Exhibit 10.12

 

PROMISSORY NOTE

 

$1,000,000 Lafayette, Colorado   October 18, 2018

 

FOR VALUE RECEIVED, and subject to the terms and conditions set forth herein,
urban-gro, Inc. a Colorado corporation (the “Borrower”), hereby unconditionally
promises to pay to the order of James Lowe or his assigns (the “Noteholder”, and
together with the Borrower, the “Parties”), the principal amount of One million
dollars ($1,000,000) (the “Loan”), together with all accrued interest thereon,
as provided in this Promissory Note (the “Note”), as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with its terms).

 

1.          Definitions. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings set forth in this Section 1.

 

“Applicable Rate” means the rate equal to an annual percentage rate of 12%.

 

“Business Day” means a day other than a Saturday, Sunday or other day on which
commercial banks in Denver, CO are authorized or required by law to close.

 

“Default” means any of the events specified in Section 7 which constitutes an
Event of Default or which, upon the giving of notice, the lapse of time, or both
pursuant to Section 7 would, unless cured or waived, become an Event of Default.

 

‘Default Rate” means, at any time, the Applicable Rate plus 2%. “Event of
Default” has the meaning set forth in Section 7.

 

“Interest Payment Date” means the 30th day of each month commencing on the first
such date to occur after the execution of this Note, except for the month of
February, which shall be the last day of said month.

 

“Law” as to any Person, means any law (including common law), statute,
ordinance, treaty, rule, regulation, policy or requirement of any Governmental
Authority and authoritative interpretations thereon, whether now or hereafter in
effect, in each case, applicable to or binding on such Person or any of its
properties or to which such Person or any of its properties is subject.

 

“Maturity Date” means the date on which all amounts under this Note shall become
due and payable pursuant to Section 2.

 

“Order” as to any Person, means any order, decree, judgment, writ, injunction,
settlement agreement, requirement or determination of an arbitrator or a court
or other Governmental Authority, in each case, applicable to or binding on such
Person or any of its properties or to which such Person or any of its properties
is subject.

 

“Origination Fee” means a one-time fee payable by the Borrower to the Noteholder
in the amount of $12,500, paid as additional consideration for the Loan.

 

“Person” means any individual, corporation, limited liability company, trust,
joint venture, association, company, limited or general partnership,
unincorporated organization, Governmental Authority or other entity.

 

 

 

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2.          Payments & Maturity Date.

 

2.1          Payment Schedule. During the term of this Note, interest only
payments equal to 1% of the then outstanding principal balance of this Note
shall be due and payable in arrears to the Noteholder on each Interest Payment
Date. The aggregate unpaid principal amount of the Loan, all accrued and unpaid
interest and all other amounts payable under this Note shall be due and payable
on the Maturity Date.

 

2.2          Optional Prepayment. The Borrower may prepay the Loan in whole or
in part at any time or from time to time without penalty or premium by paying
the principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. No prepaid amount may be re-borrowed.

 

2.3          Maturity Date. The Note matures on April 30, 2019.

 

2.4          Additional Consideration. In addition to the interest payable on
the Loan, the Borrower shall issue an option to purchase up to 30,000 shares of
its Common Stock to the Noteholder or his assigns. At an exercise price of $1.20
per share. A copy of the applicable Option Agreement is attached hereto and
incorporated herein as if set forth as Exhibit “A”.

 

A.          2.5 Right to Cure. In the event Borrower fails to make payment of
principal and/or interest after such payment is due and payable under this Note
and Borrower shall have the right to cure such default within sixty (60) days
from such default.

 

3.          Personal Guaranty. This Note will be guaranteed by each of Brad
Nattrass and Octavio Gutierrez (the “Guarantors”) under the terms of this Note
and the Guaranty Agreement attached hereto as Exhibit “B”. This personal
guaranty by the Guarantors is a guaranty of payment and not of collection.

 

4.          Interest. Except as otherwise provided herein, the outstanding
principal amount of the Loan made hereunder shall bear interest at the
Applicable Rate from the date the Loan was made until the Loan is paid in full,
whether at maturity, upon acceleration, by prepayment or otherwise. If any
amount payable hereunder is not paid when due (without regard to any applicable
grace periods), whether at stated maturity, by acceleration or otherwise, such
overdue amount shall bear interest at the Default Rate from the date of such
non-payment until such amount is paid in full. All computations of interest
shall be made on the basis of a year of 365/366 days, as the case may be, and
the actual number of days elapsed. Interest shall accrue on the Loan on the day
on which such Loan is made, and shall not accrue on the Loan on the day on which
it is paid.

 

5.          Payment Mechanics.

 

5.1          Manner of Payment. All payments of interest and principal shall be
made in lawful money of the United States of America no later than 3:00 PM
within three business days from the date on which such payment is due by
cashier’s check, certified check or by wire transfer of immediately available
funds to the Noteholder’s account at a bank specified by the Noteholder in
writing to the Borrower from time to time.

 

5.2          Application of Payments. All payments made hereunder shall be
applied first, to the payment of any fees or charges outstanding hereunder,
second, to accrued interest and third, to the payment of the principal amount
outstanding under the Note.

 

5.3          Business Day Convention. Whenever any payment to be made hereunder
shall be due on a day that is not a Business Day, such payment shall be made on
the next succeeding Business Day and such extension will be taken into account
in calculating the amount of interest payable under this Note.

 

 

 

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6.          Representations and Warranties. The Borrower hereby represents and
warrants to the Noteholder on the date hereof as follows:

 

6.1          Existence. The Borrower is (a) a corporation duly formed, validly
existing and in good standing under the laws of the state of its jurisdiction of
organization.

 

6.2          Power and Authority. The Borrower has the power and authority, and
the legal right, to execute and deliver this Note and to perform its obligations
hereunder.

 

6.3          Authorization; Execution and Delivery. The execution and delivery
of this Note by the Borrower and the performance of its obligations hereunder
have been duly authorized by all necessary limited liability action in
accordance with all applicable Laws. The Borrower has duly executed and
delivered this Note.

 

6.4          No Approvals. No consent or authorization of, filing with, notice
to or other act by, or in respect of, any Governmental Authority or any other
Person is required in order for the Borrower to execute, deliver, or perform any
of its obligations under this Note.

 

6.5          No Violations. The execution and delivery of this Note and the
consummation by the Borrower of the transactions contemplated hereby do not and
will not (a) violate any provision of the Borrower’s organizational documents;
(b) violate any Law or Order applicable to the Borrower or by which any of its
properties or assets may be bound; or (c) constitute a default under any
material agreement or contract by which the Borrower may be bound.

 

6.6          Enforceability. The Note is a valid, legal and binding obligation
of the Borrower, enforceable against the Borrower in accordance with its terms
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

 

7.          Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder:

 

7.1          Failure to Pay. The Borrower fails to pay (a) any principal amount
of the Loan when due; or (b) interest or any other amount when due and such
failure continues for sixty (60) days after written notice to the Borrower.

 

7.2          Breach of Representations and Warranties. Any representation or
warranty made or deemed made by the Borrower to the Noteholder herein is
incorrect in any material respect on the date as of which such representation or
warranty was made or deemed made.

 

7.3          Bankruptcy.

 

(a)          the Borrower commences any case, proceeding or other action (i)
under any existing or future law relating to bankruptcy, insolvency,
reorganization, or other relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it as bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (ii) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial part
of its assets, or the Borrower makes a general assignment for the benefit of its
creditors;

 

(b)          there is commenced against the Borrower any case, proceeding or
other action of a nature referred to in clause (a) above which (i) results in
the entry of an order for relief or any such adjudication or appointment or (ii)
remains undismissed, undischarged or unbonded for a period of 90 days;

 

 

 

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(c)          there is commenced against the Borrower any case, proceeding or
other action seeking issuance of a warrant of attachment, execution or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which has not been vacated, discharged, or
stayed or bonded pending appeal within 90 days from the entry thereof;

 

(d)          the Borrower takes any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in clause
(a), (b) or (c) above; or

 

(e)          the Borrower is generally not, or is unable to, or admits in
writing its inability to, pay its debts as they become due.

 

7.4          Judgments. A judgment or decree is entered against the Borrower and
such judgment or decree has not been vacated, discharged, stayed or bonded
pending appeal within 90 days from the entry thereof.

 

8.          Remedies. Upon the occurrence of an Event of Default and at any time
thereafter during the continuance of such Event of Default, the Noteholder may
at its option, by written notice to the Borrower (a) declare the entire
principal amount of this Note, together with all accrued interest thereon and
all other amounts payable hereunder, immediately due and payable and/or (b)
exercise any or all of its rights, powers or remedies under applicable law;
provided, however that, if an Event of Default described in Section 7.3 shall
occur, the principal of and accrued interest on the Loan shall become
immediately due and payable without any notice, declaration or other act on the
part of the Noteholder.

 

9.     Miscellaneous.

 

9.1          Notices. All notices, requests or other communications required or
permitted to be delivered hereunder shall be delivered in writing to such
address as a Party may from time to time specify in writing. Notices if (i)
mailed by certified or registered mail or sent by hand or overnight courier
service shall be deemed to have been given when received, (ii) sent by facsimile
during the recipient’s normal business hours shall be deemed to have been given
when sent (and if sent after normal business hours shall be deemed to have been
given at the opening of the recipient’s business on the next business day) and
(iii) sent by e-mail shall be deemed received upon the sender’s receipt of an
acknowledgment from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgment).

 

9.2          Expenses. Each Party shall bear its own expenses incurred in
connection with the transactions contemplated hereby including the negotiation,
documentation and execution of this Note. In any action arising out of this
Note, the prevailing party shall be entitled to receive reasonable attorneys’
fees and costs from the non-prevailing party.

 

9.3          Governing Law. This Note and any claim, controversy, dispute or
cause of action (whether in contract or tort or otherwise) based upon, arising
out of or relating to this Note and the transactions contemplated hereby shall
be governed by the laws of the State of Colorado.

 

9.4          Submission to Jurisdiction. The Parties hereby irrevocably and
unconditionally agrees that any legal action, suit or proceeding arising out of
or relating to this Note may be brought in the courts of the State of Colorado
in Boulder, CO or of the United States of America in Denver, CO and submits to
the exclusive jurisdiction of any such court in any such action, suit or
proceeding. Final judgment against the Borrower in any action, suit or
proceeding shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment. Nothing in this Section 9.4 shall affect the right of the
Noteholder to (i) commence legal proceedings or otherwise sue the Borrower in
any other court having jurisdiction over the Borrower or (ii) serve process upon
the Borrower in any manner authorized by the laws of any such jurisdiction.

 

 

 

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9.5          Venue. The Borrower irrevocably and unconditionally waives, to the
fullest extent permitted by applicable law, any objection that it may now or
hereafter have to the laying of venue of any action or proceeding arising out of
or relating to this Note in any court referred to in Section 9.4 and the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.

 

9.6          Waiver of Jury Trial THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO THIS NOTE OR THE
TRANSACTIONS CONTEMPLATED HEREBY WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY.

 

9.7          Counterparts; Integration; Effectiveness. This Note and any
amendments, waivers, consents or supplements hereto may be executed in
counterparts, each of which shall constitute an original, but all taken together
shall constitute a single contract. This Note constitute the entire contract
between the Parties with respect to the subject matter hereof and supersede all
previous agreements and understandings, oral or written, with respect thereto.
Delivery of an executed counterpart of a signature page to this Note by
facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as
delivery of a manually executed counterpart of this Note.

 

9.8          Successors and Assigns. This Note may be assigned, transferred or
negotiated by the Noteholder to any Person at any time without notice to or the
consent of the Borrower. The Borrower may not assign or transfer this Note or
any of its rights hereunder without the prior written consent of the Noteholder.
This Note shall inure to the benefit of and be binding upon the parties hereto
and their permitted assigns.

 

9.9          Waiver of Notice. The Borrower hereby waives presentment, demand
for payment, protest, notice of dishonor, notice of protest or nonpayment,
notice of acceleration of maturity and diligence in connection with the
enforcement of this Note or the taking of any action to collect sums owing
hereunder.

 

9.10          Amendments and Waivers. No term of this Note may be waived,
modified or amended except by an instrument in writing signed by both of the
parties hereto. Any waiver of the terms hereof shall be effective only in the
specific instance and for the specific purpose given.

 

9.11          Headings. The headings of the various Sections and subsections
herein are for reference only and shall not define, modify, expand or limit any
of the terms or provisions hereof.

 

9.12          No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising on the part of the Noteholder, of any right, remedy, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.

 

9.13          Severability. If any term or provision of this Note is invalid,
illegal or unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other term or provision of this Note or
invalidate or render unenforceable such term or provision in any other
jurisdiction.

 

[Signature Page Follows]

 

 

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IN WITNESS WHEREOF, the Borrower has executed this Note as of October ___, 2018.

 

 

  urban-gro, Inc.           By: /s/ Brad Nattrass   Brad Nattrass, Chief
Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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EXHIBIT B:

 

GUARANTY AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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GUARANTY AGREEMENT

 

THIS GUARANTY AGREEMENT (the “Guaranty”) is entered into effective as of October
, 2018, by and among Bradley Nattrass and Octavio Gutierrez (each, a
“Guarantor,” and collectively the “Guarantors”) for the benefit of James Lowe
(“Lender”) with respect to certain indebtedness of urban-gro, Inc. (the
“Company”) in the form of the Promissory Note (defined below). The Guarantors
and Lender may also be referred to herein collectively as the “Parties” or
individually as a “Party.”

 

RECITALS

 

A.          Lender has agreed to loan funds to the Company pursuant to that
certain promissory note, that is executed contemporaneously with this Guaranty,
in the original principal amount of One Million dollars (USD$1,000,000) (the
“Promissory Note”).

 

B.           As a condition to Lender’s willingness to extend the financial
accommodations to the Company evidenced by the Promissory Note, Lender has
required that the Guarantors execute this Guaranty in order to guarantee the
obligations of the Company under the Promissory Note.

 

NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants
set forth herein and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the Parties agree as
follows:

 

1.          GUARANTY. The Guarantors hereby jointly and severally guarantee the
full and timely payment of the all amounts owed to Lender under the Promissory
Note, when and as the same become due, whether at maturity, by acceleration, or
otherwise.

 

2.          SUCCESSORS AND ASSIGNS. Each reference herein to Lender shall be
deemed to include successors and assigns in respect of ownership of the
Promissory Note, in whose favor the provisions of the Guaranty shall also run.

 

3.          RIGHT TO CURE. Notwithstanding anything in this Guaranty to the
contrary, (a) the Guarantors shall be given the same notice of default and
opportunity to cure as is afforded the Company under the Promissory Note and/or
any other written agreement with Lender, and (b) to the extent all or any part
of the indebtedness herein guaranteed is satisfied, whether by payment, offset
or otherwise, the obligations of the Guarantors hereunder shall likewise be
deemed satisfied to the same extent.

 

4.          NOTICES. Any notice required or permitted by the terms of this
Guaranty shall be given in the same manner as to the Parties under the
Promissory Note addressed to the appropriate party at the address set forth
below, or at such other address as that party may have previously designated by
notice given to the other.

 

5.          GOVERNING LAW. The validity and interpretation of this Guaranty
shall be governed by the laws of the State of Colorado. Except as provided
below, any and all disputes arising under or related to this Agreement which
cannot be resolved through negotiations between the Parties shall be submitted
to binding arbitration. If the parties hereto fail to reach a settlement of
their dispute within thirty (30) days after the earliest date upon which one of
the Parties notifies the other(s) in writing of the existence of and its desire
to attempt to resolve the dispute, then the dispute shall be promptly submitted
to arbitration by a single arbitrator through the Judicial Arbiter Group of
Denver, Colorado (“JAG”), any successor of the Judicial Arbiter Group, or any
similar arbitration provider who can provide a former judge to conduct the
arbitration if JAG is no longer in existence. The arbitrator shall be selected
by JAG, if possible, on the basis of his or her expertise in the subject
matter(s) of the dispute. The decision of the arbitrator shall be final,
non-appealable and binding upon the Parties, and it may be entered in any court
of competent jurisdiction; provided, however, that any party to the arbitration
proceeding may seek a court order vacating the decision of the arbitrator in
accordance with the provisions of and on the grounds set forth in C.R.S. §
13-22-214 and/or a modification or correction of the arbitrator's award in
accordance with the provisions of C.R.S. §§ 13-22-211 or 13-22-215, and may take
an appeal from court orders related to the arbitration proceeding or award as
provided in C.R.S. § 13-22-221.

 

 

 

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The arbitration shall take place in Broomfield, Colorado. The arbitrator shall
be bound by the laws of the State of Colorado applicable to the issues involved
in the arbitration and all Colorado rules relating to the admissibility of
evidence, including, without limitation, all relevant privileges and the
attorney work product doctrine. Discovery shall be permitted and shall be
completed in accordance with the time limitations prescribed in the Colorado
Rules of Civil Procedure, unless extensions of such time limitations are
approved by all parties to the arbitration or are ordered by the arbitrator on
the basis of strict necessity adequately demonstrated by the party requesting an
extension of time. The arbitrator shall have the power to grant equitable relief
where available under Colorado law. The arbitrator shall issue a written opinion
setting forth his or her decision and the reasons therefore within thirty (30)
days after the arbitration proceeding is concluded. The obligation of the
parties to submit any dispute arising under or related to this Agreement to
arbitration as provided in this section shall survive the expiration or earlier
termination of this Agreement. Notwithstanding the foregoing, any party to this
Agreement may seek to obtain an injunction or other appropriate relief from a
court to preserve the status quo with respect to any matter pending conclusion
of the arbitration proceeding, but no such application to a court shall in any
way be permitted to stay or otherwise impede the progress of the arbitration
proceeding.

 

In the event of any arbitration or litigation being filed or instituted between
the parties concerning this Guaranty, the prevailing party will be entitled to
receive from the other party or parties its attorneys' fees, witness fees, costs
and expenses, court costs and other reasonable expenses, whether or not such
controversy, claim or action is prosecuted to judgment or other of relief. The
"prevailing party" is that party which is awarded judgment or other legal or
equitable relief as a result of trial or arbitration, or who receives a payment
of money from the other party in settlement of claims asserted by such party. If
both parties receive a judgment, settlement payment or other award or relief,
the court or the arbitrator shall determine which party is the prevailing party,
taking into consideration the merits of the claims asserted by each party, the
relative values of the judgments, settlements or other forms of relief received
by each party, and the relative equities between the parties.

 

6.          AMENDMENTS. This Guaranty may not be amended, modified, or changed
except by written instrument signed by the party against whom enforcement of
such amendment, modification, or waiver is sought.

 

[Signature Page Follows]

 

 

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first written above.

 

 

  GUARANTORS:       /s/ Tavo Gutierrez   Tavo Gutierrez           /s/ Brad
Nattrass   Brad Nattrass                   LENDER:           /s/ James Lowe  
James Lowe

 

 

 

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