Exhibit 10.1

 

 

 

MANAGEMENT AGREEMENT BY AND BETWEEN CANNABIS GLOBAL, INC. AND WHISPER WEED INC

 

This Management Service Agreement ("Agreement") is entered into as of July 22,
2020 (the "Effective Date") by and among Cannabis Global, Inc. ("Cannabis
Global"), a Nevada corporation with a business address of 520 S Grand Ave #320,
Los Angeles CA 90071; and Whisper Weed Inc, a California Corporation with a
business address of 8721 Santa Monica Blvd Ste 702, West Hollywood, California
90069. Each of Cannabis Global and Whisper Weed are referred to herein as a
“Party” and collectively as the “Parties.”

 

RECITALS

 

Whereas, Cannabis Global Inc. is a corporation organized and operating in good
standing under the laws of the State of Nevada, which seeks to expand its
business operations within the legal and licensed cannabis market sector.

 

Whereas, Whisper Weed is a business entity organized and operating in good
standing under the laws of the State of California;

 

Whereas, Whisper Weed is a brand and may not have its own licenses but works
with Care California Consultation and possibly other licenses in order to
conduct licensed and compliant delivery activity, including the non-store front
retail delivery of cannabis products in California.

 

Whereas, on May 12, 2020, Cannabis Global and Whisper Weed entered into a Letter
of Intent (the “LOI”), attached hereto.

 

Whereas, the LOI outlined the framework of an agreement where Cannabis Global
would provide management services to Whisper Weed for valuable consideration.

 

Whereas, the Parties have determined it is in mutual interest to move forward
with such an Agreement as outlined herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows.

 

Section One – Organization

 

1.1. The Parties will create a new entity to be named CGI Whisper W, Inc., a
California corporation (“CGI Whisper W”). Cannabis Global will wholly own CGI
Whisper W. The principal office shall be located at 520 S Grand Ave Ste 320,
West Los Angeles, California 90071.

 

 
 

 

 

 

1.2. The purpose of CGI Whisper W will be to provide management services (the
“Management Services”) for the lawful delivery of cannabis in the State of
California.

 

1.3. CGI Whisper W will provide such Management Services for a period of ten
(10) years unless otherwise terminated pursuant to the terms and conditions of
this Agreement.

 

1.4. Relative to the management, CGI will be responsible for overall operations
of the entity, including, but not limited to: 1) maintaining quarterly
reporting, 2) legal fees associated with the entity, 3) tax return preparation,
audits and other tasks of corporate governance, and 4) integration of such tasks
and information into the MCTC corporate entity.

 

1.5. The Parties acknowledge this Agreement does not outline all required
management functions that may fall under a typical management agreement. The
Parties agree to work in good faith to periodically workout specific functions
that shall be encompassed with the Agreement for the Management Services.

 

1.6. One, or more of the owners, shareholders or partners of the Parties is a
partial owner, shareholder or partner in another Party and thus, this Agreement,
relative to these Parties, is between Related Parties, as defined in FASB
Accounting Standards Codification 850.

 

Section Two - Fees Paid For Management Services

 

2.1. CGI Whisper W will receive, as compensation for the Management Service, a
fee equal to Fifty One (51%) of the net profits earned by Whisper Weed. The fees
(the “Quarterly Fees”) will be calculated on a rolling three-month (Quarterly)
period basis based on the 15th of each of the following months: November,
February, May, and August. Net profits will be defined as outlined by the
relevant Generally Accepted Accounting Practices. (GAAP).

 

2.2. Payment of the Quarterly Fees shall be due and payable to CGI Whisper W as
of the last day of each of the months ending in November, February, May, and
August (the “Payment Dates”). These Quarterly Fees shall be booked as revenue by
Cannabis Global.

 

Section Three - Compensation to Whisper Weed

 

3.1. Whisper Weed or its designees shall be compensated with $150,000 in
restricted common shares of Cannabis Global upon execution of this Agreement.
The value of the common shares shall be pegged at a price of the average of the
20 trading days preceding such execution. Cannabis Global agrees to register
such shares on a best efforts basis on its next registration statement to be
filed with the U.S. Securities & Exchange Commission.

 

 
 

 

 

 

3.2. Whisper Weed shall receive preferred shares in Cannabis Global as
compensation under this Agreement, as follows:

 

3.3. A new class of participating preferred shares in Cannabis Global (the
“Preferred Shares”) will be created specific to this Agreement. Whisper Weed
shall receive as of the Payment Date an equivalent number of such Preferred
Shares equal to the conversion of the Preferred Shares into common shares
equaling two times (2X) Actual sales as further described in Section 4.3 (the
“Issued Preferred Shares”).

 

3.4. Issued Preferred Share Dividend. Cannabis Global shall make a single
dividend payment on the Issued Preferred Shares at a rate equal to 90% of the
Quarterly Fee (the “Dividend”).

 

3.5. The Dividend shall be paid to Whisper Weed within twenty (20) days of the
Payment Date, assuming such payments on the Payment Date are made in accordance
with the terms of this Agreement.

 

Section Four - General Terms of the Preferred Shares

 

4.1. The Preferred Shares shall hold senior status to other debts of Cannabis
Global.

 

4.2. The Preferred Shares shall be convertible to common shares in Cannabis
Global anytime after six (6) months of issuance.

 

4.3. The value of the Preferred Shares will be protected by a backstop provision
(the “Backstop”). At the time of conversion, should the value of the common
shares into which the Preferred Shares converted, be less that two times (2X)
the Quarterly Payment associated with the issuance of the Preferred Shares, the
holder of the Preferred Shares the conversion of the Preferred Shares shall be
adjusted to the rate that would allow the value of the common shares into which
the Preferred Shares converted to be equal to two times (2X) the Quarterly
Payment associated with the issuance of the Preferred Shares. The re-valuation
of the Preferred Shares shall be determined by calculating (2x) of the actual
sales for each of the 90 day period for a two year period commencing on October
15, 2020 through October 15, 2022 For example, each quarter for two years, we
will revalue the valuation of the preferred stock to make sure that the
preferred stock reflect 2X of Whisperweed’s actual sales for the prior quarter
for a two year period. This re-valuation will be done eight times over the 24
month valuation period.

 

4.4. Full terms of the Preferred Shares shall be outlined in the Certificate of
Designation to be filed with the secretary of state for the state of Nevada.

 

 
 

 

 

 

Section Five - Representations of the Parties

 

5.1. Organization. Each Party that is a corporation or limited liability company
is duly organized and incorporated and in good standing in the jurisdiction of
its incorporation, has full power and authority to enter into and perform its
obligations under this Agreement and the Ancillary Agreements (to which it is a
party), and has the requisite approval of its Board of Directors or Managers to
enter into this Agreement and the Ancillary Agreements (to which it is a party)
and to consummate the transactions contemplated.

 

5.2. Authority. This Agreement and the Ancillary Agreements are valid, binding,
and enforceable obligations of the Parties which have executed such agreements,
in accordance with their terms (except that the enforceability of such Party’s
obligations thereunder is subject to general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law or
in arbitration). All material consents, approvals, authorizations, and other
requirements prescribed by any law, rule, or regulation that must be obtained or
satisfied by such Party and are necessary for such Party’s execution and
delivery of this Agreement and the Ancillary Agreements or the performance of
the terms thereof have been obtained and satisfied.

 

5.3. Binding Agreement. The execution and delivery of this Agreement and the
Ancillary Agreements by each Party which has executed such agreements, and the
consummation of the transactions contemplated thereby will not result in a
breach of any of the terms and provisions of, or constitute a default under, or
conflict with, any material agreement, indenture, judgment, decree, order, or
award of any court, governmental body, or arbitrator applicable to such Party,
including any law, rule or regulation applicable to such Party, or their
respective incorporation or organizational documents;

 

5.4. No Transfer. No transfer of any cannabis licenses are part of this
Agreement.

 

5.5. No Interference. Whisper Weed Inc is under no obligation to any third party
that would interfere with its representations, warranties or obligations under
this Agreement

 

 
 

 

 

 

Section 6. Dissolution and Winding Up

 

6.1. Elective Dissolution – Cessation of Business. The Agreement may be
terminated, at the unanimous election of the WhisperweedBoard of Directors as
follows:

 

a) Upon the occurrence of any event, or the existence of any condition beyond
the reasonable control of the Parties, which prevents the business operation
outlined in this Agreement from functioning in a manner consistent with the
purpose of the Agreement or to otherwise to make it possible to carry out its
purpose, and such event or condition cannot be corrected within a reasonable
time, at a reasonable expense.

 

b) Default Dissolution. The non-defaulting Party may elect to terminate and
dissolve the Management Agreement in the event of a default, as specified below,
by the other Party. The occurrence of any of the following events shall
constitute a default by a Party:

 

A Party or its Affiliate shall materially default in the observance or
performance of any material agreement, covenant, or condition contained in this
Agreement or in any material agreement with or relating to the Management
Agreement, and such default shall continue to exist for a period of 30 days
after the other Party or the Management Agreement gives such defaulting Party or
its Affiliate written notice of such default;

 

A representation or warranty made by the Party herein or in any Ancillary
Agreement (or in any certificate or financial or other statement furnished by
such Party to the other in connection therewith) or by the Party’s Affiliate in
connection with this Agreement or any Ancillary Agreement shall prove to be
false or misleading in any respect which would have a material adverse effect on
the Management Agreement or the other Party, and remain uncured for a period of
thirty (30) days after the other Party gives the Party or its Affiliate written
notice of such default.

 

c) There is an entry of an order for relief or the institution of any
proceedings of any nature under the laws of the United States or any state or
any foreign country for relief of debtors wherein an Party is seeking relief as
debtor; there is an appointment of a receiver, trustee, custodian or like
officer for all or substantially all of the business or assets of such Party on
the grounds of insolvency and either the Party has consented to such appointment
or has failed to vacate or otherwise cause said appointment to be set aside
within 60 days; or there is the institution against such Party of a proceeding
under the Federal bankruptcy act or any law of the United States or other
jurisdiction now in existence or hereinafter enacted having the same general
purpose which proceeding is not dismissed or discharged within 60 days after the
institution thereof.

 

6.2. Winding Up. If the Agreement is to be dissolved, then the Parties shall
proceed jointly to wind up the affairs of the Agreement.

 

6.3 In the event that Whisper Weed would like to discontinue this Management
Agreement, it may chose to appoint a third party manager. Both parties to this
contract shall be required to approve the newly appointed manager and Cannabis
Global should be notified 30 days in advance.

 

 
 

 

 

 

Section Seven - Audit Rights

 

Cannabis Global shall have the right, upon not less than ten (10) business days
written notice to Whisper Weed, to audit, examine and make copies of, or
extracts from, the books of account and other financial and sales records of the
business in order to confirm the calculation revenues and net profits. If an
audit reveals a discrepancy in the amounts paid and/or reported in respect of
the period covered, the Parties will reasonably cooperate to true-up the over-
or underpayment within thirty (30) days of finally determining the correct
amount of that should have been paid and/or reported.

 

Section Eight - Dispute Resolution

 

8.1 Initial Procedure. The Management Service Agreement Parties agree to meet
informally in an attempt to resolve the dispute amongst themselves acting in
good faith. If the Management Service Agreement Parties cannot resolve the
dispute, they shall then be required to endeavor to achieve a resolution of such
claim, dispute, difference or controversy by non-binding mediation administered
by the American Arbitration Association under its Commercial Mediation
Procedures, before resorting to arbitration, litigation, or some other dispute
resolution procedure.

 

The Party which elects to seek resolution of such claim, dispute, difference or
controversy by mediation shall notify the other Party in writing of such
election. Any such notice shall describe in reasonable detail the subject matter
of such claim, dispute, difference or controversy, and include a statement of
such party’s position and a summary of the arguments supporting that position
and the relief sought and shall also identify the names of three (3)
prospective, independent, neutral mediators and include a statement of their
respective curricula vitae. Each of such prospective mediators shall be a Party
of the American Arbitration Association National Roster of Arbitrators and
Mediators and have experience in commercial matters, including, if practicable,
Management Service Agreements.

 

Within ten (10) business days following its receipt of such notice, the
recipient Party shall submit to the other Party a written response, which
response shall include a reasonably detailed statement of the recipient Party’s
position regarding the dispute identified by the notifying Party and a summary
of the arguments supporting that position. Any such response shall also include
the name, selected from the list of prospective mediators provided by the
notifying party, of the individual who will act as the mediator in the dispute
identified by the notifying party.

 

 
 

 

 

 

The Parties shall meet with the selected mediator in the City of Los Angeles,
California, or such other location as the Management Service Agreement Parties
may mutually agree within thirty (30) business days after the recipient Party
has received notice of the dispute and shall proceed diligently and in good
faith, using commercially reasonable efforts, to resolve the matters in dispute.
The mediation shall not continue longer than one (1) hearing day without the
written approval of both parties. Neither Party shall be bound by any
recommendation of the mediator. One or more senior executives from each party
shall personally participate in the mediation proceedings contemplated herein
and shall endeavor to achieve a resolution of the dispute through mutual
agreement.

 

The senior executives, who shall have full authority to decide on behalf of and
bind their respective entities, shall allocate at least one (1) full business
day of their time for the mediation process on any such claim, dispute,
difference or controversy submitted to mediation hereunder. Such senior
executives may be represented by counsel in connection with any such mediation
proceedings and, in addition, either party may, with permission of the mediator,
bring such additional persons as are needed to respond to questions, contribute
information or participate in the negotiations.

 

The fees and expenses of the mediator and the American Arbitration Association
shall be shared equally by both parties. The mediator shall be disqualified as a
witness, consultant, expert or counsel for any party with respect to any such
claim, dispute, difference or controversy and any related matters. All offers,
promises, conduct and statements, whether oral or written, made in the course of
the mediation by any of the parties, their agents, employees, experts and
attorneys, and by the mediator or any employees of the American Arbitration
Association, are confidential, privileged and inadmissible for any purpose,
including, but not limited to, impeachment, in any arbitration, litigation or
other proceeding related to this Agreement, provided, however, that evidence
that is otherwise admissible or discoverable shall not be rendered inadmissible
or non-discoverable as a result of its use in the mediation.

 

At no time prior to or during the mediation shall either party initiate an
arbitration or litigation related to this Agreement except to pursue a
provisional remedy that is authorized by law or by agreement of the parties. If
any such claim, dispute, difference or controversy is not resolved by such
mediation, either party may pursue such rights and remedies as may be available
to either of them under this Agreement or at law or in equity.

 

 
 

 

 

 

Section 5.02 Injunctive Relief. Nothing in this Article 8 shall preclude any
Party, at any time, from taking or requesting any judicial or other authority in
any country to order any provisional or conservatory measure, including
pre-award attachment, injunction or similar remedy for the presentation of its
rights and interests.

 

Section 5.03 Governing Law. This agreement shall be deemed to have been entered
into in California and shall be governed by and construed under the laws of
California without giving effect to the principles of conflicts of law. Any
Dispute for which a Party is permitted to bring a court proceeding shall be
instituted in the courts of California, and each Party irrevocably submits to
the jurisdiction of such courts in any such suit, action, or proceeding. Service
of process, summons, notice, or other document by mail to such Party's address
set forth herein shall be effective service of process for any suit, action, or
other proceeding brought in any such court.

 

Section 5.04 Attorney fees. In any Dispute for which a Party is permitted to
bring a court or arbitration proceeding, the prevailing Party shall be entitled
to recover its actual attorneys' fees and court costs from the non-prevailing
Party.

 

Section Nine - Indemnification

 

9.1. Indemnification Obligations. Each Party shall indemnify, defend and hold
harmless the other Party and its officers, directors, employees, agents,
successors and assigns against all Losses arising out of or resulting from any
third-party claim, suit, action or proceeding related to or arising out of or
resulting business operations under this Agreement.

 

9.2. Indemnification Procedure. The indemnitee shall promptly notify the
indemnitor in writing of any Action and cooperate with the indemnitee at the
indemnitor's sole cost and expense. The indemnitor shall immediately take
control of the defense and investigation of the Action and shall employ counsel
of its choice/reasonably acceptable to the indemnitee to handle and defend the
Action, at the indemnitor's sole cost and expense. The indemnitor shall not
settle any Action in a manner that adversely affects the indemnitee's rights
without the indemnitee's prior written consent, which shall not be unreasonably
withheld or delayed. The indemnitee's failure to perform any obligations under
this Section shall not relieve the indemnitor of its obligation under this
Section except to the extent that the indemnitor can demonstrate that it has
been materially prejudiced as a result of the failure. The indemnitee may
participate in and observe the proceedings at its own cost and expense with
counsel of its own choosing.

 

 
 

 

 

 

Section Ten - Miscellaneous

 

10.1. Force Majeure. Neither Party shall be liable or responsible to the other
Party, nor be deemed to have defaulted under or breached this Agreement, for any
failure or delay in fulfilling or performing any term of this Agreement, when
and to the extent such failure or delay is caused by:

 

a.       acts of God;

 

b.       flood, fire or explosion;

 

c.       war, terrorism, invasion, riot or other civil unrest;

 

d.       embargoes or blockades in effect on or after the date of this
Agreement;

 

e.       Regional, national or global emergency; including pandemics ie:
COVID-19

 

f.        strikes, labor stoppages or slowdowns or other industrial
disturbances;

 

each of the foregoing, a "Force Majeure"), in each case, provided that (i) such
event is outside the reasonable control of the affected Party; (ii) the affected
Party provides prompt notice to the other Party, stating the period of time the
occurrence is expected to continue; and (iii) the affected Party uses diligent
efforts to end the failure or delay and minimize the effects of such Force
Majeure event. A Party may terminate this Agreement if a Force Majeure event
affecting the other Party continues substantially uninterrupted for a period of
one hundred and twenty (120) Business Days or more. Unless the Party terminates
this Agreement pursuant to the preceding sentence, all timelines in the
Management Service Agreement Project Plan shall automatically be extended for a
period up to the duration of the Force Majeure event.

 

10.2. Further Assurances. Each Party shall, upon reasonable request, and at the
request of the other Party, promptly execute such documents and perform such
acts as may be necessary to give full effect to the terms of this Agreement.

 

10.3. Counterparts. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute but one and the same instrument. Any party to this Agreement may
deliver an executed copy hereof or of any of the Related Agreements by facsimile
transmission or electronically in Portable Document Format (PDF) to another
party hereto or thereto and any such delivery shall have the same force and
effect as any other delivery of a manually signed copy of this Agreement or of
any of the Related Agreements.

 

 
 

 

 

 

10.4. Publicity. Each Party agrees that press releases and other announcements
to be made by the Management Service Agreement with respect to transactions
contemplated hereby shall be subject to mutual agreement and prior consent.

 

10.5. Interpretation. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.

 

10.6. Assignability. This Agreement, and all rights and obligations hereunder,
are personal to the Parties and shall not be assigned by any of them voluntarily
or by operation of law without the prior written consent thereto by the other
Parties hereto. No assignment shall become effective until the prospective
transferee has executed and delivered to the Management Service Agreement and
undertaking satisfactory to counsel for the other parties in which the
transferee agrees to be bound by the terms of this Agreement and all of the
Related Agreements as may be appropriate.

 

10.7. No Waiver. A failure by any party to assert its rights under this
Agreement shall not be deemed a waiver of such rights, nor shall any waiver be
implied from any act or omission. No waiver by a party with respect to any right
shall extend its effect to any subsequent breach of the terms hereof of like or
different kind unless such waiver explicitly provides otherwise.

 

10.8. Agreements. This Agreement may be altered, modified, or amended only by a
written instrument duly executed by each of the Parties.

 

10.9. Complete Agreement. This Agreement amends and restates, in its entirety,
the Management Service Agreement Agreement. This Agreement, together with the
Disclosure Schedules hereto and the Ancillary Agreements, represent the entire
agreement of the parties with respect to the transactions contemplated hereby
and shall supersede and replace the existing Management Service Agreement
Agreement and any and all previous contracts, arrangements, understandings,
negotiations and commitments between the parties with respect to the
transactions contemplated hereby (whether oral or written); provided, however,
that it does not change or otherwise alter or affect any of the Ancillary
Agreements except to the extent that the provisions of any such Ancillary
Agreements are inconsistent with any of the provisions hereof, in which event
the provisions of this Agreement will govern and control.

 

 
 

 

 

 

10.10. Responsibility for Breach by Affiliates. Each Party shall be responsible
for and liable for any breach of the provisions of this Agreement or any
agreement executed in connection herewith (including, but not limited to, the
Related Agreements) by its Affiliates, and any such breach by a Party’s
Affiliate shall be considered a breach of this Agreement by such Party.

 

10.11 Notices. All notices, requests, consents, claims, demands, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been given in accordance with this Section:

 

If to Cannabis Global Inc:

 

520 S Grand Ave, #320

Los Angeles, CA 90071

Email: Arman@CannabisGlobalinc.com

 

If to Whisper Weed:

 

Franco Brunetti

8721 Santa Monica Blvd Ste 702.

West Hollywood, CA 90069

 

Notices sent in accordance with this Section shall be deemed effectively given:
(a) when received, if delivered by hand (with written confirmation of receipt);
(b) when received, if sent by a nationally recognized overnight courier (receipt
requested); (c) on the date sent by facsimile or e-mail (in each case, with
confirmation of transmission), if sent during normal business hours of the
recipient, and on the next Business Day if sent after normal business hours of
the recipient; or (d) on the five (5) Business Day after the date mailed, by
certified or registered mail, return receipt requested, postage prepaid.

 

Section 07.12 Severability. If any term or provision of this Agreement is
invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision of
this Agreement or invalidate or render unenforceable such term or provision in
any other jurisdiction. Upon a determination that any term or other provision is
invalid, illegal or unenforceable, the parties hereto shall negotiate in good
faith to modify this Agreement so as to affect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.

 

(end of section - signature page(s) to follow)

 

 

 
 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the Effective Date.

 

 

For CANNABIS GLOBAL, INC.

 

X /s/ Arman Tabatabaei       

ARMAN TABATABAEI

CEO, Chairman of the Board

 

 

For WHISPER WEED INC

 

X /s/ Franco Brunetti          

FRANCO BRUNETTI

Partner

 

(end)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SIGNED LOI, May 12 20

 

LOI - Cannabis Delivery Business Management Agreement between Cannabis Global
Inc (MCTC) and Whisper Weed

May 12, 2020

Management and Owners:

Whisper Weed

2038 Sacramento S. Street Los Angeles,

CA 90021

Dear Management and Owners:

Thank you for the opportunity to discuss the possibility of a strategic
management contract relationship between Cannabis Global, Inc. (“MCTC”) and the
control entity and/or the reporting entity for the operation of Whisper Weed
Service (“Whisper Weed”).

With several legal, licensing and operating entities involved with Whisper Weed
operation, for convenience and discussion purposes, herein we reference the
operations, simply as “Whisper Weed” Based on our preliminary discussions, it
appears the true legal entity to be utilized is Whisper Weed. Nevertheless, for
the purposes of this letter, we will reference the entity as Whisper Weed.

The ideas put forth in this letter are strictly non-binding and are simply a
possible springboard to perhaps move the discussion forward in order to reach a
potential definitive agreement (the “Definitive Agreement”). Considering our
status at a publicly traded company with regulatory reporting responsibilities,
we ask you to keep these discussions confidential, until we mutually agree
otherwise.

 

We, of course, welcome your feedback relative to possible methods to enhance the
terms outlined below, so that all parties can benefit.

Overview

MCTC and Whisper Weed propose to enter into a strategic management agreement
where MCTC would provide management services to Whisper Weed in exchange for
mutual consideration in the form of a management service fee equal to 51% of the
net profits of the delivery business paid to MCTC, licensing fee and Preferred
Shares in MCTC to Whisper Weed.

One, or more of the owners, shareholders or partners of the Parties is a partial
owner, shareholder or partner in another Party and thus, this Agreement,
relative to these Parties, is between Related Parties, as defined in FASB
Accounting Standards Codification 850.

MCTC will create a new legal entity which will be registered as a California
registered corporation (C Corporation) and wholly owned subsidiary of MCTC. The
details will be outlined in the Definitive Agreements.

At the end of the MCTC fiscal quarterly periods ending on the last day of
November, February and May, financial results and statements produced by
management agreement of Whisper Weed and MCTC will be consolidated into MCTC
financial statements, which will be reviewed by the MCTC’s auditor.

At the end of MCTC fiscal year, which occurs each August 31st, financial results
and statements produced by management agreement between MCTC and Whisper Weed
will be consolidated into MCTC financial statements, which will be fully audited
by MCTC auditing firm. At the end of the quarterly periods and at the end of the
fiscal year, outlined above, all reports will be filed in a timely manner with
the U.S. Securities & Exchange Commission (the “SEC”), in accordance with its
regulations.

Management of MCTC would hold responsibility for the maintaining of quarterly
reporting, legal fees associated with the entity, tax return preparation, audits
and other tasks of corporate governance, and for the integration of such tasks
and information into the MCTC corporate entity.

 

Contract

MCTC will provide strategic management services (the “Management Services”) to
Whisper Weed for a period of ten (10) years. The specifics of the Management
Services will be outlined fully in the Definitive Agreements.

Strategic Management Contract Fees

MCTC, or new subsidiary to be designated by MCTC, will be paid a fee each
quarter ending the last day of November, February, May, and August for the
Management Services equal to the 51% net profits earned by Whisper Weed
operations.

Consideration to Whisper Weed and its Owners

Under the terms of the possible Definitive Agreement, the owners of Whisper Weed
would receive a stake in the ownership of MCTC, as well as a licensing fee.

The licensing fee would be equal to 46% of the total net profit of Whisper Weed.

This ownership stake would be represented by a new class of preferred stock in
MCTC. The new class stock, to be named Preferred Senior Series Management
Services Operations (the “Senior Preferred Shares”), would be fully convertible
into MCTC common shares, enabling the owners to unlock full value provided.

Terms of the Senior Preferred Shares

The terms of the Senior Preferred Shares would allow the series to be senior to
common shareholders in any unforeseen liquidation of the company, or due to some
other unforeseen event.

The Senior Preferred Shares would be non-dividend shares. The certificates of
designations for the Senior Preferred Shares would restrict any other use or
issuance of the series not related to the Management Services and Whisper Weed.
These certificates of designation would be included as part of the Definitive
Agreement.

 

Floating Conversion Into Common Shares and Expected Conversion Value

Holders of the Senior Preferred Shares would convert into MCTC common shares on
a variable floating basis, which will be tied to the value of the underlying
common shares into which the Senior Preferred Shares will convert, as outlined
below.

The conversion of the Senior Preferred Shares, will be into a number of common
shares of MCTC that will represent a dollar amount equal to 2 times the trailing
Whisper Weed Net Profit (the “Expected Realization Amount”). Such conversions
will take place periodically, as will be defined in the Definitive Agreement.

Upon conversion, the number of common shares to be issued to the Senior
Preferred Shareholders will be based on the Expected Realization Amount owed to
the Senior Preferred holders, not on the face value of the Senior Preferred
Shares. The floating conversion (the “Back Stop Conversion”) will mitigate the
vast majority of risk associated with a decrease in the value of the underlying
common shares. There will be other protections for the Senior Preferred holders
outlined with the Back Stop Conversion terms.

Other Protections for the Owners of Whisper Weed

We are prepared to discuss other broad protections for the owners of Whisper
Weed to ensure the value received represents the approximately value equal to
two times the MCTC Whisper Weed Revenues.

Other Terms

1) Each of the two owners of Whisper Weed will receive a stock bonus of $75,000
in the form of:

common stock consulting shares for assisting in the closing of a final
agreement.

2) MCTC and Whisper Weed will negotiate an agreement, where MCTC will hold a
first right of refusal option to acquire 100% of Whisper Weed with the details
to be determined at a later date.

3) MCTC’s staff has considerable experience in accounting, auditing and in the
financing of growth companies, especially those engaged in the cannabis sector,
Thus, MCTC will offer the following under the terms of an agreement:

 

● MCTC will assist Whisper Weed in the process of assembling the records to
ensure proper financial controls and in preparation of financial audits.

● MCTC will be able to assist in interfacing with an outside audit firm during
the audit process.

● MCTC, as a publicly-traded company, has strong access to the capital markets
and is willing to help finance future business expansion and operations for
Whisper Weed.

4) Non-Binding - This letter does not create a binding agreement between any of
the parties discussed herein. Only a possible future formal Letter of Intent or
Definitive Agreement will bind the parties mentioned. The terms and conditions
of any future agreement will supersede any terms and conditions in this Letter.

5) Confidentiality - The proposed terms and other contents of this letter are
confidential and

neither party shall disclose any content without the permission of the other.

Next Steps

We believe the next steps should be the following:

● Approval by Whisper Weed Team - We suggest the ownership team of Whisper Weed
complete discussions concerning the desire to move forward toward negotiating a
Definitive Agreement.

● A Meeting to Discuss the Drafting of a Definitive Agreement - Based on the
positive indication from the ownership team of Whisper Weed, we would propose a
meeting to discuss the details to be included in a Definitive Agreement.

We look forward to your indication of interest so that a Definitive Agreement
drafting meeting can be scheduled.

Sincerely,

_/s/_________________________

Arman Tabatabaei Chief Executive Officer Cannabis Global Inc (MCTC)

 

 

 

__/s/_______________________________

Franco Brunetti