all unpaid principal of the Note, all interest accrued thereon, all fees and all other amounts payable by Debtor to Secured Party thereunder or in connection therewith, whether now existing or hereafter arising, and whether due or to become due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and including interest that accrues after the commencement by or against Debtor of any bankruptcy or insolvency proceeding naming such Person as the debtor in such proceeding.
“Partnership and LLC Collateral” has the meaning set forth in Section 5.
“Person” means an individual, corporation, partnership, joint venture, trust, unincorporated organization, governmental agency or authority, or any other entity of whatever nature.
“Pledged Collateral” means Debtor’s (i) investment property and (ii) Partnership and LLC Collateral, including any ownership interests in any subsidiaries of Debtor.
“Pledged Collateral Agreements” means any shareholders agreement, operating agreement, partnership agreement, voting trust, proxy agreement or other agreement or understanding with respect to any Pledged Collateral.
“UCC” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York.
“Warrant” means that certain Warrant to Purchase Common Stock of Dope Media, Inc. dated June 13, 2018 issued by Debtor in favor of Secured Party, as amended, modified, renewed, extended or replaced from time to time.
(c)
Where applicable and except as otherwise defined herein, terms used in this Agreement shall have the meanings assigned to them in the UCC.
(d)
In this Agreement, (i) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; and (ii) the captions and headings are for convenience of reference only and shall not affect the construction of this Agreement.
SECTION 2
Security Interest. As security for the payment and performance of the Obligations, Debtor hereby grants to Secured Party a security interest in all of Debtor’s right, title and interest in, to and under all of its personal property, wherever located and whether now existing or owned or hereafter acquired or arising, including all accounts, chattel paper, commercial tort claims, deposit accounts, documents, equipment (including all fixtures), general intangibles, instruments, inventory, investment property, letter-of-credit rights, other goods, money and all products, proceeds and supporting obligations of any and all of the foregoing (collectively, the “Collateral”). This Agreement shall create a continuing security interest in the Collateral which shall remain in effect until terminated in accordance with Section 18 hereof. Anything herein to the contrary notwithstanding, in no event shall the Collateral include, and Debtor shall not be deemed to have granted a security interest in, any of Debtor’s right, title or interest in any of the outstanding voting capital stock or other ownership interests of a Controlled Foreign Corporation (as defined below) in excess of 65% of the voting power of all classes of capital stock or other ownership interests of such Controlled Foreign Corporation entitled to vote; provided that (i) immediately upon the amendment of the Internal Revenue Code to allow the pledge of a greater percentage of the voting power of capital stock or other ownership interests in a Controlled Foreign Corporation without adverse tax consequences, the Collateral shall include, and Debtor shall be deemed to have granted a security interest in, such greater percentage of capital stock or other ownership interests of each Controlled Foreign Corporation; and (ii) if no adverse tax consequences to Debtor shall arise or exist in connection with the pledge of any Controlled Foreign Corporation, the Collateral shall include, and Debtor shall be deemed to have granted a security interest in, such Controlled Foreign Corporation. As used herein, “Controlled Foreign Corporation” shall mean a “controlled foreign corporation” as defined in the Internal Revenue Code.
Notwithstanding anything herein to the contrary, no security interest in any contract, agreement, lease, license, permit, governmental authorization, accreditation, or other agreement entered into by Debtor (A) that prohibits or requires the consent of any Person other than Debtor and its Affiliates which has not been obtained as a condition to the creation by the Debtor of a Lien on any right, title, or interest in such contract, agreement, lease, license, permit, governmental authorization, accreditation or other agreement or any stock related thereto, or (B) to the extent that any applicable law or regulation prohibits the creation of a Lien thereon or would void the rights of the Debtor if a Lien is created thereon, but only, with respect to the prohibition in (A) and (B), to the extent and for as long as such prohibition is not terminated, rendered unenforceable, or otherwise deemed ineffective by the UCC or any other applicable law, shall be granted hereunder.
SECTION 3
Financing Statements and other Action.
(a)
Debtor hereby authorizes Secured Party to file at any time and from time to time any financing statements describing the Collateral, and Debtor shall execute and deliver to Secured Party, and Debtor hereby authorizes Secured Party to file (with or without Debtor’s signature), at any time and from time to time, all amendments to financing statements, assignments, continuation financing statements, termination statements, account control agreements, and other documents and instruments, in form reasonably satisfactory to Secured Party, as Secured Party may reasonably request, to perfect and continue perfected, maintain the priority of or provide notice of the security interest of Secured Party in the Collateral and to accomplish the purposes of this Agreement. Without limiting the generality of the foregoing, Debtor ratifies and authorizes the filing by Secured Party of any financing statements filed prior to the date hereof.
(b)
Debtor will join with Secured Party in notifying any third party who has possession of any Collateral of Secured Party’s security interest therein and use commercially reasonable efforts to obtain an acknowledgment from the third party that it is holding the Collateral for the benefit of Secured Party.
(c)
Upon request of Secured Party, Debtor (i) shall cause certificates to be issued in respect of any uncertificated Pledged Collateral issued by Subsidiaries of Debtor, (ii) shall exchange certificated Pledged Collateral issued by Subsidiaries of Debtor for certificates of larger or smaller denominations, and (iii) shall cause any securities intermediaries to show on their books that Secured Party is the entitlement holder with respect to any Pledged Collateral.
(d)
Debtor will not create any chattel paper without placing a legend on the chattel paper acceptable to Secured Party indicating that Secured Party has a security interest in the chattel paper.
SECTION 4
Representations and Warranties. Debtor represents and warrants to Secured Party that:
(a)
Debtor is duly organized, validly existing and in good standing under the law of the jurisdiction of its organization and has all requisite power and authority to execute, deliver and perform its obligations under the Documents.
(b)
The execution, delivery and performance by Debtor of the Documents have been duly authorized by all necessary action of Debtor, and the Documents constitute the legal, valid and binding obligations of Debtor, enforceable against Debtor in accordance with their terms.
2
(c)
No authorization, consent, approval, license, exemption of, or filing or registration with, any governmental authority or agency, or approval or consent of any other Person, is required for the due execution, delivery or performance by Debtor of the Documents, except for any filings necessary to perfect any Liens on any Collateral.
(d)
Debtor’s chief executive office and principal place of business (as of the date of this Agreement) is located at the address set forth in Schedule 1; Debtor’s jurisdiction of organization and organizational identification number are set forth in Schedule 1; Debtor’s exact legal name is as set forth in the first paragraph of this Agreement; and all other locations where Debtor conducts business or Collateral is kept (as of the date of this Agreement) are set forth in Schedule 1.
(e)
Debtor has rights in or the power to transfer the Collateral, and Debtor is the sole and complete owner of the Collateral, free from any Lien other than Permitted Liens.
(f)
To the Knowledge (as defined below) of the Debtor, all of Debtor’s U.S. and foreign patents and patent applications, copyrights (whether or not registered), applications for copyright, trademarks, service marks and trade names (whether registered or unregistered), and applications for registration of such trademarks, service marks and trade names, are set forth in Schedule 2. To the best of Debtor’s knowledge, Schedule 2 is accurate in all material respects as of the date hereof. Debtor will deliver an updated Schedule 2 to the Secured Party within 30 days after the date hereof. The term “Knowledge” as used herein shall mean the knowledge of senior management of the Debtor, including the knowledge that each such person would reasonably be expected to obtain after reasonable inquiry.
(g)
No control agreements exist with respect to any Collateral other than control agreements in favor of Secured Party.
(h)
The names and addresses of all financial institutions and other Persons at which Debtor maintains its deposit and securities accounts, and the account numbers and account names of such accounts, are set forth in Schedule 1.
(i)
Schedule 3 lists Debtor’s ownership interests in each of its Subsidiaries as of the date hereof. To the best of Debtor’s Knowledge, Schedule 3 is accurate in all material respects as of the date hereof. Debtor will deliver an updated Schedule 3 to the Secured Party within 30 days after the date hereof.
(j)
Debtor is and will be the legal record and beneficial owner of all Pledged Collateral, and has and will have good and marketable title thereto.
(k)
Except as disclosed in writing to Secured Party, there are no Pledged Collateral Agreements which affect or relate to the voting or giving of written consents with respect to any of the Pledged Collateral. Each Pledged Collateral Agreement contains the entire agreement between the parties thereto with respect to the subject matter thereof, has not been amended or modified, and is in full force and effect in accordance with its terms. To the best knowledge of Debtor, there exists no material violation or material default under any Pledged Collateral Agreement by Debtor or the other parties thereto. Debtor has not knowingly waived or released any of its material rights under or otherwise consented to a material departure from the terms and provisions of any Pledged Collateral Agreement.
SECTION 5
Covenants. So long as any of the Obligations remain unsatisfied, Debtor agrees that:
(a)
Debtor shall appear in and defend any action, suit or proceeding which may affect to a material extent its title to, or right or interest in, or Secured Party’s right or interest in, the Collateral, and shall do and perform all reasonable acts that may be necessary and appropriate to maintain, preserve and protect the Collateral, including the execution, delivery and reasonable cooperation with the filing of the Short-Form Trademark Security Agreement attached hereto as Exhibit A within 30 days after the date hereof.
(b)
Debtor shall comply in all material respects with all applicable laws, regulations and ordinances, and all policies of insurance, relating in a material way to the possession, operation, maintenance and control of the Collateral.
(c)
Debtor shall give prompt written notice to Secured Party (and in any event not later than 30 days following any change described below in this subsection) of: (i) any change in the location of Debtor’s chief executive office or principal place of business; (ii) any change in the locations set forth in Schedule 1; (iii) any change in its name; (iv) any changes in its identity or structure in any manner which might make any financing statement filed hereunder incorrect or misleading; (v) any change in its registration as an organization (or any new such registration); or (vi) any change in its jurisdiction of organization; provided that Debtor shall not locate any Collateral outside of the United States nor shall Debtor change its jurisdiction of organization to a jurisdiction outside of the United States.
3
(d)
Debtor shall carry and maintain in full force and effect, at its own expense and with financially sound and reputable insurance companies, insurance with respect to the Collateral in such amounts, with such deductibles and covering such risks as is customarily carried by companies engaged in the same or similar businesses and owning similar properties in the localities where Debtor operates. Insurance on the Collateral shall, within 30 days after the date hereof, name Secured Party as additional insured and as loss payee. Upon the request of Secured Party, Debtor shall furnish Secured Party from time to time with full information as to the insurance carried by it and, if so requested, copies of all such insurance policies. Debtor shall also furnish to Secured Party from time to time upon the request of Secured Party a certificate of Debtor’s insurance broker or other insurance specialist stating that all premiums then due on the policies relating to insurance on the Collateral have been paid and that such policies are in full force and effect. Debtor shall cause insurance policies required under this subsection (d) to provide that they shall not be terminated or cancelled nor shall any such policy be materially changed without at least 30 days’ prior written notice (or 10 days in the case of nonpayment) to Debtor and Secured Party. Receipt of notice of termination or cancellation of any such insurance policies or reduction of coverages or amounts thereunder shall entitle Secured Party to renew any such policies, cause the coverages and amounts thereof to be maintained at levels required pursuant to the first sentence of this subsection (d) or otherwise to obtain similar insurance in place of such policies, in each case at the expense of Debtor.
(e)
All insurance policies shall, within 30 days after the date hereof, provide that any losses payable thereunder be payable directly to Secured Party unless written authority to the contrary is obtained. In the event that Debtor shall receive any proceeds of any insurance (other than in respect of third party liability insurance) it shall immediately cause such proceeds to be paid over to Secured Party. If the Collateral shall be materially damaged or destroyed, in whole or in part, by fire or other casualty, Debtor shall give prompt notice thereof to Secured Party. Additionally, Debtor shall in any event promptly give Secured Party notice of all reports made to insurance companies in respect of any claim in excess of $10,000. No settlement on account of any loss covered by insurance shall be made for less than insured value without the consent of Secured Party. In its sole discretion Secured Party may apply all or any portion of such insurance proceeds to the payment of Obligations or may release all or any portion thereof to Debtor.
(f)
Debtor shall keep the Collateral free of all Liens except Permitted Liens.
(g)
Debtor shall pay and discharge all material taxes, fees, assessments and governmental charges or levies imposed upon it with respect to the Collateral prior to the date on which penalties attach thereto, except to the extent such taxes, fees, assessments or governmental charges or levies are being contested in good faith by appropriate proceedings.
(h)
Debtor shall maintain and preserve its legal existence, its rights to transact business and all other rights, franchises and privileges necessary or desirable in the normal course of its business and operations and the ownership of the Collateral, except in connection with any transactions expressly permitted by the Note or any other Document.
(i)
If and when Debtor shall obtain rights to any new patents, trademarks, service marks, trade names or copyrights, or otherwise acquire or become entitled to the benefit of, or apply for registration of, any of the foregoing, Debtor (i) shall, with respect the occurrence of any of the foregoing in any calendar quarter, notify Secured Party thereof on or before the last day of the calendar month following the end of such calendar quarter, and (ii) hereby authorizes Secured Party to modify, amend, or supplement Schedule 2 and from time to time to include any of the foregoing and make all necessary or appropriate filings with respect thereto.
(j)
Without limiting the generality of subsection (i), Debtor shall not register with the U.S. Copyright Office any unregistered copyrights (whether in existence on the date hereof or thereafter acquired, arising, or developed) unless Debtor provides Secured Party with written notice of its intent to register such copyrights not less than 10 days prior to the date of the proposed registration.
(k)
At Secured Party’s request, Debtor will use commercially reasonable efforts to obtain from each Person from whom Debtor leases any premises, and from each other Person at whose premises any Collateral is at any time present (including any bailee, warehouseman or similar Person), any such collateral access, subordination, landlord waiver, bailment, consent and estoppel agreements as Secured Party may require, in form and substance satisfactory to Secured Party.
(l)
(i) Debtor shall comply with all of its obligations under any Pledged Collateral Agreements to which it is a party and shall enforce all of its rights thereunder; (ii) Debtor will take all actions necessary to cause each Pledged Collateral Agreement relating to Collateral consisting of any and all limited, limited liability and general partnership interests and limited liability company interests of any type or nature (“Partnership and LLC Collateral”) issued by a Subsidiary to provide specifically at all times that: (A) the Partnership and LLC Collateral shall be securities and shall be governed by Article 8 of the applicable Uniform Commercial Code; (B) each certificate of membership or partnership representing the Partnership and LLC Collateral shall bear a legend to the effect that such membership interest or partnership interest is a security and is governed by Article 8 of the applicable Uniform Commercial Code; and (C) no consent of any member, manager, partner or other Person shall be a condition to the admission as a member or partner of any transferee that acquires ownership of the Partnership and LLC Collateral as a result of the exercise by
4
Secured Party of any remedy hereunder or under applicable law; and (iii) Debtor shall not vote to enable or take any other action to amend or terminate, or waive compliance with any of the terms of, any Pledged Collateral Agreement, certificate or articles of incorporation, bylaws or other organizational documents, or otherwise cast any vote or grant or give any consent, waiver or ratification in respect of the Pledged Collateral, in any way that materially changes the rights of Debtor with respect to any Pledged Collateral in a manner adverse to the Secured Party or that adversely affects the validity, perfection or priority of Secured Party’s security interest therein.
(m)
In the event that Debtor acquires rights in any Subsidiary after the date hereof, it shall deliver to Secured Party a completed supplement to Schedule 3, reflecting such new Subsidiary. Notwithstanding the foregoing, it is understood and agreed that the security interest of Secured Party shall attach to any such Subsidiary immediately upon Debtor’s acquisition of rights therein and shall not be affected by the failure of Debtor to deliver any such supplement to Schedule 3.
SECTION 6
Rights of Secured Party; Authorization; Appointment.
(a)
At the request of Secured Party, during the continuance of any Event of Default, all remittances received by Debtor in respect of its accounts and other rights to payment shall be held in trust for Secured Party and, in accordance with Secured Party’s instructions, remitted to Secured Party or deposited to an account of Secured Party in the form received (with any necessary endorsements or instruments of assignment or transfer).
(b)
At the request of Secured Party, upon the during the continuance of any Event of Default, Secured Party shall be entitled to receive all distributions and payments of any nature with respect to any Pledged Collateral or instrument Collateral, and all such distributions or payments received by the Debtor shall be held in trust for Secured Party and, in accordance with Secured Party’s instructions, remitted to Secured Party or deposited to an account designated by Secured Party in the form received (with any necessary endorsements or instruments of assignment or transfer). Further, during the continuance of any Event of Default any such distributions and payments with respect to any Pledged Collateral held in any securities account shall be held and retained in such securities account, in each case as part of the Collateral hereunder, and Secured Party shall have the right, following prior written notice to the Debtor, to vote and to give consents, ratifications and waivers with respect to any Pledged Collateral and instruments, and to exercise all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining thereto, as if Secured Party were the absolute owner thereof; provided that Secured Party shall have no duty to exercise any of the foregoing rights afforded to it and shall not be responsible to the Debtor or any other Person for any failure to do so or delay in doing so.
(c)
Secured Party shall have the right to, in the name of Debtor, or in the name of Secured Party or otherwise, upon notice to but without the requirement of assent by Debtor, and Debtor hereby constitutes and appoints Secured Party (and any of Secured Party’s officers, employees or agents designated by Secured Party), as Debtor’s true and lawful attorney-in-fact, with full power and authority to: (i) sign and file any of the financing statements and other documents and instruments which must be executed or filed to perfect or continue perfected, maintain the priority of or provide notice of Secured Party’s security interest in the Collateral; (ii) assert, adjust, sue for, compromise or release any claims under any policies of insurance; (iii) give notices of control, default or exclusivity (or similar notices) under any account control agreement or similar agreement with respect to exercising control over deposit accounts or securities accounts; and (iv) execute any and all such other documents and instruments, and do any and all acts and things for and on behalf of Debtor, which Secured Party may deem reasonably necessary or advisable to maintain, protect, realize upon and preserve the Collateral and Secured Party’s security interest therein and to accomplish the purposes of this Agreement. Secured Party agrees that, except upon and during the continuance of an Event of Default, it shall not exercise the power of attorney, or any rights granted to Secured Party, pursuant to clauses (ii), (iii) and (iv). The foregoing power of attorney is coupled with an interest and irrevocable so long as the Obligations have not been paid and performed in full. Debtor hereby ratifies, to the extent permitted by law, all that Secured Party shall lawfully and in good faith do or cause to be done by virtue of and in compliance with this Section 6.
SECTION 7
Events of Default. Any of the following events which shall occur and be continuing shall constitute an “Event of Default”:
(a)
The occurrence of an “Event of Default” as such term is defined in the Note.
(b)
Any material impairment in the value of the Collateral or the priority of Secured Party’s Lien with respect to any material Collateral hereunder.
(c)
Any loss, theft or substantial damage to, or destruction of, any material portion of the Collateral (unless within 10 Business Days after the occurrence of any such event, Debtor furnishes to Secured Party evidence satisfactory to Secured Party that the amount of any such loss, theft, damage to or destruction of the Collateral is fully insured under policies naming Secured Party as an additional named insured or loss payee).
5
SECTION 8
Remedies.
(a)
Upon the occurrence and during the continuance of any Event of Default, Secured Party may declare any of the Obligations to be immediately due and payable and shall have, in addition to all other rights and remedies granted to it in this Agreement, the Note or any other Document, all rights and remedies of a secured party under the UCC and other applicable laws. Without limiting the generality of the foregoing,(i) Secured Party may peaceably and without notice enter any premises of Debtor, take possession of any the Collateral, remove or dispose of all or part of the Collateral on any premises of such Debtor or elsewhere, or, in the case of equipment, render it nonfunctional, and otherwise collect, receive, appropriate and realize upon all or any part of the Collateral, and demand, give receipt for, settle, renew, extend, exchange, compromise, adjust, or sue for all or any part of the Collateral, as Secured Party may determine; (ii) Secured Party may require Debtor to assemble all or any part of the Collateral and make it available to Secured Party at any place and time designated by Secured Party; (iii) Secured Party may secure the appointment of a receiver of the Collateral or any part thereof (to the extent and in the manner provided by applicable law); (iv) Secured Party may sell, resell, lease, use, assign, license, sublicense, transfer or otherwise dispose of any or all of the Collateral in its then condition or following any commercially reasonable preparation or processing (utilizing in connection therewith any of Debtor’s assets, without charge or liability to Secured Party therefor) at public or private sale, by one or more contracts, in one or more parcels, at the same or different times, for cash or credit, or for future delivery without assumption of any credit risk, all as Secured Party deems advisable; provided, however, that Debtor shall be credited with the net proceeds of sale only when such proceeds are finally collected by Secured Party. Debtor recognizes that Secured Party may be unable to make a public sale of any or all of the Pledged Collateral, by reason of prohibitions contained in applicable securities laws or otherwise, and expressly agrees that a private sale to a restricted group of purchasers for investment and not with a view to any distribution thereof shall be considered a commercially reasonable sale. Secured Party shall have the right upon any such public sale, and, to the extent permitted by law, upon any such private sale, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption, which right or equity of redemption Debtor hereby releases, to the extent permitted by law. Secured Party shall give Debtor such notice of any private or public sales as may be required by the UCC or other applicable law.
(b)
For the purpose of enabling Secured Party to exercise its rights and remedies under this Section 8 or otherwise in connection with this Agreement, Debtor hereby grants to Secured Party, effective during the continuance of any Event of Default, an irrevocable, non-exclusive and assignable license (exercisable without payment or royalty or other compensation to Debtor) to use, license or sublicense any intellectual property Collateral.
(c)
Secured Party shall not have any obligation to clean up or otherwise prepare the Collateral for sale. Secured Party has no obligation to attempt to satisfy the Obligations by collecting them from any other Person liable for them, and Secured Party may release, modify or waive any Collateral provided by any other Person to secure any of the Obligations, all without affecting Secured Party’s rights against Debtor. Debtor waives any right it may have to require Secured Party to pursue any third Person for any of the Obligations. Secured Party may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. Secured Party may sell the Collateral without giving any warranties as to the Collateral. Secured Party may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If Secured Party sells any of the Collateral upon credit, Debtor will be credited only with payments actually made by the purchaser, received by Secured Party and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Secured Party may resell the Collateral and Debtor shall be credited with the proceeds of the sale.
(d)
To the extent Debtor uses the proceeds of any of the Obligations to purchase Collateral, Debtor’s repayment of the Obligations shall apply on a “first-in, first-out” basis so that the portion of the Obligations used to purchase a particular item of Collateral shall be paid in the chronological order the Debtor purchased the Collateral.
(e)
The cash proceeds actually received from the sale or other disposition or collection of Collateral, and any other amounts received in respect of the Collateral the application of which is not otherwise provided for herein, shall be applied first, to the payment of the reasonable costs and expenses of Secured Party in exercising or enforcing its rights hereunder and in collecting or attempting to collect any of the Collateral, and to the payment of all other amounts payable to Secured Party pursuant to Section 12 hereof; and second, to the payment of the Obligations. Any surplus thereof which exists after payment and performance in full of the Obligations shall be promptly paid over to Debtor or otherwise disposed of in accordance with the UCC or other applicable law. Debtor shall remain liable to Secured Party for any deficiency which exists after any sale or other disposition or collection of Collateral.
SECTION 9
Certain Waivers. Debtor waives, to the fullest extent permitted by law, (i) any right of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling of the Collateral or other collateral or security for the Obligations; (ii) any right to require Secured Party (A) to proceed against any Person, (B) to exhaust any other collateral or security for any of the Obligations, (C) to pursue any remedy in Secured Party’s power, or (D) to make
6
or give any presentments, demands for performance, notices of nonperformance, protests, notices of protests or notices of dishonor in connection with any of the Collateral; and (iii) all claims, damages, and demands against Secured Party arising out of the repossession, retention, sale or application of the proceeds of any sale of the Collateral.
SECTION 10
Notices. All notices or other communications hereunder shall be in accordance with Section 9.2 of the Note.
SECTION 11
No Waiver; Cumulative Remedies. No failure on the part of Secured Party to exercise, and no delay in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights and remedies under this Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges that may otherwise be available to Secured Party.
SECTION 12
Costs and Expenses; Indemnification.
(a)
Debtor agrees to pay on demand: (i) the reasonable out-of-pocket costs and expenses of Secured Party, and the reasonable fees and disbursements of counsel to Secured Party, in connection with the negotiation, preparation, execution, delivery and administration of this Agreement and the Note, and any amendments, modifications or waivers of the terms thereof, and the custody of the Collateral; (ii) all title, appraisal, survey, audit, consulting, search, recording, filing and similar costs, fees and expenses incurred or sustained by Secured Party in connection with this Agreement or the Collateral; and (iii) all costs and expenses of Secured Party, and the fees and disbursements of counsel, in connection with the enforcement or attempted enforcement of, and preservation of any rights or interests under, this Agreement and the Note, including in any out-of-court workout or other refinancing or restructuring or in any bankruptcy case, and the protection, sale or collection of, or other realization upon, any of the Collateral, including all expenses of taking, collecting, holding, sorting, handling, preparing for sale, selling, or the like, and other such expenses of sales and collections of Collateral.
(b)
Debtor hereby agrees to indemnify Secured Party, any affiliate thereof, and their respective directors, officers, employees, agents, counsel and other advisors (each an “Indemnified Person”) against, and hold each of them harmless from, any and all liabilities, obligations, losses, claims, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, including the reasonable fees and disbursements of counsel to an Indemnified Person, which may be imposed on or incurred by any Indemnified Person, or asserted against any Indemnified Person by any third party or by Debtor, in any way relating to or arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the transactions contemplated hereby or the Collateral, or (ii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by Debtor (the “Indemnified Liabilities”); provided that Debtor shall not be liable to any Indemnified Person for any portion of such Indemnified Liabilities to the extent they are found by a final decision of a court of competent jurisdiction to have resulted from such Indemnified Person’s gross negligence or willful misconduct. If and to the extent that the foregoing indemnification is for any reason held unenforceable, Debtor agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.
(c)
Any amounts payable to Secured Party under this Section 12 or otherwise under this Agreement if not paid upon demand shall bear interest from the date of such demand until paid in full, at the “Default Rate” set forth in the Note.
SECTION 13
Binding Effect. This Agreement shall be binding upon, inure to the benefit of and be enforceable by Debtor, Secured Party and their respective successors and assigns and shall bind any Person who becomes bound as a debtor to this Agreement.
SECTION 14
Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, except as required by mandatory provisions of law and to the extent the validity or perfection of the security interests hereunder, or the remedies hereunder, in respect of any Collateral are governed by the law of a jurisdiction other than New York.
SECTION 15
Entire Agreement; Amendment. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and shall not be amended except by the written agreement of the parties.
SECTION 16
Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under all applicable laws and regulations. If, however, any provision of this Agreement shall be prohibited by or invalid under any such law or regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such law or regulation, or, if for any reason it is not deemed so modified, it shall be ineffective and invalid only to the extent of such prohibition or invalidity without affecting the remaining provisions of this Agreement, or the validity or effectiveness of such provision in any other jurisdiction.
7
SECTION 17
Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.
SECTION 18
Termination. Upon payment and performance in full of all Obligations, the security interest created under this Agreement shall terminate and Secured Party shall promptly execute and deliver to Debtor such documents and instruments reasonably requested by Debtor as shall be necessary to evidence termination of all security interests given by Debtor to Secured Party hereunder.
[remainder of page intentionally left blank]
8
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, as of the date first above written.
| Dope Media, Inc. | |
|
|
|
| By: | /s/ George Jage |
| Name: | George Jage |
| Title: | Chief Executive Officer |
|
|
|
|
|
|
| 203 Sixth Avenue North, Suite 200 | |
| Seattle, Washington 98109 | |
| Attn: George Jage, CEO | |
| Phone: (702) 303-6523 | |
| Email: george@dopemagazine.com | |
|
|
|
|
|
|
|
|
|
|
|
|
| General Cannabis Corp. | |
|
|
|
| By: | /s/ Robert Frichtel |
| Name: | Robert Frichtel |
| Title: | Chief Executive Officer |
|
|
|
|
|
|
| 6565 East Evans Avenue | |
| Denver, CO 80224 | |
| Attn: Michael Feinsod | |
| Phone: (303) 759-1300 | |
| Email: Legal@generalcann.com | |
9
Exhibit 10.3
THIS WARRANT AND THE SHARES PURCHASABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT AND THE SHARES PURCHASABLE HEREUNDER ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH HEREIN.
Dated: June 13, 2018
WARRANT TO PURCHASE
COMMON STOCK OF
DOPE MEDIA, INC.
This Warrant to Purchase Common Stock of Dope Media, Inc. (the “Company”), dated as of June 13, 2018 (the “Warrant”) is issued in connection with that certain Senior Secured Note issued by the Company in favor of General Cannabis Corp. (the “Holder”) dated on or around the date hereof (the “Note”). This Warrant certifies that the Holder, for value received, is entitled to purchase, at the Stock Purchase Price (as defined below), from the Company, up to that number of fully paid and nonassessable shares of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”), equal to 1,846,187 shares.
This Warrant shall be exercisable upon the first to occur of (і) the date of any merger or consolidation with the Company or its subsidiaries or any acquisition or exclusive license of any material portion of stock or assets of the Company or its subsidiaries (including, without limitation, the filing of a registration statement with the Securities and Exchange Commission or similar regulatory agency) or any other similar transaction, other than a transaction between the Company and the Holder (a “Sale Transaction”), (ii) the Maturity Date (as defined in the Note) or (iii) when the Principal Amount is declared due and payable under the Note (such earliest date being referred to herein as the “Initial Exercise Date”) until the end of the 20 day period following the Initial Exercise Date (the “Expiration Date”) upon surrender to the Company at its principal office (or at such other location as the Company may advise the Holder in writing) of this Warrant properly endorsed with (i) the Form of Subscription attached hereto duly completed and executed, (ii) payment pursuant to Section 2 of the aggregate Stock Purchase Price for the number of shares for which this Warrant is being exercised determined in accordance with the provisions hereof, and (iii) any documents reasonably requested by the Company to be executed by the Holder as if Holder were an investor in the Company’s Common Stock. The Stock Purchase Price and the number of shares purchasable hereunder are subject to adjustment as provided in Section 4 of this Warrant. For purposes of this Warrant, the term “Stock Purchase Price” shall mean $0.3278 per share of the Common Stock.
1.
Exercise; Issuance of Certificates; Acknowledgement. This Warrant is exercisable at the option of the Holder, within 20 days of the Initial Exercise Date for all or any part of the Warrant Shares (but not for a fraction of a share) which may be purchased hereunder. The Company agrees that the shares of Common Stock purchased under this Warrant (the “Warrant Shares”) shall be and are deemed to be issued to the Holder hereof as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered, properly endorsed, the completed, executed Form of Subscription delivered and payment made for such shares. Certificates for the shares of the Common Stock so purchased, together with any other securities or property to which the Holder hereof is entitled upon such exercise, shall be delivered to the Holder hereof by the Company at the Company’s expense within a reasonable time after the rights represented by this Warrant have been so exercised. Each certificate so delivered shall be in such denominations of the Warrant Shares as may be requested by the Holder hereof and shall be registered in the name of such Holder. In case of a purchase of less than all the Warrant Shares, the Company shall execute and deliver to Holder within a reasonable time an Acknowledgement in the form attached hereto indicating the number of Warrant Shares which remain subject to this Warrant, if any. Notwithstanding anything to the contrary contained herein, unless the Holder otherwise notifies the Company, this Warrant shall be deemed to be automatically exercised using the Net Issuance Method pursuant to Section 2 hereof immediately prior to the time on the Expiration Date at which this Warrant ceases to be exercisable.
2.
Payment for Shares. The aggregate purchase price for Warrant Shares being purchased hereunder may be paid either (i) by cash or wire transfer of immediately available funds, (ii) if the fair market value of one (1) share of the Warrant Shares on the date of exercise is greater than the Stock Purchase Price, by surrender of a number of Warrant Shares which have a fair market value equal to the aggregate purchase price of the Warrant Shares being purchased (“Net Issuance”) as determined herein, or (iii) any combination of the foregoing. If the Holder elects the Net Issuance method of payment, the Company shall issue to Holder upon exercise a number of shares of Warrant Shares determined in accordance with the following formula:
X= | Y(A-B) |
A |
1
where:
X =
the number of Warrant Shares to be issued to the Holder;
Y =
the number of Warrant Shares with respect to which the Holder is exercising its purchase rights under this Warrant;
A =
the fair market value of one (1) share of the Warrant Shares on the date of exercise; and
B =
the Stock Purchase Price.
No fractional shares arising out of the above formula for determining the number of shares to be issued to the Holder shall be issued, and the Company shall in lieu thereof make payment to the Holder of cash in the amount of such fraction multiplied by the fair market value of one (1) share of the Warrant Shares on the date of exercise. For purposes of the above calculation, the fair market value of one (1) share of the Warrant Shares shall mean (a) if the date of exercise is after the commencement of trading of the Common Stock on a securities exchange or over-the-counter but prior to the closing of the IPO, the price per share to the public set forth on the final prospectus relating to the IPO, multiplied by the number of shares of Common Stock into which each share of the Warrant Shares is then convertible, (b) if the Common Stock is then traded on a securities exchange, the average of the closing prices of such Common Stock on such exchange over the thirty (30) calendar day period (or portion thereof) ending three (3) days prior to the date of exercise, multiplied by the number of shares of Common Stock into which each share of the Warrant Shares is then convertible, (c) if the Common Stock is then regularly traded over-the-counter, the average of the closing sale prices or secondarily the closing bid of such Common Stock over the thirty (30) calendar day period (or portion thereof) ending three (3) days prior to the date of exercise, multiplied by the number of shares of Common Stock into which each share of the Warrant Shares is then convertible, or (d) if there is no active public market for the Common Stock, the fair market value of one share of the Warrant Shares as determined in good faith by the Board of Directors of the Company.
3.
Shares to be Fully Paid; Reservation of Shares. The Company covenants and agrees that all shares of Common Stock which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free from all preemptive rights of any shareholder and free of all taxes, liens and charges with respect to the issue thereof. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved, for the purpose of issue or transfer upon exercise of the subscription rights evidenced by this Warrant, a sufficient number of shares of authorized but unissued shares of Common Stock, or other securities and property, when and as required to provide for the exercise of the rights represented by this Warrant.
4.
Adjustment of Stock Purchase Price and Number of Shares. The Stock Purchase Price and the number of shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 4. Upon each adjustment of the Stock Purchase Price, the Holder of this Warrant shall thereafter be entitled to purchase, at the Stock Purchase Price resulting from such adjustment, the number of shares obtained by multiplying the Stock Purchase Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment, and dividing the product thereof by the Stock Purchase Price resulting from such adjustment.
4.1
Subdivisions, Combinations and Dividends. In case the Company shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares or pay a dividend in Common Stock in respect of outstanding shares of Common Stock, the Stock Purchase Price in effect immediately prior to such subdivision or at the record date of such dividend shall be proportionately reduced, and conversely, in case the outstanding shares of the Common Stock of the Company shall be combined into a smaller number of shares, the Stock Purchase Price in effect immediately prior to such combination shall be proportionately increased.
4.2
Reclassification. If any reclassification of the capital stock of the Company shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, or other assets or property, then, as a condition of such reclassification, lawful and adequate provisions shall be made whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of the Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby. In any reclassification described above, appropriate provision shall be made with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Stock Purchase Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof.
2
4.3
Notice of Adjustment. Upon any adjustment of the Stock Purchase Price or any increase or decrease in the number of shares purchasable upon the exercise of this Warrant, the Company shall give written notice thereof, by first class mail postage prepaid, addressed to the registered Holder of this Warrant at the address of such Holder as shown on the books of the Company. The notice shall be signed by the Company’s chief financial officer and shall state the Stock Purchase Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. For the avoidance of doubt, the Company acknowledges that the Holder of this Warrant shall be entitled to the benefit of all adjustments in the number of shares of Common Stock of the Company issuable upon conversion of the Common Stock of the Company which occur prior to the exercise of this Warrant, including without limitation, any increase in the number of shares of Common Stock issuable upon conversion as a result of a dilutive issuance of capital stock.
4.4
Other Notices. If at any time:
(1)
the Company shall declare any cash dividend upon its Common Stock;
(2)
there shall be any capital reorganization or reclassification of the capital stock of the Company; or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another Person;
(3)
there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; or
(4)
there shall be a Sale Transaction or an initial public offering of the Company’s Common Stock pursuant to a registration statement under the Securities Act of 1933, as amended (the “Act”);
then, in any one or more of said cases, the Company shall give, by first class mail, postage prepaid, addressed to the Holder of this Warrant at the address of such Holder as shown on the books of the Company, (a) at least twenty (20) days prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or public offering, at least twenty (20) days prior written notice of the date when the same shall take place; provided, however, that the Holder shall make a best efforts attempt to respond to such notice as early as possible after the receipt thereof. Any notice given in accordance with the foregoing clause (a) shall also specify, in the case of any such dividend, the date on which the holders of Common Stock shall be entitled thereto. Any notice given in accordance with the foregoing clause (b) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up, conversion or public offering, as the case may be.
4.5
Acquisition. In the event of any reorganization, consolidation or merger of the Company, transfer of all or substantially all of the assets of the Company or any simultaneous sale of more than a majority of the then outstanding securities of the Company other than a mere reincorporation transaction (an “Acquisition”), then, as a condition of such Acquisition, lawful and adequate provisions shall be made whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of the Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby), at the same aggregate exercise price, such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby. In any Acquisition described above, appropriate provision shall be made with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Stock Purchase Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof.
4.6
Subsequent Common Stock and Common Stock Equivalents Issuances. In the event the Company shall at any time on or after the date hereof and prior to the Expiration Date:
(a)
issue any additional shares of Common Stock at a price per share less than the Stock Purchase Price then in effect or without consideration, then the Stock Purchase Price upon each such issuance shall be adjusted to the price equal to the consideration paid for such additional shares of Common Stock;
(b)
take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which the Company is the surviving entity) issue or sell any evidence of indebtedness, shares of capital stock or other securities which are or may be at any time convertible or exchangeable for additional shares of Common Stock (“Convertible Securities”) or any warrant, option or other right to subscribe for or purchase any additional shares of Common Stock or Convertible Security (collectively, “Common Stock Equivalents”), whether or
3
not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange shall be less than the Stock Purchase Price in effect immediately prior to the time of such issue or sale, or if, after any such issuance of Common Stock Equivalents, the price per share for which additional shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall be less than the Stock Purchase Price in effect at the time of such amendment or adjustment, then the Stock Purchase price then in effect shall be adjusted as provided in Section 4.6(a).
(c)
For the purposes of any adjustment of the Warrant Price pursuant to this Section 4.6, the following provisions shall be applicable:
(1)
In the case of the issuance of Common Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor after deducting therefrom any discounts, commissions or other expenses allowed, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof.
(2)
In the case of the issuance of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined by the board of directors of the Company, irrespective of any accounting treatment; provided, however, that such fair market value as determined by the Board of Directors, together with any cash consideration being paid, shall not exceed an aggregate amount equal to the product of (i) the aggregate Current Market Price per share of Common Stock as determined as provided in Section 4.6(d) below, multiplied by (ii) the number of shares of Common Stock being issued in such issuance.
(3)
In the case of the issuance of (i) options to purchase or rights to subscribe for Common Stock, (ii) securities by their terms convertible into or exchangeable for Common Stock or (iii) options to purchase or rights to subscribe for such convertible or exchangeable securities on or after the date hereof:
A.
the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subsections (1) and (2) above with the proviso in subscection (2) being applied to the number of shares of Common Stock deliverable upon such exercise), if any, received by the Company upon the issuance of such options or rights plus the minimum purchase price provided in such options or rights for the Common Stock covered thereby;
B.
the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversions or exchanges thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration received by the Company for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration, if any, to be received by the Company upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in subdivisions (1) and (2) above with the proviso in subdivision (2) being applied to the number of shares of Common Stock deliverable upon such conversion, exchange or exercise);
C.
on any change in the number of shares of Common Stock deliverable upon exercise of any such options or rights or conversion of or exchange for such convertible or exchangeable securities, other than a change resulting from the antidilution provisions thereof, the Stock Purchase Price shall forthwith be readjusted to such Stock Purchase Price as would have obtained had the adjustment made upon the issuance of such options, rights or securities not converted prior to such change or options or rights related to such securities not converted prior to such change being made upon the basis of such change; and
D.
on the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Stock Purchase Price shall forthwith be readjusted to such Stock Purchase Price as would have obtained had the adjustment made upon the issuance of such options, rights, securities or options or rights related to such securities being made upon the basis of the issuance of only the number of shares of Common Stock actually issued upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities.
(d)
For the purpose of any computation pursuant to this Section 4.6, the Current Market Price at any date of one share of Common Stock shall be deemed to be the average of the daily closing prices for the 15 consecutive business days ending on the last business day before the day in question (as adjusted for any stock dividend, split, combination or reclassification that took effect during such 15 business day period). The closing price for each day shall be the last reported sales price regular way or, in case no such reported sales took place on such day, the average of the last reported bid and asked prices regular way, in either case on the principal national securities exchange on which the Common Stock is listed or admitted to trading or as reported by
4
Nasdaq (or if the Common Stock is not at the time listed or admitted for trading on any such exchange or if prices of the Common Stock are not reported by Nasdaq then such price shall be equal to the average of the last reported bid and asked prices on such day as reported by The National Quotation Bureau Incorporated or any similar reputable quotation and reporting service, if such quotation is not reported by The National Quotation Bureau Incorporated); provided, however, that if the Common Stock is not traded in such manner that the quotations referred to in this Section 4.6(d) are available for the period required hereunder, the Current Market Price shall be determined in good faith by the board of directors of the Company or, if such determination cannot be made or if Holder disputes in writing any determination so made by the Company’s board of directors within 30 days of being informed of such determination, by a nationally recognized independent investment banking or accounting firm selected by the board of directors of the Company (or if such selection cannot be made, by a nationally recognized independent investment banking or accounting firm selected by the American Arbitration Association in accordance with its rules).
(e)
In addition to the foregoing adjustments to the Stock Purchase Price of this Warrant and the number of shares of Common Stock subject to this Warrant, in the event that the Convertible Promissory Notes issued and outstanding on the date hereof are converted into a greater number of shares of capital stock of the Company than the maximum number of shares set forth in Section 6.14(c)(B) (excluding for this purpose any greater number of shares resulting solely from the accrual of additional interest on such Convertible Promissory Notes after May 31, 2018), the Stock Purchase Price and the number of shares of Common Stock subject to this Warrant shall be adjusted as appropriate and necessary to provide that this Warrant (upon exercise) shall represent the same percentage ownership of the Company, for the same aggregate Stock Purchase Price, based on the actual greater number of shares into which the Convertible Notes were converted (i.e., using the same fully-diluted calculation methodology as was determined on the date hereof using the maximum number of shares set forth in Section 6.14(c)(B)).
5.
Representations and Warranties of the Holder. The Holder hereby represents and warrants to the Company that:
5.1
Purchase for Own Account. The Holder represents that it is acquiring the Warrant and the Common Stock issuable upon exercise of the Warrant (collectively, the “Securities”) solely for investment for the Holder’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 Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. The acquisition by the Holder of any of the Securities shall constitute confirmation of the representation by the Holder that the Holder does not 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.
5.2
Disclosure of Information. The Holder has received all the information it considers necessary or appropriate for deciding whether to acquire the Securities. The Holder further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities and the business, properties, prospects and financial condition of the Company.
5.3
Investment Experience. Either (i) the Holder or its officers, directors, managers or controlling persons has a preexisting personal or business relationship with the Company or its officers, directors or controlling persons, or (ii) the Holder, by reason of its own business and financial experience, has the capacity to protect its own interests in connection with the investment contemplated hereby. The Holder represents that it is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Securities. The Holder acknowledges that any investment in the Securities involves a high degree of risk, and represents that it is able, without materially impairing its financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of its investment.
5.4
Accredited Investor. The Holder represents that it is an “accredited investor” within the meaning of Securities and Exchange Commission (“SEC”) Rule 501 of Regulation D, as presently in effect. Neither (i) the Holder, (ii) any of its directors, executive officers, other officers that may serve as a director or officer of any company in which it invests, general partners or managing members, nor (iii) any beneficial owner of the Company’s voting equity securities (in accordance with Rule 506(d) of the Act) held by the Investor is subject to any Disqualification Event (as defined in Section 6.7), except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) or (d)(3) under the Securities Act and disclosed reasonably in advance in writing in reasonable detail to the Company.
5.5
Restrictions on Transfer. The Holder understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Act, only in certain limited circumstances. In this connection, the Holder represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act. THE HOLDER UNDERSTANDS AND ACKNOWLEDGES HEREIN THAT AN INVESTMENT IN THE COMPANY’S SECURITIES INVOLVES AN EXTREMELY HIGH DEGREE OF RISK AND MAY RESULT IN A COMPLETE LOSS OF HIS, HER OR ITS INVESTMENT. The Holder understands that the Securities have not been and will not be registered under the Act and have not been and will not be registered or qualified in any state in which they are offered, and thus the Holder will not be able to resell or otherwise transfer his, her or its
5
Securities unless they are registered under the Act and registered or qualified under applicable state securities laws, or an exemption from such registration or qualification is available. The Holder has no immediate need for liquidity in connection with this investment and does not anticipate that it will need to sell its Securities in the foreseeable future.
6.
Representations and Warranties of the Company. The Company hereby represents and warrants to the Holder that:
6.1
Organization, Good Standing and Qualification; Licenses. The Company is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority, and holds all governmental licenses, permits, registrations and other approvals required under applicable law, to own and hold under lease its property and to carry on its business as now conducted and as proposed to be conducted. The Company is qualified to do business in each jurisdiction where the nature of its properties of the conduct of its business requires it to be so qualified to do business.
6.2
Authorization. All action on the part of the Company necessary for the authorization, execution and delivery of this Warrant, the performance of all obligations of the Company hereunder, and the authorization, issuance (or reservation for issuance), sale and delivery of the Securities, has been taken. This Warrant constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.
6.3
Litigation. There is no action, suit, proceeding or investigation pending or currently threatened against the Company that questions the validity of this Warrant, the right of the Company to enter into this Warrant, or to consummate the transactions contemplated hereby, or that could reasonably be expected to result, either individually or in the aggregate, in any Material Adverse Effect, nor is the Company aware that there is any basis for the foregoing. “Material Adverse Effect” shall mean event, matter, condition or circumstance which (i) would materially impair the ability of the Company or any other Person to perform or observe its obligations under or in respect of the Warrant; or (ii) affects the legality, validity, binding effect or enforceability of any of the Warrant.
6.4
Absence of Required Consents; No Violations. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Warrant, except for such filing(s) pursuant to applicable state securities laws as may be necessary, which filings will be timely effected. The execution, delivery and performance of the Warrant and the consummation of the transactions contemplated hereby will not result in any violation or default (i) of any provision of its governing documents, or (ii) in any material respect of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound, or of any provision of any federal or state statute, rule or regulation applicable to the Company or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event that results in the creation of any lien upon any material assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties. “Governmental Authority” shall mean any federal, state, local or other governmental department, commission, board, bureau, agency or other instrumentality or authority, domestic or foreign, exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government.
6.5
Financial Information; Projections; Material Liabilities. The Company’s financial statements which have been delivered to the Holder fairly and accurately reflect the Company’s financial condition as of the latest date of such financial statements in all material respects. All financial projections and forecasts delivered to the Holder represent the Company’s best estimates and assumptions as to future performance, which the Company believed to be fair and reasonable as of the time made. As of the date of this Note, the Company does not have any material liabilities, fixed or contingent, that are not reflected in the financial statements referred to above as have been delivered to the Holder on or prior to the date hereof, in the notes thereto or otherwise disclosed to the Holder on or prior to the date hereof, other than liabilities arising in the ordinary course of business since the date of such financial statements.
6.6
Licenses and Intellectual Property Rights. The Company, together with its subsidiaries and affiliates, possesses all licenses, patents, trademarks, trade names, service marks, copyrights, and other intellectual property rights, free from burdensome restrictions that are material to the conduct of its business.
6.7
Tax Matters. The Company has filed all federal and other material tax returns and reports required to be filed, has made timely remittance of all material amounts as required by any governmental agency or authority and has paid all federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon it or its properties, income or assets otherwise due and payable, except those relating to the Company’s 2017 tax year or those which are being or will be contested in good faith by appropriate proceedings and for which adequate reserves have been provided. To the Company’s Knowledge (as defined below), the Company has not received any notice of any proposed tax assessment that would, if made, have a Material Adverse Effect.
6
6.8
Insurance. To the Company’s Knowledge, all material policies of insurance in effect of any kind or nature owned by or issued to the Company (a) are in full force and effect, and (b) are of a nature and provide such coverage as is customarily carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Company operates.
6.9
No Joint Ventures, Partnerships or Subsidiaries. Except as set forth on Schedule 6.9, as of the date hereof, (i) the Company is not engaged in any material joint venture or partnership with any other Person, and (ii) the Company has no material subsidiaries.
6.10
No Material Adverse Effect. To the Company’s Knowledge, on and as of the date hereof, no event has occurred or condition exists with respect to the Company or any other Person that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect. The term “to the Company’s Knowledge” shall mean the knowledge of senior management of the Company, including the knowledge that each such person would reasonably be expected to obtain after reasonable inquiry.
6.11
Offering. Subject in part to the truth and accuracy of the Holder’s representations set forth in Section 5 of this Agreement, the offer, sale and issuance of the Note and Warrant as contemplated by this Warrant are exempt from the registration requirements of the Act and will not result in a violation of the qualification or registration requirements of the any applicable state securities laws, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.
6.12
Valid Issuance of Common Stock. The shares of Common Stock issuable upon exercise of the Warrant, when issued, sold and delivered in accordance with the terms of this Warrant for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Warrant, any stockholder’s agreement reasonably requested by the Company to be executed by the Holder, and under applicable state and federal securities laws.
6.13
No “Bad Actor” Disqualification. The Company has exercised reasonable care, in accordance with SEC rules and guidance, to determine whether any Covered Person (as defined below) is subject to any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) through (viii) under the Act (“Disqualification Events”). To the Company’s knowledge, no Covered Person is subject to a Disqualification Event, except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under the Act. The Company has complied, to the extent applicable, with any disclosure obligations under Rule 506(e) under the Act. “Covered Persons” are those persons specified in Rule 506(d)(1) under the Act, including the Company; any predecessor or affiliate of the Company; any director, executive officer, other officer participating in the offering, general partner or managing member of the Company; any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power; any promoter (as defined in Rule 405 under the Act) connected with the Company in any capacity at the time of the sale of the Note; and any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of the Note (a “Solicitor”), any general partner or managing member of any Solicitor, and any director, executive officer or other officer participating in the offering of any Solicitor or general partner or managing member of any such Solicitor.
6.14
Capitalization and Voting Rights. The authorized capital of the Company consists of the following on the date hereof:
(a)
Preferred Stock. 6,213,165 shares of preferred stock, par value $0.0001 (the “Preferred Stock”), of which 6,121,168 shares are issued and outstanding; and
(b)
Common Stock. 19,129,375 shares of common stock, par value $0.0001 (“Common Stock”), of which 12,916,210 shares are issued and outstanding.
(c)
Other Rights. Except for (A) the conversion privileges of the Preferred Stock, (B) the conversion of outstanding principal and interest under currently outstanding Convertible Promissory Notes issued by the Company in the aggregate principal amount of $1,025,000 into a maximum of 3,802,297 shares of Common Stock (at any time now or in the future) based on the accrued interest on such Convertible Promissory Notes as of May 31, 2018, and (C) warrants exercisable for a maximum of 12,237,870 shares of Common Stock (at any time now or in the future), there are not outstanding any options, warrants, rights (including conversion or preemptive rights) or agreements for the purchase or acquisition from the Company of any shares of its capital stock. The Company is not a party or subject to any agreement or understanding, and, to the best of the Company’s knowledge, there is no agreement or understanding between any persons and/or entities, which affects or relates to the voting or giving of written consents with respect to any security or by a director of the Company.
7
7.
No Voting or Dividend Rights. Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof the right to vote or to consent to receive notice as a shareholder of the Company or any other matters or any rights whatsoever as a shareholder of the Company. No dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby or the shares purchasable hereunder until, and only to the extent that, this Warrant shall have been exercised.
8.
Transferability. This Warrant and any rights hereunder may not be transferred, in whole or in part, without the prior written consent of the Company, which may be withheld in its sole discretion. Notwithstanding anything to the contrary herein, subject to compliance with applicable federal and state securities laws, this Warrant and all rights hereunder may be transferred, in whole but not in part, without charge to the holder hereof (except for transfer taxes), to the acquirer of the Holder in a consolidation, amalgamation, merger of sale of all or substantially all of the Holder’s assets or equity securities.
9.
Lost Warrants. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant, the Company, at its expense, will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant.
10.
Modification and Waiver. Any term of this Warrant may be amended and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Holder.
11.
Notices. Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Warrant shall be in writing and shall be conclusively deemed to have been duly given (a) when hand delivered to the other party; (b) when sent by electronic mail to the address set forth in the books and records of the Company if sent between 8:00 am and 5:00 pm recipient’s local time on a Business Day, or on the next Business Day if sent by electronic mail other than between 8:00 am and 5:00 pm recipient’s local time; (c) three Business Days after deposit in the U.S. mail with first class or certified mail receipt requested postage prepaid and addressed to the other party at the address set forth in the books and records of the Company; or (d) the next Business Day after deposit with a national overnight delivery service, postage prepaid, addressed to the parties at the addresses set forth in the books and records of the Company with next Business Day delivery guaranteed, provided that the sending party receives a confirmation of delivery from the delivery service provider. Each Person making a communication hereunder by electronic mail shall promptly attempt to confirm by telephone to the Person to whom such communication was addressed each communication made by it by electronic mail pursuant hereto but the absence of such confirmation shall not affect the validity of any such communication. A party may change or supplement the addresses given above, or designate additional addresses, for purposes of this Section 9 by giving the other party written notice of the new address in the manner set forth above. Subject to the limitations set forth in Delaware General Corporation Law §232(e), the Holder consents to the delivery of any notice to stockholders given by the Company under the Delaware General Corporation Law or the certificate of incorporation (as amended from time to time) or bylaws (as amended from time to time) by (i) electronic mail to the Holder’s electronic mail address set forth in the books and records of the Company, (ii) posting on an electronic network together with separate notice to the Holder of such specific posting, or (iii) any other form of “electronic transmission” (as defined in the Delaware General Corporation Law) directed to the Holder. This consent may be revoked by the Holder by written notice to the Company and may be deemed revoked in the circumstances specified in Delaware General Corporation Law §232.
12.
Governing Law. This Warrant is to be construed in accordance with and governed by the laws of the State of New York.
[Signature Page to Follow]
8
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officers, thereunto duly authorized as of the date first above written.
| DOPE MEDIA, INC. | |
|
|
|
|
|
|
| By: | /s/ George Jage |
|
| George Jage |
|
| Chief Executive Officer |
[Signature Page to Warrant]
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: General Cannabis Corp.
The undersigned, the holder of a right to purchase shares of Common Stock of Dope Media, Inc., a Delaware corporation (the “Company”), pursuant to that certain Warrant to Purchase Common Stock of Dope Media, Inc. (the “Warrant”), dated as of May 31, 2018, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, __________________________ (_________) shares of Common Stock of the Company and herewith makes payment of _________________________________ Dollars ($__________) therefor by the following method:
(Check one of the following):
| (check if applicable) |
| The undersigned hereby elects to make payment of ____________ Dollars ($___________) therefor in cash. |
|
|
|
|
| (check if applicable) |
| The undersigned hereby elects to make payment for the aggregate exercise price of this exercise using the Net Issuance method pursuant to Section 2 of the Warrant. |
DATED: ________________
| [NAME OF HOLDER] | |
|
|
|
|
|
|
| By: | General Cannabis Corp. |
|
|
|
| Name: |
|
|
|
|
| Its: |
|
ACKNOWLEDGMENT
To: General Cannabis Corp.
The undersigned hereby acknowledges that as of the date hereof, __________________ (___________) shares of Common Stock remain subject to the right of purchase in favor of General Cannabis Corp. pursuant to that certain Warrant to Purchase Common Stock of Dope Media, Inc., dated as of June 13, 2018.
DATED: ________________
| DOPE MEDIA, INC. | |
|
|
|
|
|
|
| By: |
|
|
|
|
| Name: |
|
|
|
|
| Title: |
|