Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of November 16, 2020
by and between Medicine Man Technologies, Inc. a Nevada corporation (the
“Company”), and each of the investors listed on the Schedule of Buyers attached
hereto (each individually a “Buyer” and collectively, the “Buyers”).

 

WHEREAS:

 

A.       The Company and the Buyers, severally and not jointly, are executing
and delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section 4(a)(2) of the Securities Act of 1933, as
amended (the “1933 Act”), and Rule 506(b) of Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the 1933 Act.

 

B.       The Buyers, severally and not jointly, wish to purchase, and the
Company wishes to sell, upon the terms and conditions stated in this Agreement,
an aggregate of 12,400 shares (the “Shares”) of the Company’s Series A preferred
stock, par value $0.001 per share (the “Preferred Stock”), having the rights,
preferences and privileges set forth in the Certificate of Designation, the form
of which is attached hereto as Exhibit A (the “Certificate of Designation”),
including the conversion of such Preferred Stock into shares of the Company’s
common stock, par value $0.001 per share (“Common Stock”). Such purchase and
sale of Preferred Stock shall take place in a single closing (the “Closing,”),
subject to the terms and conditions of this Agreement.

 

C.       (i) The Shares and (ii) the shares of Common Stock issued and issuable
upon conversion of the Shares in accordance with the terms of the Certificate of
Designation (collectively, the “Underlying Shares”), are collectively referred
to herein as the “Securities.”

 

NOW, THEREFORE, the Company and the Buyers hereby agree as follows:

 

1.                  PURCHASE AND SALE OF SHARES.

 

(a)               Purchase of Shares. Subject to the satisfaction (or waiver) of
the conditions set forth in Sections 5 and 6 below at the Closing, the Company
shall issue and sell to the Buyers all of the Shares, and each Buyer, severally
and not jointly, agrees to purchase from the Company on the Closing (as defined
below), the number of Shares set forth on the signature page hereto executed by
such Buyer on the terms set forth herein.

 

(b)               Closing. The date of the Closing shall be on such date and
time as is mutually agreed to by the Company and the Buyers after notification
of satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 5 and 6 below, and the Closing shall be undertaken remotely by
electronic transfer of Closing documentation.

 

(c)               Purchase Price. The purchase price for the Shares to be
purchased by the Buyers at the Closing shall be $1,000 per Share (the “Purchase
Price”).

 

(d)               Form of Payment. On or before the Closing, (i) each Buyer
shall pay its aggregate Purchase Price to the Company for the Shares to be
issued and sold to such Buyer at the Closing by wire transfer of immediately
available funds in accordance with the Company’s written wire instructions; and
(ii) the Company shall deliver to each Buyer one or more stock certificates,
evidencing the number of Shares such Buyer is purchasing at the Closing, duly
executed on behalf of the Company and registered in the name of such Buyer or
its designee.

 

 

 

 

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2.                  BUYERS’ REPRESENTATIONS AND WARRANTIES. Each Buyer, for
itself and for no other Buyer, represents and warrants to the Company that, as
of the date hereof and as of the Closing (unless as of a specific date therein,
in which case they shall be accurate as of such date):

 

(a)               No Public Sale or Distribution. The Buyer is (i) acquiring the
Shares, and (ii) when issued in accordance with the terms of the Certificate of
Designation, will acquire the Underlying Shares, in the ordinary course of its
business for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, except as otherwise set forth herein or the
other Transaction Documents (as defined in Section 3(b)), the Buyer does not
agree to hold any of the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption under the 1933 Act. The
Buyer does not presently have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities. As used herein,
“Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and any governmental entity or any department or agency thereof.

 

(b)               Buyer Status and Experience. The Buyer is, and on each date on
which the Buyer acquires any Underlying Shares it will be, an “accredited
investor” as that term is defined in Rule 501(a) of Regulation D (“Accredited
Investor”). The Buyer, either alone or together with its representatives, has
such knowledge, sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the investment in the
Securities, and has so evaluated the merits and risks of such investment. The
Buyer is able to bear the economic risk of an investment in the Securities and,
at the present time, is able to afford a complete loss of such investment.

 

(c)               Reliance on Exemptions. The Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and the Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Securities.

 

(d)               Information. The Buyer and its advisors, if any, have been
furnished with a copy of the Company’s Confidential Private Placement
Memorandum, dated November 6, 2020 (the “Confidential PPM”) and all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Shares that have been requested by the
Buyer. The Buyer and its advisors, if any, have been afforded the opportunity to
ask questions of the Company and receive answers from the Company concerning the
terms and conditions of the offering of the Securities, the merits and risks of
investing in the Securities and the business, finances and operations of the
Company. Neither such inquiries nor any other due diligence investigations
conducted by the Buyer or its advisors, if any, or its representatives shall
modify, amend or affect the Buyer’s right to rely on the Company’s
representations and warranties contained herein. The Buyer understands that its
investment in the Securities involves a high degree of risk, including the risks
outlined in the Confidential PPM. The Buyer has sought such accounting, legal
and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.

 

(e)               No Governmental Review. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

 

 

 

 

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(f)                Transfer or Resale. The Buyer understands that: (i) the
Securities have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) the Buyer shall
have delivered to the Company (if requested by the Company) an opinion of
counsel, in a form reasonably acceptable to the Company, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) the Buyer
provides the Company with reasonable assurance that such Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the
1933 Act, as amended, (or a successor rule thereto) (collectively, “Rule 144”);
(ii) any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) except as otherwise provided herein, neither the Company nor any other
Person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. Notwithstanding the foregoing, the Securities may be
pledged in connection with a bona fide margin account with a FINRA registered
broker/dealer or other loan or financing arrangement with an Accredited Investor
secured by the Securities and such pledge of Securities shall not be deemed to
be a transfer, sale or assignment of the Securities hereunder, and if the Buyer
effects such a pledge of Securities it shall not be required to provide the
Company with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement or any other Transaction Document, including, without
limitation, this Section 2(f).

 

(g)               Legends. The Buyer understands that the Securities are
“restricted securities” under applicable federal and state securities laws and
that certificates or other instruments representing Securities except as set
forth below, shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such stock
certificates):

 

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN] [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 MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER
(IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE
TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A FINRA REGISTERED BROKER/DEALER OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

 

 

 

 

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No later than two days on which the principal Trading Market (as defined below)
is open (“Trading Days”) following the delivery by the Buyer to the Company or
its transfer agent of a certificate representing Securities issued with a
restrictive legend (such date, the “Legend Removal Date”), such legend shall be
removed and the Company shall issue a certificate without such legend to the
Buyer or issue to the Buyer such Securities by electronic delivery at the
applicable balance account at The Depository Trust Company (“DTC”), if such
Securities are DTC-eligible at such time, if (i) such Securities are registered
for resale under the 1933 Act and the holder has provided the Company with such
documents as are reasonably required by the Company in connection with the
removal of the legend, including but not limited to the Buyer’s representation
letter indicating an intent to sell, (ii) in connection with a sale, assignment
or other transfer, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that such sale, assignment or
transfer of the Securities may be made without registration under the applicable
requirements of the 1933 Act, (iii) the Securities can be sold, assigned or
transferred pursuant to Rule 144 without restriction or limitation, including
without the requirement to be in compliance with Rule 144(c)(1), or Rule 144A,
or (iv) if such legend is not required under applicable requirements of the 1933
Act (including, without limitation, controlling judicial interpretations and
pronouncements issued by the SEC). The Company shall be responsible for the fees
of its transfer agent and all DTC fees associated with such issuance. If the
Company shall fail for any reason or for no reason to issue to such Buyer, a
certificate without such legend to such holder or to issue to such Buyer such
Securities by electronic delivery at the applicable balance account at DTC, if
such Securities are DTC-eligible at such time, on or before the applicable
Legend Removal Date, and if after such Legend Removal Date such Buyer purchases
(in an open market transaction or otherwise) Securities to deliver in
satisfaction of a sale by such Buyer of all or any portion of the Securities
that the holder anticipated receiving without legend from the Company, then the
Company shall, within five Trading Days after such Buyer’s request and in such
Buyer’s discretion, either (i) pay cash to such Buyer in an amount equal to such
Buyer’s total purchase price (including brokerage commissions, if any) for the
Securities so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such unlegended Securities shall terminate, or (ii)
promptly honor its obligation to deliver to such Buyer such unlegended
Securities as provided above and pay cash to such Buyer in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number
Securities, times (B) any trading price of the Securities selected by such Buyer
in writing as in effect at any time during the period beginning on the
applicable Legend Removal Date and the date the Company makes the applicable
cash payment. The Company shall be responsible for the fees of its transfer
agent and all DTC fees associated with such issuance. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, in a form mutually acceptable to the Company and each Buyer (the
“Irrevocable Transfer Agent Instructions”). The Company represents and warrants
that no (x) instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 2(g) and (y) instructions that are contradictory
therewith, in each case, will be given by the Company to its transfer agent in
connection with this Agreement, and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents and applicable
law. The Company acknowledges that a breach by it of its obligations under this
Section 2(g) will cause irreparable harm to the Buyer. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 2(g) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 2(g), that
the Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.

 

(h)               Validity; Enforcement. The Buyer is either an individual or an
entity duly incorporated or formed, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power and authority
to enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
This Agreement and each other Transaction Document have been duly and validly
authorized, executed and delivered on behalf of the Buyer and constitutes the
legal, valid and binding obligations of the Buyer enforceable against the Buyer
in accordance with their respective terms, except as such enforceability may be
limited by general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.

 

(i)                 No Conflicts. The execution, delivery and performance by the
Buyer of this Agreement and each other Transaction Document and the consummation
by the Buyer of the transactions contemplated hereby and thereby will not (i)
result in a violation of the organizational documents of the Buyer or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Buyer is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to the Buyer, except in the case
of clauses (ii) and (iii) above, for such conflicts, defaults, rights or
violations which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of the Buyer to
perform its obligations hereunder.

 

 

 

 

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(j)                 Residency. The Buyer is a resident of the jurisdiction
specified on the Schedule of Buyers attached hereto.

 

(k)               No Conflicts with Sanctions Laws. Neither the Buyer nor any
director, officer, employee, agent, affiliate or other person associated with or
acting on behalf of the Buyer is, or is directly or indirectly owned or
controlled by, a Person that is currently the subject or the target of any
sanctions administered or enforced by the U.S. government (including, without
limitation, the Office of Foreign Assets Control of the U.S. Department of the
Treasury or the U.S. Departments of State or Commerce and including, without
limitation, the designation as a “Specially Designated National” or on the
“Sectoral Sanctions Identifications List”, collectively “Blocked Persons”), the
United Nations Security Council, the European Union, Her Majesty’s Treasury or
any other relevant sanctions authority (collectively, “Sanctions Laws”); neither
the Buyer, nor any director, officer, employee, agent, affiliate or other person
associated with or acting on behalf of the Buyer is located, organized or
resident in a country or territory that is the subject or target of a
comprehensive embargo or Sanctions Laws prohibiting trade with the country or
territory, including, without limitation, Crimea, Cuba, Iran, North Korea, Sudan
and Syria (each, a “Sanctioned Country”); neither the Buyer nor any director,
officer, employee, agent, affiliate or other person associated with or acting on
behalf of the Buyer, acting in any capacity in connection with the operations of
the Buyer, conducts any business with or for the benefit of any Blocked Person
or engages in making or receiving any contribution of funds, goods or services
to, from or for the benefit of any Blocked Person, or deals in, or otherwise
engages in any transaction relating to, any property or interests in property
blocked or subject to blocking pursuant to any applicable Sanctions Laws.
No action of the Buyer in connection with the execution, delivery and
performance of this Agreement and the other Transaction Documents or the
consummation of any other transaction contemplated hereby or by the other
Transaction Documents or the fulfillment of the terms hereof or thereof. For the
past five years, the Buyer has not knowingly engaged in and is not now knowingly
engaged in any dealings or transactions with any person that at the time of the
dealing or transaction is or was the subject or the target of Sanctions Laws or
with any Sanctioned Country.

 

3.                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to the Buyers that, as of the date hereof
and as of the Closing:

 

(a)               Organization and Qualification. The Company and each of its
“Subsidiaries” (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns any of the capital stock or holds an
equity or similar interest), if any, are entities duly organized and validly
existing and in good standing under the laws of the jurisdiction in which they
are formed, and have the requisite power and authorization to own their
properties and to carry on their business as now being conducted and as
presently proposed to be conducted. Each of the Company and each of its
Subsidiaries is duly qualified as a foreign entity to do business and is in good
standing in every jurisdiction in which its ownership of property or the nature
of the business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not
reasonably be expected to have a Material Adverse Effect. As used in this
Agreement, “Material Adverse Effect” means any fact, occurrence, circumstance,
event or change that, individually or in the aggregate, has had, or would
reasonably be expected to have, a material adverse effect on the business,
properties, assets, liabilities, operations, results of operations, or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole,
or on the transactions contemplated hereby or on the other Transaction Documents
or by the agreements and instruments to be entered into in connection herewith
or therewith, or on the authority or ability of the Company to perform any of
its obligations under any of the Transaction Documents, except to the extent
related to: (i) a change in general political, economic, or financial market
conditions (except if such conditions have had, or would reasonably be expected
to have, a disproportionately adverse effect on the Company and its
Subsidiaries, taken as a whole, relative to other Persons operating in the
industries in which the Company or its Subsidiaries operate generally); (ii) a
change that affected the industries in which the Company or its Subsidiaries
operate generally (except if such change has had, or would reasonably be
expected to have, a disproportionately adverse effect on the Company or its
Subsidiaries, taken as a whole, relative to other Persons operating in the
industries in which the Company or its Subsidiaries operate generally); (iii)
the announcement or pendency of this Agreement and the transactions contemplated
hereby; (iv) any changes after the date of this Agreement in GAAP or Applicable
Law or the enforcement, implementation or interpretation thereof (except if such
changes have had, or would reasonably be expected to have, a disproportionately
adverse effect on the Company or its Subsidiaries, taken as a whole, relative to
other Persons operating in the industries in which the Company or its
Subsidiaries operate generally); (v) natural disaster, sabotage, acts of
terrorism, civil unrest, rioting, looting or war (whether or not declared) or
other outbreak of hostilities or escalation thereof; or (vi) the failure of the
Company to meet its financial projections. The Company has no Subsidiaries
except as set forth in Schedule 3(a). The outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly issued, are fully
paid and non-assessable and are owned by the Company or another Subsidiary, if
any, free and clear of all liens, preemptive or similar rights, mortgages,
defects, claims, pledges, charges, taxes, rights of first refusal, encumbrances,
security interests and other encumbrances (collectively, “Liens”) and equities
and claims; and no options, warrants or other rights to purchase, agreements or
other obligations to issue or other rights to convert any obligations into
shares of capital stock or ownership interests in the Subsidiaries are
outstanding.

 

 

 

 

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(b)               Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and each of the other agreements entered into
by the parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the “Transaction Documents”) and to issue the Shares in
accordance with the terms hereof and thereof. The execution and delivery of this
Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly authorized by the Company’s Board of Directors and other than (i)
a waiver of certain covenants in the Securities Purchase Agreement, by and
between the Company and Dye Capital Cann Holdings, LLC, dated June 5, 2019, as
amended by the Amendment to Securities Purchase Agreement, by and between the
Company and Dye Capital Cann Holdings, LLC, dated July 15, 2019, as further
amended by the Amendment to Securities Purchase Agreement, by and between the
Company and Dye Capital Cann Holdings, LLC, dated May 20, 2020 to the full
extent required to give effect to the Proposed Transaction (the “Dye SPA
Waiver”), (ii) a Form D with the SEC and any other filings as may be required by
any state securities agencies, and (iii) the 8-K Filing (collectively, the
“Required Filings and Approvals”), no further filing, consent or authorization
is required by the Company, its Board of Directors or its stockholders. This
Agreement and the other Transaction Documents have been duly executed and
delivered by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies. Except as set forth in
Schedule 3(b) there are no stockholder agreements, voting agreements, or other
similar arrangements with respect to the Company’s capital stock to which the
Company is a party or, to the actual knowledge after reasonable inquiry of the
Company’s chief executive officer, chief financial officer and general counsel,
but without any obligation to conduct investigation of anyone outside of the
Company or its Subsidiaries (collectively, the “Company’s Knowledge”), between
or among any of the Company’s stockholders.

 

(c)               Issuance of Shares. The issuance of the Shares is duly
authorized and, upon issuance in accordance with the terms of the Transaction
Documents, the Shares shall be validly issued and free from all preemptive or
similar rights (except for those which have been validly waived prior to the
date hereof), taxes, liens and charges and other encumbrances with respect to
the issue thereof and the Shares shall be fully paid and nonassessable with the
holders being entitled to all rights accorded to a holder of Preferred Stock. As
of the Closing, a number of shares of Common Stock shall have been duly
authorized and reserved for issuance which equals at least the number of shares
of Common Stock issuable upon conversion of the Shares. Upon conversion of the
Shares in accordance with the terms of the Certificate of Designation, the
Underlying Shares when issued will be validly issued, fully paid and
nonassessable and free from all preemptive or similar rights, taxes, liens,
charges and other encumbrances with respect to the issue thereof, with the
holders being entitled to the rights accorded to a holder of Common Stock.
Assuming the accuracy of each of the representations and warranties set forth in
Section 2, the offer and issuance by the Company of the Shares is exempt from
registration under the 1933 Act.

 

(d)               No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Shares and the reservation for issuance and issuance of
Underlying Shares) will not (i) result in a violation of the Articles of
Incorporation (as defined below) or Bylaws (as defined below) or other
organizational documents of the Company or any of its Subsidiaries, any capital
stock of the Company or any of its Subsidiaries or bylaws of the Company or any
of its Subsidiaries or (ii) except as set forth in Schedule 3(d), conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) in any respect under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, other than conflicts or defaults that would not reasonably be expected to
have a Material Adverse Effect, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including foreign, federal and state
securities laws and regulations and the rules and regulations of the OTCQX
market (the “Principal Market”) and including all applicable foreign, federal,
state laws, rules and regulations) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, assuming, with respect to subsections (ii)
and (iii), the making and receipt of the Required Filings and Approvals, other
than violations that would not reasonably be expected to have a Material Adverse
Effect.

 

 

 

 

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(e)               Consents. Other than the Required Filings and Approvals, the
Company is not required to obtain any consent from, authorization or order of,
or make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other Person in order for it to
execute, deliver or perform any of its obligations under or contemplated by the
Transaction Documents, in each case, in accordance with the terms hereof or
thereof. Other than the Required Filings and Approvals, all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the Closing (or in the case of filings detailed above, will be made
timely after the Closing), and the Company is unaware of any facts or
circumstances which might prevent the Company from obtaining or effecting any of
the registration, application or filings contemplated by the Transaction
Documents. Except as set forth in Schedule 3(e), the Company is not in violation
of the listing requirements of the Principal Market and has no knowledge of any
facts or circumstances which would reasonably lead to the suspension of
quotation of the Common Stock on the Principal Market in the foreseeable future.
The issuance by the Company of the Shares shall not have the effect of
suspending of quotation of the Common Stock on the Principal Market.

 

(f)                Acknowledgment Regarding Buyers’ Purchase of Shares. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that, except as set forth in
Schedule 3(f), each Buyer is not (i) an officer or director of the Company or
any of its Subsidiaries, (ii) an “affiliate” of the Company or any of its
Subsidiaries (as defined in Rule 144), if any, or (iii) to the Company’s
Knowledge, a “beneficial owner” of more than 10% of the Common Stock (as defined
for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended
(the “1934 Act”)). The Company further acknowledges that each Buyer is not
acting as a financial advisor or fiduciary of the Company or any of its
Subsidiaries (or in any similar capacity), if any, with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by the Buyers or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to the Buyers’ purchase of the Shares.
The Company further represents to the Buyers that the Company’s decision to
enter into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.

 

(g)               No General Solicitation; Placement Agent Fees. Neither the
Company, nor any of its Subsidiaries or affiliates, nor any Person acting on its
or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Shares. The Company shall be responsible for the payment of any
placement agent fees, financial advisory fees, or brokers’ commissions (other
than for Persons engaged by any Buyer or any Buyer’s investment advisor)
relating to or arising out of the transactions contemplated hereby, in
connection with the sale of the Shares. The Company shall pay, and hold the
Buyers harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in
connection with any such claim.

 

(h)               No Integrated Offering. None of the Company, its Subsidiaries
or any of their affiliates, nor any Person acting on their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of the
issuance of any of the Shares under the 1933 Act, whether through integration
with prior offerings or otherwise. None of the Company, its Subsidiaries, any of
their affiliates nor any Person acting on their behalf will take any action or
steps that would require registration of the issuance of any of the Securities
under the 1933 Act.

 

(i)                 Application of Takeover Protections; Rights Agreement. The
Company and its Board of Directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, interested
stockholder, business combination, poison pill (including, without limitation,
any distribution under a rights agreement) or other similar anti-takeover
provision under the Articles of Incorporation, Bylaws or other organizational
documents or the laws of the jurisdiction of its formation which is or could
become applicable to the Buyers as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company’s issuance of the
Securities and the Buyers’ ownership of the Securities. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Preferred Stock or a change in control
of the Company or any of its Subsidiaries.

 

 

 

 

 7 

 

 

 

(j)                 SEC Documents; Financial Statements. Except as disclosed in
Schedule 3(j), during the two years prior to the date hereof, the Company has
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act (all of the foregoing filed prior to the date hereof or prior to
the Closing, and all exhibits included therein and financial statements, notes
and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Documents”). The Company has delivered to
each Buyer or its representatives, upon request, true, correct and complete
copies of the SEC Documents not available on the EDGAR system. As of their
respective filing dates, the SEC Documents complied in all material respects
with the requirements of the 1934 Act applicable to the Company and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As of their respective filing dates, the financial
statements of the Company included in the SEC Documents (the “Financial
Statements”) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
U.S. generally accepted accounting principles (“GAAP”), consistently applied
during the periods involved (except (i) as may be otherwise indicated in such
Financial Statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company and its Subsidiaries, as of the dates thereof and the
results of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments which
will not be material, either individually or in the aggregate). The Company is
not currently contemplating to amend or restate any of the Financial Statements,
nor is the Company currently aware of facts or circumstances which would require
the Company to amend or restate any of the Financial Statements, in each case,
in order for any of the Financial Statements to be in material compliance with
GAAP and the rules and regulations of the SEC. The Company has not been informed
by its independent accountants that they recommend that the Company amend or
restate any of the Financial Statements or that there is any need for the
Company to amend or restate any of the Financial Statements.

 

(k)               Absence of Certain Changes. Except as disclosed in Schedule
3(k)(i), since December 31, 2019, there has been no  Material Adverse Effect.
Except as disclosed in Schedule 3(k)(ii), since December 31, 2019, neither the
Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii)
sold any assets, individually or in the aggregate, in excess of $100,000 outside
of the ordinary course of business or (iii) had capital expenditures,
individually or in the aggregate, in excess of $100,000. Neither the Company nor
any of its Subsidiaries has taken any steps to seek protection pursuant to any
law or statute relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor to the Company’s Knowledge does the Company or
any Subsidiary believe that any of their respective creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so. The Company and its Subsidiaries as a
whole are not, as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent
(as defined below). For purposes of this Section 3(k), “Insolvent” means, with
respect to any Person, (w) the present fair saleable value of such Person’s
assets is less than the amount required to pay such Person’s total Indebtedness
(as defined in Section 3(q)), (x) such Person is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (y) such Person intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (z) such Person has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.

 

(l)               No Undisclosed Events, Liabilities, Developments or
Circumstances. Since December 31, 2019, no event, liability, development or
circumstance has occurred or exists, or is contemplated to occur with respect to
the Company, its Subsidiaries, or their respective business, properties,
prospects, operations or financial condition, that would constitute a Material
Adverse Effect.

 

 

 

 

 8 

 

 

 

(m)              Conduct of Business; Regulatory Permits. Neither the Company
nor any of its Subsidiaries is in violation of any term of or in default under
its Articles of Incorporation, any certificate of designation, preferences or
rights of any other outstanding series of preferred stock of the Company or any
of its Subsidiaries or Bylaws or their organizational charter, certificate of
formation or certificate of incorporation or bylaws, respectively. The Company
and each of its Subsidiaries have been in material compliance with all
Applicable Laws (as defined below) since the incorporation of the Company and
will continue to operate in compliance with all Applicable Laws. “Applicable
Law” means applicable provisions of federal, state or local law (including
common law), statute, rule, regulation, order, permit, judgment, injunction,
decree or other decision of any court or other tribunal or governmental
authority legally binding on the Company, its properties, its Subsidiaries, or
their properties, including applicable state or local laws with respect to
cannabis, all as may be amended, but excluding the Controlled Substances Act (21
U.S.C. §801, et. seq.) federal law that prohibits the cultivation, processing,
transportation, sale or possession of Cannabis or parts of Cannabis including
particular cannabinoids, the sale or possession of cannabis paraphernalia, or
advertising the sale of Cannabis, products containing Cannabis, or Cannabis
paraphernalia. “Cannabis” means a plant in the genus Cannabis including Cannabis
sativa, Cannabis indica, Cannabis ruderalis, and all subspecies, hybrids, or yet
to be discovered subspecies and hybrids, and including the federal law
definitions of Marijuana. “Marijuana” means any material, compound, derivative,
mixture, product or preparation that contains any quantity of the substances
listed on Schedule 1 of the Controlled Substances Act or in its implementing
regulations, including without limitation 21 C.F.R. § 1308.11, 21 U.S.C. §
802(6) as “Marihuana” or “Tetrahydrocannabinols,” except Hemp, as defined in 7
U.S.C. § 1639o and except Cannabis Plant Materials defined in 21 C.F.R. 1308.35
or which contains any of their salts, isomers and salts of isomers, or any
derivative or mixture thereof or any synthetic equivalent or which would be a
“controlled substance analogue” manufactured, formulated, sold, distributed, or
marketed with the intent to avoid the provisions of existing drug laws as
defined under 21 U.S.C. § 813. The Company and each of its Subsidiaries possess
all material certificates, authorizations and permits issued by the appropriate
foreign, federal or state regulatory authorities necessary to conduct their
respective businesses. All such certificates, authorizations and permits are
valid and in full force and effect. During the period since the Company’s Common
Stock was designated for quotation on the Principal Market, (i) the Common Stock
has been designated for quotation on the Principal Market, (ii) trading in the
Common Stock has not been suspended by the SEC or the Principal Market and (iii)
the Company has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension of quotation of the Common Stock on
the Principal Market.

 

(n)               Sarbanes-Oxley Act. The Company is in compliance with any and
all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, that
are effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof.

 

(o)               Transactions With Affiliates. Except as set forth in Schedule
3(o), none of the current officers, directors or employees (including, without
limitation, any family member or affiliate thereof) of the Company or any of its
Subsidiaries is presently a party to (or has previously been a party to) any
transaction with the Company or any of its Subsidiaries (other than for ordinary
course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of goods or services
to or by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any such officer, director or employee
or, to the Company’s Knowledge, any corporation, partnership, trust or other
Person in which any such officer, director, or employee (or family member or
affiliate thereof) has a substantial interest or is an employee, officer,
director, trustee or partner.

 

 

 

 

 9 

 

 

 

(p)               Equity Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 250,000,000 shares of Common Stock,
of which as of the date hereof, ____________ are issued and outstanding,
____________ shares are reserved for issuance pursuant to the Company’s stock
option and purchase plans and ____________ shares are reserved for issuance
pursuant to securities (other than the aforementioned options) exercisable or
exchangeable for, or convertible into, Common Stock and (ii) 10,000,000 shares
of preferred stock, par value $0.001 per share, none of which are designated and
issued and outstanding. _______ shares of Common Stock are held in treasury. All
of such outstanding shares are duly authorized, validly issued and are fully
paid and nonassessable. ____________ shares of the Company’s issued and
outstanding Common Stock on the date hereof are as of the date hereof owned by
Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act) of the
Company or any of its Subsidiaries. (i) Except as disclosed in Schedule 3(p),
none of the Company’s or any Subsidiary’s capital stock is subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company or any Subsidiary; (ii) except as disclosed in Schedule
3(p), there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, or exercisable or exchangeable for, any capital stock
of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries,
is or may become bound to issue additional capital stock of the Company or any
of its Subsidiaries, or options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries; (iii) except as disclosed in Schedule 3(p),
there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness
of the Company or any of its Subsidiaries, or by which the Company or any of its
Subsidiaries, is or may become bound; (iv) except as disclosed in Schedule 3(p),
there are no financing statements securing obligations in any amounts filed in
connection with the Company or any of its Subsidiaries; (v) except as disclosed
in Schedule 3(p), there are no agreements or arrangements (other than as set
forth herein) under which the Company or any of its Subsidiaries, is obligated
to register the sale of any of their securities under the 1933 Act; (vi) except
as disclosed in Schedule 3(p), there are no outstanding securities or
instruments of the Company or any of its Subsidiaries, which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (vii) except as disclosed in Schedule 3(p), there are
no securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Shares; (viii) except as disclosed in
Schedule 3(p), neither the Company nor any Subsidiary, if any, has any stock
appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement; and (ix) neither the Company nor any of its Subsidiaries have any
material non-public information, including any material liabilities or
obligations, that are required to be disclosed in the SEC Documents which are
not so disclosed in the SEC Documents. True, correct and complete copies of the
Company’s articles of incorporation, as amended and as in effect on the date
hereof (the “Articles of Incorporation”), and the Company’s bylaws, as amended
and as in effect on the date hereof (the “Bylaws”), and the terms of all
securities convertible into, or exercisable or exchangeable for, Common Stock
and the material rights of the holders thereof in respect thereto have
heretofore been filed as part of the SEC Documents. Except as set forth in
Schedule 3(p), each stock option granted by the Company was granted (x) in
accordance with the terms of the applicable stock option plan of the Company and
(y) with an exercise price at least equal to the fair market value of the Common
Stock on the date such stock option would be considered granted under GAAP and
applicable law. To the Company’s Knowledge, no stock option granted under the
Company’s stock option plan has been backdated. To the Company’s Knowledge, the
Company has not granted, and there is no and has been no policy or practice of
the Company to grant, stock options prior to, or otherwise coordinate the grant
of stock options with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their financial results
or prospects.

 

 

 

 

 10 

 

 

 

(q)               Indebtedness and Other Contracts. Neither the Company nor any
of its Subsidiaries, (i) except as disclosed in Schedule 3(q), has any
outstanding Indebtedness (as defined below), (ii) except as disclosed in the SEC
Documents, is a party to any material definitive agreement (as defined in Item
1.01(b) of the Current Report on Form 8-K), or (iii) except as disclosed in
Schedule 3(q), neither the Company nor such Subsidiary, nor any other party to a
material definitive agreement (as defined in Item 1.01(b) of the Current Report
on Form 8-K) is in material violation of any term of, or in default under, such
material definitive agreement, including any material definitive agreement
relating to any Indebtedness. For purposes of this Agreement: (x) “Indebtedness”
of any Person means, without duplication (A) all indebtedness for borrowed
money, (B) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services (including, without limitation, “capital
leases” in accordance with GAAP, consistently applied during the periods
involved) (other than trade payables entered into in the ordinary course of
business consistent with past practice), (C) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and other similar
instruments, (D) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses, (E) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even though the
rights and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property), (F) all monetary
obligations under any leasing or similar arrangement which, in connection with
GAAP, consistently applied for the periods covered thereby, is classified as a
capital lease, (G) all indebtedness referred to in clauses (A) through (F) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, claim, lien, tax, right
of first refusal, pledge, charge, security interest or other encumbrance upon or
in any property or assets (including accounts and contract rights) owned by any
Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (G) above; and (y) “Contingent
Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness,
capital lease, dividend or other obligation of another Person if the primary
purpose or intent of the Person incurring such liability, or the primary effect
thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto
will be complied with, or that the holders of such liability will be protected
(in whole or in part) against loss with respect thereto.

 

(r)                Absence of Litigation. Except as set forth in the SEC
Documents, there is no material action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board,
arbitrator, panel, government agency, self-regulatory organization or body
pending or, to the Company’s Knowledge, threatened against or affecting the
Company or any of its Subsidiaries, the Preferred Stock, the consummation of the
Proposed Transaction or any of the Company’s or its Subsidiaries’ officers or
directors, whether of a civil or criminal nature or otherwise, in their
capacities as such. “Proposed Transaction” means the acquisition by a wholly
owned Subsidiary of the Company of substantially all of the assets of the Star
Buds Group on substantially the terms disclosed by the Company in its 8-K
Filings prior to the date hereof. To the Company’s Knowledge, no director,
officer or employee of the Company or any of its Subsidiaries has willfully
violated 18 U.S.C. §1519 or engaged in spoliation in reasonable anticipation of
litigation. Without limitation of the foregoing, there has not been, and to the
Company’s Knowledge, there is not pending, contemplated or anticipated, any
inquiry or investigation by the SEC involving the Company, any of its
Subsidiaries or any current or former director or officer of the Company or any
of its Subsidiaries. The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
under the 1933 Act or the 1934 Act. Neither the Company nor any of its
Subsidiaries is subject to any order, writ, judgment, injunction, decree,
determination or award of any governmental entity.

 

(s)               Tax Status. The Company and each of its Subsidiaries (i) has
timely made or filed all material foreign, federal and state income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject, (ii) has timely paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and (iii) has set aside on its books adequate reserves for the
payment of all unpaid taxes. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, except for those
being contested in good faith, and the officers of the Company and its
Subsidiaries know of no basis for any such claim.

 

 

 

 

 11 

 

 

 

(t)               Internal Accounting and Disclosure Controls. The Company and
each of its Subsidiaries, maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP, consistently applied during the periods
involved, and Applicable Law, and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is permitted
only in accordance with management’s general or specific authorization and (iv)
the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action
is taken with respect to any difference. The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15 under the 1934
Act) that are effective in ensuring that information required to be disclosed by
the Company in the reports that it files or submits under the 1934 Act is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms of the SEC, including, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the 1934 Act is
accumulated and communicated to the Company’s management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure. Except as set forth in Schedule 3(s), during the twelve months prior
to the date hereof neither the Company nor any of its Subsidiaries, has received
any written notice or correspondence from any accountant relating to any
material weakness in any part of the system of internal accounting controls of
the Company or any of its Subsidiaries.

 

(u)              Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company or any of its
Subsidiaries and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its 1934 Act filings and is not so
disclosed or that otherwise has had or would be reasonably likely to have a
Material Adverse Effect.

 

(v)               Investment Company Status. Neither the Company nor any of its
Subsidiaries, is, and upon consummation of the sale of the Shares, and for so
long as the Buyers hold any Shares, will not be, an “investment company,” an
affiliate of an “investment company,” a company controlled by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company” as such terms are defined in the Investment Company
Act of 1940, as amended.

 

(w)             Acknowledgement Regarding Buyers’ Trading Activity. The Company
acknowledges and agrees that, except as otherwise set forth herein or in any
other Transaction Document, (i) the Buyers have not been asked to agree, nor
have the Buyers agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term; (ii) the
Buyers, and counter-parties in “derivative” transactions to which any Buyer is a
party, directly or indirectly, presently may have a “short” position in the
Common Stock; (iii) the Buyers shall not be deemed to have any affiliation with
or control over any arm’s length counter-party in any “derivative” transaction;
and (iv) each Buyer may rely on the Company’s obligation to timely deliver
shares of Common Stock as and when required pursuant to the Transaction
Documents for purposes of effecting trading in the Common Stock of the Company.
The Company further understands and acknowledges that (a) the Buyers may engage
in hedging and/or trading activities at various times during the period that the
Securities are outstanding, and (b) such hedging and/or trading activities, if
any, can reduce the value of the existing stockholders’ equity interest in the
Company both at and after the time the hedging and/or trading activities are
being conducted. The Company acknowledges that such aforementioned hedging
and/or trading activities do not constitute a breach of this Agreement or any of
the documents executed in connection herewith.

 

(x)               Manipulation of Price. The Company has not, and, to the
Company’s Knowledge, no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result, or that could reasonably
be expected to cause or result, in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of any of
the Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities (other than to placement agents),
(iii) paid or agreed to pay to any person any compensation for soliciting
another to purchase any other securities of the Company, or (iv) paid or agreed
to pay any Person for research services with respect to any securities of the
Company or any of its Subsidiaries.

 

(y)               Shell Company Status. The Company is not, and has never been,
an issuer identified in, or subject to, Rule 144(i)(1) of the 1933 Act.

 

 

 

 

 12 

 

 

 

(z)               Compliance with Anti-Money Laundering Laws. Other than as a
result of non-compliance with the Controlled Substances Act (21 U.S.C. §801, et.
seq.)that prohibits the cultivation, processing, transportation, sale or
possession of Cannabis or parts of Cannabis including particular cannabinoids,
the sale or possession of Cannabis paraphernalia, or advertising the sale of
Cannabis, products containing Cannabis, or Cannabis paraphernalia, the
operations of the Company and its Subsidiaries are and have been conducted at
all times in compliance with applicable financial recordkeeping and reporting
requirements and all other applicable U.S. and non-U.S. anti-money laundering
laws, rules and regulations, including, but not limited to, those of the
Currency and Foreign Transactions Reporting Act of 1970, as amended, the United
States Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001, and the
United States Money Laundering Control Act of 1986 (18 U.S.C. §§1956 and 1957),
as amended, as well as the implementing rules and regulations promulgated
thereunder, and the applicable money laundering statutes of all applicable
jurisdictions, the rules and regulations thereunder and any related or similar
rules, regulations or guidelines, issued, administered or enforced by any
governmental agency or self-regulatory body (collectively, the “Anti-Money
Laundering Laws”), and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of its Subsidiaries with respect to the Anti-Money Laundering Laws is
pending or, to the Company’s Knowledge, threatened.

 

(aa)             Sanctions. Neither the Company nor any of its Subsidiaries, nor
any director, officer, employee, agent, affiliate or other person associated
with or acting on behalf of the Company or any of its Subsidiaries or affiliates
is, or is directly or indirectly owned or controlled by, a Person that is
currently the subject or the target of any sanctions administered or enforced by
the U.S. government (including, without limitation, the Office of Foreign Assets
Control of the U.S. Department of the Treasury or the U.S. Departments of State
or Commerce and including, without limitation, the designation as a “Specially
Designated National” or on the “Sectoral Sanctions Identifications List”,
collectively “Blocked Persons”), the United Nations Security Council, the
European Union, Her Majesty’s Treasury or any other relevant sanctions authority
(collectively, “Sanctions Laws”); neither the Company, any of its Subsidiaries,
nor any director, officer, employee, agent, affiliate or other person associated
with or acting on behalf of the Company or any of its Subsidiaries or
affiliates, is located, organized or resident in a country or territory that is
the subject or target of a comprehensive embargo or Sanctions Laws prohibiting
trade with the country or territory, including, without limitation, Crimea,
Cuba, Iran, North Korea, Sudan and Syria (each, a “Sanctioned Country”); the
Company maintains in effect and enforces policies and procedures designed to
ensure compliance by the Company and its Subsidiaries with applicable Sanctions
Laws; neither the Company, any of its Subsidiaries, nor any director, officer,
employee, agent, affiliate or other person associated with or acting on behalf
of the Company or any of its Subsidiaries or affiliates, acting in any capacity
in connection with the operations of the Company, conducts any business with or
for the benefit of any Blocked Person or engages in making or receiving any
contribution of funds, goods or services to, from or for the benefit of any
Blocked Person, or deals in, or otherwise engages in any transaction relating
to, any property or interests in property blocked or subject to blocking
pursuant to any applicable Sanctions Laws; no action of the Company or any of
its Subsidiaries in connection with (i) the execution, delivery and performance
of this Agreement and the other Transaction Documents, (ii) the issuance and
sale of the Securities, or (iii) the direct or indirect use of proceeds from the
Securities or the consummation of any other transaction contemplated hereby or
by the other Transaction Documents or the fulfillment of the terms hereof or
thereof, will result in the proceeds of the transactions contemplated hereby and
by the other Transaction Documents being used, or loaned, contributed or
otherwise made available, directly or indirectly, to any Subsidiary, joint
venture partner or other person or entity, for the purpose of (i) unlawfully
funding or facilitating any activities of or business with any person that, at
the time of such funding or facilitation, is the subject or target of Sanctions
Laws, (ii) unlawfully funding or facilitating any activities of or business in
any Sanctioned Country or (iii) in any other manner that will result in a
violation by any Person (including any Person participating in the transaction,
whether as underwriter, advisor, investor or otherwise) of Sanctions Laws. For
the past five years, the Company and its Subsidiaries have not knowingly engaged
in and are not now knowingly engaged in any dealings or transactions with any
person that at the time of the dealing or transaction is or was the subject or
the target of Sanctions Laws or with any Sanctioned Country.

 

 

 

 

 13 

 

 

 

(bb)            Anti-Bribery. Neither the Company nor any of the Subsidiaries
has made any contribution or other payment to any official of, or candidate for,
any federal, state or foreign office in violation of any law. Neither the
Company, nor any of its Subsidiaries or affiliates, nor any director, officer,
agent, employee or other person associated with or acting on behalf of the
Company, or any of its Subsidiaries or affiliates, has (i) used any funds for
any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity, (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee, to any
employee or agent of a private entity with which the Company does or seeks to do
business or to foreign or domestic political parties or campaigns, (iii)
violated or is in violation of any provision of any Applicable Law implementing
the OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions or any applicable provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, the U.K. Bribery Act 2010, or
any other similar law of any other jurisdiction in which the Company operates
its business, including, in each case, the rules and regulations thereunder (the
“Anti-Bribery Laws”), (iv) taken, is currently taking or will take any action in
furtherance of an offer, payment, gift or anything else of value, directly or
indirectly, to any person while knowing that all or some portion of the money or
value will be offered, given or promised to anyone to improperly influence
official action, to obtain or retain business or otherwise to secure any
improper advantage or (v) otherwise made any offer, bribe, rebate, payoff,
influence payment, unlawful kickback or other unlawful payment; the Company and
each of its respective Subsidiaries has instituted and has maintained, and will
continue to maintain, policies and procedures reasonably designed to promote and
achieve compliance with the laws referred to in (iii) above and with this
representation and warranty; none of the Company, nor any of its Subsidiaries or
affiliates will directly or indirectly use the proceeds of the Shares or lend,
contribute or otherwise make available such proceeds to any subsidiary,
affiliate, joint venture partner or other person or entity for the purpose of
financing or facilitating any activity that would violate the laws and
regulations referred to in (iii) above; there are, and have been, no
allegations, investigations or inquiries with regard to a potential violation of
any Anti-Bribery Laws by the Company, its Subsidiaries or affiliates, or any of
their respective current or former directors, officers, employees, stockholders,
representatives or agents, or other persons acting or purporting to act on their
behalf.

 

(cc)             No Additional Agreements. Except as set forth in Schedule
3(cc), the Company does not have any agreement or understanding with any Buyer
with respect to the transactions contemplated by the Transaction Documents.

 

(dd)            Disclosure. All disclosure provided to the Buyers regarding the
Company and its Subsidiaries, their businesses and the transactions contemplated
hereby, including the schedules to this Agreement and the Confidential PPM,
furnished by or on behalf of the Company or any of its Subsidiaries, is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
All of the written information furnished after the date hereof by or on behalf
of the Company or any of its Subsidiaries, to the Buyers pursuant to or in
connection with this Agreement and the other Transaction Documents, taken as a
whole, will be true and correct in all material respects as of the date on which
such information is so provided and will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading. Each press release issued by the Company or any of its
Subsidiaries, during the twelve months preceding the date of this Agreement did
not at the time of release contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries, or
its or their business, properties, liabilities, prospects, operations (including
results thereof) or conditions (financial or otherwise), which, under Applicable
Law, requires public disclosure at or before the date hereof or announcement by
the Company but which has not been so publicly disclosed. The Company
understands and confirms that each of the Buyers will rely on the foregoing
representations in effecting the transactions of securities of the Company. The
Company acknowledges and agrees that the Buyers do not make and have not made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.

 

(ee)            No Disqualification Events. With respect to Securities to be
offered and sold hereunder in reliance on Rule 506(b) under the 1933 Act, none
of the Company, any of its predecessors, any affiliated issuer, any director,
executive officer, other officer of the Company participating in the offering
hereunder, any beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power, nor any
promoter (as that term is defined in Rule 405 under the 1933 Act) connected with
the Company in any capacity at the time of sale (each, an “Issuer Covered
Person” and, together, “Issuer Covered Persons”) is subject to any of the “Bad
Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933
Act (a “Disqualification Event”), except for a Disqualification Event covered by
Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification Event. The
Company has complied, to the extent applicable, with its disclosure obligations
under Rule 506(e), and has furnished to the Buyers a copy of any disclosures
provided thereunder.

 

 

 

 

 14 

 

 

 

(ff)              Other Covered Persons. Except as set forth on Schedule 3(ff),
the Company is not aware of any Person that has been or will be paid (directly
or indirectly) remuneration for solicitation of Buyers or potential purchasers
in connection with the sale of the Securities.

 

(gg)            Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, original works of
authorship, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights and all applications and registrations therefor (“Intellectual Property
Rights”) necessary to conduct their respective businesses as now conducted. To
the Company’s Knowledge, there is not any infringement by the Company or its
Subsidiaries of Intellectual Property Rights of others. There is no claim,
action or proceeding being made or brought, or to the Company’s Knowledge, being
threatened, against the Company or any of its Subsidiaries regarding its
Intellectual Property Rights, except where such claim, action or proceeding is
not reasonably likely to result in a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries has received any written notice alleging any
such infringement or claim, action or proceeding.

 

(hh)            Title. Each of the Company and its Subsidiaries holds good
title, or a valid leasehold interests in, to all real property, leases in real
property, facilities or other interests in real property owned or held by the
Company or any of its Subsidiaries that is material to the business of the
Company (the “Real Property”). The Real Property is free and clear of all Liens
and is not subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except for (a) Liens for
current taxes not yet due and payable, (b) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto and (c) those that are not likely to result in a Material
Adverse Effect. Any Real Property held under lease by the Company or any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere in any material
respect with the use made and proposed to be made of such property and buildings
by the Company or any of its Subsidiaries.

 

(ii)               Fixtures and Equipment. Each of the Company and its
Subsidiaries (as applicable) has good title to, or a valid leasehold interest
in, all material tangible personal property, equipment, improvements, fixtures,
and other personal property and appurtenances that are used by the Company or
its Subsidiary in connection with the conduct of its business (the “Fixtures and
Equipment”). Each of the Company’s and its Subsidiary’s Fixtures and Equipment
are structurally sound, are in good operating condition and repair, are adequate
for the uses to which they are being put, are not in need of maintenance or
repairs except for ordinary, routine maintenance and repairs and are sufficient
for the conduct of the Company’s and/or its Subsidiaries’ businesses (as
applicable) in the manner as conducted prior to the Closing. Each of the Company
and its Subsidiaries owns all of its Fixtures and Equipment free and clear of
all Liens except for (i) Liens for current taxes not yet due and payable, and
(ii) zoning laws and other land use restrictions that do not impair the present
or anticipated use of the property subject thereto.

 

(jj)               Environmental Laws.

 

(i)                 The Company and its Subsidiaries (A) are in compliance with
any and all Environmental Laws (as defined below), other than those that are not
likely to result in a Material Adverse Effect, (B) have received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (C) are in compliance with all terms
and conditions of any such permit, license or approval where, except in each of
the foregoing clauses (A), (B) and (C), where the failure to so comply or having
such permits, licenses or other approval would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. The term
“Environmental Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

 

 

 

 

 15 

 

 

 

(ii)                No Hazardous Materials:

 

(1)               to the Company’s Knowledge, have been disposed of or otherwise
released by the Company or any of its Subsidiaries from any Real Property of the
Company or any of its Subsidiaries in violation of any Environmental Laws; or

 

(2)               to the Company’s Knowledge, are present on, over, beneath, in
or upon any Real Property or any portion thereof in quantities that would
constitute a violation of any Environmental Laws. To the Company’s Knowledge, no
prior use by the Company or any of its Subsidiaries of any Real Property has
occurred that violates any Environmental Laws, which violation would have a
Material Adverse Effect.

 

(iii)               To the Company’s Knowledge, neither the Company nor any of
its Subsidiaries knows of any other person who or entity which has stored,
treated, recycled, disposed of or otherwise located on any Real Property any
Hazardous Materials, including, without limitation, such substances as asbestos
and polychlorinated biphenyls.

 

(iv)               To the Company’s Knowledge, none of the Real Property is on
any federal or state “Superfund” list or Liability Information System
(“CERCLIS”) list or any state environmental agency list of sites under
consideration for CERCLIS, nor subject to any environmental related Liens.

 

(kk)           Management. During the past five year period, to the Company’s
Knowledge, no current named executive officer (as defined in Item 402 of
Regulation S-K) or director has been the subject of:

 

(i)                 a petition under bankruptcy laws or any other insolvency or
moratorium law or the appointment by a court of a receiver, fiscal agent or
similar officer for such Person, or any partnership in which such person was a
general partner, or any corporation or business association of which such person
was an executive officer;

 

(ii)                a conviction in a criminal proceeding or a named subject of
a pending criminal proceeding (excluding traffic violations that do not relate
to driving while intoxicated or driving under the influence);

 

(iii)              any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining any such person from, or otherwise limiting, the following
activities:

 

(1)               Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the United States Commodity
Futures Trading Commission or an associated person of any of the foregoing, or
as an investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company, bank, savings
and loan association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity;

 

(2)               Engaging in any particular type of business practice; or

 

(3)               Engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any violation of
securities laws or commodities laws;

 

(iv)               any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any authority barring, suspending or otherwise limiting
for more than 60 days the right of any such person to engage in any activity
described in the preceding sub paragraph, or to be associated with persons
engaged in any such activity;

 

 

 

 16 

 

 

 

(v)                a finding by a court of competent jurisdiction in a civil
action or by the SEC or other authority to have violated any securities law,
regulation or decree and the judgment in such civil action or finding by the SEC
or any other authority has not been subsequently reversed, suspended or vacated;
or

 

(vi)               a finding by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or finding has
not been subsequently reversed, suspended or vacated.

 

(ll)              Cybersecurity. The Company and its Subsidiaries’ information
technology assets and equipment, computers, systems, networks, hardware,
software, websites, applications, and databases (collectively, “IT Systems”) are
adequate for, and operate and perform in all material respects as required in
connection with the operation of the business of the Company and its
Subsidiaries as currently conducted, free and clear of all material bugs,
errors, defects, Trojan horses, time bombs, malware and other corruptants. The
Company and its Subsidiaries have implemented and maintained commercially
reasonable physical, technical and administrative controls, policies,
procedures, and safeguards to maintain and protect their material confidential
information and the integrity, continuous operation, redundancy and security of
all IT Systems and data, including “Personal Data,” used in connection with
their businesses. “Personal Data” means (i) a natural person’s name, street
address, telephone number, e-mail address, photograph, social security number or
tax identification number, driver’s license number, passport number, credit card
number, bank information, or customer or account number; (ii) any information
which would qualify as “personally identifying information” under the Federal
Trade Commission Act, as amended; (iii) “personal data” as defined by the
European Union General Data Protection Regulation (“GDPR”) (EU 2016/679); and
(iv) any other piece of information that allows the identification of such
natural person, or his or her family, or permits the collection or analysis of
any data related to an identified person’s health or sexual orientation. To the
Company’s Knowledge, there have been no material breaches, violations, outages
or unauthorized uses of or accesses to same, except for those that have been
remedied without material cost or liability or the duty to notify any other
person, nor any incidents under internal review or investigations relating to
the same. The Company and its Subsidiaries are presently in material compliance
with all applicable laws or statutes and all judgments, orders, rules and
regulations of any court or arbitrator or governmental or regulatory authority,
internal policies and contractual obligations relating to the privacy and
security of IT Systems and Personal Data and to the protection of such IT
Systems and Personal Data from unauthorized use, access, misappropriation or
modification.

 

(mm)           Compliance with Data Privacy Laws. The Company and its
Subsidiaries are, and at all prior times were, in material compliance with all
applicable state and federal data privacy and security laws and regulations, and
the Company and its Subsidiaries have taken commercially reasonable actions to
prepare to comply with, and since May 25, 2018, have been and currently are in
compliance with, the GDPR (EU 2016/679) (collectively, the “Privacy Laws”). To
ensure compliance with the Privacy Laws, the Company and its Subsidiaries have
in place, comply with, and take appropriate steps reasonably designed to ensure
compliance in all material respects with their policies and procedures relating
to data privacy and security and the collection, storage, use, disclosure,
handling, and analysis of Personal Data (the “Policies”). The Company and its
Subsidiaries have at all times made all disclosures to users or customers
required by applicable laws and regulatory rules or requirements, and none of
such disclosures made or contained in any Policy have, to the Company’s
Knowledge, been inaccurate or in violation of any applicable laws and regulatory
rules or requirements in any material respect. To the Company’s Knowledge,
neither the Company nor any Subsidiary: (i) has received notice of any actual or
potential liability under or relating to, or actual or potential violation of,
any of the Privacy Laws, and has no knowledge of any event or condition that
would reasonably be expected to result in any such notice; (ii) is currently
conducting or paying for, in whole or in part, any investigation, remediation,
or other corrective action pursuant to any Privacy Law; or (iii) is a party to
any order, decree, or agreement that imposes any obligation or liability under
any Privacy Law.

 

(nn)             Transfer Taxes. All transfer, stamp, registration, court or
documentary, recording, filing or other similar taxes (other than taxes imposed
on or measured by net income (however denominated)) which are required to be
paid by the Company in connection with the issuance, registration, sale or
transfer of the Securities to be sold to each Buyer hereunder will be, or will
have been, fully paid or provided for by the Company, and all laws imposing such
taxes will be or will have been complied with in all material respects.

 

(oo)            Insurance. The Company and each of its Subsidiaries, if any, are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries, if any, are engaged. Neither the Company nor any such Subsidiary,
if any, has been refused any insurance coverage sought or applied for and, to
the Company’s Knowledge, neither the Company nor any such Subsidiary, if any,
has any reason to believe that it will be unable to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.

 

 

 

 

 17 

 

 

 

(pp)            U.S. Real Property Holding Corporation. Neither the Company nor
any of its Subsidiaries, if any, is, or has ever been, a U.S. real property
holding corporation within the meaning of Section 897 of the Internal Revenue
Code of 1986, as amended, and the Company and each Subsidiary shall so certify
upon a Buyer’s request.

 

(qq)            No Disagreements with Accountants and Lawyers. There are no
material disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company and the Company is current with
respect to any fees owed to its accountants and lawyers which could affect the
Company’s ability to perform any of its obligations under any of the Transaction
Documents.

 

4.                  COVENANTS.

 

(a)               Best Efforts. Each party hereto shall use its best efforts to
timely satisfy each of the conditions to be satisfied by it as provided in
Sections 5 and 6.

 

(b)               Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to the Buyers promptly after such filing. The Company shall, on or
before the Closing, take such action as the Company shall reasonably determine
is necessary in order to obtain an exemption for or to qualify the Securities
for sale to the Buyers at the Closing pursuant to this Agreement under
applicable securities or “Blue Sky” laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to the Buyers on or prior to the Closing. The Company
shall make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or “Blue Sky” laws of the states
of the United States following the Closing.

 

(c)               Reporting Status. Until the date on which no Buyer holds any
Shares (the “Reporting Period”), the Company shall timely file all reports
required to be filed with the SEC pursuant to the 1934 Act (reports filed in
compliance with the time period specified in Rule 12b-25 promulgated under the
1934 Act or SEC or SEC staff issued relief shall be considered timely for this
purpose), and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would no longer require or otherwise permit such
termination, and the Company shall take all actions necessary to maintain its
eligibility to register the Underlying Shares for resale by the Buyers on Form
S-1.

 

(d)               Use of Proceeds. The Company will use the proceeds from the
Closing in the manner described in Exhibit D hereto, provided that in no event
may the proceeds be used, directly or indirectly, for the redemption or
repurchase of any securities of the Company or any of its Subsidiaries or
repayment of any Indebtedness.

 

(e)               Financial Information. The Company agrees to send the
following to the Buyers that hold Shares during the Reporting Period (i) unless
the following are filed with the SEC through EDGAR and are available to the
public through the EDGAR system, within one Business Day after the filing
thereof with the SEC, a copy of its Annual Reports on Form 10-K, any Quarterly
Reports on Form 10-Q, any Current Reports on Form 8-K (or any analogous reports
under the 1934 Act) and any registration statements (other than on Form S-8) or
amendments filed pursuant to the 1933 Act, and (ii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders. As used herein, “Business Day” means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

 

(f)                Listing. The Company shall promptly secure the listing of all
of the Underlying Shares upon each national securities exchange and automated
quotation system, if any, upon which the Common Stock is then listed (subject to
official notice of issuance) and shall maintain such listing of all Underlying
Shares from time to time issuable under the terms of the Preferred Stock. For so
long as any Buyer owns any Shares, (i) the Company shall maintain the
authorization for quotation of the Common Stock on the Principal Market or The
New York Stock Exchange, the NYSE American, the Nasdaq Global Market, the Nasdaq
Global Select Market, the OTC Bulletin Board, the OTCQB or the OTCQX (or any
successors to any of the foregoing) (“Trading Market”), and (ii) neither the
Company nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the suspension of quotation of the Common Stock
on the Principal Market other than in connection with, as a result of or after
listing of the Common Stock on The New York Stock Exchange, the NYSE American,
the Nasdaq Global Market, the Nasdaq Global Select Market, or any other
recognized stock exchange in North America, including, without limitation, the
Toronto Stock Exchange, the TSX Venture Exchange, the NEO Exchange Inc. or the
Canadian Securities Exchange (or any successors to any of the foregoing). The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).

 

 

 

 

 18 

 

 

 

(g)               Fees. The Company shall be responsible for the payment of any
placement agent fees, financial advisory fees, or broker’s commissions (other
than those for Persons engaged by any Buyer) relating to or arising out of the
transactions contemplated hereby, including, without limitation, any fees or
commissions payable to placement agents, including any reasonable legal fees and
expenses of such placement agents. The Company shall pay, and hold the Buyers
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Shares to the Buyers.

 

(h)               Disclosure of Transactions and Other Material Information. On
or before 9:00 AM New York City time four Business Days after the date hereof,
the Company shall (A) issue a press release disclosing all material terms of the
transactions contemplated hereby and (B) file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act and attaching the material
Transaction Documents to the extent required by law (the “8-K Filing”). Subject
to the foregoing, neither the Company or its Subsidiaries nor the Buyers shall
issue any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of the Buyers, to make any press release or
other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by Applicable Law. Except for any registration statement filed in
accordance with this Agreement, the 8-K Filing and as required by Applicable Law
and Trading Market regulations, without the prior written consent of a Buyer,
neither the Company nor any of its Subsidiaries or affiliates shall disclose the
name of such Buyer in any filing, announcement, release or otherwise.

 

(i)                 Reservation of Shares of Common Stock. So long as any Buyer
owns any Shares, the Company shall take all action necessary to at all times
after the date hereof have authorized, and reserved for the purpose of issuance,
no less than the number of shares of Common Stock issuable upon conversion of
the Shares then outstanding based on the then current conversion price. If at
any time the number of shares of Common Stock so authorized and reserved for
issuance is not sufficient to meet the foregoing obligation, the Company will
promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares of Common Stock, including, without limitation,
calling a special meeting of stockholders to authorize additional shares of
Common Stock to meet such obligation.

 

(j)                Buyers Lock-Up. Notwithstanding anything to the contrary
contained herein, each Buyer agrees that it will not sell any Underlying Shares
prior to the first anniversary of the Original Issue Date. Each Buyer may sell,
in the aggregate, (1) up to 25% of the Underlying Shares purchased hereunder at
any time following the first anniversary of the Original Issue Date until the
eighteen month anniversary of the Original Issue Date, (2) up to 50% of the
Underlying Shares purchased hereunder at any time following the eighteen month
anniversary of the Original Issue Date until the second anniversary of the
Original Issue Date, and (3) all of the Underlying Shares purchased hereunder at
any time following the second anniversary of the Original Issue Date; provided,
however, that each Buyer may sell all of the Underlying Shares purchased
hereunder at any time following the first Listing Event that occurs after the
Original Issue Date; provided further, however, that this Section 4(j) shall not
apply to a Buyer’s Underlying Shares issued upon conversion of Shares in
connection with an Anticipated Change of Control Notice or a Forced Redemption
Notice (in the latter case, solely with respect to Underlying Shares issued upon
conversion of the Shares that are the subject of such Forced Redemption Notice).

 

(k)               Notice of Disqualification Events. The Company will notify the
Buyers in writing prior to any Closing of (i) any Disqualification Event
relating to any Issuer Covered Person and (ii) any event that would, with the
passage of time, become a Disqualification Event relating to any Issuer Covered
Person.

 

(l)                Compliance with Cannabis Law. The Company shall take all
action to comply with state cannabis laws and regulations, including making all
requisite filings under such laws and regulations as and when required.

 

 

 

 

 19 

 

 

(m)              Registration.

 

(i)                 After the earlier to occur of (1) a Listing Event (as
defined in the Certificate of Designation), and (2) the date that is 12 months
after the Original Issue Date, Buyers holding Shares convertible into shares of
Common Stock with a market value that is equal to at least $10,000,000 shall
have the right to require the Company at any time, and from time to time, to
file a registration statement on Form S-1 (or if eligible to use Form S-3, a
registration statement on Form S-3) with the SEC covering the resale of the
Underlying Shares (each such registration statement and each registration
statement filed pursuant to Section 4(m)(ii), a “Resale Registration
Statement”).

 

(ii)                The Company also agrees that to the extent it files any
registration statement with the SEC, other than a registration statement on Form
S-8, Form S-4 or Form S-3, it will prior to filing such registration statement,
give the Buyers reasonable written notice in order to permit the Buyers to
include in such registration statement, the resale of the Underlying Shares;
provided, however, that if, solely in connection with any primary underwritten
public offering for the account of the Company, the managing underwriter(s)
thereof shall, in its reasonable discretion, impose a limitation on the number
of Underlying Shares which may be included in such registration statement
because, in such underwriter(s)’ judgment, marketing or other factors dictate
such limitation is necessary to facilitate public distribution, then the Company
shall be obligated to allocate for inclusion in such registration statement the
Underlying Shares of each participating holder of Underlying Shares in direct
proportion (as nearly as practicable) to the number of Underlying Shares
requested to be included by such holder; provided, however, that the Buyers
shall not be disproportionately negatively affected as compared to other holders
of Company securities to be registered.

 

(iii)               The Company will promptly file and use best efforts to cause
to become promptly effective such Resale Registration Statement as well as any
filings required under any applicable state securities laws or regulations. The
Company shall keep such Resale Registration Statement effective until the
earlier of (1) such time as all of the Underlying Shares registered for resale
under such Resale Registration Statement have been sold pursuant to such Resale
Registration Statement or otherwise, or (2) such time as the Underlying Shares
registered for resale under such Resale Registration Statement may be sold under
Rule 144 without restriction or limitation and without the requirement to be in
compliance with Rule 144(c)(1). The Buyers’ right to demand registration of the
Underlying Shares shall not terminate until such time as all the Underlying
Shares have been registered for resale with the SEC and the Buyers have sold or
otherwise transferred to Persons not affiliated with the Buyers all of such
Underlying Shares. All costs related to the preparation, filing and
effectiveness of such registrations, including accounting and legal fees and
expenses (including reasonable fees and expenses of counsel for the Buyers)
shall be borne by the Company. The Company will enter into an agreement with the
Buyers including customary terms and conditions for any such registration,
including customary indemnification provisions.

 

(iv)               Notwithstanding the foregoing obligations, the Company may,
upon written notice to the Buyers, for a reasonable period of time, not to
exceed 45 days in the case of clauses (1) and (2) below, or 30 days in the case
of clause (3) below (each, a “Suspension Period”), delay the filing of a Resale
Registration Statement or a request for acceleration of the effective date, or
suspend the effectiveness of any Resale Registration Statement, in the event
that (1) the Company is engaged in any activity or transaction or preparations
or negotiations for any activity or transaction that the Company desires to keep
confidential for business reasons, if the Company’s board of directors
determines in its reasonable good faith judgement that the public disclosure
requirements imposed on the Company under the Securities Act in connection with
the Resale Registration Statement would require at that time disclosure of such
activity, transaction, preparations or negotiations and such disclosure could
result in material harm to the Company or its business transactions or
activities, (2) the Company does not yet have appropriate financial statements
of any acquired or to be acquired entities necessary for filing, or (3) any
other event occurs that makes any statement of a material fact made in such
Resale Registration Statement, including any document incorporated by reference
therein, untrue or that requires the making of any additions or changes in the
Resale Registration Statement in order to make the statements therein not
misleading. The Company may not invoke its right to suspend or delay a
registration statement pursuant to this Section 4(m)(iv) more than twice in any
twelve month period. If the Company suspends the effectiveness of a Resale
Registration Statement pursuant to this Section 4(m)(iv), the Company shall, as
promptly as reasonably practicable following the termination of the circumstance
which entitled the Company to do so, take such actions as may be necessary to
reinstate the effectiveness of such Resale Registration Statement and give
written notice to the applicable Buyers authorizing the applicable Buyers to
resume offerings and sales pursuant to such Resale Registration Statement.

 

 

 

 

 20 

 

 

 

(v)                It shall be a condition precedent to the obligations of the
Company to file or effect any Resale Registration Statement pursuant to this
Section 4(m) that each Buyer who desires to include Underlying Shares in such
Resale Registration Statement shall furnish to the Company such information
regarding itself, the Company securities held by it and the intended method of
disposition of the Underlying Shares held by it as shall be reasonably required
to effect and maintain the effectiveness of the registration of such Resale
Registration Statement and shall execute such documents in connection with such
registration as the Company may reasonably request.

 

(vi)              Notwithstanding anything contained herein to the contrary, the
Company shall not be obligated to (1) effect a registration pursuant to this
Section 4(m) within 90 days after the effective date of a previous registration;
(2) effect a registration pursuant to this Section 4(m) unless the request is
for a number of shares of Common Stock with a market value that is equal to at
least $3,000,000 as of the date of such request; (3) effect a registration if
the Company has effected two registrations on a Resale Registration Statement in
the 12-month period prior to such request, or (4) file or effect a Resale
Registration Statement with respect to any Underlying Shares subject to a
registration demand that may be sold under Rule 144 without restriction or
limitation and without the requirement to be in compliance with Rule 144(c)(1)
limitation.

 

(n)               Closing Documents. On or prior to 14 calendar days after each
Closing, the Company agrees to deliver, or cause to be delivered, to the Buyers
a complete closing set of the executed Transaction Documents and any other
documents required to be delivered to any party hereto pursuant to Section 6
hereof or otherwise.

 

(o)               Equity Incentive Plan Limitation. For as long as any Buyer
holds any Shares, without the prior written consent of Buyers holding at least a
majority of the then-outstanding Shares, the Company shall not have issued and
outstanding awards under any equity incentive plan for the issuance of shares of
Common Stock representing more than 12% of the then-issued and outstanding
shares of Common Stock (calculated on an as-converted, fully-diluted basis,
excluding warrants) in the aggregate.

 

(p)               Regulation M. The Company will not take any action prohibited
by Regulation M under the 1934 Act, in connection with the distribution of the
Securities contemplated hereby.

 

(q)              General Solicitation. None of the Company, any of its
affiliates (as defined in Rule 501(b) under the 1933 Act) or any person acting
on behalf of the Company or such affiliate will solicit any offer to buy or
offer or sell the Preferred Stock by means of any form of general solicitation
or general advertising within the meaning of Regulation D, including: (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium or broadcast over television or radio; and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.

 

(r)               Integration. None of the Company, any of its affiliates (as
defined in Rule 501(b) under the 1933 Act), or any person acting on behalf of
the Company or such affiliate will sell, offer for sale, or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in the 1933
Act) which will be integrated with the sale of the Securities in a manner which
would require the registration of the Securities under the 1933 Act or require
stockholder approval under the rules and regulations of the Principal Market and
the Company will take all action that is appropriate or necessary to assure that
its offerings of other securities will not be integrated for purposes of the
1933 Act or the rules and regulations of the Principal Market, with the issuance
of Securities contemplated hereby.

 

(s)               Pledge of Securities. The Company acknowledges and agrees that
the Securities may be pledged in connection with a bona fide margin account with
a FINRA registered broker/dealer or other loan or financing arrangement with an
Accredited Investor secured by the Securities and such pledge of Securities
shall not be deemed to be a transfer, sale or assignment of the Securities
hereunder, and if the Buyer effects such a pledge of Securities it shall not be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, this Section 2(f).

 

 

 

 

 21 

 

 

 

5.                  CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

(a)               The obligation of the Company hereunder to issue and sell the
Shares to the Buyers at the Closing is subject to the satisfaction, at or before
the Closing, of each of the following conditions, provided that these conditions
are for the Company’s sole benefit and may be waived by the Company at any time
in its sole discretion by providing the Buyers with prior written notice
thereof:

 

(i)                 Each Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.

 

(ii)                Each Buyer shall have delivered to the Company such Buyer’s
aggregate Purchase Price, for the Shares being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.

 

(iii)               The representations and warranties of each Buyer shall be
true and correct as of the date when made and as of the Closing as though made
at that time (except for representations and warranties that speak as of a
specific date which shall be true and correct as of such specified date), and
each Buyer shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Buyer at or prior to the Closing.

 

(iv)               The Company shall have received the Dye SPA Waiver.

 

(v)                The Company shall have raised or otherwise secured a minimum
of $72 million of capital from any combination of the sale of shares of
Preferred Stock and proceeds to be disbursed to the Company from a loan under a
credit facility evidenced by a commitment to lend (provided that such commitment
may be subject to conditions to draw on the credit facility and may be funded in
tranches; exclusive of original issue discount on the loan).

 

(vi)               The special committee of the Board of Directors of the
Company shall have received an opinion from a financial advisor that the
consideration received by the Company for the issuance of the Preferred Stock is
fair to the Company, from a financial point of view.

 

6.                  CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

 

(a)               The obligation of each Buyer hereunder to purchase the Shares
that such Buyer is purchasing at the Closing is subject to the satisfaction, at
or before the Closing, of each of the following conditions, provided that these
conditions are for such Buyer’s sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:

 

(i)                 The Company shall have duly executed and delivered to such
Buyer (A) each of the Transaction Documents, and (B) the Shares being purchased
by such Buyer at the Closing pursuant to this Agreement.

 

(ii)                The Company shall have delivered to such Buyer evidence of
the filing and acceptance of the Certificate of Designation from the Nevada
Secretary of State.

 

(iii)               The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of the
Closing, as to (i) the resolutions consistent with Section 3(b) as adopted by
the Company’s Board of Directors in a form reasonably acceptable to such Buyer,
(ii) the Articles of Incorporation and (iii) the Bylaws, each as in effect at
the Closing, in the form attached hereto as Exhibit B.

 

 

 

 

 22 

 

 

 

(iv)               The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing as though made
at that time (except for representations and warranties that speak as of a
specific date which shall be true and correct as of such specified date) and the
Company shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or prior
to the Closing. Such Buyer shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Buyer in the form attached hereto as Exhibit C.

 

(v)                The Common Stock (I) shall be designated for quotation on the
Principal Market and (II) shall not have been suspended, as of the Closing, by
the SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the
Closing, either (A) in writing by the SEC or the Principal Market or (B) by
falling below the minimum listing maintenance requirements of the Principal
Market.

 

(vi)               The Company shall have obtained all governmental, regulatory
or third party consents and approvals, if any, necessary for the sale of the
Shares and the consummation of the transactions contemplated hereby.

 

(vii)              The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.

 

(viii)             The Company shall have received the Dye SPA Waiver.

 

(ix)                The Company shall have raised or otherwise secured a minimum
of $72 million of capital from any combination of the sale of shares of
Preferred Stock and proceeds to be disbursed to the Company from a loan under a
credit facility evidenced by a commitment to lend (provided that such commitment
may be subject to conditions to draw on the credit facility and may be funded in
tranches; exclusive of original issue discount on the loan).

 

(x)                All of the conditions precedent to the obligations of the
parties to the Proposed Transaction to consummate the Proposed Transaction shall
have been satisfied or waived, such that the Proposed Transaction shall close
upon the funding pursuant to this Agreement and the Transaction Documents.

 

7.                  TERMINATION. In the event that the Closing shall not have
occurred on or before November 30, 2020 due to the Company’s or the Buyers’
failure to satisfy the conditions set forth in Sections 5 and 6 above (and the
nonbreaching party’s failure to waive such unsatisfied condition(s)), the
nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date by
delivering a written notice to that effect to each other party to this Agreement
and without liability of any party to any other party; provided, however, that
notwithstanding the foregoing the Buyers shall not be deemed to have waived any
right to seek damages in respect of any breach of this Agreement by the Company
and shall have all remedies available to it pursuant to this Agreement, under
law or at equity.

 

8.                  MISCELLANEOUS.

 

(a)               Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of Nevada, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Nevada or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of Nevada.
Each party hereby irrevocably submits to the exclusive jurisdiction of the state
and federal courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, 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 any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. 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 to such
party at the address for such 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 manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

 

 

 23 

 

 

(b)               Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile or .pdf signature shall
be considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
or .pdf signature.

 

(c)               Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.

 

(d)               Severability. If any provision of this Agreement is prohibited
by law or otherwise determined to be invalid or unenforceable by a court of
competent jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the broadest extent
that it would be valid and enforceable, and the invalidity or unenforceability
of such provision shall not affect the validity of the remaining provisions of
this Agreement so long as this Agreement as so modified continues to express,
without material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or unenforceability
of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

 

(e)               Entire Agreement; Amendments. This Agreement and the other
Transaction Documents supersede all other prior oral or written agreements
between the Buyers, the Company, their affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement, the
other Transaction Documents and the instruments referenced herein and therein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Buyers makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended or waived other than by an instrument in writing signed
by the Company and the Buyers holding a majority of the then-outstanding Shares,
and any amendment or waiver to this Agreement made in conformity with the
provisions of this Section 8(e) shall be binding on all holders of Securities
and the Company; provided, however, that no amendment shall be effective against
any Buyer that is disproportionately affected by such amendment as compared to
any other Buyer without such Buyer’s written consent; provided, further, that no
amendment requiring any Buyer to purchase additional Securities shall be
effective against a Buyer without such Buyer’s written consent; provided,
further, that no waiver of the provisions of Section 6(a) shall be effective
against a Buyer without such Buyer’s written consent. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
applicable Securities then outstanding. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration
(other than the reimbursement of legal fees) also is offered to all of the
parties to the Transaction Documents; provided, however, for clarity, any
Person’s participation in a subsequent securities offering of the Company shall
not be consideration for this purpose. The Company has not, directly or
indirectly, made any agreements with the Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents. Without limiting the foregoing, the
Company confirms that, except as set forth in this Agreement, the Buyers has not
made any commitment or promise or has any other obligation to provide any
financing to the Company or otherwise. Whenever this Agreement requires the
consent or approval of the holders of the Preferred Stock, unless otherwise
expressly and specifically set forth in this Agreement, such consent or approval
shall require the approval of the Buyers holding a majority of the
then-outstanding Shares.

 

(f)                Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement or any of the other Transaction Documents must be in writing and will
be deemed to have been delivered: (i) upon receipt, when delivered personally;
(ii) upon delivery, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party) or by electronic mail; (iii) upon delivery, when sent by
electronic mail (provided that the sending party does not receive an automated
rejection notice); or (iv) upon receipt, when sent by overnight courier service,
in each case properly addressed to the party to receive the same. The addresses,
facsimile numbers and e-mail addresses for such communications shall be:

 

 

 

 

 24 

 

 

 

If to the Company:

 

Medicine Man Technologies, Inc.

4880 Havana Street, Suite 201

Denver, CO 80239

Telephone:       (303) 371-0387

Facsimile:          (303) 371-0598

Attention:         General Counsel

E-mail:               dan@schwazze.com

 

If to a Buyer, to such Buyer’s address and e-mail address set forth on the
Schedule of Buyers hereto, with copies to such Buyer’s representatives as set
forth on its signature page hereto. Any notice address, facsimile number or
email address for a party may be changed by delivering such other address,
facsimile number and/or e-mail address and/or to the attention of such other
Person as the specified by written notice given to the Company or the Buyers, as
applicable, five calendar days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine or e-mail containing the time, date,
recipient facsimile number and an image of the first page of such transmission
or (C) provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.

 

(g)               Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Buyers holding a
majority of the then-outstanding Shares. A Buyer shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the
Company.

 

(h)               No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

 

(i)                 Survival. Unless this Agreement is terminated under Section
7, the covenants and agreements of the Company and the Buyer shall survive the
Closing. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder. The representations and
warranties of the Company shall survive the Closing until the two year
anniversary thereof.

 

(j)                 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as any other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

 

 

 25 

 

 

(k)               Indemnification.

 

(i)                 In consideration of each Buyer’s execution and delivery of
the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company’s other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and all of their stockholders, partners, members, officers, directors,
employees and direct or indirect investors and any of the foregoing Persons’
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, other than special, exemplary, incidental, punitive or consequential
damages, including lost profits, diminution in value, damage to reputation or
the like unless any such damages are awarded to a third party, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (x)
any misrepresentation or breach of any representation or warranty made by the
Company or any Subsidiary in this Agreement, or (y) any breach of any covenant,
agreement or obligation of the Company or any Subsidiary contained in this
Agreement or (z) any untrue or alleged untrue statement of a material fact
contained in any Resale Registration Statement or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Company will not be liable in any such
case to the extent that any such Indemnified Liabilities (A) arise primarily out
of or is based primarily upon the inaccuracy of any representations and
warranties made by such Buyer in this Agreement or (B) are caused by or
contained in any information furnished in writing to the Company by a Buyer
expressly for use in a Resale Registration Statement or any amendment thereof or
supplement thereto. To the extent that the foregoing undertaking by the Company
may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Notwithstanding anything
to the contrary herein, the Company’s aggregate liability under this Section
8(k) to any Indemnitee shall not exceed the Purchase Price paid by the
applicable Buyer.

 

(ii)                Promptly after receipt by an Indemnitee under this Section
8(k) of notice of the commencement of any action or proceeding (including,
without limitation, any governmental action or proceeding) involving an
Indemnified Liability, such Indemnitee shall, if a claim in respect thereof is
to be made against any indemnifying party under this Section 8(k), deliver to
the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnitee; provided,
however, that an Indemnitee shall have the right to retain its own counsel with
the fees and expenses of such counsel to be paid by the indemnifying party if:
(x) the indemnifying party has agreed in writing to pay such fees and expenses;
(y) the indemnifying party shall have failed promptly to assume the defense of
such Indemnified Liability and to employ counsel reasonably satisfactory to such
Indemnitee in any such Indemnified Liability; or (z) the named parties to any
such Indemnified Liability (including, without limitation, any impleaded
parties) include both such Indemnitee and the indemnifying party, and such
Indemnitee shall have been advised by counsel that a conflict of interest is
likely to exist if the same counsel were to represent such Indemnitee and the
indemnifying party (in which case, if such Indemnitee notifies the indemnifying
party in writing that it elects to employ separate counsel at the expense of the
indemnifying party, then the indemnifying party shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
indemnifying party), provided further that in the case of clause (z) above the
indemnifying party shall not be responsible for the reasonable fees and expenses
of more than one (1) separate legal counsel for such Indemnitee. The Indemnitee
shall reasonably cooperate with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnitee which relates to such Indemnified Liability. The indemnifying
party shall keep the Indemnitee reasonably apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent; provided, however, the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnitee, consent to entry of any judgment or enter into any settlement or
other compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnitee of a release from all
liability in respect to such Indemnified Liability, and such settlement shall
not include any admission as to fault on the part of the Indemnitee. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnitee with respect to all third parties,
firms or corporations relating to the matter for which indemnification has been
made. The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnitee under this Section 8(k),
except to the extent that the indemnifying party is materially and adversely
prejudiced in its ability to defend such action. The indemnity agreements
contained herein shall be in addition to (A) any cause of action or similar
right of the Indemnitees against the indemnifying party or others, and (B) any
liabilities the indemnifying party may be subject to pursuant to the law.

 

 

 

 

 26 

 

 

 

(l)                 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. Each
party hereto agrees that such party and/or its legal counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments thereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction
Document shall be subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the Common
Stock that occur after the date of this Agreement.

 

(m)             Remedies. The Buyers and each holder of the Securities shall
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to seek temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages and without posting a bond or other security. The remedies
provided in this Agreement and the other Transaction Documents shall be
cumulative and in addition to all other remedies available under this Agreement
and the other Transaction Documents, at law or in equity (including a decree of
specific performance and/or other injunctive relief).

 

(n)               Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) this Agreement,
whenever any Buyer exercises a right, election, demand or option under this
Agreement and the Company or any Subsidiary does not timely perform its related
obligations within the periods therein provided, then such Buyer may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company or such Subsidiary (as the case may be), any relevant notice, demand or
election in whole or in part without prejudice to its future actions and rights.

 

(o)               Payment Set Aside. To the extent that the Company makes a
payment or payments to a Buyer hereunder or pursuant to any of the other
Transaction Documents or a Buyer enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.

 

(p)               Independent Nature of Buyers’ Obligations and Rights. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance or non-performance of the obligations of any
other Buyer under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Buyer pursuant hereto or
thereto, shall be deemed to constitute the Buyers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Buyer shall be entitled to independently protect and enforce its
rights, including, without limitation, the rights arising out of this Agreement
or out of the other Transaction Documents, and it shall not be necessary for any
other Buyer to be joined as an additional party in any proceedings for such
purpose. Each Buyer has been represented by its own separate legal counsel in
its review and negotiation of the Transaction Documents. The Company has elected
to provide all Buyers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so
by any of the Buyers. It is expressly understood and agreed that each provision
contained in this Agreement and in each other Transaction Document is between
the Company and the Buyer, solely, and not between the Company and the Buyers
collectively and not between and among the Buyers.

  

(q)               Enforcement Fees. The prevailing party in any dispute under or
relating to this Agreement shall have the right to collect from the other all
costs and expenses incurred by such prevailing party as a result of enforcement
of this Agreement and the collection of any amounts owed to such prevailing
party hereunder (whether in cash, equity or otherwise), including, without
limitation, reasonable attorneys’ fees and expenses.

 

[Signature Page(s) Follows]

 

 

 

 

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IN WITNESS WHEREOF, the Buyers and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

 

 

  COMPANY:         MEDICINE MAN TECHNOLOGIES, INC.         By: /s/ Leonardo
Riera     Name: Leonardo Riera     Title: Member of the Special Committee Member

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the Buyers and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

 

 

  BUYERS:         Dye Capital Cann Holdings II, LLC                     By: /s/
Justin Dye     Name: Justin Dye     Title: Managing Member

 

      Copies of notices to:               Attention: Justin Dye   Email: Dye
Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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