Exhibit



Exhibit 10.5





NEITHER THIS WARRANT NOR THE SECURITIES FOR WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  

 

		
	Warrant [2016-N-__]

	Issue Date: September 21, 2016







GENERAL CANNABIS CORPORATION.




SERIES B WARRANT




TO PURCHASE SHARES OF COMMON STOCK

 

THIS Series B WARRANT (the “Warrant”) certifies that, for value received, ________________ or his assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business of the thirty six  (36th) month after the Initial Exercise Date (the “Expiration Date”) but not thereafter, to subscribe for and purchase from General Cannabis Corporation., a Colorado corporation, (the “Company”), up to [     ] shares (as subject to adjustment hereunder, the “Warrant Shares”) of the Company’s $0.01 par value common stock, (“Common Stock”).  The purchase price of one share of Common Stock under this Warrant shall be equal to $0.70, subject to adjustment hereunder (the “Exercise Price”).  

1.

The Holder may exercise this Warrant, in whole or in part, upon surrender of this Warrant, with the exercise form annexed hereto duly executed, at the office of the Company, or such other office as the Company shall notify the Holder in writing, together with a certified or bank cashier's check payable to the order of the Company in the amount of the Purchase Price multiplied by the number of shares of Common Stock being purchased; provided, that Holder may exercise this Warrant in whole or part (a) utilizing all or a portion of the amounts owed by the Company to Seller pursuant to the Note (“Note”) issued with this and other warrants under the terms of a Note and Warrant Purchase Agreement, dated as of September 21, 2016 or (b) in the event that the Company does not have an effective registration statement covering the warrant shares within six (6) months of the date hereof, the Holder may exercise this Warrant on a cashless basis as further provided herein.

2.

“Principal Market” shall include the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing) (whichever is at the time the principal trading exchange or market for the Common Stock), or any securities exchange or other securities market on which the Common Stock is then being listed, quoted or traded.  The Company will from time to time take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of the Warrant, will be listed on the Principal Market on which other shares of Common Stock are then listed, if any.

If the Company proposes to register any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than the Company’s initial public offering or a registration relating solely to the offer and sale of non-convertible, non-exchangeable debt securities or a registration on Form S-4 or Form S-8, or any successor or similar forms) (a “Piggyback Registration”), whether for the account of the Company or otherwise, it will include all Registrable Securities (as hereinafter defined) in such registration statement and give written notice to each registered Holder.  The Company will use its best efforts to effect the registration under the Securities Act of all of the Registrable Securities in such registration statement.  The term “Registrable Securities” means (i) the Warrant Shares and any other securities of the Company issuable upon the exercise of the Warrants and (ii) any shares of capital stock or other securities issued or issuable with respect to this Warrant, as a result of any stock split, stock dividend, recapitalization, exchange, or similar event or otherwise.  

3.

The person or persons in whose name or names any certificate representing Common Stock is issued hereunder shall be deemed to have become the holder of record of the Common Stock represented thereby as of the close of business on the date on which this Warrant is exercised with respect to such shares, whether or not the transfer books of the Company shall be closed.  Until such time as this Warrant is exercised or terminates, the Purchase Price payable and the number and character of securities issuable upon exercise of this Warrant are subject to adjustment as hereinafter provided.

4.

The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Form of Exercise (attached hereto as Exhibit A), the Holder (together with the Holder’s affiliates, and any other person or 




















entity acting as a group together with the Holder or any of the Holder’s affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 5, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 5 applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Form of Exercise (attached hereto as Exhibit A) shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 5 to an amount determined by the Holder in its sole discretion.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

5.

The Company covenants that it will at all times reserve and keep available a number of its authorized Common Stock, free from all preemptive rights, which will be sufficient to permit the exercise of this Warrant.  The Company further covenants that such shares as may be issued pursuant to the exercise of this Warrant will, upon issuance, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges.  Unless previously exercised, this Warrant shall expire at 5:00 p.m. Eastern Standard Time, on the Expiration Date and shall be void thereafter or can be extended at the Company’s discretion.

6.

Redemption.  In the event that the Common Stock closes at a price of at least $5.00 per share for 10 consecutive trading days, the Company  may give the Holder notice of the Company’s intention to redeem this Warrant.  During the 30 day period following such notice, the Holder may exercise such Warrant.  Following such 30 day period, the Company shall pay the Holder a price of $.01 per share that this Warrant is exercisable for and the Holder shall have no further right to exercise this Warrant.

7.

In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 7 (in each case, after taking into consideration any prior adjustments pursuant to this Section 7).

(b)

If the Company shall, at any time or from time to time after the Initial Exercise Date, issue or sell, or is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to an Exercise Price equal to the lowest price per share at which any such share of Common Stock has been issued or sold (or is deemed to have been issued or sold); provided, that if such issuance or sale (or deemed issuance or sale) was without consideration, then the Company shall be deemed to have received an aggregate of $0.01 of consideration for all such shares so issued or deemed to be issued.  This section shall not be applicable to any issuance of options issued pursuant to the Company’s existing stock option plan.

8.

If the Company subdivides its outstanding Common Stock, by split-up or otherwise, or combines its outstanding Common Stock, the Purchase Price then applicable to shares covered by this Warrant shall forthwith be proportionately decreased in the case of a subdivision, or proportionately increased in the case of a combination.























9.

If (a) the Company reorganizes its capital, reclassifies its capital stock, consolidates or merges with or into another corporation (but only if the Company is not the surviving corporation and no longer has more than a single shareholder) or sells, transfers or otherwise disposes of all or substantially all its property, assets, or business to another corporation, and (b) pursuant to the terms of such reorganization, reclassification, merger, consolidation, or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock, or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock, then (c) Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same number of shares of common stock of the successor or acquiring corporation and Other Property receivable upon such reorganization, reclassification, merger, consolidation, or disposition of assets as a holder of the number of Common Stock for which this Warrant is exercisable immediately prior to such event. At the time of such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to adjust the number of shares of the common stock of the successor or acquiring corporation for which this Warrant is exercisable. For purposes of this section, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock, or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to  subscribe for or purchase any such stock. The foregoing provisions of this section shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations, or disposition of assets.

10.

If a voluntary or involuntary dissolution, liquidation or winding up of the Company (other than in connection with a merger or consolidation of the Company) is at any time proposed during the term of this Warrant, the Company shall give written notice to the Holder at least thirty days prior to the record date of the proposed transaction.  The notice shall contain: (1) the date on which the transaction is to take place; (2) the record date (which must be at least thirty days after the giving of the notice) as of which holders of the Common Stock entitled to receive distributions as a result of the transaction shall be determined; (3) a brief description of the transaction; (4) a brief description of the distributions, if any, to be made to holders of the Common Stock as a result of the transaction; and (5) an estimate of the fair market value of the distributions.  On the date of the transaction, if it actually occurs, this Warrant and all rights existing under this Warrant shall terminate.

11.

In no event shall any fractional share of Common Stock of the Company be issued upon any exercise of this Warrant.  If, upon exercise of this Warrant as an entirety, the Holder would, except as provided in this Section 9, be entitled to receive a fractional share of Common Stock, then the Company shall issue the next higher number of full Common Stock, issuing a full share with respect to such fractional share.  If this Warrant is exercised at one time for less than the maximum number of Common Stock purchasable upon the exercise hereof, the Company shall issue to the Holder a new warrant of like tenor and date representing the number of Common Stock equal to the difference between the number of shares purchasable upon full exercise of this Warrant and the number of shares that were purchased upon the exercise of this Warrant.

12.

No adjustments in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price, provided however, that any adjustments which by reason of this Section 10 are not required to be made shall be carried forward and taken into account in any subsequent adjustment.

13.

Whenever the Purchase Price is adjusted, as herein provided, the Company shall promptly deliver to the Holder a certificate setting forth the Purchase Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

14.

If at any time prior to the expiration or exercise of this Warrant, the Company shall pay any dividend or make any distribution upon its Common Stock or shall make any subdivision or combination of, or other change in its Common Stock, the Company shall cause notice thereof to be mailed, first class, postage prepaid, to Holder at least thirty full business days prior to the record date set for determining the holders of Common Stock who shall participate in such dividend, distribution, subdivision, combination or other change.  Such notice shall also specify the record date as of which holders of Common Stock who shall participate in such dividend or distribution is to be determined.  Failure to give such notice, or any defect therein, shall not affect the legality or validity of any dividend or distribution.

15.

If at any time after six (6) months from the date hereof, there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant may be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:























(A) = the daily volume weighted average price of the Common Stock (or if not calculable or attainable from the Principal Market, the last sale price reported by such Principal Market) on the trading day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the attached Form of Exercise;

(B) = the Exercise Price of this Warrant, as adjusted in accordance with this Warrant; and 

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised, and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares.  The Company agrees not to take any position contrary to this Section.

16.

The Company will maintain a register containing the names and addresses of the Holder and any assignees of this Warrant.  Holder may change its address as shown on the warrant register by written notice to the Company requesting such change.  Any notice or written communication required or permitted to be given to the Holder may be delivered by confirmed facsimile or telecopy or by a recognized overnight courier, addressed to Holder at the address shown on the warrant register.

17.

This Warrant has not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws ("State Acts") or regulations in reliance upon exemptions under the Securities Act, and exemptions under the State Acts.  Subject to compliance with the Securities Act and State Acts, this Warrant and all rights hereunder are transferable in whole or in part, at the office of the Company at which this Warrant is exercisable, upon surrender of this Warrant together with the assignment hereof properly endorsed.

18.

In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company may issue a new warrant of like tenor and denomination and deliver the same (a) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant, or (b) in lieu of any Warrant lost, stolen, or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of such Warrant (including a reasonably detailed affidavit with respect to the circumstances of any loss, theft, or destruction) and of indemnity with sufficient surety satisfactory to the Company.

19.

Unless a current registration statement under the Securities Act, shall be in effect with respect to Common Stock to be issued upon exercise of this Warrant, the Holder, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, and at the time of any proposed transfer of Common Stock acquired upon exercise hereof, the Company may require Holder to make such representations, and may place such legends on certificates representing Common Stock issuable upon exercise of this Warrant, as may be reasonably required in the opinion of counsel to the Company to permit such Common Stock to be issued without such registration.

20.

This Warrant does not entitle Holder to any of the rights of a stockholder of the Company.

21.

Nothing expressed in this Agreement and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties to this Agreement any covenant, condition, stipulation, promise, or agreement contained herein, and all covenants, conditions, stipulations, promises and agreements contained herein shall be for the sole and exclusive benefit of the parties hereto and their respective successors and assigns.

22.

The provisions and terms of this Warrant shall be construed in accordance with the laws of the State of Colorado.

 [SIGNATURE PAGE TO FOLLOW]























IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.




			
	 
	GENERAL CANNABIS CORPORATION:


	 
	 

	 
	By::

	 

	 
	 
	Name:


	 
	 
	Title:



































EXHIBIT A

 

FORM OF EXERCISE







Date: ____________________







To: GENERAL CANNABIS CORPORATION./[TRANSFER AGENT]







The undersigned hereby subscribes for _______ shares of common stock of General Cannabis Corporation, Inc. covered by this Warrant and hereby delivers $___________ in full payment of the purchase price thereof as follows:




[  ] in lawful money of the United States;




[  ] through the forgiveness of principal due and owing under the Note in such amount;




[  ] through the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).




The certificate(s) for such shares should be issued in the name of the undersigned or as otherwise indicated below:




		
	 
	 

	 
	Signature:


	 
	 

	 
	 

	 
	 

	 
	Printed Name


	 
	 

	 
	 

	 
	 

	 
	Name for Registration, if different


	 
	 

	 
	 

	 
	 

	 
	Street Address


	 
	 

	 
	 

	 
	 

	 
	City, State and Zip Code


	 
	 

	 
	 

	 
	 

	 
	Social Security Number



































EXHIBIT B




FORM OF ASSIGNMENT







For Value Received, the undersigned hereby sells, assigns and transfers unto the assignee(s) set forth below the within Warrant certificate of General Cannabis Corporation.; together with all right, title and interest therein, and hereby irrevocably constitutes and appoints ___________________________________ attorney, to transfer the said Warrant on the books of the within-named Company with respect to the number of Common Stock set forth below, with full power of substitution in the premises.







							
	Name(s) of

Assignee(s)

	 
	Social Security or other Identifying Number(s) of Assignee(s)

	 
	Address

	 
	No. of Shares


	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
























Dated: ______________________________










		
	 
	 

	 
	Signature


	 
	 

	 
	NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE WARRANT IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.


	 
	 

	 
	 

	 
	Print Name and Title