CANN 8-K
TREES Corp (Colorado) (CANN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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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. |
Acquisition of Green Tree Assets
On September 13, 2022, the Company and a newly-formed subsidiary thereof entered into an Asset Purchase Agreement (“APA”) with Ancient Alternatives LLC (“Ancient”), Natural Alternatives For Life, LLC, (“Natural”), Mountainside Industries, LLC (“Mountainside”), Hillside Enterprises, LLC (“Hillside”), and GT Creations, LLC (“GT Creations”), each a Colorado limited liability company (“Green Tree Entities”), pursuant to which the Company agreed to purchase substantially all of the assets of the Green Tree Entities (“Green Tree Acquisition”). The purchase price in connection with the Green Tree Acquisition consists of cash equal to $500,000 payable at closing; 17,977,528 shares (“Buyer Shares”) of the Company’s common stock, par value $0.01 per share (“Common Stock”), deliverable at closing; and an additional $3,500,000 in cash in fifteen (15) equal monthly payments commencing on the 9-month anniversary of the closing. The number of Buyer Shares is subject to adjustment based upon a formula specified in the APA. The APA provides that the Company will assume certain liabilities at closing, including certain manufacturing agreements between GT Creations and affiliates of the Green Tree Entities. The Green Tree Acquisition is subject to certain conditions, including regulatory approval of the Colorado Marijuana Enforcement Division. The APA provides for multiple closings in the event that applicable regulatory approvals in respect of separate Green Tree Entities occur at different times.
As part of the Green Tree Acquisition, the Company has agreed, upon the closing, to enter into two-year employment agreements with each of Allyson Feiler and Loree Schwartz, equity principals of the Green Tree Entities (“Employment Agreements”). Ms. Feiler will be employed by the Company as its Chief Marketing Officer at an annual base salary of $225,000, with an agreed one-time bonus equal to $383,071.43, payable within 30 business days following the completion of the cannabis license transfers held by Ancient, Natural, Mountainside and GT Creations. Ms. Schwartz will be employed by the Company as its Chief Compliance Officer at an annual base salary of $150,000, also with an agreed one-time bonus equal to $383,071.43, payable within 30 business days following the completion of the cannabis license transfers held by Ancient, Natural, Mountainside and GT Creations. Both Employment Agreements also provide for severance payouts up to the full initial two-year term in the event of a termination without ‘Cause’ or for ‘Good Reason’ (as such terms are defined therein) during the initial term. In addition, the Company has agreed, upon the closing, to enter into consulting agreements (“Consulting Agreements”) with each of (i) CMD Consulting Services, Inc., pursuant to which consultant will be paid a one-time consulting fee equal to $47,619.05 within 30 days following the closing of each of Ancient, Natural and Hillside; and (ii) Silverfox LLC pursuant to which consultant will be paid a one-time consulting fee equal to $186,238.09 within 30 days following the closing of each of Ancient and Natural.
The foregoing descriptions of the APA, Employment Agreements and Consulting Agreements do not purport to be complete and are qualified in their entirety by reference to the full text of the agreements, each of which is annexed hereto as Exhibits 10.1 – 10.5, respectively, and are incorporated herein by reference.
Senior Secured Convertible Notes and Warrants Offering
On September 15, 2022, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with accredited investors (“Investors”), pursuant to which the Company agreed to issue and sell senior secured convertible notes (the “Notes”) with an aggregate principal amount of $13,500,000 (“Principal Amount”) to such Investors (“Note Offering”), in exchange for payment to the Company by certain Investors of an aggregate amount of $10,587,250 in cash, as well as cancellation of outstanding indebtedness in the aggregate amount of $2,912,750 represented by certain prior promissory notes issued by the Company in December 2020 and April 2020. The Note Offering closed on September 16, 2022.
In connection with the Note Offering, Investors received warrants (the “Warrants”) to purchase shares of the Company’s common stock equal to 20% coverage of the aggregate principal amount at $0.70 per share, which equals an aggregate of warrants to purchase 3,857,150 shares of the Common Stock. The lead Investor (“Lead Investor”) received an additional 10% warrant coverage on the aggregate principal amount of Notes for total additional warrants to purchase 1,928,571 shares of Common Stock. The Lead Investor also will receive a five percent cash fee on the aggregate principal amount of Notes, payable by the Company; one-half of such fee may be deferred by the Company for up to five months from the closing.
The Notes will bear interest at an annual rate of 12% and will mature on September 16, 2026 (the “Maturity Date”). Investors have the option to convert up to 50% of the outstanding unpaid principal and accrued interest of the Notes into Common Stock at a fixed conversion price equal to $1.00 per share. The Warrants are exercisable at an exercise price of $0.70 per Warrant, subject to adjustment as provided in the Warrants, at any time prior to the earlier of the Maturity Date and an Acquisition (as defined in the Warrants).
Payment on the Notes is secured by substantially all of the assets of the Company pursuant to a Security Agreement by and among the Company and the Investors.
The Company, the Lead Investor and the escrow agent entered into a first escrow agreement dated September 15, 2022 (“First Escrow Agreement”), pursuant to which the Lead Investor deposited $13,500,000 into escrow pending completion of required audited financial statements for the Green Tree Entities.
The parties also entered into a second escrow agreement (“Second Escrow Agreement”) on September 16, 2022 pursuant to which $2.5 million of the Principal Amount is to be held in escrow pending completion of, and for payment of a portion of the cash consideration in respect of, the Green Tree Acquisition; and an additional $1.2 million is be held in escrow pending completion of a second potential acquisition. The Second Escrow Agreement is subject to certain end dates as provided therein.
The foregoing descriptions of the Securities Purchase Agreement, Notes, Warrants, Security Agreement, First Escrow Agreement, and Second Escrow Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the agreements, each of which is annexed hereto as Exhibits 10.6 – 10.12, respectively, and are incorporated herein by reference.
Item 2.03. |
| Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth in Item 1.01 of this Current Report on Form 8-K regarding the Notes is incorporated herein by reference.
Item 3.02. |
| Unregistered Sales of Equity Securities. |
The information set forth in Item 1.01 of this Current Report on Form 8-K regarding the Warrants is incorporated herein by reference. The Warrants, and any shares of Common Stock issued upon exercise of the Warrants, if applicable, will be issued to the Investors in reliance on the exemption from the registration requirements of the Securities Act of 1933, as amended, by virtue of Section 4(a)(2) thereof.
Item 5.02. |
| Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On September 16, 2022, the Company entered into a new consulting arrangement with Adam Hershey, its Interim Chief Executive Officer. Pursuant to Mr. Hershey’s new Consulting Agreement with the Company (through an affiliate), Mr. Hershey will continue to serve as the Company’s Interim Chief Executive Officer with compensation equal to $200,000 per annum, payable by the Company monthly. The term of the Consulting Agreement is for a period of one year, with automatic six-month renewals thereafter unless terminated by either party. The Company has also agreed to extend warrants to purchase 7,280,007 shares of Common Stock held by an affiliate of Mr. Hershey for an additional two years until May 29, 2027. The exercise price and all other terms and conditions of such warrants will remain unchanged.
On September 16, 2022, the Company appointed Edward Myers, 63, as its Chief Operating Officer. Mr. Myers previously served as a consultant to the Company. Mr. Myers (through an affiliate) and the Company entered into a new Consulting Agreement with the Company, pursuant to which Mr. Myers will receive compensation equal to $200,000 per annum, payable by the Company monthly. The term of the Consulting Agreement is for a period of one year, with automatic six-month renewals thereafter unless terminated by either party.
From 2010 – present, Mr. Myers has worked in the FinTech industry at a board and interim CEO level to prepare the businesses for liquidity events, as well as advising on buy-side transactions. From 2004- 2010, Mr. Myers served as the President for Global Payments North America (NYSE: GPN). During this time, Mr. Myers also served as Chairman of the Board for Comerica Merchant Services as well as CEO & Chairman of the Board for Global Gaming Services. He also served as Managing Director of Pay Anywhere LLC, a mobile credit card processor (North American Bancard). From 1998 – 2002, Mr. Myers served as Executive Vice President of Spherion Assessment Group (NYSE: SFN), a business unit of Spherion Inc., a recruiting and staffing service. Mr. Myers also previously served as the Divisional Executive Vice President of Merchant Services of National Processing Company (NYSE: NPC), a payment processing company, from 1992-1996.
There are no family relationships between Mr. Myers and any director, executive officer, or any person nominated or chosen by the Company to become a director or executive officer. No information is required to be disclosed with respect to Mr. Myers pursuant to Item 404(a) of Regulation S-K other than with respect to his retention by the Company, as summarized above.
The foregoing description of the Consulting Agreement relating to each of Messrs. Hershey and Myers does not purport to be complete and is qualified in its entirety by reference to the full text of each such Consulting Agreement, annexed to this Form 8-K as Exhibit 10.12 and 10.13, respectively, and is incorporated herein by reference.
Item 9.01Financial Statements and Exhibits.
(b)Exhibits.
Exhibit No. |
| Description |
10.1 | ||
10.2 | Form of Employment Agreement between the Company and Allyson Feiler. | |
10.3 | Form of Employment Agreement between the Company and Loree Schwartz. | |
10.4 | Form of Consulting Agreement between the Company and CMD Consulting Services, Inc.. | |
10.5 | Form of Consulting Agreement between the Company and Silverfox LLC. | |
10.6 | ||
10.7 | Form of Senior Secured Convertible Promissory Note of the Company. | |
10.8 | ||
10.9 | Form of Security Agreement by and among the Company and Investors. | |
10.10 | ||
10.11 | ||
10.12 | ||
10.13 | Consulting Agreement dated September 16, 2022, by and between the Company and CRM LLC. | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: September 19, 2022
| TREES CORPORATION | |
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| By: | /s/ Adam Hershey |
| Name: | Adam Hershey |
| Title: | Interim Chief Executive Officer |
Exhibit 10.1
Execution Version
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the “Agreement”) is entered into as of September 13, 2022 (the “Signing Date”), by and among Green Tree Colorado, LLC, a Colorado limited liability company, or its assigns (“Buyer”), Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company (collectively together with their respective subsidiaries, affiliates and assigns, “Seller” or “Sellers”), and each of the Holders (as defined below), and for purposes of Articles II, IV, and IX and Sections 5.9, 5.10, and 7.3 only, TREES CORPORATION, a Colorado corporation (“CANN”). Sellers and Buyer, CANN, as applicable, and Holders, as applicable, are sometimes referred to individually as a “Party” and collectively as the “Parties.”
Recitals
A.Sellers own and operate licensed retail marijuana dispensaries, medical marijuana dispensaries, medical and retail cultivations, and retail and medical marijuana infused products (MIPs) in the State of Colorado (collectively the “Business”);
B.Sellers are licensed and authorized to sell, cultivate, and process retail and medical marijuana at their Leased Premises under the Marijuana Code;
C.Buyer desires to purchase certain assets from Sellers, and Sellers desire to sell certain assets to Buyer; and
D. Each of Ancient Alternatives LLC (“Ancient Alternatives”), Natural Alternatives For Life, LLC (“Natural Alternatives”), Mountainside Industries, LLC, and GT Creations, LLC (each, an “S Corporation Seller” and, collectively, “S Corporation Sellers”) expects to liquidate immediately after the sale of each S Corporation Seller’s respective assets to Buyer, and each S Corporation Seller desires the sale of each S Corporation Seller’s respective assets to Buyer to qualify as a tax-free reorganization described in Section 368(a)(1)(C) of the Code (each, an “S Corporation Sale” and, collectively, the “S Corporation Sales”).
NOW THEREFORE, the Parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1Definitions. Capitalized terms have the meanings set forth below unless defined elsewhere in this Agreement.
“Affiliate” means any Person that directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the Person specified.
“Applicable County” means Boulder and Larimer County.
“Application Fees” means all fees paid to Governmental Authorities associated with the Change of Ownership applications.
“Assets” means substantially all of the assets of Sellers, including without limitation, the Licenses; Business Contracts; inventory, furniture, fixtures, business personal property of any kind, nature, character, or description, operated, owned, or leased by Sellers at the Leased Premises, and any and all intellectual property owned by Sellers, as more fully described on Exhibit A, but excluding the assets listed on Exhibit F (the “Excluded Assets”).
“Business Contract” means all Contracts to which any Seller is a party and which are utilized in the conduct of the Business.
“Business Day” means a day other than Saturday, Sunday, or any day on which banks located in the State of Colorado are authorized or obligated to close.
“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and any rules or regulations promulgated thereunder.
“Change of Ownership” means the transfer of ownership of the Licenses from Sellers to Buyer.
“Charter Documents” means with respect to any Person, the articles or certificate of incorporation, formation or organization and by-laws, the limited partnership agreement, the partnership agreement or the limited liability company agreement, or such other organizational documents of the Person, including those that are required to be registered or kept in the place of incorporation, organization or formation of the Person and which establish the legal personality of the Person.
“Claim” means any demand, claim, action, investigation, or Proceeding.
“Closing” and “Closing Date” shall have the meanings respectively as set forth in Section 2.3 hereof.
“Code” means the Internal Revenue Code of 1986, as amended.
“Common Stock” means the common stock, par value $.001 per share, of CANN.
“Contract” means any legally binding written contract, lease, license, evidence of indebtedness, mortgage, indenture, purchase order, binding bid, letter of credit, security agreement or other written and legally binding arrangement.
“Control” means the power, direct or indirect, to direct or cause the direction of the management and policies of a Person whether through ownership of voting securities or ownership interests, by Contract or otherwise, and specifically with respect to a corporation, partnership or limited liability company, means direct or indirect ownership of at least 50% of the voting securities in the corporation or of the voting interest in a partnership or limited liability company.
"Disclosure Schedules” means the Disclosure Schedules set forth in Exhibit H to this Agreement.
“Environmental Laws” means any federal, state, local or foreign law (including, without limitation, common law), treaty, judicial decision, regulation, rule, judgment , order, decree, injunction, permit or governmental restriction or any agreement with any Governmental Authority or other third party, whether now or hereafter in effect, relating to the environment, human health and safety or to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
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“Excluded Liabilities” shall have the meaning as set forth in Section 2.5 hereof.
“Final Governmental Approval” means the final decisions by the MED and the Applicable County in writing approving the Change of Ownership, and such approvals (a) do not include any responsibility of Buyer or Buyer’s owners for the actions of Sellers or Sellers’ owner with respect to an administrative investigation or administrative disciplinary action by the MED or the Applicable County; and (b) do not subject Buyer or Buyer’s owners to discipline by the MED or the Applicable County for the actions of Sellers or Sellers’ owner with respect to an administrative investigation or administrative disciplinary action by the MED or the Applicable County.
“Governmental Authority” means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States or any state, county, city or other political subdivision or similar governing entity.
“Hazardous Substances” means any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable corrosive, reactive or otherwise hazardous substance, waste or material or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics including, without limitation, petroleum, its derivatives, by-products and other hydrocarbons, and any substance, waste or material regulated under any Environmental Law.
“Holders” shall have the meaning as set forth in Section 2.2(b)(ii) hereof.
“Income Tax” means any federal, state, local, or non-U.S. Tax measured by or calculated with respect to (i) net income or profits or overall gross income or gross receipts (however denominated), including any capital gains or alternative minimum Tax, or (ii) multiple bases (including a corporate franchise, doing business, or occupation Tax) if one or more of the bases on which the Tax may be measured or calculated is described in clause (i) of this definition.
“Income Tax Return” means any Tax Return with respect to any Income Tax.
“Interim Period” means the time period from the date of this Agreement through and including the Closing.
“Knowledge” when used in a particular statement of fact in this Agreement, means the actual knowledge (as opposed to any constructive or imputed knowledge) of a Party or its owners, without inquiry.
“Laws” means all laws, statutes, rules, regulations, ordinances, and other pronouncements having the effect of law of a Governmental Authority, except for any United States federal law, rule or regulation related to marijuana which this Agreement may violate.
“Leased Premises” means the premises located at 6859 N. Foothills Hwy, Building C-100, Boulder CO 80302, 6859 N. Foothills Hwy, Building D-300, Boulder CO 80302, 6859 N. Foothills Hwy, Building E-100, Boulder CO 80302, 6859 N. Foothills Hwy, Building E-200, Boulder CO 80302, 1090 N. 2nd St., Berthoud CO 80513, and 12626 N 107th St. Longmont CO 80504.
“Licenses” means the following state and county licenses held by Sellers as set forth in Schedule 1.1.
“Lien” means any mortgage, pledge, assessment, security interest, lien, or other similar encumbrance.
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“Loss” means any and all losses, judgments, liabilities, amounts paid in settlement, damages, fines, penalties, deficiencies, losses, and expenses (including interest, court costs, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other Proceedings or of any Claim, default or assessment), but only to the extent the losses (a) are not reasonably expected to be covered by a payment from some third party or by insurance or otherwise recoverable from third parties, and (b) are net of any associated benefits arising in connection with the loss.
“Marijuana Code” means, collectively, Sections 14 and 16 of Article XVIII of the Colorado Constitution, the Colorado Marijuana Code, §§ 44-10-101, .et seq., C.R.S., as the same may be supplemented or amended from time to time, together with the regulations promulgated thereunder, and all applicable local Laws and regulations thereto promulgated by a Governmental Authority.
“Material Adverse Effect” means any occurrence, condition, change, development, event or effect that has or could reasonably be expected to have a materially adverse effect on the assets, properties, financial condition, or results of operations on a Party, as the context dictates, taken as a whole; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions; (ii) conditions generally affecting the industries and markets in which the Sellers operate; (iii) any action required or permitted by this Agreement or any action taken (or omitted to be taken) with the written consent of or at the written request of Buyer; (iv) any matter of which Buyer is aware on the date hereof; (v) any natural or man-made disaster or acts of God; or (vi) any actions taken by a Buyer or any of its Affiliates.
“MED” means the Colorado Marijuana Enforcement Division and/or any other applicable Colorado regulatory authority.
“Permits” means all licenses (including the Licenses), permits, certificates of authority, authorizations, approvals, registrations, franchises, and similar consents granted by a Governmental Authority related to the transactions contemplated by this Agreement.
“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, other business organization, trust, union, association, or Governmental Authority.
“Pre-Closing Tax Period” means all Tax periods ending on or before the Closing Date and the portion of any Straddle Period ending on the Closing Date.
“Pre Closing Taxes” means any Liabilities for (i) Taxes relating to the Business or the Assets, for any taxable period (or portion thereof) ending on or prior to the Closing Date (including the pre-Closing portion of for any Straddle Period) (ii) any other Taxes of any Seller or any current or former stockholders or Affiliates of Seller (other than Taxes allocated to Buyer under Section 5.11) for any taxable period, (iii) any penalties or fees accruing thereon as a result of the failure to file or late filing of any Tax Returns relating to the Business or Assets due on or before the Closing Date, (iv) Taxes imposed on any of the Sellers that arise out of the consummation of the transactions contemplated hereby or that are the responsibility of any of the Sellers pursuant to Section 5.11, (v) deferred payroll or employment Taxes under the CARES Act, relating to the Business or the Assets, and (vi) Taxes identified in the Disclosure Schedules.
“Proceeding” means any complaint, lawsuit, action, suit, Claim (including claim of a violation of Law), or other proceeding at law or in equity or order or ruling, in each case by or before any Governmental Authority or arbitral tribunal.
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“Securities Act” means the Securities Act of 1933, as amended.
“Sellers” and “Sellers” shall have the meaning set forth in the preamble hereto. For purposes hereof, any reference to Sellers in the singular shall mean all Sellers for the purpose of any representations, warranties, covenants or other obligations or agreements set forth in this Agreement.
“Straddle Period” means all Tax periods beginning on or before and ending after the Closing Date.
“Tax” or “Taxes” means (i) any federal, state, local, or foreign income, gross receipts, ad valorem, sales, use, employment, social security, disability, occupation, property, severance, value added, goods and services, documentary, stamp duty, transfer, conveyance, capital stock, excise, or withholding tax or other taxes imposed by or on behalf of any Governmental Authority, including any interest, penalty or addition thereto, or (ii) a liability for amounts of the type described in clause (i) as a result Treasury Regulations §1.1502-6, as a result of being a transferee or successor, or as a result of a contract or otherwise.
“Tax Return” means any declaration, report, statement, form, return or other document or information required to be supplied to a Governmental Authority in connection with Taxes of the Sellers or of the Buyer, as applicable, including any schedule or attachment thereto, and including any amendment thereof.
“VWAP Price” means the volume weighted average price per share of the Common Stock for the fifteen (15) trading day period immediately preceding the 18-month anniversary of the Closing.
“Working Capital” means the aggregate of cash, cash equivalents, inventory and receivables minus current liabilities.
1.2Rules of Construction.
(a)All article, section, subsection, schedules and exhibit references used in this Agreement are to articles, sections, subsections, schedules and exhibits to this Agreement unless otherwise specified. The exhibits and schedules attached to this Agreement constitute a part of this Agreement and are incorporated herein for all purposes.
(b)If a term is defined as one part of speech (such as a noun), it has a corresponding meaning when used as another part of speech (such as a verb). Unless the context of this Agreement clearly requires otherwise, words importing the masculine gender include the feminine and neutral genders and vice versa. Words in the plural form include the singular form, and words in the singular form include the plural form. The words “includes” or “including” means “including without limitation,” the words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not any particular section or article in which the words appear and any reference to a Law includes any rules and regulations promulgated thereunder. Currency amounts referenced herein are in U.S. dollars.
(c)Whenever this Agreement refers to a number of days, the number refers to calendar days unless Business Days are specified. Whenever any action must be taken hereunder on or by a day that is not a Business Day, then the action may be validly taken on or by the next day that is a Business Day.
(d)Each Party and its respective attorneys have been given an equal opportunity to negotiate the terms and conditions of this Agreement, and any rule of construction to the effect that ambiguities are to be resolved against the drafting Party or any similar rule operating against the drafter of an agreement will not be applicable to the construction or interpretation of this Agreement.
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ARTICLE II
PURCHASE OF BUSINESS, PAYMENT, AND CLOSING
2.1Purchase of Assets. At the Closing, Sellers shall sell to Buyer and Buyer shall purchase from Sellers the Assets.
2.2Purchase Price; Issuance of CANN Shares; Adjustments.
(a)The purchase price for the Assets is set forth in this Section 2.2 (collectively, the “Purchase Price”).
(b)Buyer and CANN shall pay the Purchase Price by
(i) | Delivering the sum of $500,000 to Sellers at the Closing; |
(ii) | Delivering to an aggregate of 17,977,528 shares of Common Stock to those persons and in such amounts as listed on Exhibit G (the “Holders”), subject to adjustment as provided in subparagraph (iv) below (the “CANN Shares”). |
(iii) | Delivering to Sellers an aggregate cash payment of $3,500,000, to be paid to Sellers as set forth on Exhibit G and as applicable Closings occur, with each payment to be made in fifteen (15) equal monthly payments (each, an “Installment Payment”), in each case the first payment of which is to be made on the nine (9) month anniversary of the applicable Closing and the additional fourteen (14) successive payments to be made no later than the tenth (10th) calendar day of each successive calendar month thereafter; |
Buyer acknowledges that default in the payment of any Installment Payment will result in losses and additional expenses to Sellers; accordingly, upon the failure of the Buyer to pay any Installment Payment when due, which failure shall not have been cured within ten (10) days of the due date, such due but unpaid Installment Payment shall bear interest for the period beginning with the date of the happening of such event at a default rate of nine percent (9%) per annum.
(iv) | If upon the 18-month anniversary of the Closing, the VWAP Price is: |
A. | $0.89 or greater, there shall be no adjustment to the number of CANN Shares; |
B. | $0.70 or greater, but less than $0.89, the number of CANN Shares shall be adjusted such that CANN shall promptly (but in any event no later than ten business days thereafter) issue to those persons listed on Exhibit G pursuant to the allocation method set forth therein additional aggregate CANN Shares in accordance with the following formula: |
Additional CANN Shares =
($16,000,000 divided by VWAP Price) minus 17,977,528
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C. | Less than $0.70, CANN shall promptly (but in any event no later than ten business days thereafter) deliver to Sellers an additional 4,879,615 CANN Shares. |
All adjustments under this Section 2.2 shall be considered as adjustments to the Purchase Price for federal tax purposes.
(c)At the Closing, Sellers will retain all cash and funds in depository accounts.
(d)Sellers and Buyer agree to adjust, as of 11:59 p.m. Mountain Time on the day preceding the Closing Date (the “Cut-Off Time”), the following (collectively, the “Proration Items”) without duplication: utility bills; accounts payable with respect to any Leased Premises; accounts payable under the Business Contracts; and accounts receivable under the Business Contracts (except as to uncollected accounts receivable, which shall be retained by Sellers), in each case where such payable or receivable relates to both pre-Cut-Off Time periods and post-Cut-Off Time periods. Sellers will be charged and credited for the amounts of all of the Proration Items relating to the period up to and including the Cut-Off Time, and Buyer will be charged and credited for all of the Proration Items relating to the period after the Cut-Off Time. Such preliminary estimated Closing prorations shall be set forth on Exhibit E attached hereto no later than 3 days prior to Closing (the “Proration Statement”) and shall be signed by Buyer and Sellers for purposes of making the preliminary proration adjustment at Closing subject to the final cash settlement provided for below. The preliminary proration shall be paid at Closing by Buyer to Sellers (if the preliminary prorations result in a net credit to Sellers) or by Sellers to Buyer (if the preliminary prorations result in a net credit to Buyer) by increasing or reducing the cash to be delivered by Buyer in payment of the Purchase Price at the Closing. If the actual amounts of the Proration Items are not known as of the Closing Date, the prorations will be made at Closing on the basis of the best evidence then available; thereafter, when actual figures are received (not to exceed ninety (90) days after Closing), re-prorations will be made on the basis of the actual figures, and a final cash settlement will be made between Sellers and Buyer. No prorations will be made in relation to insurance premiums, and Seller’s insurance policies will not be assigned to Buyer. Final readings and final billings for utilities will be made if possible as of the Closing Date, in which event no proration will be made at Closing with respect to utility bills. Sellers will be entitled to all (i) deposits presently in effect with the utility providers and (ii) security deposits presently in effect with respect to the Leased Premises, and Buyer will be obligated to make its own arrangements for deposits with the utility providers and security deposits with the landlords of the Leased Premises.
(e)The Buyer shall be entitled to deduct and withhold from any payment made pursuant to this Agreement such amounts as are required to be deducted and withheld with respect to such payment under the Code, or any provision of applicable state, local or foreign Law; provided, however, that Buyer shall provide Sellers notice not less than two (2) days, to the extent practicable, before effecting any Tax withholding, other than any withholding required in connection with payments of compensation. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such withholding was made.
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2.3Closing. The closing for the purchase and sale of the Assets (the “Closing”) will be held on the date agreed to by the Parties (the “Closing Date”). The Closing will be at a time and place agreed to by the Parties, unless the Parties agree that the Closing need not occur at a specific location.
If Final Governmental Approval is granted by MED and/or any Applicable County as to any particular Asset before Final Governmental Approval is granted as to the remaining Assets, the Parties may effectuate multiple Closings, each of which shall transfer only those Assets for which Final Governmental Approval has been so granted, and upon each such Closing, Purchase Price shall be paid by Buyer only in respect of such Assets for which Final Governmental Approval has been granted. The Parties may, by mutual agreement, schedule or postpone the Closing Date or any particular Closing in order to effect all the Closings simultaneously, to the extent permissible by the Marijuana Code. Notwithstanding anything to the contrary, to the extent there occurs an initial Closing resulting in the purchase by Buyer of some Assets and Assumed Liabilities from the Sellers, then Buyer shall be obligated, subject in all instances to Final Governmental Approval, to purchase all of remaining Assets and Assumed Liabilities from the Sellers to effect a full Closing of all Assets and Assumed Liabilities under this Agreement; provided, that, no Closing for any Asset or Assumed Liability may occur until the Closings of the Assets and Assumed Liabilities of each of Ancient Alternatives and Natural Alternatives have been completed; provided, further, that the Closings of Ancient Alternatives and Natural Alternatives must occur simultaneously with each other. Notwithstanding anything to the contrary, to the extent all of the Assets and Assumed Liabilities to be purchased by Buyer under this Agreement are unable to simultaneously Close, then, the Parties will continue to operate all Assets and Assumed Liabilities, whether Closed or not Closed, in the ordinary course of business as at the time of signing this Agreement, including, without limitation, (i) maintaining at least substantially the same costs and rates on such Assets and Assumed Liabilities, (ii) maintaining at least the same or better payment terms, purchase frequencies and quantities, and (iii) allowing and enabling the Assets and Assumed Liabilities to interact in the same manner, both financially and operationally, as they did as at the time of signing this Agreement.
2.4Documents Deliverable at Closing. At the Closing:
(a)Sellers shall provide to Buyer (collectively, “Sellers’ Closing Documents”):
(i) | An executed Sellers’ Officer’s Certificate in the form attached hereto as Exhibit B; |
(ii) | The Closing Working Capital balance; and |
(iii) | The Bill of Sale for the Assets in the form attached hereto as Exhibit D; and |
(iv) | The Proration Statement. |
(b)Buyer shall provide to Sellers an executed Buyer’s Officer’s Certificate in the form attached hereto as Exhibit C and counter-executed copies of the Bill of Sale for the Assets and the Proration Statement.
2.5Assumed Liabilities. Upon the sale and purchase of the Assets and subject to the terms and conditions set forth herein, Buyer shall assume and agree to pay, perform and discharge when due the following liabilities and obligations of Seller arising in connection with the operation of the Business or the Assets after the Closing (the “Assumed Liabilities”):
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(a) | all liabilities and obligations arising under or relating to the Business Contracts listed on Schedule 2.5(a) arising and to be performed after the Closing and excluding any such obligations arising or to be performed prior to the Closing; and |
(b)all other liabilities and obligations arising out of or relating to Buyer's ownership or operation of the Business and the Assets after the Closing, including on Schedule 2.5(b).
2.6Excluded Liabilities. Except for the Assumed Liabilities, Buyer shall not assume by virtue of this Agreement or the transactions contemplated hereby, and shall have no liability for, any liabilities, debt, responsibility, claim or other obligations of the Sellers, whether known or unknown, contingent or absolute (including, without limitation, those related to the Business), of any kind, character or description whatsoever (collectively, “Excluded Liabilities”).
ARTICLE III
SELLERS’ AND HOLDERS’ STATEMENTS OF FACT
Except as set forth in the Disclosure Schedules, each Seller severally and not jointly represents and warrants to Buyer that the following Sections 3.1-3.11 are true as of the date of this Agreement (collectively, “Seller’s Statements of Fact”):
3.1Sellers’ Organization. Each Seller is a limited liability company duly formed, validly existing and in good standing under each of the Laws of the State of Colorado and has all requisite limited liability company power and authority to conduct its Business as it is now being conducted in accordance with the Laws.
3.2Authority. Each Seller has all requisite power and authority to execute and deliver this Agreement and the other instruments to be delivered by such Seller at the Closing, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby, subject to approvals required by the Marijuana Code. Subject to approvals required by the Marijuana Code, the execution and delivery of this Agreement and the other instruments to be delivered by each Seller at the Closing, and the performance by each Seller of its obligations hereunder and thereunder, have been duly and validly authorized by necessary action. This Agreement has been, and the instruments to be delivered by such Seller at the Closing will at the Closing be, duly and validly executed and delivered by such Seller and constitute (or, in the case of instruments to be delivered by such Seller at the Closing, will at the Closing constitute) the legal, valid and binding obligation of such Seller enforceable against it in accordance with its terms, subject to approvals required by the Marijuana Code, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or other similar Laws relating to or affecting the rights of creditors generally, or by general equitable principles.
3.3No Conflicts; Consents and Approvals. The execution and delivery by each Seller of this Agreement does not, and the performance by each Seller of its obligations under this Agreement does not:
(a)violate or result in a breach of its Charter Documents;
(b)violate or result in a default under any material Contract to which such Seller are a party, except for any material violation or default that would not be expected to result in a Material Adverse Effect on Seller’s ability to perform its obligations hereunder; or
(c)(i) materially violate or result in a material breach of any Law applicable to such Seller or (ii) require any consent or approval of any Governmental Authority other than the MED and the Applicable County and under any Law applicable to such Seller.
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3.4Proceedings. Except as disclosed herein, there is no Proceeding pending, or to such Seller’s Knowledge threatened, against such Seller (i) before or by any Governmental Authority, which seeks a writ, judgment, order or decree restraining, enjoining, or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement; or (ii) brought by or in respect of any third party.
3.5Broker. Except as set forth on Section 3.5 of the Disclosure Schedules, no Seller has any liability or obligation to pay fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which any such Seller or any of its Affiliates could become liable or obligated.
3.6Compliance with Laws and Orders. Each Seller is in material compliance with all Laws and orders applicable to it except where any non-compliance would not reasonably be expected to result in a Material Adverse Effect on such Seller; provided, however, that this Section 3.6 does not address matters relating to Taxes, which are exclusively addressed by Section 3.7, or Permits, which are exclusively addressed by Section 3.8. No Seller has Knowledge of any fact, circumstance, or condition which could cause the Assets or the Leased Premises to violate the Marijuana Code concerning required testing or contaminants. No Seller has Knowledge of any fact, circumstance, or condition which could cause the Assets or the Leased Premises to violate the Colorado Pesticide Applicator’s Act, C.R.S. §§ 35-10-101, et. seq.
3.7Taxes. Except as set forth on Section 3.7 of the Disclosure Schedules,
(a)All Tax Returns required to be filed by Sellers, or otherwise required to be filed with respect to the Assets or Business, have been timely filed (taking into account any valid extensions). Each such Tax Return is correct and complete in all material respects. All Taxes due and payable by Sellers, or with respect to the Assets of the Business, whether or not shown on any Tax Return, have been timely paid. No claim has ever been made by an authority in a jurisdiction where Sellers do not file Tax Returns that it is or may be subject to taxation by that jurisdiction with respect to the Assets or Business. There are no liens or security interests on any of the Assets or other assets of Sellers relating to the Business that arose in connection with any failure (or alleged failure) to pay any Tax. No Seller is currently the beneficiary of any extension of time within which to file any material Tax Return other than extensions of time to file Tax Returns obtained in the Ordinary Course of Business.
(b)All Taxes required to have been withheld and paid with respect to the Assets or Business in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party have been withheld and paid and all material filings required with respect thereto, including without limitation IRS Forms W-2 and 1099, have been properly completed and filed.
(c)There is no action, dispute, audit, or claim concerning any Tax Liability with respect to the Assets or Business claimed or raised by any authority in writing.
(d)No power of attorney is currently in force with respect to any Tax matter relating to the Assets or Business.
(e)There is no outstanding waiver of any statute of limitations in respect of Taxes or agreement to extend the time (or is or would be subject to a waiver or extension given by any other Person) with respect to a Tax assessment or deficiency with respect to the Assets or Business, nor has any Seller been requested to give such waivers or extensions.
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(f)There are no “closing agreements” (as described in Code Section 7121 or any corresponding or similar provision of state, local, or non-U.S. income Tax Law) and Tax rulings requested or received from any taxing authority with respect to the Assets or Business.
(g)There is no obligation in connection with the Assets or Business to pay the Taxes of another person as a result of being a transferee or successor, or as a result of a contract, or otherwise. There is no Tax allocation or Tax sharing agreement with respect to the Assets or the Business.
(h)With respect to the Business or the Assets, there is no (i) permanent establishment or office or fixed place of business outside the United States, or (ii) prepaid amounts received on or prior to the date hereof but not included in taxable income as of the date hereof.
(i)No Seller has participated in a listed transaction within the meaning of Treasury Regulations Section 1.6011-4(c) with respect to the Assets or the Business.
(j)All applicable state and local sales and use Taxes with respect to the Assets or the Business have been properly collected and timely remitted to the proper taxing authorities, and have also been properly reported in a timely manner to the proper taxing authorities.
(k)No Seller has (i) deferred any employment or payroll Taxes under Section 2302 of the CARES Act; (ii) requested or received an advance of any employment or payroll Tax credits, reduced any employment or payroll Taxes due and payable in anticipation of claiming employment or payroll Tax credits; (iii) claimed any employment or payroll Tax credits (or, to the extent any such credit is disclosed in the Disclosure Schedules, such Seller has claimed such credit in compliance with applicable Law and will not be subject to recapture), in each case under either Section 7001 or 7002 of the FFCRA or under Section 2301 of the CARES Act and relating to the business or operations of Seller.
(l)With respect to each Seller, the assets being transferred to Buyer is "substantially all" assets of the Seller, in accordance with Code Section 368(a)(1)(C).
(m)Each S Corporation Seller and its owners has duly and properly filed all elections necessary for such Seller to qualify as an “S Corporation’ as described in Code Section 1361 and 1362 for U.S. federal, state and local income tax purposes at the time of the formation of such Seller. Each S Corporation Sellers’ S Corporation status remains valid and in effect and has never been revoked or terminated.
Nothing in this Section 3.7 or otherwise in this Agreement shall be construed as a representation or warranty with respect to any Tax position that Buyer or its Affiliates may take in any taxable period (or portion thereof) beginning after the Closing Date or regarding the amount, usability, value or condition of, or any limitations on, any Tax asset or attribute with respect to the Assets, or of the S Corporation Sellers, after the Closing.
3.8Permits. Each Seller possesses all Permits that are required for the ownership and operation of its Business in the manner in which it is currently owned. All Permits described in this Section 3.8 are in full force and effect, and each such Seller is in material compliance with each such Permit.
3.9Operating Facility. The licensed business at each Leased Premises is set out on Section 3.9 of the Disclosure Schedules.
3.10Sellers’ Members, The sole members of each Seller are as set forth on Section 3.10 of the Disclosure Schedules.
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3.11Environmental Matters.
(a)Each Seller is in material compliance with all applicable Environmental Laws and any other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in such Environmental Laws, insofar as failure to comply with the same could result in any material liability affecting or otherwise materially reduce the value of the Assets. Except as set forth on Section 3.11 of the Disclosure Schedules, there are no material liabilities arising in connection with or in any way relating to the Assets arising under or relating to any applicable Environmental Law, whether accrued, contingent, absolute, determined, determinable or otherwise, and to Seller’s Knowledge, there are no facts, events, conditions, situations or set of circumstances which could reasonably be expected to result in or be the basis for any such material liability.
(b)Except as set forth in Section 3.11 of the Disclosure Schedules, to each Seller’s Knowledge, there has not been any event, condition, circumstance, activity, practice, incident, action or plan which will materially interfere with or prevent continued compliance with or which would give rise to any material liability under any applicable Environmental Law or give rise to any applicable common law or statutory liability, based on or resulting from such Seller’s or its agents’ manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, or release into the environment, of any Hazardous Substance, that could result in any material liability affecting, or other materially reduce the value of, the Assets or Business. Each Seller has taken all actions necessary under applicable requirements of applicable Environmental Law to register any products or materials required to be registered by such Seller (or any of its agents) thereunder. There is no Proceeding, notice or demand letter pending or, to any Seller’s Knowledge, threatened against any Seller relating in any way to Environmental Laws, or notice or demand letter issued, entered, promulgated or approved thereunder. Except as set forth in Section 3.11 of the Disclosure Schedules, no property now or previously owned, leased or operated by any Seller, nor any property to which Hazardous Substances located on or resulting from the use of any Asset or the Leased Premises has been transported, is listed or, to any such Seller’s Knowledge, proposed for listing on the National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any similar federal, state, local or foreign list of sites requiring investigation or cleanup.
Except for the representations and warranties contained in this Article III (including the related portions of the Disclosure Schedules and Schedule Update (as defined below)), no Seller nor any other Person has made or makes any other express or implied statement of fact, representation or warranty either written or oral, on behalf of any Seller, including any statement of fact. representation or warranty as to the accuracy or completeness of any information regarding the Business and the Assets furnished or made available to Buyer, including any information, documents or material delivered to Buyer, or as to the future revenue, profitability or success of the Business, or any statement of fact, representation or warranty arising from statute or otherwise in Law.
Each applicable Holder receiving CANN Shares, severally and not jointly, represents and warrants to Buyer that the following Section 3.12 is true as of the date of this Agreement.
3.12Securities.
(a) | Purchase Entirely for Own Account. The CANN Shares will be acquired for investment for Holder’s own account(s), not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. Holder does not presently have any Contract, |
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undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any other Person with respect to any of such CANN Shares. Holder has not been formed for the specific purpose of acquiring such CANN Shares. Neither Holder nor any of its Affiliates has any present intention of entering into any put option, short position or other similar position with respect to the CANN Shares.
(b) | Disclosure of Information. Holder has had an opportunity to discuss to Holder’s satisfaction CANN’s business, management, financial affairs and the terms and conditions of the offering of the CANN Shares with CANN’s management and has had an opportunity to review CANN’s business. Such discussions, as well as any written information delivered by CANN to Holder, were intended to describe the aspects of CANN’s business which CANN believes to be material. Further, Holder acknowledges that it has reviewed CANN’s filings with the Securities Exchange Commission, including Forms 10-K, 10-Q and 8-K, and has had the opportunity to ask questions of management of CANN concerning CANN’s business, operations and financial condition. |
(c) | Restricted Securities. The CANN Shares have not been registered and are being issued to Sellers pursuant to Section 4(2) of the Securities Act or Regulation D promulgated under the Securities Act. The CANN Shares are “restricted securities” under applicable U.S. federal and state securities Laws and a resale of the CANN Shares may be made only pursuant to registration under the Securities Act or an available exemption from registration. |
(d) | Rule 144. Holder is familiar with the provisions of Rule 144 promulgated under the Securities Act, which, in substance, permits limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer of the securities (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions and which rule requires, among other things, that CANN be subject to the reporting requirements of the Exchange Act, that resales of securities take place only after the holder of the shares has held the shares for certain specified time periods, and under certain circumstances, and that resales of securities be limited in volume and take place only pursuant to brokered transactions. CANN has provided no assurances as to whether Holder will be able to resell any or all of the CANN Shares pursuant to Rule 144. |
(e) | Resale Restrictions. If all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A promulgated under the Securities Act, or some other registration exemption will be required with respect to the CANN Shares. Notwithstanding the fact that Rule 144 is not exclusive, the staff of the Securities and Exchange Commission has expressed its opinion that Persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. The CANN Shares shall be held by Holder for a minimum period of one (1) year from the date such CANN Shares are |
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issued to Holder and Holder shall not sell, transfer or otherwise hypothecate any of the CANN Shares held by such Holder prior to the expiration of such one-year period absent written consent of CANN.
(f) | Sophistication. Holder is a sophisticated investor (as described in Rule 506 of Regulation D) and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the acquisition of the CANN Shares contemplated hereunder; and is fully capable of, and understands and accepts, the risk of loss of Holder’s entire investment in the CANN Shares. Holder and each Affiliate of Holder expressly acknowledges and understands that neither CANN nor any director, officer, employee or agent of CANN makes any representation whatsoever as to the merit, risk or value of an investment in the CANN Shares. |
(g) | No General Solicitation. Neither Holder, nor any of its officers, employees, agents, directors, members, attorneys, shareholders, or partners (a) has engaged the services of a broker, investment banker or finder to contact any potential investor, nor has Holder or any of Holder’s officers, employees, agents, directors, members or partners, agreed to pay any commission, fee or other remuneration to any third party to solicit or contact any potential investor; (b) engaged in any general solicitation; or (c) published any advertisement in connection with the offer and sale of the CANN Shares being issued hereunder. |
(h) | Reliance on Exemption. The CANN Shares are being offered and issued to it in reliance on specific exemptions from the registration requirements of federal and state securities Laws. CANN is relying in part upon the truth and accuracy of, and Holder’s compliance with, the statements of fact, representations, warranties, agreements, acknowledgements and understandings of Holders set forth in this Section 3.12 in order to determine the availability of such exemptions and the eligibility of Holders to acquire the CANN Shares. |
3.13Independent Investigation. Sellers have conducted their own independent investigation, review, and analysis of the business, results of operations, prospects, condition (financial or otherwise), or assets of CANN, and acknowledge that they have been provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of CANN for such purpose. Sellers acknowledge and agree that: (a) in making their decision to enter into this Agreement and to consummate the transactions contemplated hereby, Sellers have relied solely upon their own investigation and judgment and upon advice from such advisors as they has deemed necessary, and the express statements of facts of Buyer and CANN set forth in Article IV (including the related portions of the Disclosure Schedules or Schedule Update); and (b) neither Buyer, CANN nor any other Person has made any statements of facts as to Buyer, CANN, the business of CANN, the value or future prospects of the Common Stock, or this Agreement, except as expressly set forth in Article IV of this Agreement (including the related portions of the Disclosure Schedules or Schedule Update).
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ARTICLE IV
BUYER’S AND CANN’S STATEMENTS OF FACT
Each of Buyer and CANN jointly and severally represent and warrant that the following is true as of the date of this Agreement:
4.1Organization. Buyer is a limited liability company duly formed, validly existing and in good standing under the Laws of the State of Colorado and has all requisite limited liability power and authority to conduct its business as it is now being conducted. CANN is a corporation duly formed, validly existing and in good standing under the Laws of the State of Colorado and has all requisite corporate power and authority to conduct its business as it is now being conducted. CANN owns 100% of the membership interests of Buyer, and Buyer is disregarded as an entity separate from CANN for federal income tax purposes under Section 301.7701-2 and 301.7701-3 of the Treasury Regulations.
4.2Authority. Each of Buyer and CANN has all requisite power and authority to execute and deliver this Agreement and the other instruments to be delivered by Buyer and CANN at the Closing, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby, subject to approvals required by the Marijuana Code. The execution and delivery by Buyer and CANN of this Agreement and the other instruments to be delivered by Buyer and CANN at the Closing, and the performance by Buyer and CANN of their respective obligations hereunder and thereunder, have been duly and validly authorized by necessary action. This Agreement has been, and the instruments to be delivered by Buyer and CANN at the Closing will at the Closing be, duly and validly executed and delivered by Buyer and CANN and constitutes (or, in the case of instruments to be delivered by Buyer and CANN at the Closing, will at the Closing constitute) the legal, valid and binding obligations of Buyer and CANN enforceable against Buyer and CANN in accordance with their terms, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, arrangement, moratorium or other similar Laws relating to or affecting the rights of creditors generally, or by general equitable principles.
4.3No Conflicts; Consents and Approvals. The execution and delivery by Buyer and CANN of this Agreement do not, and the performance by Buyer and CANN of their obligations hereunder and the consummation of the transactions contemplated hereby do not:
(a)violate or result in a breach of its Charter Documents;
(b)violate or result in a default under any material Contract to which Buyer or CANN is a party, except for any such violation or default that would not reasonably be expected to result in a Material Adverse Effect on Buyer’s or CANN’s ability to perform its obligations hereunder; or
(c)(i) violate or result in a breach of any Law applicable to Buyer or CANN or (ii) require any consent or approval of any Governmental Authority (other than the MED and any Applicable County) under any Law applicable to Buyer.
4.4Proceedings. There is no Proceeding pending or, to Buyer’s Knowledge or CANN’s Knowledge, threatened, against Buyer or CANN before or by any Governmental Authority, which seeks a writ, judgment order or decree restraining, enjoining, or otherwise prohibiting or making illegal any of the transactions contemplated by this Agreement.
4.5Compliance with Laws and Orders. Neither Buyer nor CANN is in violation of, or in default under, any Law or order applicable to Buyer or CANN the effect of which, in the aggregate, would
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reasonably be expected to hinder, prevent or delay Buyer or CANN from performing their obligations hereunder except for any such violation or default that would not reasonably be expected to result in a Material Adverse Effect on Buyer’s or CANN’s ability to perform its obligations hereunder.
4.6Broker. Neither Buyer nor CANN has any liability or obligation to pay fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Sellers or any of its Affiliates could become liable or obligated.
4.7Common Stock; Reorganization. The Common Stock issued by CANN to Buyers is “voting stock” within the meaning of Section 368(a)(1)(C).
4.8Independent Investigation. Buyer and CANN have conducted their own independent investigation, review, and analysis of the business, results of operations, prospects, condition (financial or otherwise), or assets of the Sellers, and acknowledges that they have been provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of Sellers for such purpose. Buyer and CANN acknowledge and agree that: (a) in making their decision to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer and CANN have relied solely upon their own investigation and judgment and upon advice from such advisors as they has deemed necessary, and the express statements of facts of Sellers set forth in Article III (including the related portions of the Disclosure Schedules or Schedule Update); and (b) no Seller nor any other Person has made any statements of facts as to Sellers, the Business, the Assets or this Agreement, except as expressly set forth in Article III of this Agreement (including the related portions of the Disclosure Schedules or Schedule Update). (collectively, “Buyer’s and CANN’s Statements of Fact”).
ARTICLE V
COVENANTS
5.1Regulatory and Other Approvals. During the Interim Period:
(a)Each Party shall attempt to obtain as promptly as practicable all material consents and approvals that either Party or its respective Affiliates are required to obtain in order to consummate the transactions contemplated hereby; provided that, for purposes of clarification, and notwithstanding anything to the contrary in this Agreement, the obtaining of the consents and approvals will not be a condition to the Closing except to the extent set forth in Articles VI or VII, as applicable. Following the Closing, Sellers and Buyer shall use commercially reasonable efforts, and shall cooperate with each other, to obtain any such required material consent or approval required to novate all liabilities and obligations under any and all liabilities that constitute Assumed Liabilities or to obtain in writing the unconditional release of all parties to such arrangements, so that, in any case, Buyer shall be solely responsible for such liabilities and obligations from and after the Closing Date; provided, however, that neither Sellers nor Buyer shall be required to pay any consideration therefor. Once such consent, approval, or waiver is obtained, Sellers shall sell, assign, transfer, convey and deliver to Buyer the relevant Asset to which such consent, approval, waiver relates for no additional consideration. To the extent that any Asset or Assumed Liability cannot be transferred to Buyer following Closing pursuant to this Section 5.1, Buyer and Sellers shall use commercially reasonable efforts to enter into such arrangements (such as subleasing, sublicensing or subcontracting) to provide to the parties the economic and, to the extent practical and/or permitted under applicable Law, operational equivalent of the transfer of such Asset or Assumed Liability to Buyer as of the closing and the performance by Buyer of its obligations with respect thereto.
(b)Each Party shall, at the sole cost of such Party, (i) make or cause to be made the filings required of the Person or any of its applicable Affiliates under any Laws applicable to it with respect to the transactions contemplated by this Agreement and to pay any fees due of it in connection with the
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filings, as promptly as is reasonably practicable, provided that, for purposes of clarification, and notwithstanding anything to the contrary in this Agreement, the filings and payments will not be conditions to the Closing except to the extent set forth in Articles VI and VII; (ii) cooperate with the other Party by furnishing the information that is necessary in connection with the other Party’s filings; (iii) use reasonable efforts to cause the expiration of the notice or waiting periods under any Laws applicable to it with respect to the consummation of the transactions contemplated by this Agreement as promptly as is reasonably practicable; (iv) promptly inform the other Party of any written or to any Party’s Knowledge, oral, communication from or to, and any proposed written or to the relevant Party’s Knowledge, oral, understanding or agreement with, any Governmental Authority in respect of the filings; (v) reasonably consult and cooperate with the other Party in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, and opinions made or submitted by or on behalf of any Party in connection with all meetings, actions or other Proceedings with Governmental Authorities relating to the filings; (vi) comply, as promptly as is reasonably practicable, with any reasonable requests received by the Party under any applicable Laws for additional information, documents or other materials with respect to the filings, (vii) attempt to resolve any objections as may be asserted by any Governmental Authority with respect to the transactions contemplated by this Agreement; and (viii) only upon the advice of such Party’s legal counsel, contest and resist any action or other Proceeding instituted (or threatened in writing to be instituted) by any Governmental Authority challenging the transactions contemplated by this Agreement as violative of any Law.
(c)If a Party (or any of its applicable Affiliates) intends to participate in any meeting with any Governmental Authority with respect to the filings and if permitted by, or acceptable to, the applicable Governmental Authority, it shall give the other Party reasonable prior written notice of, but in any event not less than five business days prior to such meeting (unless by the nature of the meeting such notice is impractical) and an opportunity to participate in, the meeting.
(d)In connection with any such filings, Buyer shall cooperate in good faith with Governmental Authorities and with Sellers and undertake promptly any and all action required to lawfully complete the transactions contemplated by this Agreement.
(e)Each Party shall provide prompt written notification to the other when it becomes aware that any such consent or approval referred to in this Section 5.1 is obtained, taken, made, given or denied, as applicable.
(f)In furtherance of the foregoing covenants:
(i)Each Party shall prepare, or cause its Affiliates to prepare, as soon as is practicable following the execution of this Agreement, all necessary filings applicable to it and in connection with the transactions contemplated by this Agreement that may be required under any Laws; provided that, for purposes of clarification, and notwithstanding anything to the contrary in this Agreement, the filings will not be conditions to the Closing except to the extent set forth Articles VI and VII.
(ii)Each Party shall promptly furnish the other Party with copies of any written notices, correspondence or other written communication received by it from the relevant Governmental Authority, shall promptly make any appropriate or necessary subsequent or supplemental filings required of it, and shall cooperate in the preparation of the filings as is reasonably necessary and appropriate.
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(iii)Each Party shall not, and shall cause its respective Affiliates not to, take any action that could reasonably be expected to adversely affect the approval of any Governmental Authority.
5.2Access of Buyer; Due Diligence. During the Interim Period, Sellers shall provide Buyer with reasonable access, upon reasonable written notice and during normal business hours, to the Business and the Leased Premises, subject to the Marijuana Code. During the Interim Period, Sellers shall provide Buyer, upon written request, with access to copies of Sellers’ books and records, Sellers’ standard operating procedures, and with reasonable access to Sellers’ employees during normal business hours in order to allow Buyer to conduct due diligence.
5.3Certain Restrictions. During the Interim Period, except as permitted or required by the other terms of this Agreement, or consented to in writing by Buyer, Sellers shall not take any of the following actions:
(a) | Sell, lease, transfer, pledge or otherwise dispose of any of the Assets or place any Liens or encumbrances thereon, except in the ordinary course of business as is consistent with past practice including frequency and amount |
(b) | Fail to maintain in full force and effect any of the Licenses; |
(c) | Fail to perform material obligations under any Business Contracts; |
(d) | Increase the salary or compensation or benefits of any employee or contractor, except in the ordinary course consistent with past practice, and provided Sellers deliver written notice to Buyer of same; |
(e) | Incur any liabilities of Sellers other than in the ordinary course of business. |
(f) | Make capital expenditures in excess of $10,000; |
(g) | Invest in or make any loans to any person or entity in excess of $10,000; |
(h) | Dissolve Sellers or file or declare bankruptcy, insolvency or similar action; |
(i) | Sell of the Business or any Assets outside of the ordinary course of business; |
(j) | Enter into or materially amend any material Business Contract, lease or other arrangement; or |
(k) | Enter into any agreement, commitment or understanding, whether in writing or not, to take any of the above actions. |
5.4Updating. Sellers shall give prompt notice to the Buyer of (a) the occurrence, or non-occurrence, of any event (a “Change”) that Sellers acquire Knowledge of, the occurrence or non-occurrence of which would reasonably be expected to cause any representation or warranty of a Seller party contained in this Agreement to be untrue or inaccurate in any material respect, in each case at any time from and after the date of this Agreement until the Closing, and (b) any failure to comply with or timely satisfy any covenant, condition or agreement to be complied with or satisfied by the Sellers under this Agreement that Sellers acquire Knowledge of. Prior to Closing, Buyer shall provide an update to the Disclosure Schedules
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(the “Schedule Update”) as necessary to complete or correct any information in Seller’s Statements of Fact in accordance with Sellers’ disclosure of any Changes. Notwithstanding the foregoing, for purposes of Buyer’s rights and remedies pursuant to Article 9 hereof, the Schedule Update will not be deemed to amend or supplement the Disclosure Schedules or the Seller’s Statements of Fact, prevent or cure any misrepresentation, breach of warranty or breach of covenant, or limit or otherwise affect any rights or remedies available to the Buyer in connection with any Changes or other information disclosed in the Schedule Update.
5.5Further Assurances. Subject to the terms and conditions of this Agreement, at any time or from time to time after the Closing, at a Party’s written request, the other Party shall execute and deliver to the requesting Party such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as the Party may reasonably request in order to consummate the transactions contemplated by this Agreement, each at the sole cost of the requesting Party.
5.6Buyer’s Obligations if No Closing. If the Closing does not occur for any reason, Buyer shall cooperate with Sellers in executing all documents reasonably necessary to void the Change of Ownership.
5.7Application Fees. Buyer shall pay the Change of Ownership application fees and prorated annual license renewal fees for all state and county Licenses held by Sellers.
5.8Non-Compete; Non Solicitation.
(a)The “Restricted Period” begins on the Closing Date and ends on the second anniversary of the Closing Date.
(b)“Competing Business” means the cultivation, manufacture or sale of marijuana or marijuana-related products, or the operation of dispensaries in respect thereof; provided, however, that the following activities shall not be deemed a Competing Business:
i. | providing services to Buyer; |
ii. | engaging in commercial exploitation of the “Green Treets” brand; or |
iii. | engaging in commercial exploitation and creation of products and brands utilizing nano-technology of PotentNano, LLC and/or NanoSonSol Technologies, LLC; or |
iv. | the operation of certain assets and properties related to a marijuana related business located at 5565 Arapahoe Avenue, Suite G, Boulder, Colorado 80303 (the “Boulder Arapahoe Business”); provided, that Seller shall only operate the Boulder Arapahoe Business in order to attract a buyer and to work through the completion of a sale of the Boulder Arapahoe Business. |
(c)“Restricted Territory” means the United States except for the territory of Puerto Rico and the state of Utah; provided, that, Seller shall hold any interest in a Utah dispensary and/or cultivation of marijuana business passively and shall not actively engage in any business or management role or invest additional funds to increase Seller’s ownership stake in any such Utah investment.
(d)During the Restricted Period and within the Restricted Territory, no Seller shall and such Seller shall direct its Affiliates not to
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i. | engage in, invest in, or otherwise participate in, directly or indirectly, any Competing Business unless agreed to in writing by the Parties; or |
ii. | employ, retain, engage or solicit the employment or engagement of services of any employee of Buyer or CANN on a full- or part-time basis; provided, however, that the provisions of this Section 5.8(d)(ii) shall not apply to any (A) employees of the Business as of the Closing Date employed by or providing services to any non-Competing Business, (B) employees of the Buyer or CANN (other than those employees set forth in (A) immediately above) upon written consent from Buyer or CANN, as applicable, (C) general advertising or solicitation not specifically targeted at any employee of the Buyer or CANN, or (D) actions taken by any person or entity with which such Seller is associated if such Seller is not, directly or indirectly, personally involved in such solicitation and has not identified such employee for soliciting. |
(e)During the Restricted Period, no Seller shall, and such Seller shall direct its Affiliates not to, solicit prior, future or existing customers of the Business as of immediately prior to Closing in connection with a Competing Business; provided, however, that the provisions of this Section 5.8(e) shall not apply to any general advertising or solicitation not specifically targeted at any customers of the Buyer or CANN.
(f)Any violation of this Section 5.8 may result in irreparable injury to Buyer and the Business and Buyer will be entitled to seek an injunction against Sellers and its Affiliates from any court having jurisdiction over the matter, restraining any further violation of this Section 5.8, which rights shall be cumulative and in addition to any other rights or remedies to which Buyer may be entitled. Each of Sellers and its Affiliates acknowledges that it has carefully read this Agreement and has given careful consideration to the restraints imposed upon Sellers by this Section 5.8, and is in full accord as to their necessity for the reasonable and proper protection of the legitimate business interests relating to the Business and Buyer’s business now existing and to be developed in the future. Each of Sellers and its Affiliates expressly acknowledges and agrees that each and every restraint imposed by this Section 5.8 is reasonable with respect to subject matter, time period and geographical area.
(g)If any covenant set forth in this Section 5.8 is adjudicated to exceed the time, geographic, product or service or other limitations permitted by applicable law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant will be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service or other limitations permitted by the applicable Law. The covenants contained in this Section 5.8 and each provision thereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written will not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction will not invalidate or render unenforceable such covenant or provision in any other jurisdiction. To the extent the provisions of this Section 5.8 conflict with the provisions of Section 10.12, the provisions of this Section 5.8 will control.
(h)Sellers shall cause its Affiliates to comply with the obligations set forth in this Section 5.8.
5.9Post-Closing Covenants Concerning the CANN Shares.
(a)Holders shall not engage in hedging transactions with the CANN Shares except in compliance with the Securities Act. Further, no Holders nor any of their respective directors, officers,
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shareholders or Affiliates shall purchase any shares of common stock of CANN on the open market or otherwise without the express written consent of CANN.
(b)Notwithstanding anything to the contrary set forth in this Agreement, Holders shall not sell the CANN Shares in violation of applicable Laws, including Rule 144 promulgated under the Securities Act.
(c)CANN shall make reasonable efforts to register the resale of the CANN Shares issued as part of this Agreement on a Form S-1, or, if available, Form S-3. Other than as set forth in the governance documents of the CANN, Holders shall not lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right, or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any of the CANN Shares that Holders receives under this Agreement.
5.10Board Seat. Holders shall have the right to designate a representative of Holders to the Board of Directors of CANN, provided that, such designee is acceptable to the MED. CANN shall take all necessary and appropriate steps to effectuate such appointment effective as soon after the Closing as reasonably practicable. Furthermore, effective as soon after the Closing as reasonably practicable, Allyson Feiler Downing shall be appointed to the Nominating Committee of the Board of Directors of CANN.
5.11Tax Matters.
(a)Allocations in Straddle Period. In the case of any Straddle period, Taxes will be allocated between the Pre-Closing Tax Period and the period beginning after the Closing Date in the following manner: (i) in the case of Taxes imposed on or calculated by reference to income, gain, receipts, sales, use, payment of wages, or other identifiable transactions or events, all such Taxes that would be payable if the taxable period ended on and included the Closing Date; and (ii) in the case of all other Taxes (including but not limited to real, personal, or intangible property taxes, or capital stock or net worth taxes), all such Taxes for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the taxable period ending on and including the Closing Date, and the denominator of which is the number of days in the entire taxable period.
(b)Filing of Tax Returns. The Sellers agree to prepare or cause to be prepared all Tax Returns relating to the Assets and the Business for all Tax periods ending on or before the Closing Date. Buyer will prepare or cause to be prepared and file in a timely manner all Tax Returns (other than Income Tax Returns) relating to the Assets and the Business for a Straddle Period. In case of any such Tax Return prepared by Buyer that relates to a Straddle Period or which could otherwise result in a Tax indemnification obligation for any Seller (a “Seller-Reviewed Return”), at least thirty (30) days prior to the due date for filing such Tax Return (taking into account extensions of time to file), Buyer will deliver a draft of such Seller-Reviewed Tax Return to Sellers to provide Sellers with an opportunity to review and reasonably comment on such Seller-Reviewed Tax Return. Buyer will revise such Seller-Reviewed Tax Return to take into account any reasonable comments made by Sellers to such Seller-Reviewed Tax Return and will cause such Seller-Reviewed Tax Return to be timely filed and will provide a copy to Sellers. In case of any such Tax Return (other than an Income Tax Return) prepared by Sellers for tax periods ending on or before the Closing Date (a “Buyer-Reviewed Return”), at least thirty (30) days prior to the due date for filing such Tax Return (taking into account extensions of time to file), Sellers will deliver a draft of such Buyer-Reviewed Tax Return to Buyer to provide Buyer with an opportunity to review and reasonably comment on such Buyer-Reviewed Tax Return. Sellers will revise such Buyer-Reviewed Tax Return to take into
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account any reasonable comments made by Buyer to such Buyer-Reviewed Tax Return and will cause such Buyer-Reviewed Tax Return to be timely filed and will provide a copy to Buyer. Notwithstanding the foregoing, any Tax Returns relating to sales, use, payroll, or other Taxes that are required to be filed contemporaneously with, or promptly after, the close of a Tax period, shall be provided only as quickly as commercially practicable and Buyer and Sellers shall act in good faith to resolve any comments that may be provided by the other party to such Tax Returns.
(c)Transfer Taxes. Any transfer, documentary, sales, use, stamp, registration and other such similar Taxes and fees (and related Tax Return preparation and filing costs) incurred in connection with the transactions contemplated by this Agreement (“Transfer Taxes”) shall be split evenly (50/50) between the Sellers on the one hand and Buyer on the other hand.
(d)Cooperation. The Sellers and Buyer shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of any Tax Returns with respect to the Assets or the Business (including any returns relating to Transfer Taxes), the filing and prosecution of any Tax claims, and any audit, litigation or other proceeding with respect to Taxes relating to the Assets or the Business. Such cooperation shall include the retention of all books and records relating to such Taxes for a period of seven (7) years after the filing date of such Tax Returns (unless such records are offered to the other party (redacted as necessary) before such period expires). None of Sellers, their stockholders, and their Affiliates will file any initial or amended Tax Returns, make any election with respect to, or with retroactive effect to, a Pre-Closing Tax Period, or take, or cause to taken, any other similar, affirmative action (including entering into a voluntary disclosure (or similar) agreement or waiver of a statute of limitations), in each case, with respect to a Pre-Closing Tax Period relating to the Assets or the Business, that could increase the liability of Buyer or its Affiliates for Taxes without the prior, written consent of Buyer. None of Buyer, CANN, and their Affiliates will file any initial or amended Tax Return for or with respect to any Seller or any of the Assets with respect to any Pre-Closing Tax Period, make any election with respect to, or with retroactive effect to, a Pre-Closing Tax Period, or take, cause to be taken, any other similar affirmative action (including entering into a voluntary disclosure (or similar) agreement or waiver of a statute of limitations), in each case with respect to a Pre-Closing Tax Period that could increase the liability of any Seller for Taxes in respect of which agreement, without the prior written consent of Sellers not to be unreasonably withheld, or unless required by applicable Laws or authorized by Sections 5.11(a) and (e) hereof.
(e)Tax Claims. If Buyer or any Seller receives notice of any deficiency, proposed adjustment, assessment, audit, examination, suit, dispute or other claim with respect to Taxes relating to the Assets or the Business (a “Tax Claim”) for a Straddle Period, such Party will notify (and, in any event, within 30 days of the receipt of notice of any such Tax Claim) the other Parties in writing of such Tax Claim for a Straddle Period, but the failure to so notify will not relieve the other Parties of any liability they may have, except to the extent a party has suffered actual prejudice thereby. Buyer will control any Tax Claim for a Straddle Period and shall cooperate with Sellers in contesting any such Tax Claim, which cooperation will include the retention and the provision to the other party of records and information which are reasonably relevant to such Tax Claim, and making employees available on a mutually convenient basis to provide additional information or explanation of any material provided hereunder and permitting Sellers to participate (at Sellers’ cost) proceedings relating to such Tax Claim. No Tax Claim for a Straddle Period shall be settled without the consent of both Buyer and the Sellers, such consent not to be unreasonably withheld, conditioned or delayed. With respect to any Tax Claim for Tax periods ending on or before the Closing Date, the Sellers shall, at its expense, assume and control all proceedings taken in connection with
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such Tax Claim and, without limiting the foregoing, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with any applicable governmental Persons with respect thereto, provided (I) Buyer shall have the right to be kept fully informed of any material developments and receive copies of all correspondence and shall have the right to observe the conduct of and participate in any such Tax Claim controlled by Sellers (through attendance at meetings or otherwise) at its own expense, including through its own counsel and other professional experts, and (II) such Tax Claim shall not be settled without the consent of Buyer, such consent not to be unreasonably withheld, conditioned or delayed.
(f)Tax Treatment of the S Corporation Sales. The Parties intend that for applicable federal, state and local income tax purposes, (i) each S Corporation Sale shall be treated as a “reorganization” as such term is defined in Section 368(a)(1)(C) of the Code, with CANN acting as the acquiring corporation; and (ii) the Common Stock and other Purchase Price with respect to each S Corporation Sale be distributed to the Holders owning stock in such S Corporation Seller as part of that reorganization as per Section 368(a)(2)(G) of the Code ((i) through (ii), the “Intended Tax Treatment”). Buyer, CANN, and Sellers intend to comply with the record-keeping and reporting requirements and otherwise file its Tax Returns consistent with the Intended Tax Treatment, except as otherwise required by Laws (as determined by the Buyer’s tax advisors). Notwithstanding the foregoing, Buyer and Sellers agree that Sellers shall be solely responsible for, and indemnify and hold Buyer harmless from, any Taxes attributable to the failure of any S Corporation Sale to qualify under section 368(a)(1)(C) of the Code and related costs and expenses (including accounting and legal fees).
(g)No Party shall take any position or action for applicable federal, state or local Tax purposes that is inconsistent with the Intended Tax Treatment, unless required by applicable Laws.
(h)Bulk Sales. Buyer hereby waives compliance for Seller and its Affiliates with the provisions of the bulk sales laws applicable to the transfers described in this Agreement. Seller shall indemnify and hold harmless Buyer against any and all liabilities which may be enacted by third parties against Buyer as a result of such noncompliance.
(i)Purchase Price Adjustment. For the avoidance of doubt, any payments made between Buyer and Sellers hereunder shall be treated as an adjustment to the Purchase Price except as required by applicable law.
(j)Survival. This Section 5.11 shall survive until sixty (60) days after the expiration of the statute of limitations with respect to the applicable Tax.
ARTICLE VI
BUYER’S CONDITIONS TO CLOSING
The obligation of Buyer to consummate the Closing is subject to the fulfillment of each of the following conditions (except to the extent waived in writing by Buyer in its sole discretion):
6.1Statements of Fact. (a) Seller’s Statements of Fact, including the Disclosure Schedules as updated by the Schedule Update, will be true and correct in all material respects (other than those Seller’s Statements of Facts that are already qualified as to materiality, in which case shall be true and correct in all respects) on and as of the Closing as though made on and as of the Closing (other than those Seller’s
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Statements of Fact, including the Disclosure Schedules as updated by the Schedule Update, that speak to an earlier date); and (b) in the case of Seller’s Statements of Fact, including the Disclosure Schedules as updated by the Schedule Update, that speak to an earlier date, such Seller’s Statements of Fact, including the Disclosure Schedules as updated by the Schedule Update, will be true and correct in all material respects as of the earlier date (other than those Seller’s Statements of Facts that are already qualified as to materiality, in which case shall be true and correct in all respects).
6.2Performance. Sellers have performed and complied in all material respects with the agreements, covenants, and obligations required by this Agreement to be performed or complied with by Sellers at or before the Closing.
6.3Sellers’ Deliverables. Sellers have delivered to Buyer at the Closing Sellers’ Closing Documents.
6.4Orders and Laws. There is no Law or order (except for any such order issued in connection with a Proceeding instituted by Buyer or its Affiliates) restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement or the operation of the Business.
6.5Consents and Approvals. All terminations or expirations of waiting periods imposed by any Governmental Authority with respect to this Agreement have occurred; provided, however, that the absence of any appeals and the expiration of any appeal period with respect to any of the foregoing will not constitute a condition to the Closing hereunder.
6.6No Material Adverse Effect. No Material Adverse Effect exists.
6.7Final Governmental Approval. Final Governmental Approval shall have occurred.
6.8Employment Agreements. CANN has entered into (a) an employment agreement with Allyson Feiler Downing as set forth in the form attached hereto as Exhibit I-1, an employment agreement with Loree Schwartz as set forth in the form attached hereto as Exhibit I-2, and a consulting agreement with Silverfox LLC as set forth in the form attached hereto as Exhibit I-3, each executed as of the earlier of the (i) Closing Date or (ii) date upon which a Closing occurs for at least the Assets of Ancient Alternatives and Natural Alternatives together with the transfer of the Licenses in respect thereof; and (b) a consulting agreement with CMD Consulting Services, Inc. as set forth in the form attached hereto as Exhibit I-4, executed as of the earlier of the (i) Closing Date or (ii) date upon which a Closing occurs for at least the Assets of Hillside Enterprises, LLC as well as Ancient Alternatives and Natural Alternatives together with the transfer of the Licenses in respect thereof.
6.9Working Capital. Sellers shall have Working Capital of not less than $100,000 as of the Closing Date.
6.10Audited Financial Statements. Sellers shall have provided audited financial statements for each Seller for the last two fiscal years audited by a firm registered under the PCAOB, such financial statements to be reasonably satisfactory to Buyer in form and substance.
6.11 Clearance Certificate. Sellers shall provide to Buyer with a clearance certificate or similar document(s) with respect to the relevant state and local tax jurisdictions in which the Sellers are conducting the Business or holding any Assets.
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6.12IRS Form. Each Seller shall have furnished to Buyer a properly executed IRS Form W-9 of such Seller.
6.13Ancient Alternatives and Natural Alternatives. Closings of the Assets and Assumed Liabilities of each of Ancient Alternatives and Natural Alternatives shall have been completed simultaneously prior to the Closings of the Assets and Assumed Liabilities of the remaining Sellers.
ARTICLE VII
SELLERS’ CONDITIONS TO CLOSING
The obligation of Sellers to consummate the Closing is subject to the fulfillment of each of the following conditions (except to the extent waived in writing by Sellers in its sole discretion):
7.1Statements of Fact. (a) Buyer’s and CANN’s Statements of Fact will be true and correct in all material respects (other than those Buyer’s and CANN’s Statements of Facts that are already qualified as to materiality, in which case shall be true and correct in all respects) on and as of the Closing as though made on and as of the Closing (other than those of Buyer’s and CANN’s Statements of Fact that speak to an earlier date); and (b) in the case of those of Buyer’s and CANN’s Statements of Fact that speak as to an earlier date, such Buyer’s and CANN’s Statements of Fact will be true and correct in all material respects as of the earlier date (other than those Buyer’s and CANN’s Statements of Facts that are already qualified as to materiality, in which case shall be true and correct in all respects).
7.2Performance. Buyer will have performed and complied in all material respects with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Buyer at or before the Closing.
7.3Buyer’s Deliverables. Buyer and CANN will have delivered to Sellers and Holders, as applicable, the Purchase Price in the manner set forth in Section 2.2 and Buyer’s Officer’s Certificate.
7.4Orders and Laws. There is no Law or order (except for any such order issued in connection with a Proceeding instituted by Sellers or its Affiliates) restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Agreement.
7.5Consents and Approvals. All terminations or expirations of waiting periods imposed by any Governmental Authority with respect to this Agreement will have occurred; provided, however, that the absence of any appeals and the expiration of any appeal period with respect to any of the foregoing will not constitute a condition to the Closing hereunder.
7.6Final Governmental Approval. Final Governmental Approval shall have occurred.
7.7Employment Agreements. CANN has entered into (a) an employment agreement with Allyson Feiler Downing as set forth in the form attached hereto as Exhibit I-1, an employment agreement with Loree Schwartz as set forth in the form attached hereto as Exhibit I-2, and a consulting agreement with Silverfox LLC as set forth in the form attached hereto as Exhibit I-3, each executed as of the earlier of the (i) Closing Date or (ii) date upon which a Closing occurs for at least the Assets of Ancient Alternatives and Natural Alternatives together with the transfer of the Licenses in respect thereof; and (b) a consulting agreement with CMD Consulting Services, Inc. as set forth in the form attached hereto as Exhibit I-4, executed as of the earlier of the (i) Closing Date or (ii) date upon which a Closing occurs for at least the Assets of Hillside Enterprises, LLC as well as Ancient Alternatives and Natural Alternatives together with the transfer of the Licenses in respect thereof.
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7.8Ancient Alternatives and Natural Alternatives. Closings of the Assets and Assumed Liabilities of each of Ancient Alternatives and Natural Alternatives shall have been completed simultaneously prior to the Closings of the Assets and Assumed Liabilities of the remaining Sellers.
ARTICLE VIII
TERMINATION
8.1Termination. Subject to Section 2.3, this Agreement may be terminated in one or more of the following ways:
(a)At any time before the Closing, by Sellers or Buyer, by written notice to the other, if any Law or final order of a Governmental Authority restrains, enjoins or otherwise prohibits or makes illegal the sale of the Assets pursuant to this Agreement.
(b)At any time before the Closing, by Buyer (if Buyer is not then in material breach of any provision of this Agreement), by written notice to Sellers, if Sellers have materially breached its Seller’s Statements of Fact or covenants under this Agreement and such breach does result in the failure of any condition set forth in Article VI and such breach cannot be cured by Sellers within thirty (30) days of such notice.
(c)At any time during the Interim Period, by Buyer, by written notice to Sellers, if Buyer has discovered any fact, circumstance, or condition which would create a Material Adverse Effect upon any of the Assets, in Buyer’s reasonable discretion and such Material Adverse Effect cannot be cured by Sellers within thirty (30) days of such notice.
(d)At any time before the Closing, by Sellers (if Sellers are not then in material breach of any provision of this Agreement), by written notice to Buyer, if Buyer has materially breached its Buyer’s and CANN’s Statements of Facts or covenants under this Agreement and the breach does result in the failure of any condition set forth in Article VI and such breach cannot be cured by Buyer within thirty (30) days of such notice.
(e)If the Closing shall not have been consummated by 11:59 p.m. Mountain Time on the eighteen month anniversary of the Signing Date (the “Drop Dead Date”); provided, that such Drop Dead Date may be extended upon written consent of all parties to this Agreement.
8.2Effect of Valid Termination. If this Agreement is validly terminated pursuant to Section 8.1, there will be no liability or obligation hereunder on the part of either Party or any of their respective Affiliates, except as provided herein, provided, however, that Article I, Section 8.2, and Article X will survive any such termination.
ARTICLE IX
LIMITATIONS ON LIABILITY, THIRD-PARTY CLAIMS, AND ARBITRATION
9.1Indemnity. From and after the initial Closing:
(a)Each Seller, jointly and severally, shall indemnify, defend, and hold harmless Buyer and its Affiliates and each of their respective officers, directors, stockholders, managers, members, partners, employees, agents, representatives, successors and assigns (collectively, the “Buyer Indemnified Parties”) from and against and pay on behalf of or reimburse any such Buyer Indemnified Party in respect of any Losses which such Buyer Indemnified Party may suffer, sustain or become subject to, as a result of, arising out of, relating to or in connection with:
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i. | any breach by any Seller as of the Closing (as though made on and as of the Closing except to the extent a statement of fact is expressly made as of an earlier date, in which case only as of the earlier date) of Seller’s Statements of Fact (taking into account Sellers’ Disclosure Schedule). |
ii. | any breach of any covenant or agreement of any Seller contained in this Agreement. |
iii. | any Pre-Closing Taxes. |
iv. | the operation or use of the Assets, the Assumed Liabilities before Closing, and other liabilities relating to the ownership the Assets by the applicable Sellers prior to the Closing; provided, however, that this clause (iv) shall not cover items for which Seller has a right to indemnification pursuant to this Article IX. |
v. | any Excluded Assets or any Excluded Liabilities of the Sellers. |
(b)Buyer and CANN shall indemnify, defend, and hold Sellers and each of their Affiliates and each of their respective officers, directors, stockholders, managers, members, partners, employees, agents, representatives, successors and assigns (collectively, the “Seller Indemnified Parties”) from and against and pay on behalf of or reimburse any such Seller Indemnified Party in respect of any Losses which such Seller Indemnified Party may suffer, sustain or become subject to, as a result of, arising out of, relating to or in connection with:
i. | any breach as of the Closing (as though made on and as of the Closing Date except to the extent a statement of fact is expressly made as of an earlier date, in which case only as of the earlier date) of Buyer’s and CANN’s Statements of Fact; |
ii. | any breach of any covenant or agreement of Buyer or CANN contained in this Agreement including, for the avoidance of doubt, Sellers’ costs and expenses incurred in collecting the consideration contemplated in Section 2.2(b); and |
iii. | the operation or use of the Assets or the Assumed Liabilities on or after the Closing, and other liabilities relating to the ownership or use of the Assets by the Buyer on or after the Closing; provided, however, that this clause (iii) shall not cover items for which Buyer has a right to indemnification pursuant to this Article IX. |
(c)If a Buyer Indemnified Party suffers any Loss for which a Seller is obligated to indemnify pursuant to this Article IX, then the equity holders of such Seller who receive CANN Shares may, in their sole discretion (subject to Section 5.11(h), indemnify Buyer (i) through a payment of cash, (ii) by delivery of CANN Shares held by such equity holders of such Seller, or (iii) through a combination of cash payment and delivery of CANN Shares. If the equity holders of such Seller choose to make all or a portion of any indemnification payment to Buyer with CANN Shares, then such equity holders of such Seller shall provide to Buyer such number of CANN Shares calculated by (A) for the first 18 months after the first Closing, dividing (i) the amount of the applicable Losses to which such indemnification obligation relates (less any amount of such Loss to be paid by such Seller in cash) by (ii) the greater of (I) the per share fair market value of a CANN Share as at the time when Seller is obligated to indemnify Buyer pursuant to
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this Article IX and (II) $0.89 per share; and (B) at all times after the 18-month anniversary of the first Closing, dividing (i) the amount of the applicable Losses to which such indemnification obligation relates (less any amount of such Loss to be paid by such Seller in cash) by (ii) the per share fair market value of a CANN Share as at the time when Seller is obligated to indemnify Buyer pursuant to this Article IX.
(d)All payments made pursuant to Article IX shall be treated by the parties and their Affiliates as adjustments to the purchase price paid for the Assets under this Agreement.
9.2Limitations of Liability. Notwithstanding anything in this Agreement to the contrary:
(a)Seller’s Statements of Fact and Buyer’s and CANN’s Statements of Fact will survive the Closing until the date that is 18 months from the Closing Date, except for Sections 3.1, 3.2, 3.3(a), 3.5, 3.7, 3.11 3.12, 4.1, 4.2, 4.3(a) and 4.6, which shall survive until sixty (60) days after the applicable statute of limitations in respect thereof has expired. None of the covenants or other agreements contained in this Agreement shall survive the Closing Date other than those which by their terms contemplate performance after the Closing Date, and each such surviving covenant and agreement shall survive the Closing for the period contemplated by its terms.
(b)Buyer shall give written notice to Sellers within a reasonable period of time after becoming aware of any breach by Sellers of any statement of fact, covenant, agreement, or obligation in this Agreement, but in any event no later than 3 days after becoming aware of such breach.
(c)Sellers shall give written notice to Buyer within a reasonable period of time after becoming aware of any breach by Buyer of any statement of fact, covenant, agreement or obligation in this Agreement, but in any event no later than 3 days after becoming aware of such breach.
(d)the Parties have a duty to reasonably mitigate any Loss in connection with this Agreement.
(e)The Sellers liability with respect to Section 9.1(a)(i) and 9.1(a)(iv) is limited to Losses incurred or suffered by Buyer in an amount not to exceed 25% of the Purchase Price (the “Cap”); provided, however, that the Cap shall not apply with respect to (A) breaches by such Seller of Sections 3.1 (Sellers’ Organization), 3.2 (Authority), 3.5 (Broker), 3.7 (Taxes) or 3.11 (Environmental Matters) (each, a “Fundamental Representation”); or (B) Losses relating to claims arising out of fraud.
(f)Buyer’s liability with respect to Section 9.1(b)(i) is limited to Losses incurred or suffered by the Seller Indemnified Parties in an amount not to exceed the Cap; provided, however, that the Cap shall not apply with respect to breaches by Buyer of Sections 4.1 (Organization). 4.2 (Authority) 4.3(a) (No Conflict) or 4.6 (Broker).
(g)Buyer’s aggregate liability with respect to any provision of this Agreement is limited to the amount of the aggregate Purchase Price; provided, however, that the limitations set forth in this Section 9.2(g) shall not apply with respect to Losses relating to claims arising out of fraud.
(h)Except for (i) Losses relating to the breach or inaccuracy of a Fundamental Representation or (ii) Losses relating to claims arising out of fraud, Sellers shall not be liable to the Buyer Indemnified Parties for indemnification under Section 9.1(a)(i) or 9.1(a)(iv) until the aggregate amount of all Losses claimed by the Buyer Indemnified Parties in respect of indemnification under Section 9.1(a)(i) exceeds $50,000, in which event Sellers shall be required to pay or be liable for Losses from the first dollar.
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(i)The Sellers’ aggregate liability with respect to any provision of this Agreement is limited to Losses incurred or suffered by the Buyer Indemnified Parties not to exceed the Purchase Price actually received by the Sellers; provided, however, that the limitations set forth in this Section 9.2(i) shall not apply with respect to Losses relating to claims arising out of fraud.
(j)Payments by the Party against whom indemnification is requested (the “Responding Party”) pursuant to Section 9.1 in respect of any Loss shall be limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds actually received by the Party seeking indemnification (the “Claiming Party”) in respect of any such claim net of any premium increases. The Claiming Party shall use its commercially reasonable efforts to recover under insurance policies for Losses.
(k)In no event shall any Responding Party be liable to any Claiming Party for any punitive damages, loss of future revenue or income, loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement (other than penalties imposed by Governmental Authority), or diminution of value or any damages based on any type of multiple.
9.3Procedure with Respect to Third-Party Claims.
(a)If a Party is threatened with or becomes subject to a third party Claim, and such Claiming Party believes it has a claim entitled to indemnification from the Responding Party (as provided in Section 9.1 as a result, then the Claiming Party shall notify the Responding Party in writing of the basis for the Claim setting forth the nature of the Claim in reasonable detail. The failure of the Claiming Party to so notify the Responding Party will not relieve the Responding Party of liability hereunder except to the extent that the defense of the Claim is prejudiced by the failure to give the notice.
(b)If any Proceeding is brought by a third party against a Claiming Party and the Claiming Party gives notice to the Responding Party pursuant to Section 9.3(a), the Responding Party may participate in the Proceeding and, to the extent that it wishes, to assume the defense of the Proceeding, if (i) the Responding Party provides written notice to the Claiming Party that the Responding Party intends to undertake the defense, (ii) the Responding Party conducts the defense of the third-party Claim actively and diligently with counsel reasonably satisfactory to the Claiming Party (which approval shall not be unreasonably withheld or delayed), and (iii) if the Responding Party is a party to the Proceeding, the Responding Party or the Claiming Party has not determined in good faith that joint representation would be inappropriate because of a conflict of interest. The Claiming Party may, in its sole discretion, employ separate counsel (who may be selected by the Claiming Party in its sole discretion) in any such action and to participate in the defense thereof, and the Claiming Party shall pay the fees and expenses of its counsel. The Claiming Party shall cooperate with the Responding Party and its counsel in all reasonable respects in the defense or compromise of the Claim. If the Responding Party assumes the defense of a Proceeding, no compromise or settlement of the Claims may be effected by the Responding Party without the Claiming Party’s consent (which consent shall not be unreasonably withheld or delayed) unless (x) there is no finding or admission of any violation of Law or any violation of the rights of any Person and no effect on any other Claims that may be made against the Claiming Party, and (y) the sole relief provided is monetary damages that the Responding Party pays in full.
(c)If written notice is given to the Responding Party of the commencement of any third-party Proceeding and the Responding Party does not, within 14 days after the Claiming Party’s written notice is given pursuant to Section 9.3(a), give notice to the Claiming Party of its election to assume the defense of the Proceeding, any of the conditions set forth in clauses (i) through (iii) of Section 9.3(b) above become unsatisfied or a Claiming Party determines in good faith that there is a reasonable probability that a Proceeding may materially adversely affect it other than as a result of monetary damages for which it
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would be entitled to indemnification from the Responding Party under this Agreement, then the Claiming Party may (upon written notice to the Responding Party) undertake the defense, compromise or settlement of the Claim; provided, however, that the Responding Party shall reimburse the Claiming Party for the Losses associated with defending against the third-party Claim (including reasonable attorneys’ fees and expenses) and will remain otherwise responsible for any liability with respect to amounts arising from or related to the third-party Claim, in both cases to the extent it is ultimately determined that the Responding Party is liable with respect to the third-party Claim for a breach under this Agreement. The Responding Party may elect to participate in the Proceedings, negotiations or defense at any time at its own expense. For the avoidance of doubt, Tax claims shall be governed by Section 5.11 and not this Section 9.3.
9.4Mandatory Mediation.
(a)Except for Claims arising under Section 5.8 or Section 10.11, any dispute, Claim, interpretation, controversy, or issues of public policy arising out of or relating to this Agreement, including the determination of the scope or applicability of this Section 9.4, will be subject to mandatory mediation prior to the filing of any arbitration action as described in Section 9.5.
(b)The mediator will be selected from the roster of mediators at Judicial Arbiter Group, Inc. in Denver, Colorado (“JAG”), unless the Parties agree otherwise. If the Parties do not agree on the selection of a single mediator within ten days after a demand for mediation is made, then the mediator will be selected by JAG from among its available professionals. The mediation will be held within 45 days of the selection of the mediator. All communications, both written and oral, during mediation are confidential and will be treated as settlement negotiations for purposes of the Colorado Rules of Evidence. The mediation process will be confidential pursuant to terms agreed to by the Parties and the mediator. Each Party shall bear an equal share of any costs and fees associated with mediation, except for legal fees and expenses incurred by the Parties.
(c)If the Parties are unable to resolve a dispute, Claim, interpretation, controversy, or issue of public policy pursuant to this Section 9.4, the Parties shall engage in binding arbitration pursuant to Section 9.5.
9.5Mandatory Binding Arbitration.
(a)Except for Claims arising under Section 5.8 or Section 10.11, any dispute, Claim, interpretation, controversy, or issues of public policy arising out of or relating to this Agreement, including the determination of the scope or applicability of this Section 9.5, will be determined exclusively by arbitration held in Denver, Colorado, and will be governed exclusively by the Colorado Revised Arbitration Act, §§ 13-22-201, et seq., C.R.S. (the “CRAA”).
(b)A panel of three arbitrators (the “Arbitration Panel”) will be selected from the roster of arbitrators at Judicial Arbiter Group, Inc. in Denver, Colorado (“JAG”), unless the Parties agree otherwise. If the Parties do not agree on the selection of such Arbitration Panel within ten days after a demand for arbitration is made, then the Arbitration Panel will be selected by JAG from among its available professionals. Arbitration of all disputes and the outcome of the arbitration will remain confidential between the Parties except as necessary to obtain a court judgment on the award or other relief or to engage in collection of the judgment.
(c)The Parties irrevocably submit to the exclusive jurisdiction of the state courts located in Denver, Colorado, with respect to this Section 9.4 to compel arbitration, to confirm an arbitration award or order, or to handle court functions permitted under the CRAA. The Parties irrevocably waive defense of an inconvenient forum to the maintenance of any such action or other proceeding. The Parties
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may seek recognition and enforcement of any Colorado state court judgment confirming an arbitration award or order in any United States state court or any court outside the United States or its territories having jurisdiction with respect to recognition or enforcement of such judgment.
(d)The Parties waive (i) any right of removal to the United States federal courts and (ii) any right in the United States federal courts to compel arbitration, to confirm any arbitration award or order, or to seek any aid or assistance of any kind.
ARTICLE X
MISCELLANEOUS
10.1No Third-Party Beneficiaries. The terms and provisions of this Agreement are intended solely for the benefit of the Parties and their respective successors or permitted assigns, and it is not the intention of the Parties to confer third-party beneficiary rights upon any other Person.
10.2Entire Agreement. This Agreement, including all Exhibits hereto, supersedes all prior discussions and agreements between the Parties and/or their Affiliates with respect to the subject matter hereof and contains the sole and entire agreement between the Parties and their Affiliates with respect to the subject matter hereof.
10.3Waiver. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver will be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving the term or condition. No waiver by a Party of any term or condition of this Agreement, in any one or more instances, will be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law, are cumulative and not alternative.
10.4Succession and Assignment. This Agreement is binding upon and will inure to the benefit of the Parties and their successors and assigns. Sellers may not assign any of their rights, interests and obligations hereunder. Buyer may assign any of its rights hereunder to an entity or entities over which Buyer has control.
10.5Counterparts; Electronic or Fax Signatures. This Agreement may be executed in counterparts, each of which will be an original and all of which, when taken together, will constitute one instrument notwithstanding that all parties have not executed the same counterpart. Signatures that are transmitted electronically or by fax will be effective as originals.
10.6Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not modify, define, or limit any of its terms or provisions.
10.7Notices. Any notice, request, demand, Claim, or other communication hereunder will be in writing and will be deemed delivered: (a) three Business Days after it is sent by U.S. mail, certified mail, return receipt requested, postage prepaid; or (b) one Business Day after it is sent via a reputable nationwide overnight courier or sent via email, in each of the foregoing cases to the intended recipient as set forth below:
| If to Buyer: | c/o General Cannabis Corp. 1901 S. Navajo Street Denver, CO 80223 Attn: David R. Fishkin |
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| If to Sellers: | |
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| With a copy to: | 600 17th Street, Suite 2800 South Denver, CO 80202 |
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| Attention: Jenna Seigel |
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| Email: [email protected] |
Any Party may give any notice, request, demand, Claim, or other communication hereunder by personal delivery, electronically, or fax, but no such notice, request, demand, Claim, or other communication will be deemed to have been duly given unless and until it is actually received by the Party for whom it is intended. A Party may change the address to which notices, requests, demands, Claims, and other communications hereunder are to be delivered by giving notice to the other Party in the manner herein set forth.
10.8Governing Law. This Agreement is governed by and construed and enforced in accordance with the Laws of the State of Colorado, without giving effect to any conflict or choice of law provision that would result in imposition of another state’s Law. THE PARTIES ACKNOWLEDGE THAT (A) COLORADO HAS PASSED AMENDMENTS TO THE COLORADO CONSTITUTION AND ENACTED CERTAIN LEGISLATION TO GOVERN THE MARIJUANA INDUSTRY AND (B) THE POSSESSION, SALE, MANUFACTURE, AND CULTIVATION OF MARIJUANA IS ILLEGAL UNDER FEDERAL LAW. THE PARTIES WAIVE ANY DEFENSES BASED UPON INVALIDITY OF CONTRACTS FOR PUBLIC POLICY REASONS AND/OR THE SUBSTANCE OF THE CONTRACT VIOLATING FEDERAL LAW.
10.9Waiver of Right to Trial by Jury. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BYLAW TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND WITH RESPECT TO ANY COUNTERCLAIM THEREIN.
10.10Attorneys’ Fees. If either Party brings a Proceeding to enforce the provisions of this Agreement, the substantially prevailing Party will be entitled to recover its reasonable attorneys’ fees and expenses incurred in such action from the non-prevailing Party as determined by the Arbitration Panel or a court of law.
10.11Specific Performance. The rights of each Party to consummate the transactions contemplated hereby (including the satisfaction of any condition to the Closing) are special, unique, and of extraordinary character, and if the other Party violates or fails or refuses to perform any covenant or agreement made by it herein, such Party may be without an adequate remedy at law. If a Party violates or fails or refuses to perform any covenant or agreement made by them herein, the other Party may (at any time prior to the earlier of a) valid termination of this Agreement pursuant to Article VIII and b) the Closing), subject to the terms hereof, institute and prosecute an action to enforce specific performance of the covenant or agreement. The Parties irrevocably submit to the exclusive jurisdiction of the state courts located in Denver, Colorado, with respect to this Section 10.11. The Parties irrevocably waive defense of
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an inconvenient forum to the maintenance of any such action or other proceeding with respect to this Section 10.11.
10.12Invalid Provisions. If a dispute between the Parties arises out of this Agreement or the subject matter of this Agreement, the Parties would want a court or Arbitration Panel to interpret this Agreement as follows:
(a)With respect to any provision held to be unenforceable, by modifying that provision to the minimum extent necessary to make it enforceable or, if that modification is not permitted by law or public policy, by disregarding the provision;
(b)if an unenforceable provision is modified or disregarded in accordance with this Section 10.12, by holding the rest of the Agreement will remain in effect as written;
(c)by holding that any unenforceable provision will remain as written in any circumstances other than those in which the provision is held to be unenforceable; and
(d)if modifying or disregarding the unenforceable provision would result in a failure of an essential purpose of this Agreement, by holding the entire Agreement unenforceable.
Upon the determination that any term or other provision of this Agreement is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to affect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
10.13Expenses. Except as otherwise provided in this Agreement, whether or not the transactions contemplated hereby are consummated, each Party shall pay its own costs and expenses incurred in anticipation of, relating to and in connection with the negotiation and execution of this Agreement and the transactions contemplated hereby.
10.14Amendments. The Parties may amend any provision of this Agreement only by a written instrument signed by the Parties.
10.15Confidentiality and Publicity. This Agreement is confidential and will not be disclosed to any third party (other than the Parties’ Affiliates, attorneys, accountants, auditors, or other advisors, or Governmental Authorities) except as required for Tax purposes or as required by Law. A Party receiving a request for this Agreement shall promptly notify the other Party to afford it the opportunity to object or seek a protective order regarding this Agreement or information contained herein. Sellers may issue a press release or public announcement, and make any required public filings, concerning any of the transactions contemplated by this Agreement.
10.16Advice of Counsel. Each Party has had the opportunity to seek the advice of independent legal counsel and has read and understood each of the terms and provisions of this Agreement.
10.17MED Reformation. This Agreement and the transactions contemplated hereby are subject to review by the MED and any Applicable County. If the MED or an Applicable County determines that this Agreement must be reformed, the Parties shall negotiate in good faith to so reform this Agreement according to such Governmental Authority’s requirements while effectuating the original intent of this Agreement as near as possible.
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10.18Disclosure Schedules. All section headings in the Disclosure Schedules and the Schedule Update correspond to the sections of this Agreement, but information provided in any section of the Disclosure Schedules and Schedule Update shall constitute disclosure for purposes of each section of this Agreement where such information is relevant. Unless the context otherwise requires, all capitalized terms used in the Disclosure Schedules and Schedule Update shall have the respective meanings assigned to such terms in this Agreement. Certain information set forth in the Disclosure Schedules and Schedule Update is included solely for informational purposes and may not be required to be disclosed pursuant to this Agreement. No disclosure in the Disclosure Schedules or Schedule Update relating to any possible breach or violation of any agreement or Law shall be construed as an admission or indication that any such breach or violation exists or has actually occurred. The inclusion of any information in the Disclosure Schedules or Schedule Update shall not be deemed to be an admission or acknowledgment by any Seller that in and of itself, such information is material to or outside the ordinary course of the business, or is required to be disclosed on the Disclosure Schedules or Schedule Update. No disclosure in the Disclosure Schedules or Schedule Update shall be deemed to create any rights in any third party.
[Signature page follows immediately]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the Parties as of the date first above written.
GREEN TREE COLORADO, LLC
By:
Name: Adam Hershey
Title: Interim Chief Executive Officer
TREES CORPORATION
By:
Name: Adam Hershey
Title: Interim Chief Executive Officer
ANCIENT ALTERNATIVES LLC By: _____________________________ Name: Allyson Feiler Downing Title: Manager | NATURAL ALTERNATIVES FOR LIFE, LLC By: _____________________________ Name: Allyson Feiler Downing Title: Manager |
MOUNTAINSIDE INDUSTRIES, LLC By: _____________________________ Name: Allyson Feiler Downing Title: Manager | HILLSIDE ENTERPRISES, LLC By: _____________________________ Name: Allyson Feiler Downing Title: Manager |
GT CREATIONS, LLC By: Allor Holdings, LLC, its Manager By: __________________________ Name: Allyson Feiler Downing Title: Manager | |
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________________________
Allyson Feiler Downing
______________________________
Loree Schwartz
______________________________
Michael Abrams
______________________________
Charlene Dawes
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List of Exhibits
Exhibit AAssets
Exhibit BSellers’ Officer’s Certificate
Exhibit CBuyer’s Officer’s Certificate
Exhibit DBill of Sale
Exhibit EProration Statement
Exhibit FList of Excluded Assets
Exhibit GHolders
Exhibit HDisclosure Schedules
Exhibit I-1Employment Agreement with Allyson Feiler Downing
Exhibit I-2Employment Agreement with Loree Schwartz
Exhibit I-3Consulting Agreement with Silverfox LLC
Exhibit I-4Consulting Agreement with CMD Consulting Services, Inc.
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EXHIBIT A
ASSETS
Natural Alternatives for Life, LLC – State Medical Cultivation 403-01331
Natural Alternatives for Life, LLC – Berthoud Medical Cultivation
Natural Alternatives for Life, LLC - State Medical Dispensary 402-00859
Natural Alternatives for Life, LLC – Berthoud Medical Dispensary
Natural Alternatives for Life, LLC - State Retail Dispensary 402R-00771
Natural Alternatives for Life, LLC - Berthoud Retail Dispensary
GT Creations, LLC - State Medical MIP 404-00626
GT Creations, LLC – Boulder County Medical MIP MMB-18-0001
GT Creations, LLC - State Retail MIP 404R-00403
GT Creations, LLC – Boulder County Retail MIP RMB-18-0005
Hillside Enterprises, LLC - State Retail Cultivation 403R-01086
Hillside Enterprises, LLC - Boulder County Cultivation RMB-18-0004
Ancient Alternatives, LLC - State Medical Dispensary 402-01085
Ancient Alternatives, LLC - Boulder County Medical Dispensary MMB-15-0001
Ancient Alternatives, LLC - State Retail Dispensary 402R-00535
Ancient Alternatives, LLC - Boulder County Retail Dispensary RMB-15-0013
Ancient Alternatives, LLC – State Medical Cultivation 403-01685
Ancient Alternatives, LLC - Boulder County Medical Cultivation MMB-12-0036
Ancient Alternatives, LLC – State Retail Cultivation 403R-00693
Ancient Alternatives, LLC - Boulder County Retail Cultivation RMB-16-0001
Mountainside Enterprises, LLC - State Retail Cultivation 403R-01217
Mountainside Enterprises, LLC - Boulder County Retail Cultivation RMB-20-0001
Mountainside Enterprises, LLC - State Medical Cultivation 403-01936
Mountainside Enterprises, LLC - Boulder County Medical Cultivation MMB-20-0001
Leases
Ancient Alternatives, LLC – 6859 N Foothills Hwy, D, Boulder CO 80302
Ancient Alternatives, LLC – 12626 N. 107th St, Longmont CO 80513
Natural Alternatives for Life, LLC – 1090 N. 2nd St, Berthoud CO 80504
GT Creations, LLC – 6859 N Foothills Hwy, E-100, Boulder CO 80302
Mountainside Enterprises, LLC – 6859 N Foothills Hwy, A, Boulder CO 80302
Hillside Enterprises, LLC – 6859 N Foothills Hwy, E-200, Boulder CO 80302
Working Capital
Working Capital in the amount set forth in Section 6.9.
Inventory
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Other than any Excluded Asset, any and all inventory.
Equipment, Machinery, Furniture, Fixtures, Business Personal Property
·Other than any Excluded Asset, any and all machinery, equipment, furniture, fixtures, business personal property of any kind, nature, character, or description, operated, owned, or leased by the Sellers.
Intellectual Property
List of all Trademarks and Service marks
GREEN TREE MEDICINALS (Design), U.S. Serial No. 88490001, International Class 41: “educational services, namely, providing online instruction in the field of the history of cannabis; providing information, news, and commentary in the field of current events relating to cannabis, marijuana, and hemp; providing information in the field of the history of cannabis including its origins.”
It was filed in the name of Natural Alternatives for Life, LLC, having an address of 854 Terrace Circle North, Boulder, CO 80304 and has been used since 2012.
FILING RECEIPT: Trademark for GREEN TREE MEDICINALS: 56323.0004 Serial number 88490001 [IWOV-Active.FID12190557] on June 27, 2019
GREEN TREE MEDICINALS (Design), U.S. Serial No. 88490011, International Class 5: “Retail store services featuring hemp oil; Retail store services featuring body oils, massage oils, skin creams, body care products, salves, serums, creams, and oil for therapeutic purposes; all of the foregoing containing hemp oil or cannabidiol derived from hemp.”
It was filed in the name of Natural Alternatives for Life, LLC, having an address of 854 Terrace Circle North, Boulder, CO 80304 and has been used since 2012.
FILING RECEIPT: GREEN TREE MEDICINALS Trademark Application: 56323.0005 Serial number 88490011 [IWOV-Active.FID12190557] on June 27, 2019
Domain name is: www.GreenTreeMedicinals.com
Host: GoDaddy.com
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EXHIBIT B
SELLERS' OFFICER’S CERTIFICATE
This Sellers’ Officer's Certificate is delivered with respect to Article VI of that certain Asset Purchase Agreement dated ________, 2022 (the "APA") by and among Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company (collectively together with their respective subsidiaries, affiliates and assigns, “Seller” or “Sellers”), GREEN TREE COLORADO, LLC, a Colorado limited liability company. Capitalized terms used in this certificate that are defined in the APA have the respective meanings ascribed to them in the APA.
I, Allyson Feiler Downing, the duly appointed and qualified Manager of Sellers, on behalf of Sellers, hereby certify as follows:
1. | Seller’s Statements of Fact, including the Disclosure Schedules as updated by the Schedule Update, are true and correct in all material respects (other than those Seller’s Statements of Facts that are already qualified as to materiality, in which case shall be true and correct in all respects) on and as of the Closing as though made on and as of the Closing (other than those Seller’s Statements of Fact, including the Disclosure Schedules as updated by the Schedule Update, that speak to an earlier date); and (b) in the case of Seller’s Statements of Fact, including the Disclosure Schedules as updated by the Schedule Update, that speak to an earlier date, such Seller’s Statements of Fact, including the Disclosure Schedules as updated by the Schedule Update, will be true and correct in all material respects as of the earlier date (other than those Seller’s Statements of Facts that are already qualified as to materiality, in which case shall be true and correct in all respects). |
2. | Each Seller has performed and complied in all material respects with the agreements, covenants, and obligations required by the APA to be performed or complied with by Sellers at or before the Closing. |
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IN WITNESS WHEREOF, the undersigned has executed this Officer's Certificate on behalf of Sellers as of the date first written above.
Dated:
ANCIENT ALTERNATIVES LLC By: _____________________________ Name: Allyson Feiler Downing Title: Manager | NATURAL ALTERNATIVES FOR LIFE, LLC By: _____________________________ Name: Allyson Feiler Downing Title: Manager |
MOUNTAINSIDE INDUSTRIES, LLC By: _____________________________ Name: Allyson Feiler Downing Title: Manager | HILLSIDE ENTERPRISES, LLC By: _____________________________ Name: Allyson Feiler Downing Title: Manager |
GT CREATIONS, LLC By: Allor Holdings, LLC, its Manager By: __________________________ Name: Allyson Feiler Downing Title: Manager | |
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EXHIBIT C
BUYER'S AND CANN’S OFFICER'S CERTIFICATE
This Buyer's and CANN’s Officer's Certificate is delivered with respect to Article VII of that certain Asset Purchase Agreement dated , 2022 (the “APA”), by and among Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company (collectively together with their respective subsidiaries, affiliates and assigns, “Seller” or “Sellers”), GREEN TREE COLORADO, LLC, a Colorado limited liability company (“Buyer”), and TREES CORPORATION, a Colorado corporation (“CANN”). Capitalized terms used in this certificate that are defined in the APA have the respective meanings ascribed to them in the APA.
I, Adam Hershey, the duly appointed and qualified Interim Chief Executive Officer of Buyer and the Interim Chief Executive Officer of CANN, hereby certify as follows:
1. | Buyer's and CANN’s Statements of Fact are true and correct in all material respects (other than those Buyer’s and Cann’s Statements of Facts that are already qualified as to materiality, in which case shall be true and correct in all respects) on and as of the Closing as though made on and as of the Closing (other than those of Buyer’s and CANN’s Statements of Fact that speak to an earlier date); and (b) in the case of those of Buyer’s and CANN’s Statements of Fact that speak as to an earlier date, such Buyer’s and CANN’s Statements of Fact will be true and correct in all material respects as of the earlier date (other than those Buyer’s and CANN’s Statements of Facts that are already qualified as to materiality, in which case shall be true and correct in all respects). |
2. | Buyer has performed and complied in all material respects with the agreements, covenants, and obligations required by the APA to be performed or complied with by Buyer at or before the Closing. |
IN WITNESS WHEREOF, the undersigned has executed this Officer's Certificate on behalf of Buyer and CANN as of the date first written above.
Dated:
GREEN TREE COLORADO, LLC
By:
Name: Adam Hershey
Title: Interim Chief Executive Officer
TREES CORPORATION
By:
Name: Adam Hershey
Title: Interim Chief Executive Officer
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EXHIBIT D
BILL OF SALE
THIS BILL OF SALE (this "Bill of Sale") is entered into on __________, 2022, by Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company (collectively together with their respective subsidiaries, affiliates and assigns, “Seller” or “Sellers”), for the benefit of GREEN TREE COLORADO, LLC, a Colorado limited liability company ("Buyer").
Recitals
A. | Sellers and Buyer, among others, entered into that certain Asset Purchase Agreement dated _______, 2022 (the "APA"), whereby Buyer agreed to purchase the Assets from Sellers; and |
B. | Capitalized terms not defined herein have the respective meanings ascribed to them in the APA. |
NOW THEREFORE, Sellers certifies as follows:
Terms
1. | Sale of Assets. In accordance with the terms and conditions of the APA, Sellers hereby sells, transfers, conveys, assigns and delivers unto Buyer all of the Assets subject to the APA, free and clear of all Liens. |
2. | Title. Sellers have good and marketable title to the Assets, free and clear of all Liens, and Buyer hereby receives such good and marketable title thereto. |
3. | Warranty. Sellers shall warrant and defend the sale, transfer, conveyance, assignment and conveyance of the Assets hereunder against each and every person or persons claiming against any or all of the same. |
4. | Further Assurances. Sellers shall take all steps necessary to put Buyer in actual possession and operating control of the Assets, including by executing and delivering, or causing to be executed and delivered, such further instruments or documents of transfer, assignment and conveyance, or by taking such other actions as may be reasonably requested in writing by Buyer. |
5. | Independent Covenants. This Bill of Sale is subject in all respects to the terms and conditions of the APA. Nothing contained in this Bill of Sale will be deemed to diminish any of the obligations, agreements, covenants, or statements of fact of Sellers set forth in the APA. |
6. | Dispute Resolution. If a dispute arises under this Bill of Sale, such dispute will be settled by in accordance with the provisions set forth in the APA. |
7. | Electronic or Fax Signatures. This Bill of Sale may be executed electronically or by fax which will each be effective as original signature. |
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IN WITNESS WHEREOF, this Bill of Sale has been duly executed and delivered by the duly authorized representative of Sellers as of the date first above written.
| |
ANCIENT ALTERNATIVES LLC By: _____________________________ Name: Allyson Feiler Downing Title: Manager | NATURAL ALTERNATIVES FOR LIFE, LLC By: _____________________________ Name: Allyson Feiler Downing Title: Manager |
MOUNTAINSIDE INDUSTRIES, LLC By: _____________________________ Name: Allyson Feiler Downing Title: Manager | HILLSIDE ENTERPRISES, LLC By: _____________________________ Name: Allyson Feiler Downing Title: Manager |
GT CREATIONS, LLC By: Allor Holdings, LLC, its Manager By: __________________________ Name: Allyson Feiler Downing Title: Manager | |
| |
| |
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EXHIBIT E
PRORATION STATEMENT
44
EXHIBIT F
LIST OF EXCLUDED ASSETS
Artwork in Corporate office located at 6859 N. Foothills Hwy, E-200, Boulder CO 80303
Artwork in Distribution Center located at 5565 Arapahoe Ave, Suite G, Boulder CO 80304
Macbook Pro 16”
Mercedes Sprinter Van
All physical inventory, including cannabis biomass, extracted concentrates, distilled oil, finished or unfinished inventory, or other cannabis-related material at the MIP located at 6859 N. Foothills Hwy, Building E-100, Boulder CO 80302 that is property of Green Treets, Inc. or a third-party processing material with Green Treets, Inc.
All ingredients, input materials, and components of Green Treets, Inc. recipes.
Any and all patents held by Potent Nano, PotentNano, Nano Son Sol, NanoSonSol, or Pot Shots
Any and all licensed products owned by Potent Nano, PotentNano, Nano Son Sol, NanoSonSol, or Pot Shots
Any and all formulations, recipes, SOP's and ingredients owned by Potent Nano, PotentNano, Nano Son Sol, NanoSonSol, Pot Shots
QSonica 700CA located at 6859 N. Foothills Hwy, E-100, Boulder CO 80302
Mini DeBee 45 Ultra-High Pressure Homogenizer located at 6859 N. Foothills Hwy, E-100, Boulder CO 80302
Izon TRPS Nanobiological Testing Instrument located at 6859 N. Foothills Hwy, E-100, Boulder CO 80302
The trademark: Green Treets
Any and all patents and pending patents of Green Treets, Inc.
Any and all licensed products owned by Green Treets, Inc.
Any and all formulations, recipes, SOP's and ingredients owned by Green Treets Inc.
Domain and hosting of GreenTreets.com
Domain and hosting of GreenTreetsCBD.com
Domain and hosting of TreetsCannabis.com
Domain and hosting of RapiDoseTech.com
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Domain and hosting of RapiDoseTHC.com
Domain and hosting of RapiDoseInfusion.com
Domain and hosting of RapiDoseCannabis.com
46
EXHIBIT G
HOLDERS
Allyson Feiler Downing - 7,111,396 CANN SHARES
Loree Schwartz - 6,886,677 CANN SHARES
Michael Abrams – 3,123,381 CANN SHARES
Charlene Dawes – 856,073 CANN SHARES
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EXHIBIT H
DISCLOSURE SCHEDULES
See attached.
48
EXHIBIT I-1
EMPLOYMENT AGREEMENT WITH ALLYSON FEILER DOWNING
See attached.
49
EXHIBIT I-2
EMPLOYMENT AGREEMENT WITH LOREE SCHWARTZ
See attached.
50
EXHIBIT I-3
CONSULTING AGREEMENT WITH SILVERFOX LLC
See attached.
51
EXHIBIT I-4
CONSULTING AGREEMENT WITH CMD CONSULTING SERVICES, INC.
See attached.
52
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of ______, 2022 ("Effective Date"), is entered into by and between TREES Corporation, a Colorado corporation (the "Company"), and Allyson Feiler, an individual ("Employee").
WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company in accordance with the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises, terms, provisions, and conditions set forth in this Agreement, the parties hereby agree as follows:
1. | Employment. |
(a) | Effective as of the Effective Date, Employee is hereby employed with the Company as the Chief Marketing Officer. Employee shall report to the Chief Executive Officer of the Company. |
(b) | The term of this Agreement (“Term”) shall be a period of two (2) years from the Effective Date, and shall automatically renew for successive one-year periods thereafter unless either party delivers written notice of non-renewal to the other party not less than 90 days prior to the expiration of the Term then in effect. |
2. | Position and Duties. |
(a) | During Employee's employment with the Company, Employee shall serve as Chief Marketing Officer and shall have such duties and authority commensurate with such position and as shall be assigned to her from time to time by the Chief Executive Officer. Without limiting the generality of the foregoing, Employee shall be responsible for, among other matters, any and all marketing and related matters, as well as such other matters as may be assigned to Employee. |
(b) | Employee shall devote her reasonable best efforts, business time and attention (except for permitted vacation periods, maternity leave, reasonable periods of illness or other incapacity) to the business and affairs of the Company. Employee shall perform her duties, responsibilities and functions to the Company in good faith in a diligent, trustworthy, professional and efficient manner and shall comply with the Company's general employment policies and practices, as they may be amended from time to time; provided, that when the terms of this Agreement conflict with such general employment policies or practices, this Agreement shall control. So long as Employee is employed by the Company, Employee shall not, without the prior written consent of the Board, accept other employment or perform other services for compensation that materially interfere with Employee’s employment or with her performance hereunder; provided, that Employee may engage in those activities set forth in Section 8(a). |
3. | Base Salary. Employee's base salary shall be $225,000 per annum and shall be subject to increase from time to time in the Board's sole discretion (the “Base Salary”), which salary shall be paid by the Company in regular installments in accordance with the Company's general payroll practices (in effect from time to time); but not less frequently than semi-monthly during the Term. |
4. | Employee Benefits. |
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(a) | Insurance and Employee Programs. During Employee's employment with the Company, Employee shall be eligible for all employee benefit programs (including any retirement plan, life insurance, group medical and dental, and short-term disability policies, plan and programs) established and maintained for the benefit of the Company's employees of comparable rank and status as Employee, subject to the provisions of such plans and programs. |
(b) | One-time Bonus. In addition to the Base Salary, Employee shall be entitled to a one-time bonus in an amount equal to $383,071.43 (“Bonus”) within 30 business days following the completion of the transfer to the Company of the cannabis licenses held by Ancient Alternatives, LLC, Natural Alternatives for Life, LLC, GT Creations, LLC, and Mountainside Industries, LLC (the “Licenses”). The parties hereto agree and acknowledge that $93,119.05 of the Bonus represents consideration in respect of Ancient Alternatives, LLC, $190,005.00 represents consideration in respect of Natural Alternatives for Life, LLC, $76,137.86 represents consideration in respect of GT Creations, LLC, and $23,809.52 represents consideration in respect of Mountainside Industries, LLC; and further, that no Bonus shall be payable until all of the Licenses have been transferred to the Company. |
(c) | Expense Reimbursement. During Employee's employment with the Company, the Company shall reimburse Employee for all reasonable business expenses incurred by Employee in the course of performing her duties and responsibilities under this Agreement which are consistent with the Company's documented policies in effect from time to time, subject to the Company's documented requirements with respect to reporting and documentation of such expenses. |
(d) | Paid Time Off. During Employee's employment with the Company, Employee shall be entitled to paid vacation and holidays in accordance with the Company's documented policy. Employee shall also be entitled to such periods of sick leave as is customarily provided by the Company to its employees of comparable rank and status of Employee. |
(e) | Withholding. All amounts payable to Employee as compensation hereunder shall be subject to all required and customary employment and income withholding obligations by the Company. |
5. | Termination of Employment. |
(a) | Accrued Obligations. If Employee's employment with the Company is terminated for any reason, then Employee shall be entitled to any accrued but unpaid Base Salary through the date of termination of the Employee’s employment with the Company (the “Termination Date”) and unreimbursed business expenses that are reimbursable in accordance with Section 4(b); provided, that if Employee’s employment is terminated by the Company without Cause or by the Employee for Good Reason prior to the second anniversary of the Effective Date, then, in addition to the payment set forth in the first sentence of this Section 5(a), the Employee shall be entitled to receive continued Base Salary for a period equal to the remainder of the time period between the Termination Date and the second anniversary of the Effective Date, payable in equal installments in accordance with the Company’s policy, but in any event no less frequently than monthly, which shall commence on the first regular payroll date following the Termination Date. Employee expressly agrees and acknowledges that, other than with respect to any payments under (i) the first sentence of this Section 5(a), (ii) Section 5(b), or (iii) applicable law, order or regulation, no termination of Employee’s employment for any reason following the second anniversary of the Effective Date shall trigger any obligation for any further payments to Employee whatsoever. |
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(b) | Termination of Employee Benefits. Except as otherwise expressly provided herein, Employee shall not be entitled to any other salary, bonuses, employee benefits or compensation from the Company after the termination of Employee's employment with the Company and all of Employee's rights to salary, bonuses, employee benefits and other compensation hereunder which would have accrued or become payable after the termination of Employee’s employment with the Company (other than vested retirement or other benefits accrued on or prior to the termination of Employee's employment with the Company, including, without limitation, any vested rights under any equity plan of the Company or other amounts owing hereunder as of the date of such termination or expiration that have not yet been paid) shall cease upon such termination or expiration, other than those expressly required under applicable law (such as COBRA). All such salary, bonuses, employee benefits or compensation shall be deemed unearned and all conditions for any right to receive such payments shall be deemed unsatisfied. |
(c) | Definition of Cause. For purposes of this Agreement, "Cause" shall be determined by the Board and shall mean with respect to Employee one or more of the following: (i) Employee's breach of her covenants contained in this Agreement, in any material respect, or any breach of fiduciary duty owed to the Company, which breach with respect only to breach of covenants remains substantially uncured for fifteen (15) or more days after Employee's receipt of written notice from the Company of such breach; (ii) Employee's willful failure or refusal to perform the duties and responsibilities lawfully required to be performed by Employee under the terms of this Agreement, which failure or refusal to perform remains substantially uncured for fifteen (15) or more days after Employee's receipt of written notice from the Company of such failure or refusal to perform; (iii) Employee’s failure to follow the directives of the Board in any material respect, which breach remains substantially uncured for fifteen (15) or more days after Employee's receipt of written notice from the Company of such breach; (iv) Employee's documented gross negligence or willful misconduct in the performance of her duties on behalf of the Company; (v) Employee's commission of an act constituting common law fraud or a felony or the commission of any other act or omission involving misappropriation, embezzlement, dishonesty, or theft with respect to the Company; (vi) Employee’s material failure to follow or comply with any documented policies or procedures of the Company as may be in effect from time to time, which material failure to follow or comply remains substantially uncured for fifteen (15) or more days after Employee's receipt of written notice from the Company of such material failure to follow or comply; or (vi) any willful or intentional act or omission materially aiding or abetting a competitor or supplier of the Company to the disadvantage or detriment of the Company. |
(d) | Definition of Disability. For purposes of this Agreement, “Disability” shall mean Employee's inability to perform her duties and responsibilities, with reasonable accommodation, as provided herein due to physical or mental disability or sickness extending for, or reasonably expected to extend for, greater than one hundred and eighty (180) days in any twelve-month period. |
(e) | Definition of Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following: (i) the reduction of Employee’s Base Salary; (ii) the assignment to Employee of any duties negatively inconsistent in any respect of Employee’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities in any material respect, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities; (iii) the relocation of Employee’s normal principal place of work to more than 50 miles from the Employee’s principal office location; (iv) the Company’s material failure to follow or comply with any documented policies or procedures of the Company with respect to Employee as may be in effect from time to time, which material failure to follow or comply remains substantially uncured for fifteen (15) or more days after the Company’s receipt of written notice |
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from Employee of such material failure to follow or comply; or (v) the Company’s material breach of this Agreement, including but not limited to the obligation to make any payments to Employee when due.
6. | Confidential Information. |
(a) | Employee acknowledges that the continued success of the Company depends upon the use and protection of a large body of confidential, proprietary, and/or trade secret information. All such confidential, proprietary and trade secret information now existing or developed during the term of Employee's employment hereunder will be referred to in this Agreement as "Confidential Information." Confidential Information will be interpreted broadly to include all information of any sort (whether embodied in a tangible or intangible form) that is (i) related to the Company's business and (ii) not generally or publicly known. Confidential Information includes, without specific limitation, the information, observations and data obtained by Employee during the course of her performance under this Agreement concerning the business and affairs of the Company, information concerning acquisition opportunities in or reasonably related to the Company's business or industry of which Employee becomes aware during Employee's employment with the Company, the persons or entities that are current, former or prospective suppliers or customers of any one or more of them during Employee's course of performance under this Agreement, as well as development, transition and transformation plans, methodologies and methods of doing business, strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans, confidential employee lists and contact information, compensation and incentive structures and strategies, confidential information concerning sales, including volumes, pricing, and margins, new and existing programs and services, prices and terms, customer service, integration processes, requirements and costs of providing service, support and equipment. Therefore, Employee agrees that she shall not disclose to any unauthorized person or use for her own account any of such Confidential Information without the Board’s prior written consent, unless and to the extent that any Confidential Information (i) is or becomes generally known to and available for use by the public other than as a result of Employee's improper acts or omissions to act, (ii) is required to be disclosed pursuant to any applicable law, regulation or court order, (iii) is independently developed by Employee, or (iv) is lawfully acquired by Employee from sources which Employee is not aware of any prohibitions from disclosing such information1. Employee agrees that she shall not disclose any Confidential Information for three (3) years after her employment ends, except with respect to Trade Secrets, which shall be subject to Section 9(a) below . If requested by the Company in writing, Employee agrees to deliver to the Company or destroy, at the Employee’s discretion, at the end of Employee's employment with the Company, or at any other time during the Term that the Company may request, all memoranda, notes, plans, records, reports and other documents (and copies thereof and all electronic data residing on any electronic device) relating to the business of the Company (including, without limitation, all Confidential Information) that she may then possess or have under her control, provided that Employee may retain copies of Employee's personnel information, such as performance evaluations, payroll information and the like. |
(b) | During Employee's employment with the Company, Employee shall not use or disclose any confidential information or trade secrets, if any, of any former employers or any other person to whom Employee has an obligation of confidentiality, and shall not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any |
1 | Note to Draft: Employee should not be on the hook for information received for which she is not aware is confidential. |
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Highly Confidential
other person to whom Employee has an obligation of confidentiality unless consented to in writing by the former employer or person. Employee shall use in the performance of her duties only information that is (i) generally known and used by persons with training and experience comparable to Employee’s and that is (x) common knowledge in the industry or (y) is otherwise legally in the public domain, (ii) otherwise provided or developed by the Company or (iii) in the case of materials, property or information belonging to any former employer or other person to whom Employee has an obligation of confidentiality, approved for such use in writing by such former employer or person. If at any time during employment with the Company, Employee believes she is being asked to engage in work that will, or will be likely to, jeopardize any confidentiality or other obligations Employee may have to former employers or other persons, Employee shall promptly advise the Board so that Employee’s duties can be modified appropriately.
(c) | During the Term, Employee shall promptly notify the Company of any intended or unintended, unauthorized disclosure or use of any trade secrets or Confidential Information by Employee or any other person or entity of which Employee becomes aware. Employee shall, at the Company’s expense, reasonably cooperate with the Company in the procurement of any protection of the Company’s rights to or in any of the trade secrets or Confidential Information. |
(d) | Employee understands that the Company will receive from third parties confidential or proprietary information ("Third Party Information") subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. During Employee's employment with the Company and thereafter, and without in any way limiting the provisions of Section 6(a) above, Employee will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel of the Company who need to know such information in connection with their work for the Company) or use, except in connection with her work for the Company, such Third Party Information unless expressly authorized by the Board's written consent. |
7. | Employee Proprietary Information Agreement. Upon reasonable request by Company, Employee shall execute a separate agreement between the parties hereto made a part hereof covering, among other things, non-disclosure and assignment of inventions; provided that any provisions of such separate agreement requiring the assignment of inventions do not apply to any invention that Employee developed entirely on her own time without using the Company’s equipment, supplies, facilities, Confidential Information, or Trade Secrets except for those inventions that result from any work performed by Employee for the Company. |
8. | Non-Compete; Non-Solicitation. |
(a) | In recognition of the importance to the Company of the preservation and protection of its intellectual property, name and goodwill and in consideration for employment and/or continued employment, access to or continued access to Confidential Information, training, compensation and benefits, as well as other good and valuable consideration provided by the Company to Employee, the receipt and sufficiency of which are hereby acknowledged by Employee, the parties agree that during Employee’s employment with the Company and for a period of two (2) years following the termination of Employee’s employment with the Company for any reason (the “Non-Compete”) Employee shall not, directly or indirectly, as a partner, joint venturer, member, lender, employer, employee, advisor, contractor, consultant, shareholder, principal or agent, engage in, control, advise with respect to, manage or furnish consulting or other services to, nor have any interest in, any Competing Business (as defined in the Asset Purchase Agreement, dated September ___, 2022, by |
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and among [Green Tree Colorado, LLC], a Colorado limited liability company, or its assigns, Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company) and other parties set forth therein (the “Purchase Agreement”)) within the Restricted Territory (as defined in the Purchase Agreement). The Non-Compete shall not prohibit Employee from owning outstanding stock in the Company of 5% or less of the outstanding stock of any publicly-traded corporation.
(b) | Employee acknowledges that the foregoing geographic restriction on competition is fair and reasonable, given the geographic scope of Company's business operations and the nature of Employee's position with the Company. Employee also acknowledges that while employed by the Company, Employee will have access to information that would be valuable or useful to Company's competitors, and therefore acknowledges that the foregoing restrictions on Employee's future employment and business activities are fair and reasonable. Employee acknowledges and is prepared for the possibility that Employee's standard of living may be reduced during the noncompetition period, and assumes and accepts any risk associated with that possibility. |
(c) | Employee acknowledges the following provisions of Colorado law, set forth in Colorado Revised Statutes § 8-2-113(2): |
Any covenant not to compete which restricts the right of any person to receive compensation for performance of skilled or unskilled labor for any employer shall be void, but this subsection (2) shall not apply to:
(i) | Any contract for the purchase and sale of a business or the assets of a business; |
(ii) | Any contract for the protection of trade secrets; |
(iii) | Any contract provision providing for the recovery of the expense of educating and training an employee who has served an employer for a period of less than two (2) years; and |
(iv) | Executive and management personnel and officers and employees who constitute professional staff to executive and management personnel. |
(d) | Employee acknowledges that this Agreement is a contract for the protection of trade secrets under § 8-2-113(2)(b), and is intended to protect the Confidential Information identified above; and that Employee is an executive and management employee or professional staff to executive or management personnel, within the meaning of § 8-2-113(2)(d). |
(e) | Employee agrees that during Employee’s employment with the Company and for two (2) years after the termination of Employee's employment with the Company for any reason, Employee shall not, without the Company's written permission, directly or indirectly through another person or entity (i) induce or attempt to induce any employee of the Company to leave the employ of the Company, or in any way interfere with the relationship between the Company and any of its employees, (ii) hire any person who was an employee of the Company at any time during the six (6) months preceding such hiring, or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company to cease doing business with the Company, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company (including, without limitation, making any negative or disparaging statements or communications about the Company), (iv) directly or |
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indirectly acquire or attempt to acquire any business known by the Employee that the Company identified in writing as a potential acquisition target during Employee's employment with the Company (an "Acquisition Target"), or take any action to induce or attempt to induce any Acquisition Target to consummate any acquisition, investment or other similar transaction with any person or entity other than the Company; provided, however, that for clauses (i) and (ii) above shall not prohibit Employee from placing any general advertisements for employees and hiring individuals that respond to such general advertisements. For purposes of this Section 8(e), the term "employee" shall include consultants and independent contractors of the Company.
(f) | Employee agrees that the covenants made in this Section 8 shall be construed as agreements independent of any other provision(s) of this Agreement and shall survive any order of a court of competent jurisdiction terminating any other provision(s) of this Agreement. |
9. | Trade Secrets; Remedies; Restrictions. |
(a) | Employee further acknowledges and agrees with the Company that Employee's service to the Company requires the use of proprietary information, including programs, methods, techniques, and processes, that the Company has made reasonable efforts to keep confidential and that derives independent economic value, actual or potential, from not being generally known to the public or to other person who can obtain economic value from its disclosure or use (collectively, "Trade Secrets"). Employee acknowledges and agrees that the Company would be irreparably damaged if Employee were to use or disclose such Trade Secrets to third parties, including any person or entity competing with the Company or engaged in a material line of business similar to that engaged in by the Company. Employee accordingly covenants and agrees with the Company that during the period commencing on the date of this Agreement, throughout Employee's employment, and for so long as such information remains a Trade Secret under applicable law, Employee shall not, directly or indirectly, either for herself or for any other person employ, reveal or otherwise utilize or disclose Company Trade Secrets, other than for the Company. Employee further acknowledges and agrees that during the period commencing on the date of this Agreement, throughout Employee's employment, and for so long as such information remains a Trade Secret under applicable law, Employee shall keep the Company's Trade Secrets strictly confidential and not disclose them to any third parties. |
(b) | In the event of the breach or a threatened breach by Employee of any of the provisions of Sections 6, 7, 8, or 9, the Company may suffer irreparable harm, and in addition and supplementary to other rights and remedies existing in its favor, the Company shall be entitled to seek specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). In addition, in the event a court of competent jurisdiction determines that Employee breached or violated Sections 6, 7, 8, or 9, the periods of such restrictive covenants will be tolled until such breach or violation has been duly cured. |
(c) | If, at the time of enforcement of Sections 6, 7, 8, or 9 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing the parties hereto agree that the maximum period, scope or geographic area held reasonable by the court shall be substituted for the stated period, scope or area. Employee acknowledges that the restrictions contained in Sections 6, 7, 8, or 9 are reasonable in all respects and necessary to protect the goodwill of the businesses of the Company and that, without such protection, the Company's customer, distributor and supplier relations and competitive advantage would be adversely affected. |
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10. | Employee's Representations. Employee hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Employee do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which she is bound, (ii) Employee is not a party to or bound by any other employment agreement, noncompete agreement or, except in the ordinary course of business, confidentiality agreement with any other person or entity except as disclosed in writing to the Company prior to the date hereof, and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms. Employee hereby acknowledges and represents that she has consulted with independent legal counsel regarding her rights and obligations under this Agreement and that she fully understands the terms and conditions contained herein. |
11. | Survival. To the extent contemplated by this Agreement, the respective rights and obligations of the parties hereto shall survive and continue in full force in accordance with their terms notwithstanding the termination of Employee’s employment with the Company. |
12. | Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight courier service, mailed by first class mail, return receipt requested, or by facsimile transmission or electronic mail in .pdf format, to the recipient at the address below indicated: |
Notices to Employee:
Allyson Feiler
3556 W 62 Ave.
Denver, CO 80221
Email: [email protected]
Notices to Company:
TREES Corporation
1901 S. Navajo Avenue
Denver, CO 80223
Attention: David Fishkin, General Counsel
Email: [email protected]
or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notices required or permitted hereunder shall be deemed given upon personal delivery to the appropriate address, or three (3) days after the date of mailing if sent by certified or registered mail, or one (1) day after the date of mailing if sent by overnight delivery service, or the day of transmission of such notice by facsimile or email if sent during normal business hours of the recipient, and if sent after normal business hours of the recipient then on the next business day. Each party may change its address, facsimile number or email address for receipt of notice by giving notice of the change to the other party.
13. | Modification; Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, the provision shall be modified to the minimum extent necessary to be valid, legal and |
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enforceable. If it cannot be so modified, the provision shall be severed, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. The invalidity, illegality or unenforceability of any provision shall not affect any other provision of this Agreement or any action in any other jurisdiction.
14. | Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. |
15. | No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party. |
16. | Counterparts. This Agreement may be executed in separate counterparts (including by means of facsimile or by electronic mail in .pdf format), each of which is deemed to be an original and all of which taken together constitute one and the same agreement. |
17. | Successors and Assigns. Neither party shall, without the prior written consent of the other party, assign, transfer or delegate this Agreement or any of such party’s rights or obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon and inure to the benefit of the parties and their respective successors and assigns. |
18. | Choice of Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Colorado, notwithstanding any state's choice-of-law rules to the contrary. |
19. | Arbitration. Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by arbitration in Denver, Colorado before three (3) arbitrator(s). The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures. Judgment on the Award may be entered in any court having jurisdiction. This clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction, in which case each party consents to the jurisdiction and venue of the state and federal courts located in Denver, Colorado. The reasonable attorney's fees and costs of the party ultimately prevailing in such dispute shall be borne by the other party. |
20. | Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of both the Company (as approved by the Board) and Employee, and no course of conduct or course of dealing or failure or delay by any party hereto in enforcing or exercising any of the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement or be deemed to be an implied waiver of any provision of this Agreement. |
21. | Deductions/Withholdings on Behalf of Employee. The Company shall be entitled to deduct or withhold from any amounts owing from the Company to Employee any federal, state, local or foreign withholding taxes, excise tax, or employment taxes ("Taxes") imposed with respect to Employee's compensation or other payments from the Company or Employee's ownership interest in the Company (including, without limitation, wages, bonuses, dividends, the receipt or exercise of equity options and/or the receipt or vesting of restricted equity). |
22. | Corporate Opportunity. During Employee's employment with the Company, Employee shall submit to |
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the Board all business, commercial and investment opportunities or offers that Employee becomes aware of, whether orally or in writing, which relate to the business of the Company Business at any time during Employee's employment with the Company ("Corporate Opportunities"); provided, however, Corporate Opportunities shall not include any business, commercial or investment opportunities or offers which are related to a non-Competing Business or which are outside of the Restricted Territory. If the Company elects not to pursue a submitted Corporate Opportunity, Employee shall have the right to accept or pursue such Corporate Opportunity. Notwithstanding anything to the contrary in this Section 22, in the event Employee receives a non-written offer or proposal, Employee need not disclose such proposal to the Company provided Employee does not pursue it, or enter into any agreement whatsoever in respect thereof.
23. | Indemnification. The Company shall indemnify the Employee to the maximum extent permitted by applicable law against all costs, charges and expenses incurred or sustained by her in connection with any action, suit or proceeding to which she may be made a party by reason of her being an officer or employee of the Company. |
24. | Employee's Cooperation. During Employee's employment with the Company and other than with respect to any proceeding between Employee and the Company, Employee shall, subject to the Company reimbursing Employee for out-of-pocket expenses, cooperate with the Company in any internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by the Company (including, without limitation, Employee being available to the Company upon reasonable notice for interviews and factual investigations, appearing at the Company's request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company all pertinent information and turning over to the Company all relevant documents which are or may come into Employee’s possession, all at times and on schedules that are reasonably consistent with Employee's other permitted activities and commitments). |
25. | Section 409A Compliance. The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations and guidance promulgated thereunder (collectively "Code Section 409A") and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to Employee and the Company of the applicable provision without violating the provisions of Code Section 409A. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on Employee by Code Section 409A or damages for failing to comply with Code Section 409A. Notwithstanding anything herein to the contrary, a termination of employment shall be deemed to have occurred at the time such termination constitutes a "separation from service" within the meaning of Code Section 409A for purposes of any provision of this Agreement providing for the payment of any amounts or benefits in connection with a termination of employment and, for purposes of any such provision of this Agreement, references to a "termination," "termination of employment" or like terms shall mean a "separation from service." Further, if, on the date of a "separation from service" (as defined in Code Section 409A), Employee is a "specified employee" (as defined in Code Section 409A), no amounts that would constitute deferred compensation payable hereunder that are subject to Code Section 409A shall be made until the earliest date on which payment is permissible under 409A(a)(2)(B)(i) (the six (6)-month delay rule for specified employees). To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A, (A) all such expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year in which such expenses were incurred by Employee, (B) any right to |
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such reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year. For purposes of Code Section 409A, Employee’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company. Notwithstanding any other provision to the contrary, in no event shall any payment under this Agreement that constitutes "deferred compensation" for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.
*****
[Signature page follows immediately]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
TREES CORPORATION
By: ________________________________
Name
Title:
Employee:
____________________________________
Allyson Feiler
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Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of ______, 2022 ("Effective Date"), is entered into by and between TREES Corporation, a Colorado corporation (the "Company"), and Loree Schwartz, an individual ("Employee").
WHEREAS, the Company wishes to employ Employee and Employee wishes to be employed by the Company in accordance with the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises, terms, provisions, and conditions set forth in this Agreement, the parties hereby agree as follows:
| 1. | Employment. |
| (a) | Effective as of the Effective Date, Employee is hereby employed with the Company as the Chief Compliance Officer. Employee shall report to the Chief Operating Officer of the Company. |
| (b) | The term of this Agreement (“Term”) shall be a period of two (2) years from the Effective Date, and shall automatically renew for successive one-year periods thereafter unless either party delivers written notice of non-renewal to the other party not less than 90 days prior to the expiration of the Term then in effect. |
| 2. | Position and Duties. |
| (a) | During Employee's employment with the Company, Employee shall serve as Chief Compliance Officer and shall have such duties and authority commensurate with such position and as shall be assigned to her from time to time by the Chief Executive Officer. Without limiting the generality of the foregoing, Employee shall be responsible for, among other matters, any and all compliance, regulatory, licensing and related matters, as well as such other matters as may be assigned to Employee. |
| (b) | Employee shall devote her reasonable best efforts, business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company. Employee shall perform her duties, responsibilities and functions to the Company in good faith in a diligent, trustworthy, professional and efficient manner and shall comply with the Company's general employment policies and practices, as they may be amended from time to time; provided, that when the terms of this Agreement conflict with such general employment policies or practices, this Agreement shall control. So long as Employee is employed by the Company, Employee shall not, without the prior written consent of the Board, accept other employment or perform other services for compensation that materially interfere with Employee’s employment or with her performance hereunder; provided, that Employee may engage in those activities set forth in Section 8(a). |
| 3. | Base Salary. Employee's base salary shall be $150,000 per annum and shall be subject to increase from time to time in the Board's sole discretion (the "Base Salary"), which salary shall be paid by the Company in regular installments in accordance with the Company's general payroll practices (in effect from time to time); but not less frequently than semi-monthly during the Term. |
| 4. | Employee Benefits. |
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| (a) | Insurance and Employee Programs. During Employee's employment with the Company, Employee shall be eligible for all employee benefit programs (including any retirement plan, life insurance, group medical and dental, and short-term disability policies, plan and programs) established and maintained for the benefit of the Company's employees of comparable rank and status as Employee, subject to the provisions of such plans and programs. |
| (b) | One-time Bonus. In addition to the Base Salary, Employee shall be entitled to a one-time bonus in an amount equal to $383,071.43 (“Bonus”) within 30 business days following the completion of the transfer to the Company of the cannabis licenses held by Ancient Alternatives, LLC, Natural Alternatives for Life, LLC, GT Creations, LLC, and Mountainside Industries, LLC (the “Licenses”). The parties hereto agree and acknowledge that $93,119.05 of the Bonus represents consideration in respect of Ancient Alternatives, LLC, $190,005.00 represents consideration in respect of Natural Alternatives for Life, LLC, $76,137.86 represents consideration in respect of GT Creations, LLC, and $23,809.52 represents consideration in respect of Mountainside Industries, LLC; and further, that no Bonus shall be payable until all of the Licenses have been transferred to the Company. |
| (c) | Expense Reimbursement. During Employee's employment with the Company, the Company shall reimburse Employee for all reasonable business expenses incurred by Employee in the course of performing her duties and responsibilities under this Agreement which are consistent with the Company's documented policies in effect from time to time, subject to the Company's documented requirements with respect to reporting and documentation of such expenses. |
| (d) | Paid Time Off. During Employee's employment with the Company, Employee shall be entitled to paid vacation and holidays in accordance with the Company's documented policy. Employee shall also be entitled to such periods of sick leave as is customarily provided by the Company to its employees of comparable rank and status of Employee. |
| (e) | Withholding. All amounts payable to Employee as compensation hereunder shall be subject to all required and customary employment and income withholding obligations by the Company. |
| 5. | Termination of Employment. |
| (a) | Accrued Obligations. If Employee's employment with the Company is terminated for any reason, then Employee shall be entitled to any accrued but unpaid Base Salary through the date of termination of the Employee’s employment with the Company (the “Termination Date”) and unreimbursed business expenses that are reimbursable in accordance with Section 4(b); provided, that if Employee’s employment is terminated by the Company without Cause or by the Employee for Good Reason prior to the second anniversary of the Effective Date, then, in addition to the payment set forth in the first sentence of this Section 5(a), the Employee shall be entitled to receive continued Base Salary for a period equal to the remainder of the time period between the Termination Date and the second anniversary of the Effective Date, payable in equal installments in accordance with the Company’s policy, but in any event no less frequently than monthly, which shall commence on the first regular payroll date following the Termination Date. Employee expressly agrees and acknowledges that, other than with respect to any payments under (i) the first sentence of this Section 5(a), (ii) Section 5(b), or (iii) applicable law, order or regulation, no termination of Employee’s employment for any reason following the second anniversary of the Effective Date shall trigger any obligation for any further payments to Employee whatsoever. |
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| (b) | Termination of Employee Benefits. Except as otherwise expressly provided herein, Employee shall not be entitled to any other salary, bonuses, employee benefits or compensation from the Company after the termination of Employee's employment with the Company and all of Employee's rights to salary, bonuses, employee benefits and other compensation hereunder which would have accrued or become payable after the termination of Employee’s employment with the Company (other than vested retirement or other benefits accrued on or prior to the termination of Employee's employment with the Company, including, without limitation, any vested rights under any equity plan of the Company or other amounts owing hereunder as of the date of such termination or expiration that have not yet been paid) shall cease upon such termination or expiration, other than those expressly required under applicable law (such as COBRA). All such salary, bonuses, employee benefits or compensation shall be deemed unearned and all conditions for any right to receive such payments shall be deemed unsatisfied. |
| (c) | Definition of Cause. For purposes of this Agreement, "Cause" shall be determined by the Board and shall mean with respect to Employee one or more of the following: (i) Employee's breach of her covenants contained in this Agreement, in any material respect, or any breach of fiduciary duty owed to the Company, which breach with respect only to breach of covenants remains substantially uncured for fifteen (15) or more days after Employee's receipt of written notice from the Company of such breach; (ii) Employee's willful failure or refusal to perform the duties and responsibilities lawfully required to be performed by Employee under the terms of this Agreement, which failure or refusal to perform remains substantially uncured for fifteen (15) or more days after Employee's receipt of written notice from the Company of such failure or refusal to perform; (iii) Employee’s failure to follow the directives of the Board in any material respect, which breach remains substantially uncured for fifteen (15) or more days after Employee's receipt of written notice from the Company of such breach; (iv) Employee's documented gross negligence or willful misconduct in the performance of her duties on behalf of the Company; (v) Employee's commission of an act constituting common law fraud or a felony or the commission of any other act or omission involving misappropriation, embezzlement, dishonesty, or theft with respect to the Company; (vi) Employee’s material failure to follow or comply with any documented policies or procedures of the Company as may be in effect from time to time, which material failure to follow or comply remains substantially uncured for fifteen (15) or more days after Employee's receipt of written notice from the Company of such material failure to follow or comply; or (vi) any willful or intentional act or omission materially aiding or abetting a competitor or supplier of the Company to the disadvantage or detriment of the Company. |
| (d) | Definition of Disability. For purposes of this Agreement, “Disability” shall mean Employee's inability to perform her duties and responsibilities, with reasonable accommodation, as provided herein due to physical or mental disability or sickness extending for, or reasonably expected to extend for, greater than one hundred and eighty (180) days in any twelve-month period. |
| (e) | Definition of Good Reason. For purposes of this Agreement, “Good Reason” shall mean any of the following: (i) the reduction of Employee’s Base Salary; (ii) the assignment to Employee of any duties negatively inconsistent in any respect of Employee’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities in any material respect, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities; (iii) the relocation of Employee’s normal principal place of work to more than 50 miles from the Employee’s principal office location; (iv) the Company’s material failure to follow or comply with any documented policies or procedures of the Company with respect to Employee as may be in effect from time to time, which material failure to follow or comply remains substantially uncured for fifteen (15) or more days after the Company’s receipt of written notice |
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| from Employee of such material failure to follow or comply; or (v) the Company’s material breach of this Agreement, including but not limited to the obligation to make any payments to Employee when due. |
| 6. | Confidential Information. |
| (a) | Employee acknowledges that the continued success of the Company, depends upon the use and protection of a large body of confidential, proprietary, and/or trade secret information. All such confidential, proprietary and trade secret information now existing or developed during the term of Employee's employment hereunder will be referred to in this Agreement as "Confidential Information." Confidential Information will be interpreted broadly to include all information of any sort (whether embodied in a tangible or intangible form) that is (i) related to the Company's business and (ii) not generally or publicly known. Confidential Information includes, without specific limitation, the information, observations and data obtained by Employee during the course of her performance under this Agreement concerning the business and affairs of the Company, information concerning acquisition opportunities in or reasonably related to the Company’s business or industry of which Employee becomes aware during Employee's employment with the Company, the persons or entities that are current, former or prospective suppliers or customers of any one or more of them during Employee's course of performance under this Agreement, as well as development, transition and transformation plans, methodologies and methods of doing business, strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans, confidential employee lists and contact information, compensation and incentive structures and strategies, confidential information concerning sales, including volumes, pricing, and margins, new and existing programs and services, prices and terms, customer service, integration processes, requirements and costs of providing service, support and equipment. Therefore, Employee agrees that she shall not disclose to any unauthorized person or use for her own account any of such Confidential Information without the Board’s prior written consent, unless and to the extent that any Confidential Information (i) is or becomes generally known to and available for use by the public other than as a result of Employee's improper acts or omissions to act, (ii) is required to be disclosed pursuant to any applicable law, regulation or court order, (iii) is independently developed by Employee, or (iv) is lawfully acquired by Employee from sources which Employee is not aware of any prohibitions from disclosing such information. Employee agrees that she shall not disclose any Confidential Information for three (3) years after her employment ends, except with respect to Trade Secrets, which shall be subject to Section 9(a) below . If requested by the Company in writing, Employee agrees to deliver to the Company or destroy, at the Employee’s discretion, at the end of Employee's employment with the Company, or at any other time during the Term that the Company may request, all memoranda, notes, plans, records, reports and other documents (and copies thereof and all electronic data residing on any electronic device) relating to the business of the Company (including, without limitation, all Confidential Information) that she may then possess or have under her control, provided that Employee may retain copies of Employee's personnel information, such as performance evaluations, payroll information and the like. |
| (b) | During Employee's employment with the Company, Employee shall not use or disclose any confidential information or trade secrets, if any, of any former employers or any other person to whom Employee has an obligation of confidentiality, and shall not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom Employee has an obligation of confidentiality unless consented to in writing by the former employer or person. Employee shall use in the performance of her duties only information that is (i) generally known and used by persons with training and experience |
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| comparable to Employee’s and that is (x) common knowledge in the industry or (y) is otherwise legally in the public domain, (ii) otherwise provided or developed by the Company or (iii) in the case of materials, property or information belonging to any former employer or other person to whom Employee has an obligation of confidentiality, approved for such use in writing by such former employer or person. If at any time during employment with the Company, Employee believes she is being asked to engage in work that will, or will be likely to, jeopardize any confidentiality or other obligations Employee may have to former employers or other persons, Employee shall promptly advise the Board so that Employee’s duties can be modified appropriately. |
| (c) | During the Term, Employee shall promptly notify the Company of any intended or unintended, unauthorized disclosure or use of any trade secrets or Confidential Information by Employee or any other person or entity of which Employee becomes aware. Employee shall, at the Company’s expense, reasonably cooperate with the Company in the procurement of any protection of the Company’s rights to or in any of the trade secrets or Confidential Information. |
| (d) | Employee understands that the Company will receive from third parties confidential or proprietary information ("Third Party Information") subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. During Employee's employment with the Company and thereafter, and without in any way limiting the provisions of Section 6(a) above, Employee will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel of the Company who need to know such information in connection with their work for the Company) or use, except in connection with her work for the Company, such Third Party Information unless expressly authorized by the Board's written consent. |
| 7. | Employee Proprietary Information Agreement. Upon reasonable request by Company, Employee shall execute a separate agreement between the parties hereto made a part hereof covering, among other things, non-disclosure and assignment of inventions; provided that any provisions of such separate agreement requiring the assignment of inventions do not apply to any invention that Employee developed entirely on her own time without using the Company’s equipment, supplies, facilities, Confidential Information, or Trade Secrets except for those inventions that result from any work performed by Employee for the Company. |
| 8. | Non-Compete; Non-Solicitation. |
| (a) | In recognition of the importance to the Company of the preservation and protection of its intellectual property, name and goodwill and in consideration for employment and/or continued employment, access to or continued access to Confidential Information, training, compensation and benefits, as well as other good and valuable consideration provided by the Company to Employee, the receipt and sufficiency of which are hereby acknowledged by Employee, the parties agree that during Employee’s employment with the Company and for a period of two (2) years following the termination of Employee’s employment with the Company for any reason (the “Non-Compete”) Employee shall not, directly or indirectly, as a partner, joint venturer, member, lender, employer, employee, advisor, contractor, consultant, shareholder, principal or agent, engage in, control, advise with respect to, manage or furnish consulting or other services to, nor have any interest in, any Competing Business (as defined in the Asset Purchase Agreement, dated September ___, 2022, by and among [Green Tree Colorado, LLC], a Colorado limited liability company, or its assigns, Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company) and |
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| other parties set forth therein (the “Purchase Agreement”)) within the Restricted Territory (as defined in the Purchase Agreement). The Non-Compete shall not prohibit Employee from owning outstanding stock in the Company of 5% or less of the outstanding stock of any publicly-traded corporation. |
| (b) | Employee acknowledges that the foregoing geographic restriction on competition is fair and reasonable, given the geographic scope of Company's business operations and the nature of Employee's position with the Company. Employee also acknowledges that while employed by the Company, Employee will have access to information that would be valuable or useful to Company's competitors, and therefore acknowledges that the foregoing restrictions on Employee's future employment and business activities are fair and reasonable. Employee acknowledges and is prepared for the possibility that Employee's standard of living may be reduced during the noncompetition period, and assumes and accepts any risk associated with that possibility. |
| (c) | Employee acknowledges the following provisions of Colorado law, set forth in Colorado Revised Statutes § 8-2-113(2): |
Any covenant not to compete which restricts the right of any person to receive compensation for performance of skilled or unskilled labor for any employer shall be void, but this subsection (2) shall not apply to:
| (i) | Any contract for the purchase and sale of a business or the assets of a business; |
| (ii) | Any contract for the protection of trade secrets; |
| (iii) | Any contract provision providing for the recovery of the expense of educating and training an employee who has served an employer for a period of less than two (2) years; and |
| (iv) | Executive and management personnel and officers and employees who constitute professional staff to executive and management personnel. |
| (d) | Employee acknowledges that this Agreement is a contract for the protection of trade secrets under § 8-2-113(2)(b), and is intended to protect the Confidential Information identified above; and that Employee is an executive and management employee or professional staff to executive or management personnel, within the meaning of § 8-2-113(2)(d). |
| (e) | Employee agrees that during Employee’s employment with the Company and for two (2) years after the termination of Employee's employment with the Company for any reason, Employee shall not, without the Company's written permission, directly or indirectly through another person or entity (i) induce or attempt to induce any employee of the Company to leave the employ of the Company, or in any way interfere with the relationship between the Company and any of its employees, (ii) hire any person who was an employee of the Company at any time during the six (6) months preceding such hiring, or (iii) induce or attempt to induce any customer, supplier, licensee, licensor, franchisee or other business relation of the Company to cease doing business with the Company, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company (including, without limitation, making any negative or disparaging statements or communications about the Company), (iv) directly or indirectly acquire or attempt to acquire any business known by the Employee that the Company identified in writing as a potential acquisition target during Employee's employment with the Company (an "Acquisition Target"), or take any action to induce or attempt to induce any |
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| Acquisition Target to consummate any acquisition, investment or other similar transaction with any person or entity other than the Company; provided, however, that for clauses (i) and (ii) above shall not prohibit Employee from placing any general advertisements for employees and hiring individuals that respond to such general advertisements. For purposes of this Section 8(e), the term "employee" shall include consultants and independent contractors of the Company. |
| (f) | Employee agrees that the covenants made in this Section 8 shall be construed as agreements independent of any other provision(s) of this Agreement and shall survive any order of a court of competent jurisdiction terminating any other provision(s) of this Agreement. |
| 9. | Trade Secrets; Remedies; Restrictions. |
| (a) | Employee further acknowledges and agrees with the Company that Employee's service to the Company requires the use of proprietary information, including programs, methods, techniques, and processes, that the Company has made reasonable efforts to keep confidential and that derives independent economic value, actual or potential, from not being generally known to the public or to other person who can obtain economic value from its disclosure or use (collectively, "Trade Secrets"). Employee acknowledges and agrees that the Company would be irreparably damaged if Employee were to use or disclose such Trade Secrets to third parties, including any person or entity competing with the Company or engaged in a material line of business similar to that engaged in by the Company. Employee accordingly covenants and agrees with the Company that during the period commencing on the date of this Agreement, throughout Employee's employment, and for so long as such information remains a Trade Secret under applicable law, Employee shall not, directly or indirectly, either for herself or for any other person employ, reveal or otherwise utilize or disclose Company Trade Secrets, other than for the Company. Employee further acknowledges and agrees that during the period commencing on the date of this Agreement, throughout Employee's employment, and for so long as such information remains a Trade Secret under applicable law, Employee shall keep the Company's Trade Secrets strictly confidential and not disclose them to any third parties. |
| (b) | In the event of the breach or a threatened breach by Employee of any of the provisions of Sections 6, 7, 8, or 9, the Company may suffer irreparable harm, and in addition and supplementary to other rights and remedies existing in its favor, the Company shall be entitled to seek specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). In addition, in the event a court of competent jurisdiction determines that Employee breached or violated Sections 6, 7, 8, or 9, the periods of such restrictive covenants will be tolled until such breach or violation has been duly cured. |
| (c) | If, at the time of enforcement of Sections 6, 7, 8, or 9 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing the parties hereto agree that the maximum period, scope or geographic area held reasonable by the court shall be substituted for the stated period, scope or area. Employee acknowledges that the restrictions contained in Sections 6, 7, 8, or 9 are reasonable in all respects and necessary to protect the goodwill of the businesses of the Company and that, without such protection, the Company's customer, distributor and supplier relations and competitive advantage would be adversely affected. |
| 10. | Employee's Representations. Employee hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Employee do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree |
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| to which Employee is a party or by which she is bound, (ii) Employee is not a party to or bound by any other employment agreement, noncompete agreement or, except in the ordinary course of business, confidentiality agreement with any other person or entity except as disclosed in writing to the Company prior to the date hereof, and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms. Employee hereby acknowledges and represents that she has consulted with independent legal counsel regarding her rights and obligations under this Agreement and that she fully understands the terms and conditions contained herein. |
| 11. | Survival. To the extent contemplated by this Agreement, the respective rights and obligations of the parties hereto shall survive and continue in full force in accordance with their terms notwithstanding the termination of Employee’s employment with the Company. |
| 12. | Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight courier service, mailed by first class mail, return receipt requested, or by facsimile transmission or electronic mail in .pdf format, to the recipient at the address below indicated: |
Notices to Employee:
Loree Schwartz
854 Terrace Circle North
Boulder, CO 80304
Email:[email protected]
Notices to Company:
TREES Corporation
1901 S. Navajo Avenue
Denver, CO 80223
Attention: David Fishkin, General Counsel
Email: [email protected]
or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notices required or permitted hereunder shall be deemed given upon personal delivery to the appropriate address, or three (3) days after the date of mailing if sent by certified or registered mail, or one (1) day after the date of mailing if sent by overnight delivery service, or the day of transmission of such notice by facsimile or email if sent during normal business hours of the recipient, and if sent after normal business hours of the recipient then on the next business day. Each party may change its address, facsimile number or email address for receipt of notice by giving notice of the change to the other party.
| 13. | Modification; Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, the provision shall be modified to the minimum extent necessary to be valid, legal and enforceable. If it cannot be so modified, the provision shall be severed, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. The invalidity, illegality or unenforceability of any |
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| provision shall not affect any other provision of this Agreement or any action in any other jurisdiction. |
| 14. | Complete Agreement. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. |
| 15. | No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party. |
| 16. | Counterparts. This Agreement may be executed in separate counterparts (including by means of facsimile or by electronic mail in .pdf format), each of which is deemed to be an original and all of which taken together constitute one and the same agreement. |
| 17. | Successors and Assigns. Neither party shall, without the prior written consent of the other party, assign, transfer or delegate this Agreement or any of such party’s rights or obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon and inure to the benefit of the parties and their respective successors and assigns. |
| 18. | Choice of Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Colorado, notwithstanding any state's choice-of-law rules to the contrary. |
| 19. | Arbitration. Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by arbitration in Denver, Colorado before three (3) arbitrator(s). The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures. Judgment on the Award may be entered in any court having jurisdiction. This clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction, in which case each party consents to the jurisdiction and venue of the state and federal courts located in Denver, Colorado. The reasonable attorney's fees and costs of the party ultimately prevailing in such dispute shall be borne by the other party. |
| 20. | Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of both the Company (as approved by the Board) and Employee, and no course of conduct or course of dealing or failure or delay by any party hereto in enforcing or exercising any of the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement or be deemed to be an implied waiver of any provision of this Agreement. |
| 21. | Deductions/Withholdings on Behalf of Employee. The Company shall be entitled to deduct or withhold from any amounts owing from the Company to Employee any federal, state, local or foreign withholding taxes, excise tax, or employment taxes ("Taxes") imposed with respect to Employee's compensation or other payments from the Company or Employee's ownership interest in the Company (including, without limitation, wages, bonuses, dividends, the receipt or exercise of equity options and/or the receipt or vesting of restricted equity). |
| 22. | Corporate Opportunity. During Employee's employment with the Company, Employee shall submit to the Board all business, commercial and investment opportunities or offers that Employee becomes aware of, whether orally or in writing, which relate to the business of the Company Business at any time during Employee's employment with the Company ("Corporate Opportunities"); provided, |
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| however, Corporate Opportunities shall not include any business, commercial or investment opportunities or offers which are related to a non-Competing Business or which are outside of the Restricted Territory. If the Company elects not to pursue a submitted Corporate Opportunity, Employee shall have the right to accept or pursue such Corporate Opportunity. Notwithstanding anything to the contrary in this Section 22, in the event Employee receives a non-written offer or proposal, Employee need not disclose such proposal to the Company provided Employee does not pursue it, or enter into any agreement whatsoever in respect thereof. |
| 23. | Indemnification. The Company shall indemnify the Employee to the maximum extent permitted by applicable law against all costs, charges and expenses incurred or sustained by her in connection with any action, suit or proceeding to which she may be made a party by reason of her being an officer or employee of the Company. |
| 24. | Employee's Cooperation. During Employee's employment with the Company and other than with respect to any proceeding between Employee and the Company, Employee shall, subject to the Company reimbursing Employee for out-of-pocket expenses, cooperate with the Company in any internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by the Company (including, without limitation, Employee being available to the Company upon reasonable notice for interviews and factual investigations, appearing at the Company's request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company all pertinent information and turning over to the Company all relevant documents which are or may come into Employee’s possession, all at times and on schedules that are reasonably consistent with Employee's other permitted activities and commitments). |
| 25. | Section 409A Compliance. The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations and guidance promulgated thereunder (collectively "Code Section 409A") and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to Employee and the Company of the applicable provision without violating the provisions of Code Section 409A. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on Employee by Code Section 409A or damages for failing to comply with Code Section 409A. Notwithstanding anything herein to the contrary, a termination of employment shall be deemed to have occurred at the time such termination constitutes a "separation from service" within the meaning of Code Section 409A for purposes of any provision of this Agreement providing for the payment of any amounts or benefits in connection with a termination of employment and, for purposes of any such provision of this Agreement, references to a "termination," "termination of employment" or like terms shall mean a "separation from service." Further, if, on the date of a "separation from service" (as defined in Code Section 409A), Employee is a "specified employee" (as defined in Code Section 409A), no amounts that would constitute deferred compensation payable hereunder that are subject to Code Section 409A shall be made until the earliest date on which payment is permissible under 409A(a)(2)(B)(i) (the six (6)-month delay rule for specified employees). To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A, (A) all such expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year in which such expenses were incurred by Employee, (B) any right to such reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind |
10
Highly Confidential
| benefits to be provided, in any other taxable year. For purposes of Code Section 409A, Employee’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company. Notwithstanding any other provision to the contrary, in no event shall any payment under this Agreement that constitutes "deferred compensation" for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A. |
*****
[Signature page follows immediately]
11
Highly Confidential
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
| TREES CORPORATION | ||
| | | |
| By: | | |
| | Name: | |
| | Title: | |
| | | |
| | | |
| Employee: | ||
| | | |
| | | |
| Loree Schwartz | ||
12
Exhibit 10.4
CONSULTING AGREEMENT
This Consulting Agreement (“Agreement”) dated as of _______, 2022, is entered into by and between TREES Corporation, having an address at 1901 S. Navajo Avenue, Denver, CO 80223 (the “Company”), and CMD Consulting Services, Inc., having an address at 6575 NW 95 Lane, Parkland Florida 33076 (“Consultant”).
WHEREAS, the Company is desirous of retaining Consultant, and Consultant desires to be retained, to provide certain services to the Company as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows:
| 1. | Agreement to Provide Services; Reimbursement of Expenses. The Company hereby retains Consultant, and Consultant hereby agrees to furnish to the Company, as an independent contractor, consulting services for the Term (as defined in Section 5 below), in accordance with the terms and conditions set forth below and as further specified in this Agreement. Specifically, Consultant shall provide licensing and advisory services, on an as-needed basis (the “Services”). |
| 2. | Limitations. In performing the Services, it is expressly agreed by Consultant that as an independent contractor, Consultant shall not in any manner do, perform or undertake any of the following, and that at all times the Consultant shall perform the Services subject to the following limitations on its actions and authority, except as otherwise authorized by the Interim Chief Executive Officer of the Company (“CEO”), other authorized officer(s) or the Board of Directors or Chairman thereof: |
| a. | Consultant shall have no authority to, and shall not, represent himself as having the power, right or authority to represent or enter into any obligations or commitments whatsoever on behalf of, or as agent for the Company. |
| b. | Consultant shall conduct its affairs with regard to third parties to avoid the appearance or creation of any relationship between Consultant and the Company, other than that of an independent contractor, as provided for herein. |
| c. | Consultant shall have no authority to, and shall not, take or permit the taking of any actions the taking of which, or omit to take or permit the omission of any actions the omission of which, would give rise to any liability on the part of the Company or any of its officers, directors, employees, agents or shareholders. |
| d. | Consultant shall not in any manner identify or represent its office facilities as being the office facilities or other place of business of the Company. |
| e. | Consultant shall not have the authority to engage any sub-contractors or sub-consultants in relation to the Services to be provided hereunder, including investigators, consultants, experts or legal counsel, without the Company’s prior approval. |
| 3. | Compensation. In consideration for the Services to be provided under this Agreement by Consultant, the Company hereby agrees to pay Consultant a one-time consulting fee equal to $47,619.05, payable by wire transfer of immediately available funds to the account |
| designated in writing by Consultant within 30 days following the closing of the sale to the Company of substantially all of the assets of (i) Ancient Alternatives LLC; (ii) Natural Alternatives for Life LLC; and (iii) Hillside Enterprises, LLC. |
| 4. | Limitation of Liability. The Company’s liability hereunder shall be limited to payment to Consultant of the amount as set forth in Section 3 pursuant to this Agreement. The Consultant’s liability under this Agreement shall be limited to liability relating to withholding and payment of taxes and similar charges related to compensation Consultant receives pursuant to Section 3. |
| 5. | Term. This Agreement shall remain in full force and effect for a term of three (3) months to commence effective as of the date hereof (the “Initial Term”). The Initial Term may only be extended upon written agreement of the parties. The Initial Term and any such extensions are hereby referred to as the “Term.” |
| 6. | Compliance with the Company’s Instructions. In its performance of the Services, Consultant shall reasonably comply with such reasonable documented instructions as the Company may from time to time submit to Consultant. |
| 7. | Standard of Performance. Consultant will perform the Services in a good and workmanlike manner, and in accordance with the professional standards and practices normally exercised by professional consultants performing services of a similar nature. Consultant shall also conduct its activities in accordance with all relevant laws, regulations, decrees and/or official government rules and orders. |
| 8. | Confidentiality; Work Product. |
| a. | Consultant acknowledges that the continued success of the Company, depends upon the use and protection of a large body of confidential, proprietary, and/or trade secret information of the Company. All such confidential, proprietary and trade secret information now existing or developed during the term of Consultant's consultancy hereunder will be referred to in this Agreement as "Confidential Information." Confidential Information will be interpreted broadly to include all information of any sort (whether embodied in a tangible or intangible form) that is (i) related to the Company's or its subsidiaries' business and (ii) not generally or publicly known. Confidential Information includes, without specific limitation, the information, observations and data obtained by Consultant during the course of its performance under this Agreement concerning the business and affairs of the Company, information concerning acquisition opportunities in or reasonably related to the Company's business or industry of which Consultant becomes aware during Consultant's consultancy with the Company, the persons or entities that are current, former or prospective suppliers or customers of any one or more of them during Consultant's course of performance under this Agreement, as well as development, transition and transformation plans, methodologies and methods of doing business, strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans, confidential Consultant lists and contact information, compensation and incentive structures and strategies, confidential information concerning sales, including volumes, pricing, and margins, new and existing programs and services, prices and terms, customer service, integration processes, requirements and costs of providing service, support and equipment. Therefore, Consultant agrees that it shall not |
2
| disclose to any unauthorized person or use for her own account any of such Confidential Information without the Board’s prior written consent, unless and to the extent that any Confidential Information (i) becomes generally known to and available for use by the public other than as a result of Consultant's improper acts or omissions to act, (ii) is required to be disclosed pursuant to any applicable law, regulation or court order, (iii) is independently developed by Consultant, or (iv) is lawfully acquired by Consultant from sources which, to Consultant’s knowledge, are not prohibited from disclosing such information. Consultant agrees that it shall not disclose any Confidential Information for three (3) years after its consultancy ends. If requested by the Company in writing, Consultant agrees to deliver to the Company or destroy, at the Consultant’s discretion, at the end of Consultant's consultancy with the Company, or at any other time during the Term that the Company may request, all memoranda, notes, plans, records, reports and other documents (and copies thereof and all electronic data residing on any electronic device) relating to the business of the Company (including, without limitation, all Confidential Information) that it may then possess or have under its control, provided that Consultant may retain copies of Consultant's personnel information, such as performance evaluations, payroll information and the like. |
| b. | During the Term, Consultant shall promptly notify the Company of any intended or unintended, unauthorized disclosure or use of any trade secrets or Confidential Information by Consultant or any other person or entity of which Consultant becomes aware. Consultant shall, at the Company’s expense, reasonably cooperate with the Company in the procurement of any protection of the Company’s rights to or in any of the trade secrets or Confidential Information. |
Upon reasonable request by Company, Consultant shall execute a separate agreement between the parties hereto made a part hereof covering, among other things, non-disclosure and assignment of inventions, provided, that any provisions of such separate agreement requiring the assignment of inventions do not apply to any invention that Consultant developed entirely on its own time without using the Company’s equipment, supplies, or facilities except for those inventions that result from any services performed by Consultant for the Company.
| 9. | Termination of Services. Subject to receipt of the compensation set forth in Section 3, promptly upon the termination of this Agreement, Consultant shall deliver to the Company all originals and copies of all records and work product obtained or generated by Consultant in the course of performing the Services, and will promptly deliver to the Company (or at the Consultant’s discretion, destroy) all of the confidential information in Consultant’s possession, including, but not limited to, all copies, reproductions, summaries, analyses or extracts thereof or based thereon stored in any medium whatsoever, including, but not limited to, the hard drives of any computer system; provided, that Consultant shall be permitted to retain a list of the items furnished for purposes of documenting such delivery, and provided further that Consultant shall be entitled to retain its own records of invoices submitted and payments received with respect to such Services. |
| 10. | Equitable Remedies. Consultant acknowledges and agrees that this Agreement involves valuable trade secret and other proprietary rights of the Company and that the Company’s remedies at law for any breach or threatened breach by Consultant of the covenants contained herein may be inadequate, and, accordingly, Consultant consents that, in addition to such other remedies as may be available to the Company at law or in equity, the |
3
| Company shall be entitled to seek equitable relief by way of injunction issued by any court of competent jurisdiction if Consultant breaches or threatens to breach any of the provisions of this Agreement. Furthermore, Consultant agrees that any and all work product, including, but not limited to, documents, computer software, files, recordings, and photographs relating thereto, which Consultant may possess or have under its custody or control, are held by Consultant in constructive trust for the Company, and that any court of competent jurisdiction may summarily liquidate such trust on behalf of the Company. |
| 11. | Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado without giving effect to principles of conflicts or choice of laws thereof; federal and state courts located in the State of Colorado shall have exclusive jurisdiction with respect to any dispute or proceeding arising out of or relating to this Agreement, and the Company and Consultant hereby submit to the exclusive jurisdiction of such courts. |
| 12. | Notices. All notices to be provided pursuant to this Agreement (and any consents permitted by the terms of this Agreement) shall be in writing and delivered by hand, or sent by overnight courier or registered mail, return receipt requested to the address as set forth on the first page of this Agreement or such other address as may be properly noticed; or via email. |
| 13. | Successors and Assigns. It is understood and agreed by the parties hereto that the Services to be provided by Consultant hereunder are personal to Consultant, and that Consultant shall not be entitled to assign its rights or obligations hereunder without having obtained the Company’s prior written consent thereto. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, including in the case of individuals, their heirs, executors and administrators. |
| |
| 14. | Amendment. Except by an instrument in writing signed by the parties, this Agreement may not be amended or modified in any respect, except upon mutual written agreement between the Company and Consultant. |
| 15. | Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto as to the subject matter hereof and supersedes all previous agreements between the parties, whether written, oral or otherwise. |
| 16. | No Waiver. It is understood and agreed that no failure or delay by a party in exercising any right, power or privilege hereunder shall operate as a waiver thereof by such party, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. |
| 17. | Relationship Between Consultant and the Company. The relationship of Consultant to the Company under this Agreement shall be that of independent contractor. Except to the extent that the Company may from time to time give Consultant specific authorization to enter into specific commitments with third parties for or on behalf of the Company, Consultant shall have no authority to and shall not represent himself as having the power, right or authority to represent or enter into any obligations or commitments whatsoever on behalf of or as agent for the Company. No provision of this Agreement is intended to or shall be construed as creating an employment, mutual agency, joint venture, partnership or other fiduciary relationship between the parties hereto, or as entitling Consultant or any of its agents or affiliates to any compensation or benefits as an employee, except as expressly |
4
| provided in this Agreement. The Company expressly agrees and acknowledges that Consultant is permitted to commence or continue with other business activities, provided such activities do not conflict with this Agreement. |
| 18. | Signing in Counterparts; Email Delivery. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document. Transmission by email scan shall be sufficient for delivery hereof. |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.
| TREES CORPORATION | ||
| | | |
| By: | | |
| | Name: | Adam Hershey |
| | Title: | Interim Chief Executive Officer |
| | | |
| | | |
| Consultant: | ||
| | ||
| CMD Consulting Services, Inc. | ||
| | | |
| By: | | |
| | Name: | Charlene Dawes |
| | Title: | President |
| | ||
5
Exhibit 10.5
CONSULTING AGREEMENT
This Consulting Agreement (“Agreement”) dated as of _______, 2022, is entered into by and between TREES Corporation., having an address at 1901 S. Navajo Avenue, Denver, CO 80223 (the “Company”), and Silverfox LLC, having an address at 27 Senexet Village Rd, Woodstock Connecticut 06281 (“Consultant”).
WHEREAS, the Company is desirous of retaining Consultant, and Consultant desires to be retained, to provide certain services to the Company as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows:
1. | Agreement to Provide Services; Reimbursement of Expenses. The Company hereby retains Consultant, and Consultant hereby agrees to furnish to the Company, as an independent contractor, consulting services for the Term (as defined in Section 5 below), in accordance with the terms and conditions set forth below and as further specified in this Agreement. Specifically, Consultant shall provide licensing and advisory services, on an as-needed basis (the “Services”). |
2. | Limitations. In performing the Services, it is expressly agreed by Consultant that as an independent contractor, Consultant shall not in any manner do, perform or undertake any of the following, and that at all times the Consultant shall perform the Services subject to the following limitations on its actions and authority, except as otherwise authorized by the Interim Chief Executive Officer of the Company (“CEO”), other authorized officer(s) or the Board of Directors or Chairman thereof: |
a. | Consultant shall have no authority to, and shall not, represent himself as having the power, right or authority to represent or enter into any obligations or commitments whatsoever on behalf of, or as agent for the Company. |
b. | Consultant shall conduct its affairs with regard to third parties to avoid the appearance or creation of any relationship between Consultant and the Company, other than that of an independent contractor, as provided for herein. |
c. | Consultant shall have no authority to, and shall not, take or permit the taking of any actions the taking of which, or omit to take or permit the omission of any actions the omission of which, would give rise to any liability on the part of the Company or any of its officers, directors, employees, agents or shareholders. |
d. | Consultant shall not in any manner identify or represent its office facilities as being the office facilities or other place of business of the Company. |
e. | Consultant shall not have the authority to engage any sub-contractors or sub-consultants in relation to the Services to be provided hereunder, including investigators, consultants, experts or legal counsel, without the Company’s prior approval. |
3. | Compensation. In consideration for the Services to be provided under this Agreement by Consultant, the Company hereby agrees to pay Consultant a one-time consulting fee equal to $186,238.09, payable by wire transfer of immediately available funds to the account |
designated in writing by Consultant within 30 days following the closing of the sale to the Company of substantially all of the assets of (i) Ancient Alternatives LLC; and (ii) Natural Alternatives for Life LLC.
4. | Limitation of Liability. The Company’s liability hereunder shall be limited to payment to Consultant of the amount as set forth in Section 3 pursuant to this Agreement. The Consultant’s liability under this Agreement shall be limited to liability relating to withholding and payment of taxes and similar charges related to compensation Consultant receives pursuant to Section 3. |
5. | Term. This Agreement shall remain in full force and effect for a term of three (3) months to commence effective as of the date hereof (the “Initial Term”). The Initial Term may only be extended upon written agreement of the parties. The Initial Term and any such extensions are hereby referred to as the “Term.” |
6. | Compliance with the Company’s Instructions. In its performance of the Services, Consultant shall reasonably comply with such reasonable documented instructions as the Company may from time to time submit to Consultant. |
7. | Standard of Performance. Consultant will perform the Services in a good and workmanlike manner, and in accordance with the professional standards and practices normally exercised by professional consultants performing services of a similar nature. Consultant shall also conduct its activities in accordance with all relevant laws, regulations, decrees and/or official government rules and orders. |
8. | Confidentiality; Work Product. |
a. | Consultant acknowledges that the continued success of the Company, depends upon the use and protection of a large body of confidential, proprietary, and/or trade secret information of the Company. All such confidential, proprietary and trade secret information now existing or developed during the term of Consultant's consultancy hereunder will be referred to in this Agreement as "Confidential Information." Confidential Information will be interpreted broadly to include all information of any sort (whether embodied in a tangible or intangible form) that is (i) related to the Company's or its subsidiaries' business and (ii) not generally or publicly known. Confidential Information includes, without specific limitation, the information, observations and data obtained by Consultant during the course of its performance under this Agreement concerning the business and affairs of the Company, information concerning acquisition opportunities in or reasonably related to the Company's business or industry of which Consultant becomes aware during Consultant's consultancy with the Company, the persons or entities that are current, former or prospective suppliers or customers of any one or more of them during Consultant's course of performance under this Agreement, as well as development, transition and transformation plans, methodologies and methods of doing business, strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans, confidential Consultant lists and contact information, compensation and incentive structures and strategies, confidential information concerning sales, including volumes, pricing, and margins, new and existing programs and services, prices and terms, customer service, integration processes, requirements and costs of providing service, support and equipment. Therefore, Consultant agrees that it shall not |
2
disclose to any unauthorized person or use for her own account any of such Confidential Information without the Board’s prior written consent, unless and to the extent that any Confidential Information (i) becomes generally known to and available for use by the public other than as a result of Consultant's improper acts or omissions to act, (ii) is required to be disclosed pursuant to any applicable law, regulation or court order, (iii) is independently developed by Consultant, or (iv) is lawfully acquired by Consultant from sources which, to Consultant’s knowledge, are not prohibited from disclosing such information. Consultant agrees that it shall not disclose any Confidential Information for three (3) years after its consultancy ends. If requested by the Company in writing, Consultant agrees to deliver to the Company or destroy, at the Consultant’s discretion, at the end of Consultant's consultancy with the Company, or at any other time during the Term that the Company may request, all memoranda, notes, plans, records, reports and other documents (and copies thereof and all electronic data residing on any electronic device) relating to the business of the Company (including, without limitation, all Confidential Information) that it may then possess or have under its control, provided that Consultant may retain copies of Consultant's personnel information, such as performance evaluations, payroll information and the like.
b. | During the Term, Consultant shall promptly notify the Company of any intended or unintended, unauthorized disclosure or use of any trade secrets or Confidential Information by Consultant or any other person or entity of which Consultant becomes aware. Consultant shall, at the Company’s expense, reasonably cooperate with the Company in the procurement of any protection of the Company’s rights to or in any of the trade secrets or Confidential Information. |
Upon reasonable request by Company, Consultant shall execute a separate agreement between the parties hereto made a part hereof covering, among other things, non-disclosure and assignment of inventions, provided, that any provisions of such separate agreement requiring the assignment of inventions do not apply to any invention that Consultant developed entirely on its own time without using the Company’s equipment, supplies, or facilities except for those inventions that result from any services performed by Consultant for the Company.
9. | Termination of Services. Subject to receipt of the compensation set forth in Section 3, promptly upon the termination of this Agreement, Consultant shall deliver to the Company all originals and copies of all records and work product obtained or generated by Consultant in the course of performing the Services, and will promptly deliver to the Company (or at the Consultant’s discretion, destroy) all of the confidential information in Consultant’s possession, including, but not limited to, all copies, reproductions, summaries, analyses or extracts thereof or based thereon stored in any medium whatsoever, including, but not limited to, the hard drives of any computer system; provided, that Consultant shall be permitted to retain a list of the items furnished for purposes of documenting such delivery, and provided further that Consultant shall be entitled to retain its own records of invoices submitted and payments received with respect to such Services. |
10. | Equitable Remedies. Consultant acknowledges and agrees that this Agreement involves valuable trade secret and other proprietary rights of the Company and that the Company’s remedies at law for any breach or threatened breach by Consultant of the covenants contained herein may be inadequate, and, accordingly, Consultant consents that, in addition to such other remedies as may be available to the Company at law or in equity, the |
3
Company shall be entitled to seek equitable relief by way of injunction issued by any court of competent jurisdiction if Consultant breaches or threatens to breach any of the provisions of this Agreement. Furthermore, Consultant agrees that any and all work product, including, but not limited to, documents, computer software, files, recordings, and photographs relating thereto, which Consultant may possess or have under its custody or control, are held by Consultant in constructive trust for the Company, and that any court of competent jurisdiction may summarily liquidate such trust on behalf of the Company.
11. | Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado without giving effect to principles of conflicts or choice of laws thereof; federal and state courts located in the State of Colorado shall have exclusive jurisdiction with respect to any dispute or proceeding arising out of or relating to this Agreement, and the Company and Consultant hereby submit to the exclusive jurisdiction of such courts. |
12. | Notices. All notices to be provided pursuant to this Agreement (and any consents permitted by the terms of this Agreement) shall be in writing and delivered by hand, or sent by overnight courier or registered mail, return receipt requested to the address as set forth on the first page of this Agreement or such other address as may be properly noticed; or via email. |
13. | Successors and Assigns. It is understood and agreed by the parties hereto that the Services to be provided by Consultant hereunder are personal to Consultant, and that Consultant shall not be entitled to assign its rights or obligations hereunder without having obtained the Company’s prior written consent thereto. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, including in the case of individuals, their heirs, executors and administrators. |
| |
14. | Amendment. Except by an instrument in writing signed by the parties, this Agreement may not be amended or modified in any respect, except upon mutual written agreement between the Company and Consultant. |
15. | Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto as to the subject matter hereof and supersedes all previous agreements between the parties, whether written, oral or otherwise. |
16. | No Waiver. It is understood and agreed that no failure or delay by a party in exercising any right, power or privilege hereunder shall operate as a waiver thereof by such party, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. |
17. | Relationship Between Consultant and the Company. The relationship of Consultant to the Company under this Agreement shall be that of independent contractor. Except to the extent that the Company may from time to time give Consultant specific authorization to enter into specific commitments with third parties for or on behalf of the Company, Consultant shall have no authority to and shall not represent himself as having the power, right or authority to represent or enter into any obligations or commitments whatsoever on behalf of or as agent for the Company. No provision of this Agreement is intended to or shall be construed as creating an employment, mutual agency, joint venture, partnership or other fiduciary relationship between the parties hereto, or as entitling Consultant or any of its agents or affiliates to any compensation or benefits as an employee, except as expressly |
4
provided in this Agreement. The Company expressly agrees and acknowledges that Consultant is permitted to commence or continue with other business activities, provided such activities do not conflict with this Agreement.
18. | Signing in Counterparts; Email Delivery. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document. Transmission by email scan shall be sufficient for delivery hereof. |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.
TREES CORPORATION
By: ______________________________
Name:Adam Hershey
Title:Interim Chief Executive Officer
Consultant:
Silverfox LLC
By: ______________________________
Name:Michael Abrams
Title:Authorized Representative
5
Offering Document No.: _____
Exhibit 10.6
TREES CORPORATION
_____________________________________________________
Securities Purchase Agreement
_____________________________________________________
Senior Secured Convertible Promissory Notes
and
Warrants to Purchase Common Stock
_____________________________________________________
September 15, 2022
CONFIDENTIAL
CONFIDENTIAL INFORMATION
THE OFFEREE, BY ACCEPTING THE SECURITIES PURCHASE AGREEMENT AND THE OTHER OFFERING DOCUMENTS RELATING TO THE COMPANY’S PROPOSED OFFERING OF SENIOR SECURED CONVERTIBLE PROMISSORY NOTES AND WARRANTS TO ACQUIRE SHARES OF ITS COMMON STOCK, ACKNOWLEDGES AND AGREES THAT: (I) THE OFFERING DOCUMENTS HAVE BEEN FURNISHED TO THE OFFEREE ON A CONFIDENTIAL BASIS SOLELY FOR THE PURPOSE OF ENABLING THE OFFEREE TO EVALUATE THE OFFERING; (II) THAT THE OFFEREE MAY NOT FURTHER DISTRIBUTE THE OFFERING DOCUMENTS WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY, EXCEPT TO THE OFFEREE’S LEGAL, FINANCIAL OR OTHER PERSONAL ADVISORS, IF ANY, WHO WILL USE THE OFFERING DOCUMENTS ON THE OFFEREE’S BEHALF SOLELY FOR PURPOSES OF EVALUATING THE OFFERING; (III) ANY REPRODUCTION OR DISTRIBUTION OF THE OFFERING DOCUMENTS, IN WHOLE OR IN PART, OR THE DIRECT OR INDIRECT DISCLOSURE OF THE CONTENTS OF THE OFFERING DOCUMENTS FOR ANY OTHER PURPOSE WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY IS PROHIBITED; AND (IV) THE OFFEREE SHALL BE BOUND BY ALL TERMS AND CONDITIONS SPECIFIED IN THE OFFERING DOCUMENTS.
THE OFFEREE ACKNOWLEDGES THAT INFORMATION CONCERNING THE MATTERS THAT ARE THE SUBJECT MATTER OF THE OFFERING DOCUMENTS MAY CONSTITUTE MATERIAL NON-PUBLIC INFORMATION UNDER UNITED STATES FEDERAL SECURITIES LAWS, AND THAT UNITED STATES FEDERAL SECURITIES LAWS PROHIBIT ANY PERSON WHO HAS RECEIVED MATERIAL NON-PUBLIC INFORMATION RELATING TO THE COMPANY FROM PURCHASING OR SELLING SECURITIES OF THE COMPANY, OR FROM COMMUNICATING SUCH INFORMATION TO ANY PERSON UNDER CIRCUMSTANCES IN WHICH IT IS REASONABLY FORESEEABLE THAT SUCH PERSON IS LIKELY TO PURCHASE OR SELL SECURITIES OF THE COMPANY. ACCORDINGLY, UNTIL SUCH TIME AS ANY SUCH NON-PUBLIC INFORMATION HAS BEEN ADEQUATELY DISSEMINATED TO THE PUBLIC, THE OFFEREE SHALL NOT PURCHASE OR SELL ANY SECURITIES OF THE COMPANY, OR COMMUNICATE SUCH INFORMATION TO ANY OTHER PERSON.
NOTICE TO OFFEREES
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THIS SECURITIES PURCHASE AGREEMENT AND THE OTHER OFFERING DOCUMENTS DO NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THE SECURITIES ARE BEING SOLD FOR INVESTMENT PURPOSES ONLY, WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE TRANSFERRED, RESOLD OR OFFERED FOR RESALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND EFFECTIVE REGISTRATION OR QUALIFICATION UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, OR THE AVAILABILITY OF AN EXEMPTION THEREFROM.
AN INVESTMENT MADE IN THE SECURITIES OFFERED HEREBY IS SUITABLE ONLY FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL RESOURCES, WHO HAVE NO NEED FOR LIQUIDITY IN THIS INVESTMENT AND WHO UNDERSTAND OR HAVE BEEN ADVISED WITH RESPECT TO THE TAX CONSEQUENCES OF, AND RISK FACTORS ASSOCIATED WITH, THIS INVESTMENT AND WHO ARE ABLE TO BEAR THE RISK OF AN UNSECURED DEBT INVESTMENT THROUGH MATURITY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR THE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS SECURITIES PURCHASE AGREEMENT OR ANY OF THE OTHER OFFERING DOCUMENTS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
ADDITIONAL INFORMATION
TREES CORPORATION (the “Company”) files annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended. Reports, statements or other information that the Company files with the SEC are available to the public at the SEC’s Website at http://www.sec.gov, as well as the Company’s Website at www.generalcann.com. Information contained on the Company’s Website does not constitute part of this agreement. The Company incorporates by reference its annual, quarterly and current reports previously filed with the SEC through and including August 12, 2022.
The information incorporated by reference into this agreement is an important part of this agreement. Any statement contained in a document incorporated by reference into this agreement shall be deemed to be modified or superseded for the purposes of this agreement to the extent that a statement contained herein or in any other subsequently filed document modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this agreement.
You should rely only on the information contained in this agreement or incorporated by reference into this agreement. The Company has not authorized anyone to provide you with different information. You should not assume that the information in this agreement is accurate as of any date other than the date this agreement is sent to you for review or that the information incorporated by reference into this agreement is accurate as of any date other than the date set forth on the front of the document containing such information.
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is entered into as of September 15, 2022, by and between TREES Corporation, a Colorado corporation (the “Company”), and the persons and entities identified on the signature page hereof (each individually a “Purchaser,” and collectively, the “Purchasers”).
RECITALS
WHEREAS, in order to provide for its capital needs, the Company wishes to conduct a private offering to accredited investors (the “Offering”) of its securities consisting of an aggregate of up to $13,500,000 in principal (“Principal Amount”) (subject to increase by the Company with the prior written consent of TCM Tactical Opportunities Fund II LP (hereafter “Lead Investor”)) of senior secured convertible promissory notes in the form attached hereto as Exhibit A (each, a “Note” and, collectively, the “Notes”); and a warrant exercisable for shares of common stock of the Company in the form attached hereto as Exhibit B (each, a “Warrant” and, collectively, the “Warrants”).
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchasers hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTES AND WARRANTS
1.1Issuance and Sale of Notes. Subject to the terms and conditions of this Agreement, the Purchaser hereby irrevocably subscribes for and agrees to purchase, and the Company agrees to sell and issue to the Purchaser at the Closing (as defined below), a Note or Notes in the principal amount set forth on the signature page hereof. The purchase price of each Note shall be equal to 100% of the original principal amount of such Note. The Company’s agreement with each Purchaser is a separate agreement which is separate from the Company’s agreement with any other Purchaser, and the sales of the Notes to different Purchasers are separate sales. Nothing herein shall obligate the Company to accept any subscription tendered by the Purchaser.
1.2Issuance and Sale of Warrants. As an inducement to the Purchasers to purchase the Notes, the Company shall sell, issue and deliver at each Closing to each Purchaser, and each Purchaser shall purchase, severally and not jointly, from the Company, a Warrant, in the form attached as Exhibit B hereto, to purchase a number of shares of the Company’s common stock (the “Common Stock”) equal to 20% of the principal amount of the Note purchased by such Purchaser divided by the exercise price of $0.70 (subject to adjustment as set forth in the Warrant), except with respect to one investor who is acting as the lead investor in connection with this Offering (“Lead Investor”), for which the Warrants granted thereto shall include an additional 10% of the Principal Amount. For the avoidance of any doubt, the Lead Investor, in addition to be granted Warrants to purchase a number of shares of the Company’s common stock equal to 20% of the principal amount of the Note purchased by the Lead Investor divided by the exercise price of $0.70,
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and shall also be granted Warrants to purchase Company’s shares of common stock equal to 10% of the Principal Amount divided by the exercise price of $0.70.
For illustration purposes only, if the Purchaser purchases a Note in the principal amount of $500,000, then the Company will issue to the Purchaser a Warrant to purchase 142,857 shares of Common Stock (($500,000 x 0.20) ÷ $0.70 = 142,857), plus, for the Lead Investor, any shares of Common Stock related to the Principal Amount (10% of the Principal Amount divided by $0.70).
The Notes, the Warrants, the securities issuable upon conversion of the Notes (and upon the further conversion of such securities, if applicable), and the securities issuable upon exercise of the Warrants are sometimes collectively referred to herein as the “Securities.”
1.3Initial Escrow. On the date of this Agreement or immediately thereafter, the Lead Investor shall deliver to Day & Associates, LLC (the “Initial Escrow Agent”) the Principal Amount (the “Initial Escrow”). For purposes of holding the Initial Escrow, Purchaser, Company and Initial Escrow Agent shall enter into an escrow agreement in standard commercial terms (the “Initial Escrow Agreement”). The release of the Initial Escrow to the Company pursuant to Sections 5.1. (b) and 5.2. (d) below shall be a condition precedent to Closing as set forth in Section 1.4. (a) below.
1.4Closing; Delivery.
(a)The initial purchase and sale of the Notes and Warrants (the “Initial Closing”) shall take place remotely via the exchange of documents and signatures upon the satisfaction or confirmation of the closing conditions set forth in Article V.
(b)The Company may continue to conduct one or more closings after the Initial Closing of additional Notes and Warrants in an amount up to an aggregate of the Principal Amount of Notes, subject to increase in the discretion of the Company to cover over-allotments, provided Company receives prior written consent from Lead Investor. (each an “Additional Closing” and together with the Initial Closing, each, a “Closing”) for a period of up to 90 days after the Initial Closing.
(c)At each Closing, subject to the terms and conditions hereof, the Company will deliver to each Purchaser a counterpart signature page to this Agreement and a fully executed Note and Warrant against payment for such securities by check or wire transfer made payable to the order of the Company. In addition to cash investors, the Company may, in its sole discretion, accept subscriptions for Notes and Warrants from investors who offer in exchange the surrender and cancellation of Current Outstanding Notes (as defined in Section 3.6(c)) (the “Prior Note Investors”). The Company reserves the right to issue the Prior Note Investors additional warrants (or to extend or modify the terms of existing warrants issued to the Prior Note Investors in prior rounds of financings) in order to induce their participation in this Offering. Notwithstanding the forgoing, the terms offered to Prior Note Investors shall be on terms no more favorable than those offered to the Lead Investor (and notice of such terms shall be provided to the Lead Investor). The
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term “Warrants” as used herein shall be deemed to include any such additional or modified warrants to purchase Common Stock.
(d)All funds tendered by Purchaser will be held by the Company in a segregated bank account, pending acceptance or rejection of this Agreement by the Company and the closing of Purchaser’s purchase of Notes and Warrants. If this Agreement is rejected for any reason, including the termination of the Offering of the Notes and Warrants by the Company for any reason, including without limitation failure to raise the Minimum Investment, this Agreement and all funds tendered herewith will be promptly returned to Purchaser, without interest or deduction of any kind, and this Agreement will be void and of no further force or effect. In addition, certain funds will be held pursuant to the Second Escrow Agreement (defined below) in a separate account maintained by the Escrow Agent pending the completion of certain acquisitions and the license transfers associated therewith.
1.5Use of Proceeds.
(a)Subject to the allocation of funds at the Initial Closing as set forth in Section 1.5 (b) below, assuming the full Offering amount is raised, the Company intends to use the proceeds from the sale of the Notes and Warrants for the repayment of outstanding indebtedness, to fund strategic merger and acquisition related activities and for general working capital purposes, all as set forth in the use of proceeds schedule to be agreed to by the Parties (“Use of Proceeds Schedule”). To assist in the private placement of the Notes and Warrants, the Company may enter into placement agreements with one or more registered broker-dealers which will provide for a broker’s fee, or a commission in the form of cash and securities to be issued by the Company.
(b)Notwithstanding Section 1.5(a) above, proceeds received by the Company from the sale of Notes and Warrants at the Initial Closing shall first be used for the retirement of the Company’s Current Outstanding Notes upon the Initial Closing (as defined in Section 3.6(c)); and, only thereafter, for the other purposes set forth above.
(c)Notwithstanding Section 1.5(a) above, certain portions of the Principal Amount shall be escrowed in accordance with the Second Escrow Agreement in the form attached hereto as Exhibit C (“Second Escrow Agreement”).
1.6Minimum Cash Balance. The Company covenants that as long as any Notes are outstanding, the Company shall maintain a (i) monthly minimum cash balance of not less than $350,000 (“Minimum Balance”); and (ii) bi-monthly minimum cash balance of not less than $625,000 (the “Two-Month Minimum”). The Minimum Balance shall be determined as of the last day of each calendar month; and the Two-Month Minimum shall be calculated as a two-month average, as of the last day of the applicable calendar month. The first such measurement of the (A) Minimum Balance shall be calculated as of the last day of the first full month following the Initial Closing and shall be recalculated as of the last day of each successive month thereafter; and (B) Two-Month Minimum shall be calculated as of the last day of the second full month following the Initial Closing and shall be recalculated as of the last day of each second calendar month thereafter (the “Cash Measurement Date”). Failure to meet either the Minimum Balance or Two-Month Minimum in any instance(s) (each a “Cash Measurement Date Shortfall”) shall not constitute an Event of Default under the Note or a default or breach of this Agreement or any of
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the agreements executed in connection herewith, provided that either (i) the Company provides to Lender a plan to cure the Cash Measurement Date Shortfall within 10 calendar days after the Cash Measurement Date showing the shortfall and such plan is acceptable to Lender, at its sole discretion or (ii) the Company cures the Cash Measurement Date Shortfall within 20 calendar days of the Cash Measurement Date showing the shortfall. If Company fails to cure any Cash Measurement Shortfall within the parameters of a plan approved pursuant to clause (i) of the preceding sentence, then the shortfall shall constitute an Event of Default hereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each Purchaser represents and warrants to the Company that:
2.1Authority. The Purchaser has the requisite power and authority to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action and no further consent or authorization of the Purchaser is required. This Agreement constitutes the valid and binding obligation of the Purchaser enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
2.2Purchase Entirely for Own Account. The Purchaser acknowledges that this Agreement is made with such Purchaser in reliance upon such Purchaser’s representation to the Company, which such Purchaser confirms by executing this Agreement, that the Securities will be acquired for investment for such Purchaser’s own account, not as a nominee or agent (unless otherwise specified on such Purchaser’s signature page hereto), and not with a view to the resale or distribution of any part thereof, and that such Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, each Purchaser further represents that such Purchaser 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 the Securities. If other than an individual, each Purchaser also represents it has not been organized solely for the purpose of acquiring the Securities.
2.3Disclosure of Information; Non-Reliance. The Purchaser acknowledges that it has received all the information it considers necessary or appropriate to enable it to make an informed decision concerning an investment in the Securities. The Purchaser 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. Each Purchaser confirms that the Company has not given any guarantee or representation as to the potential success, return, effect or benefit (either legal, regulatory, tax, financial, accounting or otherwise) of an investment in the Securities. In deciding to purchase the Securities, such Purchaser is not relying on the advice or recommendations of the Company and such Purchaser has made its own independent decision that the investment in the Securities is suitable and appropriate for such Purchaser. The Purchaser understands that no federal
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or state agency has passed upon the merits or risks of an investment in the Securities or made any finding or determination concerning the fairness or advisability of this investment.
2.4Investment Experience. The Purchaser has such knowledge, sophistication and experience in financial, tax and business matters in general, and investments in securities in particular, including knowledge as to investments in securities of companies in the cannabis industry, that it is capable of evaluating the merits and risks of an investment in the Securities, and that it can bear the economic risks of an investment in the Securities.
2.5Material Offering Risks. Purchasing Securities in the Offering will subject the Purchaser to certain material risks, including, but not limited to, each of the following: (i) the Company operates a business within the general cannabis industry which, until cannabis is legalized at a federal level, subjects the Company to significant regulatory, business and tax risks; (ii) there is an increased risk to Purchasers who participate in the Initial Closing where only the Minimum Investment must be raised, since the remainder of the funds may not be forthcoming and the Company’s inability to raise the full Offering amount may jeopardize the Company’s ability to execute its business plan; (iii) if the Company does not raise the full Offering amount hereunder, after repayment of the Current Outstanding Notes (as defined in Section 3.6(c)), there may not be sufficient proceeds from the sale of the Notes and Warrants hereunder to provide meaningful capital to execute its business plan; (iv) the Company has a history of losses and remains subject to a going concern qualification, and if it cannot generate sufficient revenue in future periods to service its obligations under the Notes, it may need to obtain financing from other sources in order to pay its obligations under the Notes as they become due; (v) certain terms of the Notes may be amended or waived upon the consent of the Company and the holders of at least 66% of the principal amount of Notes and such amendment, supplement or waiver shall be binding upon all Purchasers, whether or not such Purchaser has consented to such amendment or waiver, provided prior written consent is given by Lead Investor for any amendment or waiver that impacts or limits its rights; (vi) although the Company does not intend to allocate any separate value to the Warrants on the Closing, to the extent that the Internal Revenue Service successfully takes a contrary position, the value of the Warrants at the Closing may constitute additional original issue discount (“OID”) on the Notes which may need to be recognized by the Purchaser on an annual basis without any current payment of cash with which to pay any tax liability associated with such OID; (vii) there can be no assurance that the trading price of the Common Stock will exceed the exercise price of the Warrants or the conversion price of the Notes; and (viii) the subscription investments made by Purchasers prior to the Initial Closing, if any, although held in a segregated bank account, will not be held in a bank escrow account (other than the funds held pursuant to the Initial Escrow Agreement); thus, will be subject to creditor claims should the Company be unable to pay its debts in the orderly course. In addition to the foregoing, the Purchaser acknowledges and agrees that it has read the risk factors included within the Company’s filings with the SEC and is purchasing the Securities fully cognizant of such risks and is willing to assume such risks.
2.6Accredited Investor. The Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder (the “Securities Act”). The Purchaser agrees to furnish any additional information requested by the Company to assure compliance with
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applicable U.S. federal and state securities laws in connection with the purchase and sale of the Securities.
2.7Restricted Securities. The Purchaser understands that the Securities have not been, and will not be, registered under the Securities Act or any state securities laws, by reason of specific exemptions under the provisions thereof which depend upon, among other things, the bona fide nature of the investment intent and the accuracy of each Purchaser’s representations as expressed herein. The Purchaser understands that the Securities are “restricted securities” under U.S. federal and applicable state securities laws and that, pursuant to these laws, such Purchaser must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission (“SEC”) and registered or qualified by state authorities, or an exemption from such registration and qualification requirements is available. Subject to Article IV, each Purchaser acknowledges that the Company has no obligation to register or qualify the Securities for resale and further acknowledges that, if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of such Purchaser’s control, and which the Company is under no obligation, and may not be able, to satisfy.
2.8No General Solicitation. The Purchaser, and its officers, directors, employees, agents, stockholders or partners have not either directly or indirectly, including through a broker or finder, solicited offers for or offered or sold the Securities by means of any form of general solicitation or general advertising within the meaning of Rule 502 of Regulation D under the Securities Act or in any manner involving a public offering within the meaning of Section 4(a)(2) of the Securities Act. Each Purchaser acknowledges that neither the Company nor any other person offered to sell the Securities to it by means of any form of general solicitation or advertising within the meaning of Rule 502 of Regulation D under the Securities Act or in any manner involving a public offering within the meaning of Section 4(a)(2) of the Securities Act.
2.9Residence. If the Purchaser is an individual, such Purchaser resides in the state or province identified in the address shown on such Purchaser’s signature page hereto. If the Purchaser is a partnership, corporation, limited liability company or other entity, such Purchaser’s principal place of business is located in the state or province identified in the address shown on such Purchaser’s signature page hereto.
2.10No Bad Actor Disqualification. Neither the Purchaser nor any of its affiliates is subject to a “bad actor” disqualification under Rule 506(d) of SEC Regulation D which would make the provisions of Rule 506(b) of SEC Regulation D unavailable for the sale of Class A Shares pursuant to this Agreement (a “Disqualification Event”). The Purchaser hereby agrees that it shall notify the Company promptly in writing in the event a Disqualification Event becomes applicable to the Purchaser or any of its affiliates.
2.11No Tax Advice. The Purchaser confirms that it has read the terms of the Notes and the Warrants and has had an opportunity to consult with its personal legal counsel and tax advisor, including with respect to the tax implications associated with investment in the Notes, the Warrants and the Common Stock issuable upon conversion or exercise thereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that:
3.1Organization of the Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado and has all requisite corporate power and authority to carry on its business as described in the Company’s public filings with the SEC. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on its business or properties.
3.2Authority. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Notes and the Warrants. The execution and delivery of this Agreement, the Notes and the Warrants by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required. This Agreement, the Notes and the Warrants have been duly executed and delivered by the Company and constitute a valid and binding obligation of the Company enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
3.3Business Licenses. As of the date of Closing, all of Company’s licenses are in good standing and condition and free and clear from any claims, disputes, investigations, or litigation.
3.4Disclosure of Material Contracts. As of the date of Closing, the Company’s SEC filings include true correct and complete copies of any material contracts to which Company is a party or which bind or affect its assets and are required to be so disclosed. Company is not in default in any material respect in the payment or performance of any of its contractual obligations.
3.5No Employment Disputes. There are no material employment related disputes, grievances, or disciplinary actions pending or threatened, by or between the Company and any of its employees or contractors.
3.6Accounts Receivable and Accounts Payable. A true and correct list of all accounts receivable and accounts payable of the Company as of the date Closing, has been furnished to Purchaser. All of the accounts receivable of the Company are actual and bona fide accounts receivable representing obligations for the total dollar amount thereof showing on the Company’s balance sheet and are not subject to any recoupments, set-offs or counterclaims and are collectible in the ordinary course of business. All accounts payable of Company have arisen from bona fide transactions in the ordinary course of business and are to be paid in accordance with normal trade practice.
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3.7Valid Issuance of Common Stock. The Common Stock issuable upon conversion of the Notes and/or the exercise of the Warrants purchased hereunder has been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Notes and Warrants, 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 Agreement and under applicable state and federal securities laws or liens or encumbrances created by or imposed by a Purchaser.
3.8Effect of Agreement. The execution, delivery and performance by the Company of this Agreement, the Notes and the Warrants, will not violate the charter documents, bylaws or formation documents of the Company or any law to which the Company is subject, or any judgment, award or decree or any material indenture, material agreement or other material instrument to which the Company is a party, or by which the Company or its properties or assets are bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under, any such indenture, agreement or other instrument, or result in the creation or imposition of any lien of any nature whatsoever upon any of the properties or assets of the Company, except to the extent the effect thereof will not be materially adverse to the Company’s ability to fulfill its obligations under this Agreement, the Notes and the Warrants.
3.9Legal Proceedings. There is no order or action pending, or, to the knowledge of the Company, threatened against or affecting the Company, in connection with the Company’s performance hereunder. There is no matter as to which the Company, or, to the knowledge of the Company, any affiliate of the Company has received any notice, claim or assertion which otherwise has been threatened against or affecting the Company in connection with its performance hereunder.
3.10SEC Reports and Financial Statements; Outstanding Notes.
(a)Since the date of filing of the Company’s Form 10-K for the fiscal year ended December 31, 2020, the Company has filed with the SEC true and complete copies of all forms, reports, schedules, statements and other documents required to be filed by it under the Exchange Act or the Securities Act (as such documents have been amended since the date of their filing, collectively, the “Company SEC Documents”). As of their respective dates or, if amended, as of the date of the last such amendment, the Company SEC Documents, including any financial statements or schedules included therein, complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder.
(b)Each of the financial statements included in the Company SEC Documents have been prepared from, and are in accordance with, the books and records of the Company, comply in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the financial position and the results of operations and cash flows of the Company as of the dates thereof or for the periods presented therein (subject, in the case of unaudited statements, to normal year-end audit adjustments not material in amount).
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(c)A true and correct copy of the Company’s unaudited balance sheet as of July 31, 2022 has been furnished by Company to Purchaser.
(d)As of the date hereof, the Company has outstanding indebtedness represented by 10% promissory notes issued by the Company in prior financing transactions that consist of promissory notes that are scheduled to become due on or before April 20, 2024, in the aggregate principal amount of $6,900,000 (“Current Outstanding Notes”).
3.11 Tax Returns. The Company has filed all federal, state and local tax returns and other reports each is required by law to file and has paid all taxes, assessments, fees and other governmental charges that are due and payable, excepting therefrom, any such charges which are being contested by the Company in good faith in appropriate proceedings after the posting of adequate reserves on the Company’s books to cover the costs thereof. The provision for taxes on the books of Company are adequate for all years not closed by applicable statutes, and for its current Fiscal Year, and the Company has no knowledge of any deficiency or additional assessment in connection therewith not provided for on its books.
ARTICLE IV
REGISTRATION RIGHTS
The Company covenants and agrees as follows:
4.1Definitions. For the purpose of this Article IV, the following definitions shall apply:
(a)“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time.
(b)“Person” shall mean an individual, partnership (general or limited), corporation, limited liability company, joint venture, business trust, cooperative, association or other form of business organization, whether or not regarded as a legal entity under applicable law, a trust (inter vivos or testamentary), an estate of a deceased, insane or incompetent person, a quasi-governmental entity, a government or any agency, authority, political subdivision or other instrumentality thereof, or any other entity.
(c)“Register,” “registered,” and “registration” shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or order of effectiveness of such registration statement or document by the SEC.
(d)“Registration Statement” shall mean any registration statement of the Company filed with the SEC pursuant to the provisions of Section 4.2 or Section 4.3 of this Agreement, which covers the resale of the Restricted Stock on an appropriate form then permitted by the SEC to be used for such registration and the sales contemplated to be made thereby under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including any pre- and post- effective amendments
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thereto, in each case including the prospectus contained therein, all exhibits thereto and all materials incorporated by reference therein.
(e)“Restricted Stock” shall mean (i) shares of Common Stock issuable upon exercise of the Warrants or conversion of the Notes; and (ii) any additional shares of Common Stock of the Company issued or issuable after the date hereof in respect of any of the foregoing securities, by way of a stock dividend or stock split; provided that as to any particular shares of Restricted Stock, such securities shall cease to constitute Restricted Stock when (x) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of thereunder, (y) such securities are permitted to be transferred pursuant to Rule 144 (or any successor provision to such rule) under the Securities Act without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, as determined by the counsel to the Company, or (z) such securities are otherwise freely transferable to the public without further registration under the Securities Act.
(f)“Selling Stockholders” shall mean Purchaser and any other purchaser of Notes and/or Warrants pursuant to the Agreement, and their respective successors and assigns.
(g)“Initiating Stockholder” shall mean a Selling Stockholder initiating a demand registration of Restricted Stock pursuant to Section 4.3.
4.2Piggyback Registration of the Restricted Stock.
(a)The Company shall notify all Selling Stockholders in writing at least ten (10) days prior to the filing of any registration statement under the Securities Act for the purpose of registering the primary offering of securities of the Company or the reoffer of securities of existing security holders of the Company, excluding registration statements on SEC Forms S-4, S-8 or any similar or successor forms, and will afford each such Selling Stockholder an opportunity to include in such registration statement all or part of such Restricted Stock held by such Selling Stockholder. Each Selling Stockholder desiring to include in any such registration statement all or any part of the Restricted Stock held by it shall, within five (5) days after the above-described notice from the Company, so notify the Company in writing. Such notice shall state the intended method of disposition of the Restricted Stock by such Selling Stockholder. If a Selling Stockholder decides not to include all of its Restricted Stock in any registration statement thereafter filed by the Company, such Selling Stockholder shall nevertheless continue to have the right to include any Restricted Stock in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. The Company may, without the consent of the Selling Stockholders, withdraw such registration statement prior to its becoming effective if the proposal to register the securities proposed to be registered thereby is abandoned.
(b)In the event that any registration pursuant to Section 4.2(a) shall be, in whole or in part, an underwritten public offering of Common Stock on behalf of the Company, all Purchasers proposing to distribute their Restricted Stock through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for
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such underwriting by the Company. If the managing underwriter thereof advises the Company in writing that in its opinion the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the Company, the Company shall include in such registration (i) first, the securities the Company proposes to sell, and (ii) second, the Restricted Stock and any other registrable securities eligible and requested to be included in such registration only to the extent that the number of shares to be registered under this clause (ii) will not, in the opinion of the managing underwriter, adversely affect the offering of the securities pursuant to clause (i); and in such a case, the Leading Investor’s Restricted Stock shall have priority for registration of shares covered by clause (ii), and the remainder -if any- shall be registered pro rata among the holders of such Restricted Stock and registrable securities on the basis of the number of shares eligible for registration that are owned by all such holders and requested to be included in such registration.
(c)Notwithstanding anything to the contrary contained herein, the Company's obligation in Sections 4.2(a) and 4.2(b) above shall extend only to the inclusion of the Restricted Stock in a Registration Statement. The Company shall have no obligation to assure the terms and conditions of distribution, to obtain a commitment from an underwriter relative to the sale of the Restricted Stock or to otherwise assume any responsibility for the manner, price or terms of the distribution of the Restricted Stock.
(d)The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 4.2 prior to the effectiveness of such registration without thereby incurring liability to the holders of the Restricted Stock, regardless of whether any holder has elected to include securities in such registration. The Registration Expenses (as defined in Section 4.6) of such withdrawn registration shall be borne by the Company in accordance with Section 4.6 hereof.
4.3Demand Registration of Restricted Stock.
(a)If at any time after the second anniversary of the Initial Closing date the Company receives a request by the Lead Investor that the Company file a registration statement on SEC Form S-3 (if the Company is eligible to use this form) or any similar or successor forms under the Securities Act for the sale, in whole or in part, of its Restricted Stock, then the Company shall (I) within five (5) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Selling Stockholders other than the Initiating Stockholder; and (II) as soon as practicable, and in any event ninety (90) days after the date such request is given by the Initiating Stockholder, file such registration statement under the Securities Act covering all the Restricted Stock that the Initiating Stockholder requested to be registered and any additional Restricted Stock requested to be included in such registration by any other Selling Stockholder, as specified by notice given by each such Selling Stockholder to the Company within five (5) days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 4.3. (b) and 4.3. (c). The Lead Investor shall be the only Selling Shareholder entitled to demand registration, and they shall have the right to initiate registration pursuant to this Section 4.3 once in each twelve (12) month period after becoming eligible to do so.
(b)If, pursuant to Section 4.3 (a), the Initiating Stockholder intends to distribute the Restricted Stock covered by their request by means of an underwriting, they shall so advise the
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Company as a part of their request made pursuant to Section 4.3 (a), and the Company shall include such information in the Demand Notice. In such event, the right of any Selling Stockholder other than the Initiating Stockholder to include their Restricted Stock in such registration shall be conditioned upon such Selling Stockholder’s participation in such underwriting and the inclusion of their Restricted Stock in the underwriting to the extent provided herein. All Selling Stockholders proposing to distribute their securities through such underwriting shall (together with the Company) enter into an underwriting agreement in customary form with the underwriter selected for such underwriting by the Initiating Stockholder. Notwithstanding any other provision of this Section 4.3 (b), if the managing underwriter advises the Initiating Stockholder in writing that in its opinion the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the Initiating Stockholder, the Company shall include in such registration (i) first, the securities the Initiating Stockholder proposes to sell, and (ii) second, the Restricted Stock and any other registrable securities eligible and requested to be included in such registration only to the extent that the number of shares to be registered under this clause (ii) will not, in the opinion of the managing underwriter, adversely affect the offering of the securities pursuant to clause (i).
(c)Notwithstanding the foregoing obligations, if the Company furnishes to the Initiating Stockholder a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its shareholders for such registration statement to be filed and is therefore necessary to defer the filing of such registration statement, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than ninety (90) days after the request of the Initiating Stockholder is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period.
4.4Registration Procedures. Whenever it is obligated to register any Restricted Stock pursuant to this Agreement, the Company shall:
(a)prepare and file with the SEC a Registration Statement with respect to the Restricted Stock in the manner set forth in Sections 4.2 and 4.3 hereof and use its reasonable best efforts to cause such Registration Statement to become effective as promptly as possible and to remain effective until the earlier of: (i) the sale of all shares of Restricted Stock covered thereby, (ii) the availability under Rule 144 for the Selling Stockholder to publicly offer all Restricted Stock covered thereby without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, as determined by the counsel to the Company, or (iii) if Form S-3 is utilized, three (3) years from the date of effectiveness of the Registration Statement;
(b)prepare and file with the SEC such amendments (including post-effective amendments) and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for the period specified in Section 4.4 (a) above and to comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Restricted Stock covered by such
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Registration Statement in accordance with the intended method of disposition set forth in such Registration Statement for such period;
(c)furnish to the Selling Stockholders such number of copies of the Registration Statement and the prospectus included therein (including each preliminary prospectus) as such person may reasonably request in order to facilitate the public sale or other disposition of the Restricted Stock covered by such Registration Statement;
(d)use its reasonable best efforts to register or qualify the Restricted Stock covered by such Registration Statement under the state securities laws of such jurisdictions as any Selling Stockholder shall reasonably request; provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;
(e)immediately notify each Selling Stockholder at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus contained in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required or necessary to be stated therein in order to make the statements contained therein not misleading in light of the circumstances under which they were made. The Company will use reasonable efforts to amend or supplement such prospectus in order to cause such prospectus not to include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made;
(f)prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration Statements as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement;
(g)use its reasonable best efforts to list the Restricted Stock covered by such Registration Statement on each exchange, automated quotation system or over-the-counter market on which similar securities issued by the Company are then listed (with the listing application being made at the time of the filing of such Registration Statement or as soon thereafter as is reasonably practicable);
(h)notify each Selling Stockholder of any threat by the SEC or state securities commission to undertake a stop order with respect to sales under the Registration Statement; and
(i)subject to the establishment of such processes as the Company may establish in its discretion, from time to time, to insure that the resale of Restricted Stock complies with all applicable securities laws, cooperate in the timely removal of any restrictive legends from the shares of Restricted Stock in connection with the resale of such shares covered by an effective Registration Statement.
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4.5Delay of Registration. No Selling Stockholder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Article IV.
4.6Expenses.
(a)For the purposes of this Section 4.6, the term “Registration Expenses” shall mean: all expenses incurred by the Company in complying with Sections 4.2 or 4.3 of this Agreement, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees under state securities laws, fees of the Financial Industry Regulatory Authority, Inc. (FINRA), fees and expenses of listing shares of Restricted Stock on any securities exchange or automated quotation system on which the Company's shares are listed and fees of transfer agents and registrars. The term “Selling Expenses” shall mean: all underwriting discounts and selling commissions applicable to the sale of Restricted Stock and all accountable or non-accountable expenses paid to any underwriter in respect of such sale, but only if such expenses have been previously approved by Lead Investor at the time of the negation of the Underwriting Agreement or related engagement letter.
(b)Except as otherwise provided herein, the Company will pay all Registration Expenses in connection with the Registration Statements filed pursuant to Sections 4.2 and 4.3 of this Agreement. All Selling Expenses in connection with any Registration Statements filed pursuant to Sections 4.2 and 4.3. of this Agreement shall be borne by the Selling Stockholders pro rata on the basis of the number of shares registered by each Selling Stockholder whose shares of Restricted Stock are covered by such Registration Statement, or by such persons other than the Company (except to the extent the Company may be a seller) as they may agree. If the Company elects to terminate a registration process pursuant to Section 4.2(d) or otherwise, the Company shall reimburse Purchaser for any expenses associated with its participation in the registration process through the date of such termination.
4.7Obligations of the Selling Stockholders.
(a)In connection with each registration hereunder, each Selling Stockholder will furnish to the Company in writing such information with respect to it and the securities held by it and the proposed distribution by it, as shall be reasonably requested by the Company in order to assure compliance with applicable federal and state securities laws as a condition precedent to including the Selling Stockholder's Restricted Stock in the Registration Statement. Each Selling Stockholder shall also promptly notify the Company of any changes in such information included in the Registration Statement or prospectus as a result of which there is an untrue statement of material fact or an omission to state any material fact required or necessary to be stated therein in order to make the statements contained therein not misleading in light of the circumstances under which they were made.
(b)In connection with the filing of the Registration Statement, each Selling Stockholder shall furnish to the Company in writing such information and affidavits as the
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Company reasonably requests for use in connection with such Registration Statement or prospectus.
(c)In connection with each registration pursuant to this Agreement, each Selling Stockholder agrees that it will not effect sales of any Restricted Stock until notified by the Company of the effectiveness of the Registration Statement, and thereafter will suspend such sales after receipt of telegraphic or written notice from the Company to suspend sales to permit the Company to correct or update a Registration Statement or prospectus. At the end of any period during which the Company is obligated to keep a Registration Statement current, each Selling Stockholder shall discontinue sales of Restricted Stock pursuant to such Registration Statement upon receipt of notice from the Company of its intention to remove from registration the Restricted Stock covered by such Registration Statement that remains unsold, and each Selling Stockholder shall notify the Company of the number of shares registered which remain unsold immediately upon receipt of such notice from the Company.
4.8Information Blackout. At any time when a Registration Statement effected pursuant to Sections 4.2 or 4.3 is effective, upon written notice from the Company to Purchaser that the Company has determined in good faith that the sale of Restricted Stock pursuant to the Registration Statement would require disclosure of non-public material information, or at any time that the Company believes that maintaining the effectiveness of a Registration Statement would not be in the best interests of the Company, as determined by a vote of its Board of Directors, Purchaser shall suspend sales of Restricted Stock pursuant to such Registration Statement until such time as the Company determines that such material information has been disclosed to the public or has ceased to be material, or that sales pursuant to such Registration Statement may otherwise be resumed, and the Company shall immediately notify the Purchaser at that time.
ARTICLE V
CONDITIONS TO CLOSING
5.1Conditions of the Company’s Obligations at Closing. The obligations of the Company to each Purchaser under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:
(a)Representations, Warranties and Covenants. The representations and warranties of each Purchaser contained in Article II shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing and the Purchaser shall have complied with all covenants in this Agreement as of or prior to the Closing.
(b)Release of Initial Escrow. The appropriate portion of the Initial Escrow shall have been released to the Company pursuant to Section 5.2 (d) below.
(c)Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing.
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(d)Ancillary Agreements. The Second Escrow Agreement and security agreement in the form annexed hereto as Exhibit D (“Security Agreement”) shall have been executed and delivered.
5.2Conditions of the Purchasers’ Obligations at Closing. The obligations of each Purchaser to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:
(a)Representations, Warranties and Covenants. The Company shall have delivered a closing certificate certifying that the representations and warranties of the Company contained in Article III are true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date hereof and the Company shall have complied with all covenants in this Agreement as of or prior to the Closing.
(b)Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing.
(c)Ancillary Agreements. The Note, the Warrant, the Second Escrow Agreement and Security Agreement shall have been executed and delivered.
(d)Initial Escrow. The Initial Escrow shall have been released to the Company upon fulfillment of the conditions set forth in this Section 5.2(d) below:
(i)The Initial Escrow shall be distributed pursuant to Section 1.5. above within three (3) business day of the Company obtaining and delivering to Purchaser, within sixty (60) days of the date of this Agreement, in a form acceptable to Purchaser at its reasonable discretion, a signed unqualified audit opinion on the latest fiscal year financial statements of the companies identified in Section 5.2(e) below.
(ii)Should the condition set forth in Section 5.2(d)(i) above not be met by Company within the timeframe specified therein, the Initial Escrow shall be returned to the Purchaser immediately upon demand, pursuant to the terms of the Initial Escrow Agreement and this Agreement shall be terminated and be of no effect whatsoever upon the Company or the Purchaser, who shall be released from all obligations therewith.
(e)Green Tree Transaction. A definitive asset purchase or similar agreement for the acquisition by the Company of all or substantially all of the assets of Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises,
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LLC, and GT Creations, LLC, each a Colorado limited liability company, shall have been executed and delivered by the parties thereto on terms substantially similar to those set forth in the letters of intent for such acquisitions that have been provided to the Lead Investor.
ARTICLE VI
NOTICES
6.1Notices. Any notices, consents, waivers or other communications required or permitted to be given hereunder must be in writing and will be deemed to have been given (i) upon receipt, when delivered personally or via email to the email address designated below; (ii) three days after being sent by U.S. certified mail, return receipt requested; or (iii) one day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses for such communications shall be:
The addresses for such communications shall be: If to the Company: TREES Corporation 1901 S. Navajo Street Denver, CO 80223 Attention: David R. Fishkin, General Counsel If to the Purchasers: To the address of each Purchaser as set forth on the signature page hereto. |
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A party hereto may from time to time change its address or e-mail for notices under this Section 6.1 by giving at least five (5) days’ prior written notice of such changed address to the other party hereto.
ARTICLE VII
MISCELLANEOUS
7.1Non-Public Information. Each Purchaser acknowledges that information concerning the matters that are the subject matter of this Agreement may constitute material non-public information under United States federal securities laws, and that United States federal securities laws prohibit any person who has received material non-public information relating to the Company from purchasing or selling securities of the Company, or from communicating such information to any person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell securities of the Company. Accordingly, until such time as any such non-public information has been adequately disseminated to the public, each Purchaser shall not purchase or sell any securities of the Company, or communicate such information to any other person. Notwithstanding the forgoing, Lead Investor may disclose certain confidential information
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regarding the Agreement to its investment partners so long as confidentiality agreements are in full force and effect with these partners.
7.2Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Colorado without regard to the principles of conflicts of law (whether of the State of Colorado or any other jurisdiction).
7.3Exclusive Jurisdiction. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall only be commenced in the state and federal courts sitting in the County of Denver, Colorado (the “Colorado Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Colorado Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Colorado Courts, or such Colorado Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law.
7.4JURY TRIAL WAIVER. THE COMPANY AND THE PURCHASER HEREBY IRREVOCABLY WAIVE A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES AND/OR THE WARRANTS.
7.5Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and the Purchaser and their respective successors. No assignment may be made without the prior written approval of the Parties.
7.6No Third Party Beneficiaries. This Agreement is intended for the benefit of the Company and the Purchaser and their respective successors, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
7.7Entire Agreement. This Agreement, the Notes and the Warrants, together with the exhibits and schedules thereto, contain the entire understanding of the Company and the Purchasers with respect to the matters covered herein and therein and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
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7.8Fees and Expenses. Except as expressly set forth herein or any other writing to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. Notwithstanding the foregoing, the Lead Investor shall be reimbursed by the Company for up to $10,000 for actual legal fees incurred by the Lead Investor in connection with the review of this Agreement and the agreements contemplated thereby, regardless of whether the transaction closes and funding occurs.
7.9Counterparts. This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the parties and shall be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one and the same instrument. This Agreement may be delivered to the other parties hereto by e-mail of a copy of this Agreement bearing the signature of the parties so delivering this Agreement.
7.10Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party.
7.11No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
7.12Titles and Subtitles. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered in construing or interpreting this Agreement.
7.13Amendments; Waivers. Any term of this Agreement, the Notes or the Warrants may be amended and the observance of any term of this Agreement, the Notes or the Warrants may be waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of the Company, the holders of more than sixty-six percent (66%) of the then aggregate outstanding principal amount of the Notes (which must include the consent of the Lead Investor). Any waiver or amendment effected in accordance with this Section 7.13 will be binding upon each party to this Agreement and each holder of a Note and/or Warrant purchased under this Agreement then outstanding and each future holder of all such Notes and/or Warrants.
7.14Disclosure. The Purchaser acknowledges that this Agreement, the Notes and the Warrants may be deemed to be “material contracts,” as that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the Securities Act or the Exchange Act. The Purchaser further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel.
7.15Advice of Counsel. The Purchaser represents and acknowledges that it has had the opportunity to avail itself of the advice of counsel prior to signing this Agreement.
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7.16Indemnification. Each party hereto (as the case may be, the “Indemnifying Party”) shall indemnify, defend and hold harmless the other party and its affiliates and their respective officers, directors, employees, representatives and agents (collectively the “Indemnitees”; each, an “Indemnitee”) in respect of any and all losses incurred by any Indemnitee arising out of or as a result of any: (i) inaccuracy or misrepresentation in or breach of any representation or warranty made by the Indemnifying Party in this Agreement; (ii) breach of any covenant or agreement made by the Indemnifying Party in this Agreement; (iii) costs and expenses of any Indemnitees (including reasonable attorneys’ fees and amounts paid in settlement) reasonably incurred in connection with any legal proceedings arising out of any of the foregoing, or in enforcing this indemnification.
** Signature Page Follows **
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IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have caused this Agreement to be executed as of the date set forth below.
Date: September 15, 2022 | Individual Purchasers: PURCHASER Individual Purchasers:
Name: Entity Purchasers: TCM Tactical Opportunities Fund II LP By: Name: Douglas Troob Title: Manager All Purchasers Complete: Address: 777 Westchester Avenue, Suite 203, White Plains, NY 10604 |
SUBSCRIPTION AMOUNT: Principal Amount of Note: $ 10,448,551.00 | |
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** Signature Page to Securities Purchase Agreement **
ACCEPTANCE OF SUBSCRIPTION
(To be completed by TREES Corporation)
TREES Corporation hereby accepts the above application for subscription for the Notes and Warrants listed below.
TREES CORPORATION
By: ________________________
Name: Adam Hershey
Title: Interim Chief Executive Officer
Date: September 15, 2022
Principal Amount of Note: $ 10,448,551.00
Warrant to Purchase 2,980,361 Shares of Common Stock (20% of the principal amount of the Note divided by the strike price of $0.70)
Warrant to Purchase 1,928,571 Shares of Common Stock (10% of the Principal Amount divided by the strike price of $0.70)
List of Exhibits
Exhibit AForm of Senior Secured Convertible Promissory Note
Exhibit BForm of Warrant
Exhibit CForm of Second Escrow Agreement
Exhibit DForm of Security Agreement
EXHIBIT A
Form of Senior Secured Convertible Promissory Note
EXHIBIT B
Form of Warrant
EXHIBIT C
Form of Second Escrow Agreement
EXHIBIT D
Form of Security Agreement
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Exhibit 10.7
NEITHER THE ISSUANCE NOR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES FILED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE BORROWER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
Principal Amount: $ 10,443,223.00 | Issue Date: September 16, 2022 |
FORM OF SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED, TREES CORPORATION, a Colorado corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of TCM Tactical Opportunities Fund II LP, or its registered assigns (the “Holder”) the principal sum of $ 10,443,223.00 (TEN MILLION FOUR HUNDRED AND FOURTY THREE THOUSAND TWO HUNDRED AND TWENTY THREE DOLLARS WITH NO 0/100) (the “Principal Amount”), together with interest at the rate of twelve percent (12%) per annum on the aggregate unconverted and then outstanding Principal Amount of this Note, at maturity or upon acceleration or otherwise, as set forth herein (this “Note”).
This Note is one of a series of Notes issued pursuant to that certain Securities Purchase Agreement entered into by the Borrower and the Holder (the “Purchase Agreement”), and capitalized terms not defined herein will have the meanings set forth in the Purchase Agreement.
The maturity date of this Note shall be on that day that is forty-eight (48) months after the Issue Date (the “Maturity Date”), and is the date upon which the Principal Amount, as well as all accrued and unpaid interest and other fees, shall be due and payable.
Interest on the outstanding Principal Amount shall be paid quarterly in arrears. Interest will accrue for the first six months and then be payable on a current basis quarterly thereafter (i.e. months 9, 12, 15, etc.). The interest accrued over the first six months will be payable over the next four quarters in arrears (i.e. months 9, 12, 15, 18). Both the accrued interest and the current interest due on the Note will be payable in arrears. The accrued interest will earn an additional 1% per
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month on its outstanding balance to be paid in arrears with other interest payments.
Any amount of principal or interest on this Note, which is not paid by the Maturity Date, shall bear interest at the rate of the lesser of (i) eighteen percent (18%) per annum or (ii) the
maximum amount allowed by law, from the due date thereof until the same is paid (“Default Interest”).
The Borrower shall have the right to prepay all or any portion of this Note. The following procedure shall apply in connection with any such prepayment. The Borrower shall first provide notice of its intention to prepay all or any portion of this Note (“Prepayment Notice”). Within two (2) business days following delivery of the Prepayment Notice, the Borrower shall provide the “Requisite Information” as set forth in Exhibit B annexed hereto. The Holder may elect to exercise its conversion right (as set forth in Article II below) within five (5) business days following the delivery of the Requisite Information. In the event the Holder does not so exercise within such time period, the Borrower may proceed with the prepayment as specified in the Prepayment Notice.
All payments due hereunder (to the extent not converted into the Borrower’s common stock (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.
Upon the Issue Date, with respect only to the Holder who is also the Lead Investor, the Lead Investor shall be entitled to a cash fee equal to five percent (5%) of the Principal Amount (“Fee”), payable as follows: (i) One-half of the Fee shall be payable by the Borrower to the Lead Investor in cash upon the Issue Date (or netted out of the Principal Amount upon the parties’ mutual consent); and (ii) the other one-half of the Fee (“Deferred Cash Fee”) may be deferred in whole or in part in the sole discretion of the Borrower, upon written notice to the Lead Investor at any time or from time to time following the Issue Date setting forth that portion of the Deferred Cash Fee to be so deferred, for a period not to exceed the five-month anniversary of the Issue Date (“Deferred Fee Due Date”). Interest shall accrue on any outstanding amount of the Deferred Cash Fee at the rate of one percent (1%) per month. Both the Deferred Cash Fee and any interest accrued thereon shall be due and payable in full no later than the Deferred Fee Due Date.
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The following additional terms shall also apply to this Note:
ARTICLE I
SENIORITY
1.1Seniority. This Note shall rank senior in right of payment to all other “Borrower Debt” as further set forth in that certain Security Agreement between the Borrower and the Holders of even date herewith (the “Security Agreement”). “Borrower Debt” means any indebtedness now or during the term hereof for borrowed money of any kind whether evidenced by notes, debentures, bonds or similar instruments, and any guaranty of any of the foregoing, excluding (i) any other Notes issued in the Offering pursuant to the Purchase Agreement, (ii) accounts payable and trade debt and/or related cost, expenditures or payments incurred in the day-to-day operations of the business of the Borrower, (iii) operating, real estate and/or capex or similar leases, (iv) royalties existing as of the date hereof or ordinary course of business operating licenses and (vi) any other indebtedness for borrowed money incurred upon the written consent of the Holders of more than sixty-six percent (66%) of the then aggregate outstanding Principal Amount of the Notes and the Lead Investor. Notwithstanding the above, the Borrower shall not make any interest payments with respect to Borrower Debt that is junior to the Purchaser’s right of payment hereunder without Purchaser’s prior written consent.
1.2Borrower Covenant. Borrower agrees that so long as any of the obligations evidenced hereby remain outstanding it will not become obligated or a guarantor with respect to any Borrower Debt that is not, by its terms, junior in right of payment to the obligations hereunder; provided however that nothing herein shall prohibit the Borrower from repaying or refinancing any or all of its Current Outstanding Notes as contemplated in the Purchase Agreement, so long as Borrower receives the prior written consent of the Lead Investor.
ARTICLE II
CONVERSION RIGHT
2.1Optional Conversion by the Holder. Commencing as of the six-month anniversary of the Issue Date, the Holder shall have the right at any time prior to the Maturity Date, to convert up to a total of fifty percent (50%) of the outstanding and unpaid Principal Amount of this Note and unpaid accrued interest on this Note (such amount, the “Conversion Amount”) into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified (“Conversion Shares”), at the Conversion Price set forth below. The number of Conversion Shares to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 2.3 below; provided that the Notice of Conversion is submitted by e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The shares of Common Stock issuable
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upon conversion of this Note may not be sold or transferred except in accordance with Section 2.4 below.
2.2 | Conversion Price, Adjustments. |
(a)Conversion Price. The “Conversion Price” per share is equal to $1.00, subject to adjustment as provided below.
(b)Authorized Shares. The Borrower covenants that during the period the Conversion rights exist, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the full conversion of this Note.
(c)Adjustments for Subdivisions or Combinations of Common Stock. In the event the outstanding shares of Common Stock shall be subdivided (by stock split, by payment of stock dividend or otherwise), into a greater number of shares of Common Stock, the Conversion Price in effect immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased such that the Holder of this Note shall be entitled to receive the number of shares of Common Stock or other capital stock of the Borrower which such Holder would have owned or been entitled to receive immediately following such action had this Note been converted immediately prior to the occurrence of such event. In the event the outstanding shares of Common Stock shall be combined (by reclassification or otherwise) into a lesser number of shares of Common Stock, the Conversion Price in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination, be proportionately increased such that the Holder of this Note shall be entitled to receive the number of shares of Common Stock or other capital stock of the Borrower which such Holder would have owned or been entitled to receive immediately following such action had this Note been converted immediately prior to the occurrence of such event.
(d)Adjustments for Reorganization, Merger or Sale of Assets. If at any time while this Note, or any portion thereof, is outstanding there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for in subsection (d) above), (ii) a merger or consolidation with or into another corporation in which the Borrower is not the surviving entity, or a reverse triangular merger in which the Borrower is the surviving entity but the shares of the Borrower’s capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (iii) a sale or transfer of the Borrower’s properties and assets as, or substantially as, an entirety to any other person, then, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this Note shall thereafter be entitled to receive upon conversion of this Note the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon conversion of this Note would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Note had been converted immediately before such reorganization, merger, consolidation,
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sale or transfer, all subject to further adjustment as provided in this Section 2.2. The foregoing provisions of this Section 2.2(d) shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the conversion of this Note. If the per-share consideration payable to the Holder for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Borrower’s Board of Directors. In all events, appropriate adjustment (as determined in good faith by the Borrower’s Board of Directors) shall be made in the application of the provisions of this Note with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Note shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon conversion of this Note.
2.3 | Mechanics of Conversion. |
(a)Surrender of Note Upon Conversion. The Holder and the Borrower shall maintain records showing the updated current unpaid and unconverted Principal Amount of the Note. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid Principal Amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the Principal Amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid Principal Amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted Principal Amount of this Note represented by this Note may be less than the amount stated on the face hereof.
(b)Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note, and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(c)Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of an e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 2.3 and Section 2.4 (and, solely in the case of conversion of the entire unpaid Principal Amount hereof, surrender
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of this Note), the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion in accordance with the terms hereof within fourteen (14) days.
2.4Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope satisfactory to the Borrower) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Securities Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 2.4 and who is an “accredited investor” (as defined in Rule 501(a) of the Securities Act). Except as otherwise provided (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Securities Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE BORROWER, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.”
The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope satisfactory to the Borrower, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Securities Act, which opinion shall be accepted by the Borrower so that the
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sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Securities Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold.
2.5Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note.
ARTICLE III
EVENTS OF DEFAULT; REMEDIES
3.1Events of Default. The occurrence of any of the following events of default shall each be an “Event of Default”:
(a)Failure to Pay Principal or Interest. The Borrower fails to pay the Principal Amount hereof or interest thereon when due on this Note, whether at the Maturity Date, upon acceleration, or otherwise, and such failure continues for a period of ten (10) business days after written notice thereof to the Borrower from the Holder.
(b)Breach of Covenants. The Borrower breaches any covenant or other term or condition contained in this Note or in any other document entered into between the Holder and Borrower in any material respect, and such breach continues for a period of thirty (30) days after written notice thereof to the Borrower from the Holder.
(c)Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith, shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note, provided that Holder shall provide Borrower with five (5) days advance notice that Holder intends to declare that such representation or warranty was breached by the Borrower.
(d)Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
(e)Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower, which proceedings are not dismissed within ninety (90) days after institution.
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(f)Liquidation. The Borrower commences any dissolution, liquidation or winding up of Borrower.
3.2Remedies. If an Event of Default shall occur, then the Holder, provided it receives the consent of the Lead Investor (except in connection with an Event of Default resulting from Borrower’s failure to pay the Principal Amount hereof or interest thereon at the Maturity Date for which no consent is required), by written notice to the Borrower, may (i) declare the obligations due hereunder to be immediately due and payable, whereupon the sum of (x) the outstanding Principal Amount of this Note and (y) the interest and other amounts outstanding hereunder shall become and shall be forthwith due and payable, without diligence, presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and (ii) exercise any and all of its other rights under applicable law and/or hereunder. Any payment pursuant to this Section 3.2 shall be applied first to the Interest owed under this Note, second, to any other obligations (other than principal) owed hereunder and lastly to the principal balance of this Note.
ARTICLE IV
MISCELLANEOUS
4.1Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges.
4.2Notices. Any notices, consents, waivers or other communications required or permitted to be given hereunder must be in writing and will be deemed to have been given (i) upon receipt, when delivered personally or via email to the email address designated below; (ii) three days after being sent by U.S. certified mail, return receipt requested; or (iii) one day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses for such communications shall be:
If to the Borrower, to:
TREES Corporation
1901 S. Navajo Street
Denver, CO 80223
Attention: David R. Fishkin, General Counsel
If to the Holder, to:
The address furnished by the Holder to the Borrower in accordance with the Purchase Agreement
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4.3Amendments. Except for the Borrower’s obligations to repay the outstanding Principal Amount and any accrued and unpaid interest, the terms of the Notes (and this Note),
including the Maturity Date and the interest rate, may be modified with the written consent of the Borrower and the Holders of more than sixty-six percent (66%) of the then aggregate outstanding Principal Amount of the Notes and the Lead Investor.
4.4Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns. This Note may not be transferred unless the Holder delivers to the Borrower a written opinion of legal counsel or otherwise satisfies the Borrower with respect to the compliance of such transfer with applicable securities laws and the transferee agrees to be bound by all of the provisions of this Note. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the Securities Act).
4.5Costs and Expenses. Subject to Section 7.8 in the Purchase Agreement, each of Borrower and Holder will pay its own expenses in connection with the transactions contemplated under the Securities Purchase Agreement and the issuance of this Note. After the occurrence of an Event of Default, Borrower agrees to pay Holder for all reasonable out-of-pocket costs and expenses, including reasonable attorneys’ fees, incurred by Holder in connection with the enforcement of this Note.
4.6Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Colorado, without regard to the principles of conflict of laws thereof.
4.7Exclusive Jurisdiction. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Note (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall only be commenced in the state and federal courts sitting in Denver County, State of Colorado (the “Colorado Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Colorado Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Note), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Colorado Courts, or such Colorado Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby.
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4.8JURY TRIAL WAIVER. THE BORROWER AND THE HOLDER HEREBY WAIVE A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER IN RESPECTOFANY MATTER ARISINGOUT OF OR IN CONNECTION WITH THIS NOTE.
4.9Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.
** signature page to follow **
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer on the Issue Date.
TREES Corporation
By: ________________________
Name: Adam Hershey
Title: Interim Chief Executive Officer
SIGNATURE PAGE TO SENIOR CONVERTIBLE PROMISSORY NOTE
EXHIBIT A
Notice of Conversion
The undersigned hereby elects to convert $___________ principal amount of the Senior Convertible Promissory Note dated as of , 2022 (the “Note”) issued by TREES Corporation, a Colorado corporation (the “Borrower”), into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, according to the conditions of the Note, as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
[ ] The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).
DTC Broker:
Account Number:
[ ] The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:
| |
Date of Conversion: | |
Applicable Conversion Price: | $ |
Number of Shares of Common Stock to be Issued Pursuant to Conversion of this Note: | |
Amount of Principal Balance Due remaining under this Note after this conversion: | $ |
HOLDER: [ ]
By:
Name:
Title:
Date:
EXHIBIT B
Requisite Information
1. | Current capitalization table; |
2. | Interim financial statements if not yet filed with the SEC (unaudited non-GAAP); |
3. | Any term sheets or other information related to proposed acquisitions or other material transactions; |
4. | Copies of any third-party valuations; |
5. | Latest available projections and or budgets; |
6. | Update on any litigation, government investigations or claims not otherwise reported publicly; |
7. | Anything else the parties may believe to be relevant for a conversion decision. |
Exhibit 10.8
NEITHER THIS WARRANT NOR THE SECURITIES FOR WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE FORM AND SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
TREES CORPORATION
FORM OF WARRANT TO PURCHASE SHARES OF COMMON STOCK
Effective Date: September 16, 2022 Void After: September 15, 2027
No. TCORPW-
TREES CORPORATION, a Colorado corporation (the “Company”), for value received, hereby certifies that TCM Tactical Opportunities Fund II LP, or its registered assigns (the “Holder”), is entitled to purchase from the Company, at the Exercise Price, 4,912,349 (FOUR MILLION NINE HUNDRED AND TWELVE THOUSAND THREE HUNDRED AND FORTY NINE) shares of the duly authorized, validly issued, fully paid and nonassessable shares the Company’s common stock with a par value of $0.001 (“Common Stock”), at any time or from time to time prior to 11:59 P.M., New York City time, on the Expiration Date, all subject to the terms, conditions and adjustments set forth below.
This Warrant is one of a series of warrants of like tenor that have been issued in connection with the Company’s private offering solely to accredited investors of senior secured convertible promissory notes and warrants in accordance with, and subject to, the terms and conditions described in the Securities Purchase Agreement between the Holder and the Company, as the same may be amended and supplemented from time to time (the “Purchase Agreement”). This Warrant is entitled to the benefits of the Purchase Agreement and is also subject to the obligations imposed by the Purchase Agreement, including as it relates to any restrictions on transfer of ownership of this Warrant.
Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned such terms in the Purchase Agreement.
“Acquisition” shall mean any sale or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than thirty percent (30%) of the outstanding voting securities of the surviving entity after the transaction.
“Business Day” shall mean any day other than a Saturday or a Sunday or a day on which commercial banking institutions in the City of New York are authorized by law to be closed. Any reference to “days” (unless Business Days are specified) shall mean calendar days. In any circumstance where a date of determination under this Warrant falls on a date that is not a Business Day, it shall be deemed to be the next Business Day.
“Common Stock” shall have the meaning assigned to it in the introduction to this Warrant, such term to include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock, and all other stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference.
“Company” shall have the meaning assigned to it in the introduction to this Warrant, such term to include any corporation or other entity which shall succeed to or assume the obligations of the Company hereunder in compliance with Section 4.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations thereunder, or any successor statute.
“Exercise Price” shall mean $0.70 per Warrant Share, subject to adjustment and readjustment from time to time as provided in Section 3, and, as so adjusted or readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by Section 3.
“Expiration Date” shall mean the fifth (5th) anniversary of the Effective Date, subject to Section 4.
“Person” shall mean any individual, firm, partnership, corporation, trust, joint venture, association, joint stock company, limited liability company, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof, and shall include any successor (by merger or otherwise) of such entity.
“Securities Act” shall mean the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder, or any successor statute.
“Warrant Shares” shall mean the number of shares of Common Stock that can be purchased upon exercise of this Warrant.
Regardless of any adjustment or readjustment in the Exercise Price or the number of Warrant Shares or other securities actually purchasable under the Warrant (or the issuance of any certificate with respect thereto pursuant to this Section 5), any Warrant may continue to express the Exercise Price and the number of Warrant Shares purchasable under the Warrant as the price and number of shares were expressed on the Warrant when initially issued, subject to the Holder’s rights hereunder to exchange the Warrant for a new Warrant that reflects the terms of any such adjustment or readjustment.
If to the Company:
TREES Corporation
1901 S. Navajo Street
Denver, CO 80223
Attention: David R. Fishkin, General Counsel
If to the Holder:
At the address furnished by the Holder to the Company in accordance with the Purchase Agreement by and between the Company and the Holder
Each party shall provide five (5) days’ prior written notice to the other party of any change in address. Notwithstanding the foregoing, the exercise of this Warrant shall be effective in the manner provided in Section 2.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Warrant to be issued as of the
Effective Date.
| TREES CORPORATION | ||
| | | |
| By: | | |
| | Name: | Adam Hershey |
| | Title: | Interim Chief Executive Officer |
EXHIBIT A
TREES CORPORATION
ELECTION TO PURCHASE SHARES
The undersigned hereby irrevocably elects to purchase shares of Common Stock, (“Common Stock”), of TREES CORPORATION (the “Company”) by exercising the warrant (the “Warrant”) dated , 20 and issued to the undersigned, and hereby makes payment of $ therefor. The undersigned hereby requests that the certificate(s) for such shares and payment for fractional shares be issued and made as follows:
ISSUE/PAY TO:
(NAME)
(ADDRESS, INCLUDING ZIP CODE)
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER) DELIVER TO:
(NAME)
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock purchased hereby is less than the number of shares of Common Stock covered by the Warrant, the undersigned requests that a new Warrant representing the number of shares of Common Stock not so purchased be issued and delivered as follows:
ISSUE/PAY TO:
(NAME)
(ADDRESS, INCLUDING ZIP CODE)
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER) DELIVER TO:
(NAME)
(ADDRESS, INCLUDING ZIP CODE)
In order to induce the Company to give instructions to its transfer agent to issue the shares of Common Stock being purchased upon exercise of the Warrant, the undersigned hereby represents and warrants that the undersigned is an “accredited investor” as that term is defined in Regulation D under the Securities Act of 1933, as amended.
[Signature page follows]
* If other than the Holder specified on the Warrant delivered with this Election to Purchase Shares, the transfer is subject to compliance with applicable securities laws and the payment by the Holder of any applicable transfer or similar taxes.
[Signature Page to Election to Purchase Shares]
Individual(s): | | |
Signature (exactly as name appears on stock certificate(s) tendered) | | Signature of spouse, joint tenant, tenant in common, or other required signature |
Print or type name | | Print or type name |
Entity: | | |
Print or type name of entity (exactly as name appears on stock certificate(s) tendered) | | |
By: | | |
Name: Title: | | |
(Unless waived by the Company, all signatures must be guaranteed by an eligible guarantor institution that is a member of a recognized medallion signature guarantee program.)
EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED, and subject to compliance with applicable securities laws and payment of any applicable transfer taxes, the undersigned hereby sells, assigns, and transfers unto the Assignee named below all of the rights of the undersigned to purchase Common Stock of TREES CORPORATION (the “Company”) represented by the Warrant dated , with respect to the number of shares of Common Stock set forth below:
Name of Assignee | | Address | | No. of |
| | | | |
and does hereby irrevocably constitute and appoint any officer of the Company to make such transfer on the books of the Company maintained for that purpose, with full power of substitution in the premises.
Date:
(Unless waived by the Company, all signatures must be guaranteed by an eligible guarantor institution that is a member of a recognized medallion signature guaranty program.)
Exhibit 10.9
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this “Agreement”) is entered into as of September 16, 2022 by and between TREES Corporation, a Colorado corporation (the “Company”), and the persons and entities identified on the signature page hereof (each individually a “Holder,” and collectively, the “Holders”).
RECITALS:
WHEREAS, The Company has issued and delivered Senior Secured Convertible Promissory Notes of even date herewith in the principal amount of $10,443,223.00 (“Notes”) to certain noteholders (“Holders”) pursuant to that certain Securities Purchase Agreement by and among the Company and Holders (“SPA”); and
WHEREAS, Holders have required, as a condition of accepting the Notes, that the Company execute this Agreement to secure all obligations under the Notes.
NOW THEREFORE, in consideration of the foregoing recitals, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Holders hereby agree as follows:
1. | Capitalized Terms. Capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed thereto in the SPA. |
2. | Liability Secured. This Agreement is entered into as security for the payment of the Notes. |
3. | Granting Clause. As security for the obligations under the Notes, the Company does hereby grant, pledge, transfer, sell, assign, convey and deliver to the Holder a security interest in, all of the right, title and interest of the Company, in and to the property listed on Exhibit A hereto, which is incorporated herein by reference and all proceeds or replacements thereof (hereinafter collectively referred to as the “Collateral”). |
4. | Warranties of Title. The Company hereby: (a) covenants with the Holders, and their respective successors and assigns that the Company is the lawful owner of the Collateral and has the right to sell, assign, convey and grant a security interest in the same and that the Collateral is free and clear of all encumbrances and security interests (other than that of the Holders) except encumbrances in the ordinary course of business; (b) warrants and covenants to defend the title of the Collateral unto the Holders, against the claims of all persons; (c) warrants no financing statement covering any of the Collateral or any proceeds therefrom is on file at any public office; and (d) agrees, promptly upon request from the |
Holders to join with the Holders in executing one or more financing statements pursuant to the Uniform Commercial Code in form satisfactory to the Holders and to pay the cost of filing the same in all public offices wherever filing is deemed necessary or prudent by the Holders.
5. | Taxes and Assessments. The Company agrees to pay all taxes, rents, assessments and charges levied against the Collateral and all other claims that are or may become liens against the Collateral, or any part thereof. |
6. | Insurance. For so long as this Agreement shall remain effective, the Company agrees to maintain insurance coverage on all Collateral secured hereby on terms and conditions consistent with reasonable business standards and in compliance with all contractual obligations of the Company. The Company shall provide evidence of such insurance, and provide additional insured status, to the Lead Investor upon request. |
7. | Non-Waiver. It is agreed that no delay in exercising any right or option given or granted hereby to the Holders shall be construed as a waiver thereof; nor shall a single or partial exercise of any other right, power or privilege. Holders may permit the Company to remedy any default without waiving the default so remedied, and Holder may waive any default without waiving any other subsequent or prior default by the Company. |
8. | Events of Default. As used in this agreement, the term “Event of Default” shall mean the occurrence of an Event of Default under the Notes. |
9. | Acceleration of Liabilities. Upon the occurrence of any Event of Default, the Holder shall have the right without further notice to the Company to declare the entire unpaid balance of the Notes immediately due and payable. |
10. | Secured Party's Right After Default. Upon the occurrence of an Event of Default under this agreement, the Holder shall have, in addition to any other rights under this Agreement or under applicable law, the right upon reasonable notice to the Company to take any or all of the following actions at the same or at different times: (a) to collect all Collateral in the Company' name and take control of any cash or non-cash proceeds of Collateral (a deposit account control agreement to be in effect granting Holder exclusive control over cash proceeds in the event of default); (b) to enforce payment of any Collateral, to prosecute any action or proceeding with respect to the Collateral, to extend the time of payment of any and all Collateral, to make allowance and adjustments with respect thereto and to issue credits in the name of the Borrower; (c) to reposess any equipment, hard assets and inventory; (d) to transfer any licenses held by Company to name of Holder to the extent permitted by law; and (e) to exercise, in addition to all other rights and remedies of a Holder upon default under the Uniform Commercial Code. The net cash proceeds resulting from the exercise of any of the foregoing rights, after deducting all charges, expenses, cost and attorneys' fees relating thereto, including any and all costs and expenses incurred in securing the possession of Collateral and preparing the same for sale, shall be applied by the Holders to the payment of the Notes, whether due or to become due, and the Company shall remain liable to the Holders for any deficiency. |
11. | Miscellaneous. |
a. | Non-Public Information. Each Holder acknowledges that information concerning the matters that are the subject matter of this Agreement may constitute material non-public information under United States federal securities laws, and that United States federal securities laws prohibit any person who has received material non-public information relating to the Company from purchasing or selling securities of the Company, or from communicating such information to any person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell securities of the Company. Accordingly, until such time as any such non-public information has been adequately disseminated to the public, each Holder shall not purchase or sell any securities of the Company, or communicate such information to any other person. |
b. | Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Colorado without regard to the principles of conflicts of law (whether of the State of Colorado or any other jurisdiction). |
c. | Exclusive Jurisdiction. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall only be commenced in the state and federal courts sitting in the County of Denver, Colorado (the “Colorado Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Colorado Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Colorado Courts, or such Colorado Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. |
d. | JURY TRIAL WAIVER. THE COMPANY AND THE HOLDERS HEREBY IRREVOCABLY WAIVE A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES AND/OR THE WARRANTS. |
e. | Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and the Holders and their respective successors. No assignment may be made without the prior written approval of the Parties. |
f. | No Third Party Beneficiaries. This Agreement is intended for the benefit of the Company and the Holders and their respective successors, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. |
g. | Entire Agreement. This Agreement, the Notes and the Warrants, together with the exhibits and schedules thereto, contain the entire understanding of the Company and the Holders with respect to the matters covered herein and therein and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. |
h. | Counterparts. This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the parties and shall be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one and the same instrument. This Agreement may be delivered to the other parties hereto by e-mail of a copy of this Agreement bearing the signature of the parties so delivering this Agreement. |
i. | Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party. |
j. | No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. |
k. | Titles and Subtitles. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered in construing or interpreting this Agreement. |
l. | Amendments; Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of the Company and the holders of more than sixty-six percent (66%) of the then aggregate outstanding principal amount of the Notes. Any waiver or amendment effected in accordance herewith will be binding upon each party to this Agreement. Notwithstanding the forgoing, no amendments or waivers shall be made without the prior written approval of Lead Investor. |
m. | Disclosure. The Holders acknowledge that this Agreement, the Notes and the Warrants may be deemed to be “material contracts,” as that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the Securities Act or the Exchange Act. The Holders further agree that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel. |
n. | Advice of Counsel. Each Holder represents and acknowledges that it has had the opportunity to avail itself of the advice of counsel prior to signing this Agreement. |
[Signature page follows immediately]
IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have caused this Agreement to be executed as of the date set forth above.
TREES CORPORATION
By: ________________________
Name: Adam Hershey
Title: Interim Chief Executive Officer
HOLDER
TCM Tactical Opportunities Fund II LP
By: ________________________
Name: Douglas Troob
Title: Managing Partner
Exhibit A
Collateral
All right, title and interest in and to all assets of the Company.
Exhibit 10.10
INITIAL ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this “Agreement”) is entered into as of September 15, 2022, by and among TCM Tactical Opportunities Fund II LP (“Purchaser”), TREES Corporation, a Colorado corporation (the “Company”) and Day & Associates, LLC, a New Jersey limited liability company (the “Escrow Agent”, and together with Purchaser and Company, sometimes referred to individually as “Party” and collectively as the “Parties”).
RECITALS:
WHEREAS, Company and Purchaser have entered into a Securities Purchase Agreement of even date herewith (the “Securities Purchase Agreement”), pursuant to which the Company agreed to sell to Purchaser and Purchaser agreed to purchase from the Company, a certain Senior Secured Promissory Note(s) and a certain Warrant (as each term is defined in the Securities Purchase Agreement) for up to $13,500,000.00 (the “Principal Amount”); and
WHEREAS, pursuant to the terms of the Securities Purchase Agreement, the Parties have agreed to enter into this Agreement and deposit the entirety of the Principal Amount with the Escrow Agent as set forth in the Securities Purchase Agreement for the purposes set forth herein; and
WHEREAS, the execution and delivery of this Agreement is a condition to the obligations of the Parties under the Securities Purchase Agreement.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties and mutual covenants hereinafter set forth, the Parties hereto agree as follows:
1.Appointment. The Parties hereby appoint Escrow Agent as their escrow agent for the purposes set forth herein, and Escrow Agent hereby accepts such appointment under the terms and conditions set forth herein.
2.Escrow Amount. On the date hereof, Purchaser, or its designee, shall deposit with Escrow Agent the sum of thirteen million five hundred thousand dollars and no/100 ($13,500,000.00) (the “Escrow Amount”). Unless otherwise instructed by the Parties, Escrow Agent shall hold the Escrow Amount in a non-interest bearing deposit account insured by the Federal Deposit Insurance Corporation (“FDIC”) to the applicable limits.
3.Disposition and Termination.
(a)Escrow Agent is directed to hold and distribute the Escrow Amount as set forth in this Section 3.
(b)Except as otherwise provided in this Section 3, Escrow Agent will distribute the Escrow Amount only in accordance with (i) a joint written instrument, substantially in the form attached hereto as Exhibit A, delivered to Escrow Agent that is executed by Authorized Representatives (as defined below) of each Company and Purchaser, and that instructs Escrow Agent as to the disbursement of some or all of the Escrow Amount (“Joint Payment Instructions”), or (ii) a final non-appealable order of a court of competent jurisdiction accompanied by a written certification of the prevailing Party that such judgment or decree is final and not subject to any further appeal or proceedings, a copy of which is delivered to Escrow
Agent and the other Parties, that instructs Escrow Agent as to the disbursement of some or all of the Escrow Amount (a “Court Order”).
(c)Amounts distributed pursuant to this Section 3 will be paid to Purchaser or to the Company in accordance with wire instructions set forth in Section 3(d) below or furnished by an Authorized Representative of a Party to the Escrow Agent and confirmed in accordance with Section 3(d) below.
(d)Any instructions setting forth, claiming, containing, objecting to, or in any way related to the transfer or distribution of the Escrow Amount, must be in writing and set forth in a Portable Document Format (“PDF”), executed by the appropriate Party or Parties as evidenced by the signatures of the person or persons signing this Agreement or one of their designated persons as set forth on Schedules 1-A and 1-B attached hereto (each, an “Authorized Representative”), and delivered to Escrow Agent only by an attachment to an email on a Business Day to the email address set forth in Section 8 below. No instruction for or related to the transfer or distribution of the Escrow Amount will be deemed delivered and effective unless Escrow Agent actually receives it on a Business Day as a PDF attached to an email at the email address set forth in Section 8 and as evidenced by a confirmed transmittal to the Party’s or Parties’ email address, and Escrow Agent has been able to satisfy any applicable security procedures as may be required hereunder. Escrow Agent will not be liable to any Party or other person for refraining from acting upon any instruction for or related to the transfer or distribution of the Escrow Amount if delivered to any other email address, including but not limited to a valid email address of any employee of Escrow Agent. The Parties each acknowledge that Escrow Agent is authorized to use the following funds transfer instructions to disburse any funds due to Purchaser as set forth in Section 3(g) below:
Purchaser:
Bank Name:
ABA Number:
Account Name:
Account Number:
(e)In the event any other funds transfer instructions are set forth in a permitted instruction from a Party or the Parties in accordance with Section 3(d), Escrow Agent is authorized to seek confirmation of such funds transfer instructions by a single telephone call-back to one of the Authorized Representatives, and Escrow Agent may rely upon the confirmation of anyone purporting to be that Authorized Representative. The persons and telephone numbers designated for call-backs may be changed only in a writing executed by Authorized Representatives of the applicable Party and actually received by Escrow Agent via facsimile or as a PDF attached to an email. Except as set forth in Section 3(d) above, no funds will be disbursed until an Authorized Representative is able to confirm such instructions by telephone callback. Escrow Agent, any intermediary bank and the beneficiary’s bank in any funds transfer may rely upon the identifying number of the beneficiary’s bank or any intermediary bank included in a funds transfer instruction provided by a Party or the Parties and confirmed by an Authorized Representative. Further, the beneficiary’s bank in the funds transfer instructions may make payment on the basis of the account number provided in such Party’s or the Parties’ instruction and confirmed by an Authorized Representative even though it identifies a person different from the named beneficiary.
(f)As used in this Section 3, “Business Day” will mean any day other than a Saturday, Sunday, federal holiday or any other day on which Escrow Agent located at the notice address set forth below is authorized or required by law or executive order to remain closed. The Parties acknowledge that the security procedures set forth in this Section 3 are commercially reasonable. Upon delivery of the Escrow Amount by Escrow Agent, this Agreement will terminate, subject to the provisions of Section 6.
(g)This Agreement will be terminated automatically on the sixtieth (60th) day follwoing the date hereof. The Agreement may also be terminated at any time by a written agreement executed by each of the Parties. Upon termination of this Agreement, the Escrow Amount will be distributed, pursuant to the fund transfer instructions set forth in Section 3(d) above, to the Purchaser.
4.Escrow Agent. Escrow Agent will have only those duties as are specifically and expressly provided herein, which will be deemed purely ministerial in nature, and no other duties, including but not limited to any fiduciary duty, will be implied. Escrow Agent has no knowledge of, nor any obligation to comply with, the terms and conditions of any other agreement between the Parties, nor will Escrow Agent be required to determine if any Party has complied with any other agreement. Notwithstanding the terms of any other agreement between the Parties, the terms and conditions of this Agreement will control the actions of Escrow Agent. Escrow Agent may conclusively rely upon any written notice, document, instruction or request delivered by the Parties believed by it to be genuine and to have been signed by an Authorized Representative(s), as applicable, without inquiry and without requiring substantiating evidence of any kind and Escrow Agent will be under no duty to inquire into or investigate the validity, accuracy or content of any such document, notice, instruction or request. Escrow Agent will not be liable for any action taken, suffered or omitted to be taken by it except to the extent that Escrow Agent’s gross negligence or willful misconduct was the cause of any direct loss to either Party. Escrow Agent may execute any of its powers and perform any of its duties hereunder directly or through affiliates or agents. In the event Escrow Agent shall be uncertain, or believes there is some ambiguity, as to its duties or rights hereunder or receives instructions, claims or demands from any Party hereto which in Escrow Agent’s judgment conflict with the provisions of this Agreement, or if Escrow Agent receives conflicting instructions from the Parties, Escrow Agent will be entitled either to (a) refrain from taking any action until it will be given Joint Payment Instructions which eliminate such conflict or by a Court Order or (b) file an action as an interpleader. Escrow Agent will have no duty to solicit any payments which may be due it, including, without limitation, the Escrow Amount, nor will Escrow Agent have any duty or obligation to confirm or verify the accuracy or correctness of any amounts deposited with it hereunder. Anything in this Agreement to the contrary notwithstanding, in no event will Escrow Agent be liable for special, incidental, punitive, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.
5.Resignation; Succession; Removal.
(a)Escrow Agent may resign and be discharged from its duties or obligations hereunder by giving fifteen (15) days advance notice in writing of such resignation to the Parties. Escrow Agent’s sole responsibility after such fifteen (15) day notice period expires will be to hold the Escrow Amount and to deliver the same to a designated substitute escrow agent, if any, appointed by the Parties, or such other person designated by the Parties, or in accordance with the directions of a Court Order, at which time of delivery, Escrow Agent’s obligations hereunder will cease and terminate. If prior to the effective resignation date the Parties have failed to appoint a successor escrow agent, or to instruct Escrow Agent to deliver the Escrow Amount to another person as provided above, at any time on or after the effective resignation date, Escrow Agent either (i) may interplead the Escrow Amount with a court of competent jurisdiction, or (ii) appoint a successor escrow agent of its own choice. Any appointment by Escrow Agent of a successor escrow agent pursuant to the forgoeing will be binding upon the Parties and no appointed successor escrow agent will be deemed to be an agent of Escrow Agent. Escrow Agent will deliver the Escrow Amount to any appointed successor escrow agent, at which time Escrow Agent’s obligations under this Agreement will cease and terminate. Any entity into which Escrow Agent may be merged or converted or with which it may be consolidated, or any entity to which all or substantially all the escrow business may be transferred, will be considered “Escrow Agent” under this Agreement without further act.
(b)The Parties may remove Escrow Agent by giving twenty (20) days advance notice in writing of such removal to Escrow Agent. Within ten (10) days after giving the foregoing notice of removal to Escrow Agent, the Parties will jointly agree on and appoint a successor escrow agent. If a successor to Escrow Agent has not accepted such appointment by the end of such ten (10) day period, Escrow Agent either (i) may interplead the Escrow Amount with a court of competent jurisdiction, or (ii) appoint a successor escrow agent of its own choice. Any appointment of a successor escrow agent will be binding upon the Parties and no appointed successor escrow agent will be deemed to be an agent of Escrow Agent.
6.Compensation. The Parties agree jointly and severally to pay Escrow Agent upon execution of this Agreement, and from time to time thereafter, reasonable compensation for the services to be rendered hereunder, which unless otherwise agreed in writing, will be as described in Schedule 2. As between the Parties, the Company on one hand, and Purchaser on the other, will each be responsible for one-half (1/2) of all amounts payable or reimbursable to Escrow Agent under this Section 6 or otherwise provided for in this Agreement.
7.Indemnification and Reimbursement. The Parties agree jointly and severally to indemnify, defend, hold harmless, pay or reimburse Escrow Agent and its affiliates and their respective successors, assigns, directors, agents and employees (the “Indemnitees”) from and against any and all losses, damages, claims, liabilities, penalties, judgments, settlements, litigation, investigations, costs or expenses (including, without limitation, the fees and expenses of outside counsel and experts and their staff and all expenses of document location, duplication and shipment) (collectively “Losses”), arising out of or in connection with: (a) Escrow Agent’s performance of this Agreement, except to the extent that such Losses are determined by a court of competent jurisdiction to have been caused by the gross negligence, willful misconduct, or fraud of such Indemnitee; and (b) Escrow Agent’s following any instructions or directions, whether joint or singular, from the Parties received in accordance with this Agreement. The Parties hereby grant Escrow Agent a right of set-off against the Escrow Amount for the payment of any claim for indemnification, fees, expenses and amounts due to Escrow Agent or an Indemnitee. In furtherance of the foregoing, Escrow Agent is expressly authorized and directed, but will not be obligated, to charge against and withdraw from the Escrow Amount for its own account or for the account of an Indemnitee any amounts due to Escrow Agent or to an Indemnitee under Sections 6 or 7. The obligations set forth in this Section 7 will survive the resignation, replacement or removal of Escrow Agent or the termination of this Agreement. As between the Parties, the Company on one hand, and Purchaser on the other, agree that irrespective of any joint and several liability that either may have to Escrow Agent under this Agreement, as between them, the Company on one hand, and Purchaser on the other, will each only be liable for 50% of any Losses incurred by Escrow Agent which result in reimbursement or indemnification under this Section 7. As between the Parties, if either the Company on one hand, or Purchaser on the other, incurs greater than 50% of any such Losses, Purchaser or the Company, as applicable, will promptly make payment to the other such that each of the Company on one hand, and Purchaser on the other, has borne 50% of all amounts which are paid to Escrow Agent under this Section 7.
8.Notices. All communications hereunder will be in writing and set forth in a PDF attached to an email, and all instructions from a Party or the Parties to Escrow Agent will be executed by an Authorized Representative, and will be delivered in accordance with Section 3(d) to the address set forth for each Party as follows:
If to Purchaser:
TCM Tactical Opportunities Fund II LP
777 Westchester Ave, Suite 203
White Plains, NY 10604
Attn: Peter Troob
E-mail: [email protected]
If to Company:
TREES Corporation
1901 S. Navajo Street
Denver, CO 80223
Attn: David R. Fishkin, General Counsel
E-mail:[email protected]
If to Escrow Agent:
Day & Associates, LLC
2 Hudson Place, Suite 100
Hoboken, NJ 07030
Attn: Nick Day, Esq.
E-mail: [email protected]
9.Compliance with Court Orders. In the event that legal garnishment, attachment, levy, restraining notice or court order is served with respect to any of the Escrow Amount, or the delivery thereof will be stayed or enjoined by an order of a court, Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all such orders so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and in the event that Escrow Agent obeys or complies with any such order it will not be liable to any of the Parties hereto or to any other person by reason of such compliance notwithstanding such order be subsequently reversed, modified, annulled, set aside or vacated.
10.Miscellaneous. The provisions of this Agreement may be waived, altered, amended or supplemented only by a writing signed by Escrow Agent and the Parties. Neither this Agreement nor any right or interest hereunder may be assigned by any Party without the prior consent of Escrow Agent and the other Party. This Agreement will be governed by and construed under the laws of the State of New York. Each Party and Escrow Agent irrevocably waives any objection on the grounds of venue, forum non-conveniens or any similar grounds and irrevocably consents to service of process by mail or in any other manner permitted by applicable law and consents to the jurisdiction of the courts located in the State of New York. To the extent that in any jurisdiction either Party may now or hereafter be entitled to claim for itself or its assets, immunity from suit, execution, attachment (before or after judgment) or other legal process, such Party will not claim, and hereby irrevocably waives, such immunity. Escrow Agent and the Parties further hereby waive any right to a trial by jury with respect to any lawsuit or judicial proceeding arising or relating to this Agreement. No Party to this Agreement is liable to any other Party for losses due to, or if it is unable to perform its obligations under the terms of this Agreement because of, acts of God, fire, war, terrorism, floods, strikes, electrical outages, equipment or transmission failure, or other causes reasonably beyond its control. This Agreement, and any joint instructions from the Parties, may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument or instruction, as applicable. All signatures of the Parties to this Agreement may be transmitted by facsimile or as PDF attached to an email, and such facsimile or PDF will, for all purposes, be deemed to be the original signature of such Party whose signature it reproduces, and will be binding upon such Party. If any provision of this Agreement is determined to be prohibited or unenforceable by reason of any applicable law of a jurisdiction, then such provision will, as to such
jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions thereof, and any such prohibition or unenforceability in such jurisdiction will not invalidate or render unenforceable such provisions in any other jurisdiction. The Parties represent, warrant and covenant that, to each Party’s knowledge, each document, notice, instruction or request provided by it to the Escrow Agent will comply with applicable laws and regulations. Except as expressly provided in Section 7 above, nothing in this Agreement, whether express or implied, will be construed to give to any person or entity other than Escrow Agent and the Parties any legal or equitable right, remedy, interest or claim under or in respect of the Escrow Amount or this Agreement.
***Signature Page to Escrow Agreement Follows***
IN WITNESS WHEREOF, the Parties hereto have executed this Escrow Agreement as of the date set forth above.
PURCHASER: | TCM Tactical Opportunities Fund II, LP. By:______________________________ Name: Peter Troob Title: Managing Partner |
COMPANY: | TREES Corporation By: _____________________________ Name: Adam Hershey Title: Interim Chief Executive Officer |
ESCROW AGENT: | DAY & ASSOCIATES, LLC By: ____________________________ Name: Nicholas Day, Esq. Title: Managing Member |
| |
Signature Page to Escrow Agreement
EXHIBIT A
FORM OF ESCROW RELEASE NOTICE – JOINT INTSRUCTIONS
VIA EMAIL ([email protected])
Date: [____________________]
Day & Associates, LLC
2 Hudson Place, Suite 100
Hoboken, NJ 07030
Attn: Nicholas Day, Esq.
Re: Initial Escrow Agreement dated September [ ], 2022
Dear Mr. Day:
We refer to an escrow agreement dated September [ ], 2022 by and among TCM Tactical Opportunities Fund II, LP (“Purchaser”), Day & Associates, LLC, a New Jersey limited liability company (the “Escrow Agent”) and TREES Corporation (the “Company”) (the “Escrow Agreement”).
Capitalized terms used in this letter that are not otherwise defined herein shall have the same meaning given to them in the Escrow Agreement.
The Parties instruct the Escrow Agent to release an amount equal to [__________________], from the Escrow Account, to the specified Party as instructed below.
Amount (In writing)
Beneficiary
City
Country
US Wire Transfer Instructions:
Bank
Bank address
ABA Number:
Credit A/C Name:
Credit A/C #:
Credit A/C Address:
COMPANY: TREES Corporation By: ______________________________ Name: Adam Hershey Title: Interim Chief Executive Officer | PURCHASER: TCM Tactical Opportunities Fund II, LP By:______________________________ Name: Peter Troob Title: Managing Partner |
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SCHEDULE 1-A
TCM Tactical Opportunities Fund II, LP
DESIGNATION OF AUTHORIZED REPRESENTATIVES
Each of the following persons is at the date hereof an Authorized Representative, as such term is defined in the Escrow Agreement, dated [•], 2022 by and among Purchaser, the Company and the Escrow Agent (the “Escrow Agreement”), that the signature appearing opposite each person’s name is the true and genuine signature of such person, and that each person’s contact information is current and up-to-date at the date hereof. Each of the Authorized Representatives is authorized to issue instructions, confirm funds transfer instructions by callback and effect changes in Authorized Representatives, all in accordance with the terms of the Escrow Agreement.
NAME | SIGNATURE | TELEPHONE & CELL NUMBERS |
Peter Troob | ___________________________ | Office: (914) 694-5777 |
| | E-mail:[email protected] |
Douglas Troob | ___________________________ | Office: (914) 694-5777 |
| | E-mail:[email protected] |
Vincent Mazziotta | ___________________________ | Office: (914) 694-5777 |
| | E-mail: [email protected] |
All instructions, including but not limited to funds transfer instructions, must include the signature of the Authorized Representative authorizing said funds transfer on behalf of such Party.
SCHEDULE 1-B
TREES Corporation
Telephone Numbers and Authorized Signatures of
Person(s) Designated to Give Instructions and Confirm Funds Transfer Instructions
Each of the following persons is at the date hereof an Authorized Representative, as such term is defined in the Escrow Agreement, dated [•], 2022 by and among Purchaser, the Company and the Escrow Agent (the “Escrow Agreement”), that the signature appearing opposite each person’s name is the true and genuine signature of such person, and that each person’s contact information is current and up-to-date at the date hereof. Each of the Authorized Representatives is authorized to issue instructions, confirm funds transfer instructions by callback and effect changes in Authorized Representatives, all in accordance with the terms of the Escrow Agreement.
NAME | SIGNATURE | TELEPHONE & CELL NUMBERS |
David Fishkin | ___________________________ | Office: 917.880.0743 |
| | E-mail: [email protected] |
Adam Hershey | ___________________________ | Office: 917.880.0743 |
| | E-mail: [email protected] |
Jessica Bast | ___________________________ | Office: 917.880.0743 |
| | E-mail: [email protected] |
All instructions, including but not limited to funds transfer instructions, must include the signature of the Authorized Representative authorizing said funds transfer on behalf of such Party.
SCHEDULE 2
Schedule of Fees for Escrow Agent Services
Based upon our current understanding of your proposed transaction, our fee proposal is as follows:
Acceptance and Administration Fee
To cover the acceptance of the Escrow Agency appointment, the study of the Escrow Agreement, and supporting documents submitted in connection with the execution and delivery thereof, and communication with other members of the working group. The annual administration fee covers maintenance of the Escrow Account including safekeeping of assets in the escrow account, normal administrative functions of the Escrow Agent, including maintenance of the Escrow Agent’s records, follow-up of the Escrow Agreement’s provisions, and any other safekeeping duties required by the Escrow Agent under the terms of the Escrow Agreement. Fee is based on Escrow Amount being deposited in a non-interest bearing transaction deposit account, FDIC insured to the applicable limits.
Fee: $0
Transaction Fees
To oversee all required disbursements or release of property from the escrow account to any Party, including cash disbursements made via check and/or wire transfer, fees associated with postage and overnight delivery charges incurred by the Escrow Agent as required under the terms and conditions of the Escrow Agreement:
Fee: $0, except that wire charges or delivery fees are to be withheld from any dispursement of funds.
Other Fees
Material amendments to the Agreement or the coordination of dispute resolution activity will be subject to additional charges by the Escrow Agent and will require an upfront retainer in an agreed upon amount to be paid equally by the Parties.
Exhibit 10.11
SECOND ESCROW AGREEMENT
SECOND ESCROW AGREEMENT, made as of the 16th day of September, 2022, by and among TREES Corporation, a Colorado corporation (the “Company”), and the persons and entities identified on the signature page hereof (each individually a “Purchaser,” and collectively, the “Purchasers”), and TCM Tactical Opportunities Fund II LP (as “Lead Investor"), and Day & Associates, LLC (hereinafter the “Escrow Agent”).
W I T N E S S E T H:
WHEREAS, The Company has issued and delivered Senior Secured Convertible Promissory Notes of even date herewith in the principal amount of $10,443,223.00 (“Notes”) to the Lead Investor pursuant to that certain Securities Purchase Agreement by and among the Company and the Lead Investor (“SPA”); and
WHEREAS, the SPA contemplates, and the parties so desire, that portions of the principal of the Notes be held in escrow and released therefrom as set forth herein.
NOW THEREFORE, in consideration of the foregoing recitals, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company, the Purchasers and the Escrow Agent hereby agree as follows:
ARTICLE 1
TERMS OF THE ESCROW
| 1.1 | Establishment of Escrow; Deposit of Escrowed Funds. Upon the date hereof, the following amounts shall be deposited into escrow by the Purchasers into an account maintained by the Escrow Agent (“Escrow Account”) with the Escrow Agent acting as escrow agent in respect thereof and having sole signature authority with respect thereto at all times throughout the term hereof (collectively referred to herein as the “Escrowed Funds”): |
| a. | An amount equal to $2,500,000 (“Green Tree Escrow”) |
| b. | An amount equal to $1,200,000 (“Second Acquisition Escrow”) |
Escrow Agent shall deliver monthly bank statements to the Company and the Lead Investor showing the current balance and all transactions in the Escrow Account.
| 1.2 | Release of Escrowed Funds. |
| a. | The Green Tree Escrow shall be released from the Escrow Account as follows: |
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| (i) | An amount equal to $1,500,000 of the Green Tree Escrow (“Green Tree Cash Consideration”) shall be released from the Escrow Account and delivered to the Green Tree Sellers (as hereinafter defined) as directed thereby, no later than three (3) business days after receipt of joint written instructions from the Company and the Lead Investor that the closing of the Green Tree Acquisition is imminent and that the funds should be released. In the event of multiple Closings of the Green Tree Acquisition on different dates, the Green Tree Cash Consideration shall be released after the Closing of both the Ancient Alternatives LLC and Natural Alternatives For Life, LLC transactions. If the Closing of these two acquisitions does not occur by June 30, 2023, the Green Tree Cash Consideration (or any portion thereof not previously delivered to the Green Tree Sellers) shall be remitted to the Purchaser promptly thereafter unless the Lead Investor agrees to extend the escrow period for all Purchasers. |
| (ii) | The remaining $1,000,000 of the Green Tree Escrow shall be released from the Escrow Account and delivered to the Company within three (3) business days following the Closing of the Green Tree Acquisition, which for greater clarity means the Closing of all five of the acquisitions contemplated thereby. |
| b. | The Second Acquisition Escrow shall be released from the Escrow Account and delivered to the Company after payment of the Green Tree Cash Consideration pursuant to the Green Tree Escrow and not later than three (3) business days after receipt of joint written instructions from the Company and the Lead Investor that the closing of the Second Acquisition is imminent and that the funds should be released. If the Second Acquisition does not close by September 30, 2023, the Second Acquisition Escrow funds shall be remitted to the Purchaser promptly thereafter unless the Lead Investor agrees to extend the escrow period. |
| c. | Definitions: |
| (i) | “Green Tree Acquisition” means acquisition by the Company of all or substantially all of the assets of Ancient Alternatives LLC, Natural Alternatives For Life, LLC, Mountainside Industries, LLC, Hillside Enterprises, LLC, and GT Creations, LLC, each a Colorado limited liability company (“Green Tree Sellers”). |
| (ii) | “Second Acquisition” means acquisition by the Company of all or substantially all of the assets of a separate cannabis dispensary currently under consideration, or a substantially similar transaction with another seller or sellers. |
| (iii) | “Closing” for purposes of Section 1.2(a) and (b) shall mean the time when the state and local licenses as set forth on Schedule 1.1 hereof required to run the entity being acquired have transferred to and been accepted by the Company. |
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| 1.3 | Written Consent for Release of Escrowed Funds. The Escrowed Funds shall only be released from the Escrow Account as set forth above. The Escrow Agent shall require a written notice of consent from the Lead Investor prior to releasing any Escrowed Funds to the Company. The Purchasers hereby authorize the Lead Investor to make any and all decisions related to the release of funds authorized pursuant hereto. Each Purchaser, other than the Lead Investor, expressly waives any right to direct the distribution or release of the Escrowed Funds, and the Escrow Agent is authorized to act upon the instructions of the Lead Investor on behalf of all of the Purchasers in all cases. |
ARTICLE 2
MISCELLANEOUS
| 2.1 | Waiver. No waiver or any breach of any covenant or provision contained herein shall be deemed a waiver of any preceding or succeeding breach thereof, or of any other covenant or provision herein contained. No extension of time for performance of any obligation or act shall be deemed any extension of the time for performance of any other obligation or act. |
| 2.2 | Notices. Any notices, consents, waivers or other communications required or permitted to be given hereunder must be in writing and will be deemed to have been given (i) upon receipt, when delivered personally or via email to the email address designated below; (ii) three days after being sent by U.S. certified mail, return receipt requested; or (iii) one day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses for such communications shall be: |
The addresses for such communications shall be: If to the Company: TREES Corporation 1901 S. Navajo Street Denver, CO 80223 Attention: David R. Fishkin, General Counsel If to the Purchasers: To the address of each Purchaser as set forth on the signature page hereto. If to the Escrow Agent: |
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Day & Associates, LLC 2 Hudson Place, Suite 100 Hoboken, NJ 07030 Attn: Nicholas Day, Esq. |
|
A party hereto may from time to time change its address or e-mail for notices under this Section by giving at least five (5) days’ prior written notice of such changed address to the other parties hereto.
| 2.3 | Binding Effect. This Escrow Agreement shall be binding upon and shall inure to the benefit of the permitted successors and assigns of the parties hereto. |
| 2.4 | Entire Agreement. This Escrow Agreement is the final expression of, and contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior understandings with respect thereto. |
| 2.5 | Singular/Plural. Whenever required by the context of this Escrow Agreement, the singular shall include the plural and masculine shall include the feminine. This Escrow Agreement shall not be construed as if it had been prepared by one of the parties, but rather as if both parties had prepared the same. Unless otherwise indicated, all references to Articles are to this Escrow Agreement. |
| 2.6 | Governing Law; Jurisdiction. This Escrow Agreement will be construed and enforced in accordance with and governed by the laws of the State of New York, without reference to principles of conflicts or choice of law thereof. Each of the parties consents to the jurisdiction of the state courts of the State of New York sitting in Manhattan in connection with any dispute arising under this Escrow Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. Each party hereby agrees that if another party to this Escrow Agreement obtains a judgment against it in such a proceeding, the party which obtained such judgment may enforce same by summary judgment in the courts of any country having jurisdiction over the party against whom such judgment was obtained, and each party hereby waives any defenses available to it under local law and agrees to the enforcement of such a judgment. Each party to this Escrow Agreement irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address set forth herein. Nothing herein shall affect the right of any party to serve process in any other manner permitted by law. Each party waives its right to a trial by jury. The parties acknowledge and agree that by signing this Agreement, they waive any right to, and will not, raise as a defense that the Agreement included terms that violated federal cannabis laws and should therefore be null and void. This waiver of |
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| illegality defense clause also waives the ability for a party to claim the contract is null and void due to any public policy consideration. |
| 2.7 | Amendment; Successor Escrow Agent. This Escrow Agreement may be altered or amended only with the consent of all of the parties hereto. Should the Company or the Purchasers attempt to change this Escrow Agreement in a manner which, in the Escrow Agent's sole discretion, shall be undesirable, the Escrow Agent may resign as Escrow Agent by notifying the Company and the Purchasers in writing. In the case of the Escrow Agent's resignation or removal pursuant to the foregoing, its only duty, until receipt of notice from the Company and the Purchasers or its agent that a successor escrow agent shall have been appointed, shall be to hold and preserve the funds. Upon receipt by the Escrow Agent of said notice from the Company and the Purchasers of the appointment of a successor escrow agent, the name of a successor escrow account and a direction to transfer the Escrowed Funds, the Escrow Agent shall promptly thereafter transfer (or arrange for the same) all of the Escrowed Funds held in escrow to said successor escrow agent. Immediately after said transfer, the Escrow Agent shall furnish the Company and the Purchasers with proof of such transfer. The Escrow Agent is authorized to disregard any notices, requests, instructions or demands received by it from the Company or the Purchasers after notice of resignation or removal shall have been given, unless the same shall be the aforementioned notice from the Company and the Purchasers to transfer the funds to a successor escrow agent or to return same to the respective parties. |
| 2.8 | Expenses. The Escrow Agent shall be reimbursed by the Company and the Purchasers for any reasonable expenses incurred in the event there is a conflict between the parties and the Escrow Agent shall deem it necessary to retain counsel. |
| 2.9 | No Liability. The Escrow Agent shall not be liable for any action taken or omitted by it in good faith in accordance with the advice of the Escrow Agent's counsel; and in no event shall the Escrow Agent be liable or responsible except for the Escrow Agent's own gross negligence or willful misconduct. The Escrow Agent in its capacity as such has no liability hereunder to any party hereto other than to hold the Escrowed Funds (or arrange for the same) and to deliver them (or arrange for the same) under the terms hereof. The Escrow Agent and its designees, and their respective directors, officers, partners, employees, attorneys and agents, shall be indemnified, reimbursed, held harmless and, at the request of the Escrow Agent, defended by the Company and the Purchasers, jointly and severally, from and against any and all claims, liabilities, losses and expenses (including, without limitation, the disbursements, expenses and fees of their respective attorneys) that may be imposed upon, incurred by, or asserted against any of the Escrow Agent and its designees, or any of their respective directors, officers, partners, employees, attorneys or agents, arising out of or related directly or indirectly to this Escrow Agreement or any Escrowed Funds or documents, except such as are occasioned by the indemnified person's own acts and omissions breaching a duty owed to the claimant and amounting to gross negligence or willful misconduct as finally determined pursuant to applicable law by a governmental authority having jurisdiction. |
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| 2.10 | Conflicting Demands. If conflicting or adverse claims or demands are made or notices served upon the Escrow Agent with respect to the escrow provided for herein, the Company and the Purchasers agree that the Escrow Agent shall be entitled to refuse to comply with any such claim or demand and to withhold and stop all further performance of this escrow so long as such disagreement shall continue. In so doing, the Escrow Agent shall not be or become liable for damages, losses, expenses or interest to the Company or any Purchaser or any other person for its failure to comply with such conflicting or adverse demands. The Escrow Agent shall be entitled to continue to so refrain and refuse to so act until: (a) the rights of the adverse claimants have been finally adjudicated in a court assuming and having jurisdiction and venue over the parties and/or the documents, instruments or funds involved herein or affected hereby; and/or (b) the Escrow Agent shall have received an executed copy of a dispositive settlement agreement to which the Company, the Purchasers and all other adverse claimants, if any, are parties and signatories; and/or (c) the Escrow Agent has received instructions signed by the Company and the Lead Investor to transfer the Escrow Funds to a third party pursuant to a new escrow arrangement that has been approved by the Company and the Lead Investor. The Escrow Agent also may elect to commence an interpleader or other action for declaratory judgment for the purpose of having the respective rights of the claimants adjudicated, and may deposit with the court all funds and documents held hereunder pursuant to this Escrow Agreement; and if it so commences and deposits, the Escrow Agent shall be relieved and discharged from any further duties and obligations under this Escrow Agreement. The Company and the Purchasers agree to pay jointly and severally all costs, expenses and attorneys' fees and expenses incurred by the Escrow Agent in seeking any such judgment. The Company and the Lead Investor may also elect to change the escrow agent at any time, and the Escrow Agent shall comply with such request and authorize the transfer of funds to the new escrow agent promptly upon receipt of joint instructions from the Company and the Lead Investor to do so. |
| 2.11 | Reliance. The Escrow Agent shall be entitled to rely upon any notice, consent, certificate, affidavit, statement, paper, document, writing or communication (which to the extent permitted hereunder may be by telegram, cable, telex, email, facsimile, or telephone) reasonably believed by it to be genuine and to have been signed, sent or made by the proper person or persons, and upon opinions and advice of legal counsel (including himself or counsel for any party hereto), independent public accountants and other experts selected by the Escrow Agent. |
| 2.12 | Escrow Agent’s Relationship. The Escrow Agent is acting under this Escrow Agreement as a stakeholder only and shall be considered an independent contractor with respect to the Company and each Purchaser. No term or provision of this Escrow Agreement is intended to create, nor shall any such term or provision be deemed to have created, any principal-agent, trust, joint venture, partnership, debtor-creditor or attorney-client relationship between or among the Escrow Agent and any of the Company and the Purchasers. This Escrow Agreement shall not be deemed to prohibit or in any way restrict the Escrow Agent's representation of the Lead Investor, which may be advised by the Escrow Agent on any and all matters, including matters pertaining to the Agreement, this |
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| Escrow Agreement and the Escrowed Funds and documents. Each Purchaser and the Company hereby waive any conflict of interest and irrevocably authorizes and directs the Escrow Agent to carry out the terms and provisions of this Escrow Agreement fairly as to all parties, without regard to any such representation and irrespective of the impact upon the Company or any Purchaser. The Escrow Agent's only duties are those expressly set forth in this Escrow Agreement, and the Company and each Purchaser authorizes the Escrow Agent to perform those duties in accordance with its usual practices in holding funds and documents of its own or those of other escrows. The Escrow Agent may exercise or otherwise enforce any of its rights, powers, privileges, remedies and interests under this Escrow Agreement and applicable law or perform any of its duties under this Escrow Agreement by or through its directors, officers, partners, employees, attorneys, agents or designees. |
| 2.13 | Waiver of Liability. The Escrow Agent and its designees, and their respective directors, officers, partners, employees, attorneys and agents, shall not incur any liability whatsoever for the investment or disposition of funds, the holding or delivery of documents or the taking of any other action in accordance with the terms and provisions of this Escrow Agreement, for any mistake or error in judgment, for compliance with any applicable law or any attachment, order or other directive of any court or other authority (irrespective of any conflicting term or provision of this Escrow Agreement), or for any act or omission of any other person engaged by the Escrow Agent in connection with this Escrow Agreement; and the Company and each Purchaser hereby waives any and all claims and actions whatsoever against the Escrow Agent and its designees, and their respective directors, officers, partners, employees, attorneys and agents, arising out of or related directly or indirectly to any and all of the foregoing acts, omissions and circumstances. Furthermore, the Escrow Agent and its designees, and their respective directors, officers, partners, employees, attorneys and agents, shall not incur any liability (other than for a person's own acts or omissions breaching a duty owed to the claimant and amounting to gross negligence or willful misconduct as finally determined pursuant to applicable law by a governmental authority having jurisdiction) for other acts and omissions arising out of or related directly or indirectly to this Escrow Agreement or the escrowed funds or documents; and the Company and each Purchaser hereby expressly waives any and all claims and actions (other than those attributable to a person's own acts or omissions breaching a duty owed to the claimant and amounting to gross negligence or willful misconduct as finally determined pursuant to applicable law by a governmental authority having jurisdiction) against the Escrow Agent and its designees, and their respective directors, officers, partners, employees, attorneys and agents, arising out of or related directly or indirectly to any and all of the foregoing acts, omissions and circumstances. Notwithstanding anything to the contrary stated herein or any interpretation thereof, the Escrow Agent shall be responsible for any act or omission that constitutes his or his agent’s gross negligence, willful misconduct, or direct contravention of the terms of this Agreement or a joint directive of the Lead Investor and the Company authorized hereby. |
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[Signatures pages follow immediately]
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IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have caused this Agreement to be executed as of the date set forth above.
| TREES CORPORATION | ||
| | | |
| By: | | |
| | Name: | Adam Hershey |
| | Title: | Interim Chief Executive Officer |
| | | |
| | Lead Investor | |
| | TCM Tactical Opportunities Fund II LP | |
| | | |
| By: | | |
| | Name: | Douglas Troob |
| | Title: | Managing Partner |
Escrow Agent: | | |||
Day & Associates, LLC | | | | |
| | | | |
By: | | | ||
| Nicholas Day, Esq. | | ||
| Managing Member | | ||
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| Individual Purchasers: Name: Entity Purchasers: Name of Entity By:___________________________________ Name: Title: |
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Schedule 1.1.
Natural Alternatives for Life, LLC – State Medical Cultivation 403-01331
Natural Alternatives for Life, LLC – Berthoud Medical Cultivation
Natural Alternatives for Life, LLC - State Medical Dispensary 402-00859
Natural Alternatives for Life, LLC – Berthoud Medical Dispensary
Natural Alternatives for Life, LLC - State Retail Dispensary 402R-00771
Natural Alternatives for Life, LLC - Berthoud Retail Dispensary
Ancient Alternatives, LLC - State Medical Dispensary 402-01085
Ancient Alternatives, LLC - Boulder County Medical Dispensary MMB-15-0001
Ancient Alternatives, LLC - State Retail Dispensary 402R-00535
Ancient Alternatives, LLC - Boulder County Retail Dispensary RMB-15-0013
Ancient Alternatives, LLC – State Medical Cultivation 403-01685
Ancient Alternatives, LLC - Boulder County Medical Cultivation MMB-12-0036
Ancient Alternatives, LLC – State Retail Cultivation 403R-00693
Ancient Alternatives, LLC - Boulder County Retail Cultivation RMB-16-0001
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Exhibit 10.12
CONSULTING AGREEMENT
This Consulting Agreement (“Agreement”) dated as of September 16, 2022, is entered into by and between TREES Corporation, having an address at 1901 S. Navajo Avenue, Denver, CO 80223 (the “Company”), and Hershey Management 1, LLC, having an address at 6 Pompano Road, Rumson, NJ 07760 (“Consultant”).
WHEREAS, Consultant has served as the Interim Chief Executive Officer of the Company since May 2021; and
WHEREAS, the Company desires to continue to retain Consultant, and Consultant desires to be so retained, in such capacity as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows:
1. | Agreement to Provide Services; Reimbursement of Expenses. The Company hereby agrees to continue retaining Consultant, and Consultant hereby agrees to continue to serve, as the Interim Chief Executive Officer of the Company for the Term (as defined in Section 5 below), in accordance with the terms and conditions set forth below and as further specified in this Agreement (the “Services”). |
2. | Board of Directors. Consultant shall report directly to the Board of Directors of the Company (“Board”) or Chairman thereof. |
3. | Compensation. In consideration for the Services to be provided under this Agreement by Consultant, the Company hereby agrees to pay Consultant a consulting fee equal to $200,000 per annum, payable in equal monthly installments. |
4. | Limitation of Liability. The Company’s liability hereunder shall be limited to payment to Consultant of the amount as set forth above pursuant to this Agreement. All liability relating to withholding and payment of taxes and similar charges related to such compensation shall be Consultant’s sole responsibility. |
5. | Term. This Agreement shall remain in full force and effect for a term of one (1) year to commence effective as of the date hereof (the “Initial Term”). The Initial Term will automatically renew for successive six-month periods unless either party provides written notice of termination not less than sixty (60) days in advance of the expiration thereof. The Initial Term and any such extensions are hereby referred to as the “Term.” |
6. | Compliance with the Company’s Instructions. In his performance of the Services, Consultant shall comply with such reasonable instructions as the Board may from time to time submit to Consultant. |
7. | Standard of Performance. Consultant will perform the Services in a good and workmanlike manner, and in accordance with the highest professional standards and practices normally exercised by professional consultants performing services of a similar nature. Consultant shall also conduct his activities in accordance with all relevant laws, regulations, decrees and/or official government rules and orders. |
8. | Confidentiality; Work Product. |
a. | Consultant acknowledges that the continued success of the Company and its subsidiaries and affiliates, depends upon the use and protection of a large body of confidential, proprietary, and/or trade secret information. All such confidential, proprietary and trade secret information now existing or developed during the term of Consultant's consultancy hereunder will be referred to in this Agreement as "Confidential Information." Confidential Information will be interpreted broadly to include all information of any sort (whether embodied in a tangible or intangible form) that is (i) related to the Company's or its subsidiaries' business and (ii) not generally or publicly known. Confidential Information includes, without specific limitation, the information, observations and data obtained by Consultant during the course of his performance under this Agreement concerning the business and affairs of the Company and its Subsidiaries and affiliates, information concerning acquisition opportunities in or reasonably related to the Company' or its subsidiaries' or affiliates' business or industry of which Consultant becomes aware during Consultant's consultancy with the Company, the persons or entities that are current, former or prospective suppliers or customers of any one or more of them during Consultant's course of performance under this Agreement, as well as development, transition and transformation plans, methodologies and methods of doing business, strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans, confidential Consultant lists and contact information, compensation and incentive structures and strategies, confidential information concerning sales, including volumes, pricing, and margins, new and existing programs and services, prices and terms, customer service, integration processes, requirements and costs of providing service, support and equipment. Therefore, Consultant agrees that he shall not disclose to any unauthorized person or use for her own account any of such Confidential Information without the Board’s prior written consent, unless and to the extent that any Confidential Information (i) becomes generally known to and available for use by the public other than as a result of Consultant's improper acts or omissions to act; (ii) was independently developed by Consultant without reference to any Confidential Information; (iii) was furnished or disclosed to the Consultant by a third party under circumstances where Consultant believed, after reasonable inquiry, that such third party was free of any obligation of confidentiality regarding the Confidential Information; or (iv) is required to be disclosed pursuant to any applicable law, regulation or court order. Consultant agrees that he shall not disclose any Confidential Information after his consultancy ends. If requested by the Company in writing, Consultant agrees to deliver to the Company at the end of Consultant's consultancy with the Company, or at any other time the Company may request, all memoranda, notes, plans, records, reports and other documents (and copies thereof and all electronic data residing on any electronic device) relating to the business of the Company or its Subsidiaries or affiliates (including, without limitation, all Confidential Information) that he may then possess or have under his control, provided that Consultant may retain copies of Consultant's personnel information, such as performance evaluations, payroll information and the like. |
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b. | Consultant shall promptly notify the Company of any intended or unintended, unauthorized disclosure or use of any trade secrets or Confidential Information by Consultant or any other person or entity of which Consultant becomes aware. Consultant shall cooperate fully with the Company in the procurement of any protection of the Company’s rights to or in any of the trade secrets or Confidential Information. |
c. | Upon reasonable request by Company, Consultant shall execute a separate agreement between the parties hereto made a part hereof covering, among other things, non-disclosure and assignment of inventions. |
9. | Termination of Services. Promptly upon the termination of this Agreement, Consultant shall deliver to the Company all originals and copies of all records and work product obtained or generated by Consultant in the course of performing the Services, and will promptly deliver to the Company (or at the Company’s request, destroy) all of the confidential information in Consultant’s possession, including, but not limited to, all copies, reproductions, summaries, analyses or extracts thereof or based thereon stored in any medium whatsoever, including, but not limited to, the hard drives of any computer system; provided, that Consultant shall be permitted to retain a list of the items furnished for purposes of documenting such delivery, and provided further that Consultant shall be entitled to retain his own records of invoices submitted and payments received with respect to such Services. |
10. | Equitable Remedies. Consultant acknowledges and agrees that this Agreement involves valuable trade secret and other proprietary rights of the Company and that the Company’s remedies at law for any breach or threatened breach by Consultant of the covenants contained herein will be inadequate, and, accordingly, Consultant consents that, in addition to such other remedies as may be available to the Company at law or in equity, the Company shall be entitled to seek equitable relief by way of injunction issued by any court of competent jurisdiction, without bond or other security, if Consultant breaches or threatens to breach any of the provisions of this Agreement. Furthermore, Consultant agrees that any and all work product, including, but not limited to, documents, computer software, files, recordings, and photographs relating thereto, which Consultant may possess or have under its custody or control, are held by Consultant in constructive trust for the Company, and that any court of competent jurisdiction may summarily liquidate such trust on behalf of the Company. |
11. | Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado without giving effect to principles of conflicts or choice of laws thereof; federal and state courts located in the State of Colorado shall have exclusive jurisdiction with respect to any dispute or proceeding arising out of or relating to this Agreement, and the Company and Consultant hereby submit to the exclusive jurisdiction of such courts. |
12. | Notices. All notices to be provided pursuant to this Agreement (and any consents permitted by the terms of this Agreement) shall be in writing and delivered by hand, or sent by overnight courier or registered mail, return receipt requested to the address as set forth on the first page of this Agreement or such other address as may be properly noticed; or via email. |
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13. | Successors and Assigns. It is understood and agreed by the parties hereto that the Services to be provided by Consultant hereunder are personal to Consultant, and that Consultant shall not be entitled to assign his rights or obligations hereunder without having obtained the Company’s prior written consent thereto. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, including in the case of individuals, their heirs, executors and administrators. |
14. | Amendment. Except by an instrument in writing signed by the parties, this Agreement may not be amended or modified in any respect, except as expressly provided herein. |
15. | Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto as to the subject matter hereof and supersedes all previous agreements between the parties, whether written, oral or otherwise. |
16. | No Waiver. It is understood and agreed that no failure or delay by a party in exercising any right, power or privilege hereunder shall operate as a waiver thereof by such party, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. |
17. | Relationship Between Consultant and the Company. The relationship of Consultant to the Company under this Agreement shall be that of independent contractor. No provision of this Agreement is intended to or shall be construed as creating an employment, mutual agency, joint venture, partnership or other fiduciary relationship between the parties hereto, or as entitling Consultant or any of his agents or affiliates to any compensation or benefits as an employee, except as expressly provided in this Agreement. The Company expressly agrees and acknowledges that Consultant is permitted to commence or continue with other business activities, provided such activities do not conflict with this Agreement. |
18. | Signing in Counterparts; Email Delivery. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document. Transmission by email scan shall be sufficient for delivery hereof. |
[Signature Page follows immediately]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.
| TREES CORPORATION | ||
| |||
By: | |||
Name: | David R. Fishkin | ||
Title: | General Counsel | ||
| | ||
| | ||
| Hershey Management 1, LLC | ||
| |||
By: | |||
Name: | Adam Hershey | ||
Title: | Managing Member | ||
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Exhibit 10.13
CONSULTING AGREEMENT
This Consulting Agreement (“Agreement”) dated as of September 16, 2022, is entered into by and between TREES Corporation, having an address at 1901 S. Navajo Avenue, Denver, CO 80223 (the “Company”), and CRM LLC, having an address at 112 Windward Way, Indian Harbor Beach, FL 32937 (“Consultant”).
WHEREAS, Consultant has served as a consultant of the Company since May 2021; and
WHEREAS, the Company desires to continue to retain Consultant, and Consultant desires to be so retained, in such capacity as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows:
1. | Agreement to Provide Services; Reimbursement of Expenses. The Company hereby agrees to continue retaining Consultant, and Consultant hereby agrees to serve, as the Chief Operating Officer of the Company for the Term (as defined in Section 5 below), in accordance with the terms and conditions set forth below and as further specified in this Agreement (the “Services”). |
2. | Board of Directors. Consultant shall report directly to the Interim Chief Executive Officer of the Company as well as the Board of Directors of the Company (“Board”) or Chairman thereof. |
3. | Compensation. In consideration for the Services to be provided under this Agreement by Consultant, the Company hereby agrees to pay Consultant a consulting fee equal to $200,000 per annum, payable in equal monthly installments. |
4. | Limitation of Liability. The Company’s liability hereunder shall be limited to payment to Consultant of the amount as set forth above pursuant to this Agreement. All liability relating to withholding and payment of taxes and similar charges related to such compensation shall be Consultant’s sole responsibility. |
5. | Term. This Agreement shall remain in full force and effect for a term of one (1) year to commence effective as of the date hereof (the “Initial Term”). The Initial Term will automatically renew for successive six-month periods unless either party provides written notice of termination not less than sixty (60) days in advance of the expiration thereof. The Initial Term and any such extensions are hereby referred to as the “Term.” |
6. | Compliance with the Company’s Instructions. In his performance of the Services, Consultant shall comply with such reasonable instructions as the Interim CEO or Board may from time to time submit to Consultant. |
7. | Standard of Performance. Consultant will perform the Services in a good and workmanlike manner, and in accordance with the highest professional standards and practices normally exercised by professional consultants performing services of a similar nature. Consultant shall also conduct his activities in accordance with all relevant laws, regulations, decrees and/or official government rules and orders. |
8. | Confidentiality; Work Product. |
a. | Consultant acknowledges that the continued success of the Company and its subsidiaries and affiliates, depends upon the use and protection of a large body of confidential, proprietary, and/or trade secret information. All such confidential, proprietary and trade secret information now existing or developed during the term of Consultant's consultancy hereunder will be referred to in this Agreement as "Confidential Information." Confidential Information will be interpreted broadly to include all information of any sort (whether embodied in a tangible or intangible form) that is (i) related to the Company's or its subsidiaries' business and (ii) not generally or publicly known. Confidential Information includes, without specific limitation, the information, observations and data obtained by Consultant during the course of his performance under this Agreement concerning the business and affairs of the Company and its Subsidiaries and affiliates, information concerning acquisition opportunities in or reasonably related to the Company' or its subsidiaries' or affiliates' business or industry of which Consultant becomes aware during Consultant's consultancy with the Company, the persons or entities that are current, former or prospective suppliers or customers of any one or more of them during Consultant's course of performance under this Agreement, as well as development, transition and transformation plans, methodologies and methods of doing business, strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans, confidential Consultant lists and contact information, compensation and incentive structures and strategies, confidential information concerning sales, including volumes, pricing, and margins, new and existing programs and services, prices and terms, customer service, integration processes, requirements and costs of providing service, support and equipment. Therefore, Consultant agrees that he shall not disclose to any unauthorized person or use for her own account any of such Confidential Information without the Board’s prior written consent, unless and to the extent that any Confidential Information (i) becomes generally known to and available for use by the public other than as a result of Consultant's improper acts or omissions to act; (ii) was independently developed by Consultant without reference to any Confidential Information; (iii) was furnished or disclosed to the Consultant by a third party under circumstances where Consultant believed, after reasonable inquiry, that such third party was free of any obligation of confidentiality regarding the Confidential Information; or (iv) is required to be disclosed pursuant to any applicable law, regulation or court order. Consultant agrees that he shall not disclose any Confidential Information after his consultancy ends. If requested by the Company in writing, Consultant agrees to deliver to the Company at the end of Consultant's consultancy with the Company, or at any other time the Company may request, all memoranda, notes, plans, records, reports and other documents (and copies thereof and all electronic data residing on any electronic device) relating to the business of the Company or its Subsidiaries or affiliates (including, without limitation, all Confidential Information) that he may then possess or have under his control, provided that Consultant may retain copies of Consultant's personnel information, such as performance evaluations, payroll information and the like. |
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b. | Consultant shall promptly notify the Company of any intended or unintended, unauthorized disclosure or use of any trade secrets or Confidential Information by Consultant or any other person or entity of which Consultant becomes aware. Consultant shall cooperate fully with the Company in the procurement of any protection of the Company’s rights to or in any of the trade secrets or Confidential Information. |
c. | Upon reasonable request by Company, Consultant shall execute a separate agreement between the parties hereto made a part hereof covering, among other things, non-disclosure and assignment of inventions. |
9. | Termination of Services. Promptly upon the termination of this Agreement, Consultant shall deliver to the Company all originals and copies of all records and work product obtained or generated by Consultant in the course of performing the Services, and will promptly deliver to the Company (or at the Company’s request, destroy) all of the confidential information in Consultant’s possession, including, but not limited to, all copies, reproductions, summaries, analyses or extracts thereof or based thereon stored in any medium whatsoever, including, but not limited to, the hard drives of any computer system; provided, that Consultant shall be permitted to retain a list of the items furnished for purposes of documenting such delivery, and provided further that Consultant shall be entitled to retain his own records of invoices submitted and payments received with respect to such Services. |
10. | Equitable Remedies. Consultant acknowledges and agrees that this Agreement involves valuable trade secret and other proprietary rights of the Company and that the Company’s remedies at law for any breach or threatened breach by Consultant of the covenants contained herein will be inadequate, and, accordingly, Consultant consents that, in addition to such other remedies as may be available to the Company at law or in equity, the Company shall be entitled to seek equitable relief by way of injunction issued by any court of competent jurisdiction, without bond or other security, if Consultant breaches or threatens to breach any of the provisions of this Agreement. Furthermore, Consultant agrees that any and all work product, including, but not limited to, documents, computer software, files, recordings, and photographs relating thereto, which Consultant may possess or have under its custody or control, are held by Consultant in constructive trust for the Company, and that any court of competent jurisdiction may summarily liquidate such trust on behalf of the Company. |
11. | Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado without giving effect to principles of conflicts or choice of laws thereof; federal and state courts located in the State of Colorado shall have exclusive jurisdiction with respect to any dispute or proceeding arising out of or relating to this Agreement, and the Company and Consultant hereby submit to the exclusive jurisdiction of such courts. |
12. | Notices. All notices to be provided pursuant to this Agreement (and any consents permitted by the terms of this Agreement) shall be in writing and delivered by hand, or sent by overnight courier or registered mail, return receipt requested to the address as set forth on the first page of this Agreement or such other address as may be properly noticed; or via email. |
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13. | Successors and Assigns. It is understood and agreed by the parties hereto that the Services to be provided by Consultant hereunder are personal to Consultant, and that Consultant shall not be entitled to assign his rights or obligations hereunder without having obtained the Company’s prior written consent thereto. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, including in the case of individuals, their heirs, executors and administrators. |
14. | Amendment. Except by an instrument in writing signed by the parties, this Agreement may not be amended or modified in any respect, except as expressly provided herein. |
15. | Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto as to the subject matter hereof and supersedes all previous agreements between the parties, whether written, oral or otherwise. |
16. | No Waiver. It is understood and agreed that no failure or delay by a party in exercising any right, power or privilege hereunder shall operate as a waiver thereof by such party, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. |
17. | Relationship Between Consultant and the Company. The relationship of Consultant to the Company under this Agreement shall be that of independent contractor. No provision of this Agreement is intended to or shall be construed as creating an employment, mutual agency, joint venture, partnership or other fiduciary relationship between the parties hereto, or as entitling Consultant or any of his agents or affiliates to any compensation or benefits as an employee, except as expressly provided in this Agreement. The Company expressly agrees and acknowledges that Consultant is permitted to commence or continue with other business activities, provided such activities do not conflict with this Agreement. |
18. | Signing in Counterparts; Email Delivery. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document. Transmission by email scan shall be sufficient for delivery hereof. |
[Signature Page follows immediately]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.
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TREES CORPORATION | |||
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By: | |||
Name: | David R. Fishkin | ||
Title: | General Counsel | ||
TREES CORPORATION | |||
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By: | |||
Name: | Edward Myers | ||
Title: | Managing Member | ||
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