Exhibit 10.2

 

THIS LOAN AGREEMENT dated as of the 21st day of November, 2014,

 

B E T W E E N :

 

CANADIAN CANNABIS CORP. and CANADA CANNABIS CORP. (collectively, the “Borrower”)

 

and

 

CRIMSON CAPITAL, LLC (the “Lender”)

 

and

 

2264793 ONTARIO INC. (“2264793”)

 

RECITALS:

 

A.The Borrower wishes to borrow monies from the Lender in the principal sum of
$600,000 in lawful money of Canada.

 

NOW THEREFORE the parties agree as follows:

 

1.The Loan

 

(a)The Lender shall, on the terms and conditions of this Agreement, lend monies
to the Borrower in the amount of $600,000 in lawful money of Canada (the
“Loan”).

 

2.Repayment of the Loan

 

(a)Subject to this Section, the Borrower shall repay the entire principal sum on
February 21, 2015 (the “Maturity Date”).     (b)Subject to this Section, the
Borrower shall pay interest on the entire outstanding principal advanced from
time to time under the Loan, to be paid on the Maturity Date, at a rate which is
equal to fifty four per cent (54%) per annum, both before and after maturity and
both before and after default, if any, together with interest on overdue
interest at the rate set out above. In the event that the rate of interest
hereunder is considered a “criminal rates of interest” pursuant to the Criminal
Code (Canada), then the interest rate shall be deemed to be the highest rate
permitted by law. The entire Loan shall be deemed advanced on the date hereof
notwithstanding the payments to be made after the date hereof under 2(d)(iv)
below.

 

  

 

 

(c)After a period of 2 months from the date hereof the Borrower shall have the
privilege, when not in default in any of its obligations contained in this
Agreement, without premium or penalty, of prepaying all or any part of the
moneys advanced pursuant to the Loan. Before the date that is 2 months from the
date hereof the Borrower may still prepay the Loan provided that the Borrower
pays a penalty so that the total interest paid is equal to two months interest.
    (d)The proceeds of the Loan shall be disbursed by the Lender as follows:

 

(i)the Lender will pay the Borrower’s insurance company [insert] the sum of
$116,923.67     (ii)the Lender will pay the Borrower’s gas bill of $45,481.50
    (iii)the Lender will pay the tax bill for the Property in the amount of
$27,205.59     (iv)the Lender will make the payments due in November, December
and January under the First Mortgage, each in the amount of $104,788     (v)the
Lender will deduct the amount of $30,000 from the Loan to cover the Lender’s
costs which shall include the Lender’s legal fees     (vi)the Lender will
advance the balance in the sum of $66,025.24 to the Borrower

 

(e)The Borrower shall have the option to extend the term of the Loan on a month
by month basis for an additional period until July 1, 2015 (an “Extension”)
subject to the following:

 

(i)for each month (or part of a month) Extension the Borrower provides at least
15 days prior written notice,     (ii)the Lender has yet to trigger the Option
to Purchase (as described in Section 8); and     (iii)no Event of Default has
occurred.

 

(f)The Borrower agrees that the term of the Loan shall not be extended past July
1, 2015.

 

3.The Security

 

As a continuing collateral security for the payment of all advances made under
the Loan and interest and all other moneys payable pursuant to this Agreement
the Borrower and guarantors shall execute and deliver to the Lender the
following, all in form and content satisfactory to the Lender:

 

(a)an unlimited guarantee from each of 2264793 and Benjamin A. Ward;

 

 2 

 

 

(b)a second in priority mortgage from 2264793 of the property municipally known
as 98-102 Rutherford Rd., S., Brampton, ON and legally described as PIN
14032-0123 (LT), PT LT 4 CON 2 E.H.S. CHINGUACOUSY PTS 1 TO 4, 43R17742; T/W
BR48239 ; S/T BR51139; TOGETHER WITH AN EASEMENT AS IN VS121670; CITY OF
BRAMPTON (the “Property”); and

 

(c)such other security as reasonably requested by the Lender or its lawyers.

 

4.Representations and Warranties of the Borrower

 

Each of the Borrower and 2264793 represents and warrants to the Lender that:

 

(a)It is a corporation legally incorporated, duly organized and validly
existing, in good standing under the laws of the jurisdiction of its
incorporation and is qualified to carry on its business in all jurisdictions
where the nature of its business or the character of its properties make such
qualification necessary.     (b)The borrowing of money and the execution,
delivery and performance of this Agreement and the security set forth in Section
3 are within their corporate powers and capacities and have been duly authorized
by proper corporate proceedings.     (c)There are no actions, suits or
proceedings pending or to the knowledge of the Borrower and 2264793 threatened
against or adversely affecting the Borrower in any court or before or by any
federal, provincial, municipal or other governmental department, commission,
board, bureau or agency, Canadian or foreign, which might materially affect the
financial condition of the Borrower or 2264793 or the title to its property or
assets.     (d)The execution and delivery of this Agreement, the consummation of
the transactions contemplated by this Agreement, the execution and delivery to
the Lender of the security set forth in Section 3, and the compliance with the
covenants, terms, provisions and conditions of this Agreement will not conflict
with or result in a breach of any of the terms or provisions of the constating
documents or by-laws of the Borrower and 2264793, or any resolution of the
directors or shareholders of the Borrower and 2264793, any laws of Canada, or
the Province of Ontario, or any agreement or instrument to which it is now a
party.     (e)This Agreement and all other deeds, documents or instruments to be
delivered pursuant to this Agreement will, when executed and delivered,
constitute valid and binding obligations of the Borrower and/or 264793
enforceable against it in accordance with their respective terms, except as may
be limited by other deeds, documents or instruments delivered pursuant to this
Agreement, or by applicable bankruptcy, reorganization, insolvency, moratorium
and other laws affecting the enforcement of creditors' rights.

 

 3 

 

 

(f)The borrowing of money under this Agreement and the execution and delivery of
this Agreement do not require the consent or approval of, or registration of any
other party.     (g)All balance sheets, earnings statements and other financial
data, which have been or shall be furnished to the Lender to induce the Lender
to enter into this Agreement or otherwise in connection with this Agreement have
been or will be prepared in accordance with generally accepted accounting
principles and do or will fairly present the financial condition and the results
of the operations, and all other information, certificates, schedules, reports
and other papers and data furnished to the Lender are or will be at the time
they are so furnished, accurate and complete in all material respects.    
(h)The Property is not in violation of any zoning, building, health, fire,
traffic, environmental, wetlands, coastal or other rules, regulations,
ordinances, statutes and requirements applicable thereto, and there are no
outstanding work orders.     (i)No hazardous material is now, or was formerly,
used, stored, generated, manufactured, installed, disposed of or otherwise
present at or about the Property or any property adjacent to the Property
(except for cleaning and other products currently used in connection with the
routine maintenance or repair of the Property in full compliance with all
federal, provincial and local environmental laws (“Environmental Laws”)).    
(j)All permits, licenses, approvals and filings required by Environmental Laws
have been obtained, and the use, operation and condition of the Property do not,
and did not previously, violate any Environmental Laws.     (k)No civil,
criminal or administrative action, suit, claim, hearing, investigation or
proceeding has been brought or been threatened, nor have any settlements been
reached by or with any parties or any liens imposed in connection with the
Property concerning hazardous materials or Environmental Laws.     (l)It has
paid when due and in full all employee pensions and benefits payable by it,
including without limitation Workers’ Compensation Board premiums, Employer
Health Tax premiums, Canada Pension Plan contributions and Employment Insurance
Commission premiums, and has remitted when required and in full all source
deductions for income tax, Canada Pension Plan contributions and Employment
Insurance Commission premiums of its employees and all goods and services tax
and retail sales tax paid and received by it.

 

 4 

 

 

(m)All realty taxes due have been paid in full. There are no pending or, to the
Borrowers' best knowledge, proposed, special or other assessments for public
improvements or otherwise affecting the Property, nor are there any contemplated
improvements to the Property that may result in such special or other
assessments.     (n)As of the date hereof, the only tenants of the Property are
Trans Connect Logistics Inc., Butcher Industrial Finishings Inc., C & J Paving
Ltd. and Pattison Outdoor Advertising LP (by its general partner, Pattison
Outdoor Advertising Ltd). All such leases are in good standing with no defaults
thereunder.     (o)All tenants of the Property deal at arm’s length with the
Borrower and 2264793 and neither the Borrower nor 2264793 Ontario Inc., nor any
of their respective agents or affiliates have any written or unwritten lease or
sublease in connection with the Property.     (p)No tenant of the Property or
any other party has an option to purchase all or any portion of the Property.

 

5.Affirmative Covenants

 

Each of the Borrower and 2264793 covenants with the Lender that so long as any
amounts advanced under the Loan together with interest remain outstanding:

 

(a)It will deliver financial statements and any other financial information or
reports upon request by the Lender.     (b)It will permit any person designated
by the Lender in writing to visit and inspect the Property, corporate books and
financial records and to discuss the affairs, finances and accounts of the
Borrower and 2264793 at all reasonable times and as often as the Lender may
reasonably request.     (c)It will insure and keep insured all of its property
with extended coverage against loss or damage by fire, theft, collision or other
insurance hazards commonly insured against to the full insurable value. All
insurance shall be maintained with an insurer or insurers as may be approved by
the Lender. The loss under all insurance will be payable to lenders in order of
priority and each policy will contain a mortgage clause providing for a minimum
of 15 days’ notice to the Lender of cancellation or lapse.

 

 5 

 

 

(d)It will give the Lender prompt written notice of any material adverse change
in its business or of any material loss, destruction or damage of or to any of
its property.     (e)It will pay or reimburse the Lender for all costs, charges
and expenses (including legal fees) of or incurred by the Lender in connection
with this Agreement or any security taken in pursuance of this Agreement,
including all costs, charges and expenses in connection with the recovery or
enforcement of payment of moneys advanced under the Loan, together with
interest.     (f)It will maintain at all times proper records and books of
account and make true and correct entries in the records of all dealings and
transactions relating to its business.     (g)It will do, observe and perform
all of its obligations and all matters and things necessary or expedient to be
done, observed or performed under any law or regulation of Canada, the Province
of Ontario, or any other province where its assets may be located, or any
municipality, for the purpose of creating and maintaining the security provided
for in this Agreement.     (h)It will give the Lender written notice of any
event of default immediately on the occurrence of such an event.     (i)It will
give the Lender written notice of the occurrence of any material litigation,
proceeding or dispute affecting the Borrower and will provide to the Lender all
reasonable information requested by the Lender concerning the status of the
litigation, proceeding or dispute.     (j)If the Borrower or 2264793 receives
additional financing or funding, including but not limited to from a loan or
line of credit then such funds shall be used to prepay the Loan.

 

6.Negative Covenants

 

Each of the Borrower and 2264793 covenants with the Lender that it will not,
without the prior written consent of the Lender:

 

(a)Redeem, purchase or otherwise acquire, either directly or indirectly any of
its shares, or declare or pay any dividend on any of its shares of whatever
class, or in any other manner make payments to its shareholders except for usual
remuneration or reimbursement in respect of employment.     (b)Lend money to,
invest in, or become contingently liable by guarantee or otherwise for the
obligations of, any person, firm or body corporate.

 

 6 

 

 

(c)Consolidate, amalgamate or merge with any other corporation or acquire the
shares or assets of any corporation, firm or partnership, or sell, lease or
transfer or otherwise dispose of all or a substantial part of its assets.    
(d)Enter into any partnership, joint venture or similar agreement or arrangement
with any other person, firm or corporation.     (e)Create, suffer or permit to
exist any mortgage, pledge, lien, charge, assignment by way of security,
hypothecation, security interest, security agreement, trust or arrangement
having the effect of security, any type of preferential arrangement or other
encumbrance of any kind whether or not similar to the foregoing to exist on or
with respect to its assets, except those that already exist as of the date
hereof.     (f)Enter into any offer to lease, agreement to lease, lease,
sublease, renewal of lease or sublease in connection with the Property,
including any parking agreements and storage space leases.

 

7.Events of Default

 

The principal advanced under the Loan and all interest payable together with all
of the moneys payable pursuant to this Agreement shall, at the option of the
Lender, become immediately due and payable and any security held by the Lender
for the payment thereof shall, at the option of the Lender, become immediately
enforceable and the Lender may exercise its rights under Section 8 herein, in
each and every of the following events (each an “Event of Default”):

 

(a)If the Borrower defaults in the repayment of any instalment of principal or
interest under the Loan when it becomes due and payable.     (b)If the Borrower
fails to perform or observe any of the covenants contained in this Agreement or
in any of the security delivered pursuant to this Agreement and any failure
shall not be remedied within 10 days following notice being given to the
Borrower.     (c)If any representation, warranty, certificate, statement or
report made in connection with this Agreement or in connection with advances
under the Loan is false or erroneous in any material respect.     (d)If any
indebtedness of the Borrower or 2264793 for liabilities other than to the Lender
becomes due prior to the stated maturity date, unless and to the extent that the
same shall be contested in good faith and by appropriate proceedings.

 

 7 

 

 

(e)If the Borrower becomes insolvent or bankrupt or subject to the provisions of
the Bankruptcy and Insolvency Act (Canada), or goes into liquidation, either
voluntarily or under an order of a court of competent jurisdiction, or makes a
general assignment for the benefit of its creditors or otherwise acknowledges
itself insolvent.     (f)If the Borrower removes from the Province of Ontario or
sells any material part of its undertaking, property and assets.     (g)If the
Borrower abandons all or any part of its undertaking and property and assets or
ceases or threatens to cease to carry on its business, or threatens to commit
any act of bankruptcy.     (h)If any execution, sequestration, extent, or any
other process of any court becomes enforceable against the Borrower or if a
distress or analogous process is levied on the property and assets of the
Borrower, and the execution, sequestration, extent, distress or process, remains
unsatisfied for a period as would permit the property or a part of it to be
sold.     (i)If there is a default under the first mortgage loan registered
against the Property as Instrument No. PR2560468, and transferred pursuant to
Instrument No. PR2566032 (the “First Mortgage”).

 

8.Option to Purchase

 

(a)Upon the occurrence of an Event of Default or upon the extension of the term
of the Loan pursuant to any Extension described in Section 2(e), the Lender,
shall have the immediate right to purchase the Property from 2264793 for the sum
of $9,400,000 CDN (the “Option to Purchase”).     (b)The Lender and 2264793 will
enter into a form of purchase agreement for the Option to Purchase by December
5, 2014. Failure to agree to the form of purchase agreement by December 5, 2014
will be considered a Event of Default under this Agreement.     (c)If the Lender
chooses to exercise the Option to Purchase then the Lender shall deliver written
notice to the Borrower and upon delivery of such notice the purchase agreement
shall be released from escrow and become immediately effective.

 

 8 

 

 

9.General

 

(a)The Borrower covenants that it will execute or cause to be made, done or
executed, all further and lawful acts, deeds, things, devices, conveyances and
assurances whatsoever for effecting the purposes and intent of this Agreement as
counsel for the Lender shall reasonably advise or request.     (b)The Lender may
from time to time appropriate any moneys received by it from the Borrower or
from the proceeds of security given by the Borrower in or towards payment of the
liabilities intended to be secured, as it in its sole discretion may see fit and
the Borrower shall not have the right to require any other appropriation, and it
is agreed that the taking of a judgment or judgments or any other action or
dealing whatsoever by the Lender with respect to the securitites shall not
operate as a merger of any debt owing by the Borrower to the Lender or any part.
    (c)Notice to be given shall be in writing and be delivered by courier to the
following addresses (effective on the date of delivery):

 

(i)As to the Borrower or 2264793:     (ii)As to the Lender:

 

489 South Riverview Drive, Totowa, New Jersey 07512

Attention: Joseph R. Prestifilippo

 

with a copy to:

Gardiner Roberts LLP

40 King Street West, Suite 3100

Toronto, ON M5H 3Y2

Attention: David Epstein

 

or any other addresses as the parties from time to time may notify the other.

 

(d)This Agreement and all other agreements, security and documents to be
delivered in connection with this Agreement shall be governed by and construed
in accordance with the applicable laws of the Province of Ontario and of Canada.
    (e)This Agreement shall be binding on and enure to the benefit of the
Borrower, the Lender and their respective successors and assigns, except that
the Borrower shall not, without the prior written consent of the Lender, assign
any rights or obligations with respect to this Agreement. The Lender may
transfer, assign or grant participation in its rights and obligations with
respect to this Agreement.

 

 9 

 

 

(f)Any provision of this Agreement which is or becomes prohibited or
unenforceable in any jurisdiction shall not invalidate or impair the remaining
provisions of this Agreement which shall be deemed severable from the prohibited
or unenforceable provision and any prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable that provision in any
other jurisdiction.     (g)No amendment supplement or waiver of any provision of
this Agreement or any other agreements provided for or contemplated, nor any
consent to any departure by the Borrower, shall in any event be effective unless
it shall be in writing and signed by the Lender and then the waiver or consent
shall be effective only in the specific instance for the specific purpose for
which it has been given.     (h)No waiver or act or omission of the Lender shall
extend to or be taken in any manner whatsoever to affect any subsequent event of
default or breach by the Borrower of any provision of this Agreement or the
results or the rights resulting from it.     (i)Time shall be of the essence of
this Agreement.     (j)This Agreement shall remain in full force and effect
until the payment and performance in full of all of the Borrower's obligations
under this Agreement.     (k)This Agreement constitutes the entire agreement
among the parties and cancels and supersedes any prior agreements, undertakings,
declarations or representations, written or verbal in respect of it.

 

[SIGNATURE PAGES FOLLOWS]

 

 10 

 

 

IN WITNESS OF WHICH the parties have caused this Agreement to be executed by
their respective officers duly authorized.

 

  CANADIAN CANNABIS CORP.         Per: /s/ John Esteireiro   Name: John
Esteireiro   Title: Chief Operating Officer         Per: /s/ Benjamin Ward  
Name: Benjamin Ward   Title: President & CEO         I/We have authority to bind
the Corporation       CANADIAN CANNABIS CORP.         Per: /s/ John Esteireiro  
Name: John Esteireiro   Title: Chief Operating Officer         Per: /s/ Benjamin
Ward   Name: Benjamin Ward   Title: President & CEO         I/We have authority
to bind the Corporation       2264793 ONTARIO INC.         Per: /s/ Scott Keevil
  Name: Scott Keevil   Title:           Per: /s/ Benjamin Ward   Name: Benjamin
Ward   Title: Secretary         I/We have authority to bind the Corporation

 

SIGNATURE PAGE TO LOAN AGREEMENT  

 

 S-1 

 

 

      CRIMSON CAPITAL, LLC         Per: /s/ Stephen R. Malley   Name: Stephen R.
Malley   Title: Managing Member         Per:     Name:     Title:           I/We
have authority to bind the Corporation

 

SIGNATURE PAGE TO LOAN AGREEMENT

 

 

S-2