Exhibit 10.5

 

THIS DEBENTURE, AND ANY SHARES ACQUIRED UPON CONVERSION HEREOF, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") OR ANY
STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR (B) AN OPINION OF COUNSEL ACCEPTABLE TO COUNSEL FOR THE ISSUER THAT SUCH
REGISTRATION IS NOT REQUIRED AND THAT THE PROPOSED TRANSFER MAY BE MADE WITHOUT
VIOLATION OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAW.

 

$_____________ July __, 2018

 

 

CANNAPHARMARX, INC.

(a Delaware corporation)

 

12% CONVERTIBLE DEBENTURE

Due On or Before July __, 2019

 

CANNAPHARMARX, INC., a Delaware corporation (the "Company"), for value received
and intending to be legally bound, hereby promises to pay to the order of
_________________________, ("Holder"), the principal amount of
________________________________ Dollars ($_________________) on or before July
__, 2019, together with interest thereon as set forth herein.

 

1.                  Convertible Debenture. By accepting this Debenture, the
Holder hereby acknowledges that this Debenture has not been registered under the
Securities Act of 1933, as amended, or any state securities laws and Holder
represents for himself and his legal representative that he is acquiring this
Debenture and will acquire any shares issued upon conversion hereof, for his own
account, for investment purposes only and not with a view to, or for sale in
connection with, any distribution of such securities and Holder agrees to
reaffirm, in writing, this investment representation at the time of exercise of
the conversion right set forth herein.

 

2.                  Principal and Interest Payment. Interest on the principal
balance due hereunder shall be calculated at the rate of twelve percent (12%)
per annum and shall be paid at maturity. Payment of principal and all accrued
interest on this Debenture shall be made on or before July __, 2019 upon
presentation of this Debenture by the Holder at the offices of the Company, in
lawful money of the United States of America, by delivery of a check payable in
immediately available funds to the Holder at Holder's address.

 

3.                  Conversion of Debenture. This Debenture may be converted
into shares of Common Stock of the Company, as follows:

 

(a)       Conversion.

 

(i) Automatic Conversion. If the Company issues equity securities (“Equity
Securities”) in a transaction or series of related transactions resulting in
aggregate gross proceeds to the Company of at least $5,000,000, including
conversion of the Convertible Notes and any other indebtedness, or issuance of
Equity Securities in connection with any business combination, including a
merger or acquisition (a “Qualified Financing”), then the Convertible Notes, and
any accrued but unpaid interest thereon, will automatically convert into the
equity securities issued pursuant to the Qualified Financing at a conversion
price equal to the lesser of (i) 50% of the per share price paid by the
purchasers of such equity securities in the Qualified Financing or (ii) $0.40
per share.

 

 

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(ii) Voluntary Conversion at or prior to the Maturity Date. If this Note has not
been previously converted pursuant to a Qualified Financing, then, upon Holders
election prior to the Maturity Date or effective upon the Maturity Date, the
Holder may elect to this Convertible Notes into shares of the Company’s Common
Stock at a conversion price equal to the lesser of (i) 50% of the market price
for the Company’s Common Stock as of the Maturity Date or (ii) $0.40 per share.
Any election to convert the Convertible Notes pursuant to this paragraph shall
be effectuated by the Holder submitting to the Company a notice of conversion
attached hereto as Exhibit "1" (the "Conversion Notice") at least five (5) days
prior to the Maturity Date. The Conversion Notice shall state the dollar amount
thereof to be so converted and shall include or be accompanied by
representations as to the Holder's investment intent substantially similar to
those contained in this Debenture. Shares issuable upon conversion of the
Debenture shall be issued in the name of the Holder and shall be transferable
only in accordance with all of the terms and restrictions contained herein. No
fractional Shares shall be issued or delivered upon conversion of the Debenture.

 

(iii) Upon conversion of the entire balance of this Note, the principal
represented thereby shall be canceled upon delivery of the Debenture to the
offices of the Company.

 

(b) Subdivision or Combination. Whenever the Company shall subdivide or combine
the outstanding shares of Common Stock issuable upon conversion of this
Debenture, the Conversion Price in effect immediately prior to such subdivision
or combination shall be proportionately decreased in the case of subdivision or
increased in the case of combination effective at the time of such subdivision
or combination.

 

(c) Reclassification or Change. Whenever any reclassification or change of the
outstanding shares of Common Stock shall occur (other than a change in par
value, or from par value to no par, or from no par to par value, or as a result
of a subdivision or combination), effective provision shall be made whereby the
Holder shall have the right, at any time thereafter, to receive upon conversion
of this Debenture the kind of stock, other securities or property receivable
upon such reclassification by a holder of the number of shares of Common Stock
issuable upon conversion of this Debenture immediately prior to such
reclassification. Thereafter, the rights of the parties hereto with respect to
the adjustment of the amount of securities or other property obtainable upon
conversion of this Debenture shall be appropriately continued and preserved, so
as to afford as nearly as may be possible protection of the nature afforded by
this subparagraph (c).

 

(d)               Merger. If, prior to repayment of the obligations relevant
hereto, or prior to conversion of this Debenture into equity in the Company, the
Company shall be consolidated or merged with another company, or substantially
all of its assets shall be sold to another company in exchange for stock with
the view to distributing such stock to its shareholders, each share of stock
into which this Debenture is convertible shall be replaced for the purposes
hereof by a pro rata amount of the securities or property issuable or
distributable, based upon the percentage of the Company's common stock which a
Holder would have owned had a there been a conversion herein after consummation
of such merger, consolidation or sale and adequate provision to that effect
shall be made at the time thereof. The Company will provide the Holder at least
thirty (30) days prior written notice of any event described in this subsection
(d).

 

(e)               Reservation of Common Shares. The Company shall take or has
taken all steps necessary to reserve a number of its authorized but unissued
Common Shares sufficient for issuance upon conversion of this Convertible
Subordinated Debenture pursuant to the provisions included hereinabove.

 

 

 

 

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(f)                 Securities Laws Restrictions. This Debenture and the Common
Shares issuable upon conversion have not been registered for sale under the
Securities Act of 1933, as amended and neither this Debenture nor those shares
nor any interest in this Debenture nor those shares may be sold, offered for
sale, pledged or otherwise disposed of without compliance with applicable
securities laws, including, without limitation, an effective registration
statement relating thereto or delivery of an opinion of counsel acceptable to
the Company that such registration is not required under the Securities Act of
1933.

 

(g)               Status of Registered Holder. The Company may treat the
registered holder of this Debenture as the absolute owner of this Debenture for
the purposes of making payments of principal or interest and for all other
purposes and shall not be affected by any notice to the contrary.

 

(h)               Redemption/Prepayment of Debenture. This Debenture is subject
to redemption at the option of the Company upon 30 days prior written notice
(subject to the Holder's prior exercise of its right of conversion as set forth
above), as a whole at any time, or in part from time to time, upon payment by
the Company of 100% of the unpaid principal amount or such portion thereof so
redeemed, plus accrued interest thereon through the date of redemption.

 

4.       Events of Default. If any of the following conditions or events
("Events of Default") shall occur and be continuing:

 

(a) if the Company shall default in the payment of principal and/or interest
accruing herein when the same becomes due and payable, whether at maturity or by
declaration of acceleration or otherwise, and shall fail to cure such default
within seven days after written notice thereof from the Holder to the Company,
if the Company fails to tender any payment due hereunder when the same becomes
due; and shall fail to cure such default within seven days after written notice
thereof from the Holder to the Company, or

 

(b) if the Company shall materially default in the performance of or compliance
with any term contained herein and such default shall not have been remedied
within fifteen days after written notice thereof from the Holder to the Company;
or

 

(c) if the Company shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or a
voluntary petition for reorganization under Title 11 of the United States Code
("Title 11") shall be filed by the Company or an order shall be entered granting
relief to the Company under Title 11 or a petition shall be filed by the Company
in bankruptcy, or the Company shall be adjudicated a bankrupt or insolvent, or
shall file any petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, or shall file any
answer admitting or not contesting the material allegations of a petition filed
against the Company in any such proceeding, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver or liquidator of the
Company or of all or any substantial part of the properties of the Company or if
the Company or its directors or majority shareholders shall take any action
looking to the dissolution or liquidation of the Company; or

 

(d) if within 120 days after the commencement of an action against the Company
seeking a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been dismissed or nullified or all orders
or proceedings thereunder affecting the operations or the business of the
Company stayed, or if the stay of any such order or proceeding shall thereafter
be set aside, or if, within 120 days after the appointment without the consent
or acquiescence of the Company of any trustee, receiver or liquidator of the
Company or of all or any substantial part of the properties of the Company such
appointment shall not have been vacated;

 

 

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then, and in any such event, the Holder may at any time (unless such Event of
Default shall theretofore have been remedied) at its option, by written notice
to the Company, declare the Debenture to be due and payable, whereupon the
Debenture shall forthwith mature and become due and payable, together with
interest accrued thereon, and thereafter interest shall be due, at the rate per
annum hereinabove provided, on the entire principal balance until the same is
fully paid, and on any overdue interest (but only to the extent permitted by
law), without presentment, demand, protest or notice, all of which are hereby
waived, subject however, to the other terms, including those relating to
subordination, of this Debenture.

 

In the case of a default in the payment of any principal of or interest on the
Debenture, the Company will pay to the Holder such further amount as shall be
sufficient to cover the cost and expenses of collection, including, without
limitation, reasonable attorneys' fees, expenses and disbursements. No course of
dealing and no delay on the part of Holder in exercising any right shall operate
as a waiver thereof or otherwise prejudice such Holder's rights, powers or
remedies. No right, power or remedy conferred by this Debenture upon Holder
shall be exclusive of any other right, power or remedy referred to herein or now
or hereafter available at law, in equity, by statute or otherwise.

 

5.       Usury Laws. Notwithstanding any provision contained in this Debenture
to the contrary, the Company's liability for payment of interest shall not
exceed the limits imposed by applicable usury law. If any provision hereof
requires interest payments in excess of the then legally permitted maximum rate,
such provision shall automatically be deemed to require such payment at the then
legally-permitted maximum rate.

 

6.       Notices. All notices required or permitted to be given under this
Debenture shall be in writing (delivered by hand or sent certified or registered
mail, return receipt requested, or by nationally recognized overnight courier
service) addressed to the following addresses:

 

  If to Holder:                               If to Company: CANNAPHARMARX, INC.
                      Attn: President  

 

All notices shall be deemed given upon receipt by the recipient.

 

7.       Governing Law. This Debenture shall be governed by the laws of the
State of Colorado.

 

8.       Severability. If any provision, paragraph or subparagraph of this
Agreement is adjudged by any court to be void or unenforceable in whole or in
part, this adjudication shall not affect the validity of the remainder of the
Agreement, including any other provision, paragraph or subparagraph. Each
provision, paragraph or subparagraph of this Agreement is separable from every
other provision, paragraph and subparagraph and constitutes a separate and
distinct covenant.

 

9.       Amendment. This Agreement may only be amended in writing, duly endorsed
by the parties hereto.

 

10.       Headings. The headings in this Debenture are solely for convenience of
reference and shall not affect its interpretation.

 

 

 

ATTEST:   CANNAPHARMARX, INC.               By: Secretary   President

 

 

 

 

 

 

 

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EXHIBIT "1"

 

CONVERSION NOTICE

 

TO: CANNAPHARMARX, INC.

 

The Holder listed below hereby irrevocably exercises his/her/its right to
convert ____% ($______) of this Debenture into shares of Common Stock of
CANNAPHARMARX, INC. at the Conversion Price of $______ per share in accordance
with the terms of this Debenture, and directs that the Common Shares issuable
and deliverable upon such conversion, be registered in the name of the Holder on
the books and records of CANNAPHARMARX, INC. and delivered to the Holder.

 

The Holder hereby acknowledges that the Common Shares (i) have not been and will
not be at the time of acquisition by the undersigned registered under the
Securities Act of 1933, as amended, or under any state securities laws, and
hereby represents and warrants to the Company that he is acquiring the Common
Shares for his own account, for investment, and not with a view to, or for sale
in connection with, any distribution of such Common Shares; and (ii) are
transferable only in accordance with all the terms and restrictions contained in
the Debenture.

 

 

Dated: ________________ , 20___

 

  

 

      Witness   Signature of Holder                 (Print Name of Holder)      
          Social Security Number or EIN                 Address            

 

 

 

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