Document:

Exhibit

Exhibit 10.2

FORM OF
SECURED PROMISSORY NOTE

(Dated September 21, 2016)

FOR VALUE RECEIVED, and subject to the terms and conditions set forth herein, General Cannabis Corporation, a Colorado corporation (the “Borrower”), hereby unconditionally promises to pay to the order of _________________ or his assigns (the “Noteholder”, and together with the Borrower, the “Parties”), the principal amount of $[Principle Amount of Loan] (the “Loan”), together with all accrued interest thereon, as provided in this Promissory Note (the “Note”) in United States currency. This Note and other notes of like tenor are being delivered under the terms of a note and warrant purchase agreement, dated as of September 21, 2016 (“Purchase Agreement”).

1.

Definitions. Capitalized terms used herein shall have the meanings set forth in this Section 1.

“Affiliate” means as to any Person, any other Person that, directly or indirectly through one or more intermediaries, is in control of, is controlled by, or is under common control with, such Person. 

“Applicable Rate” means the rate equal to 12% per annum; provided that same shall be increased to the lesser of 18% and the highest allowable rate upon an Event of Default.

“Borrower” has the meaning set forth in the introductory paragraph.

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

“Commitment Period” means the period from the date hereof to the Maturity Date.

“Debt” of the Borrower, means all (a) indebtedness for borrowed money; (b) obligations for the deferred purchase price of property or services, except trade payables arising in the ordinary course of business; (c) obligations evidenced by notes, bonds, debentures or other similar instruments; (d) obligations as lessee under capital leases; (e) obligations in respect of any interest rate swaps, currency exchange agreements, commodity swaps, caps, collar agreements or similar arrangements entered into by the Borrower providing for protection against fluctuations in interest rates, currency exchange rates or commodity prices or the exchange of nominal interest obligations, either generally or under specific contingencies; (f) obligations under acceptance facilities and letters of credit; (g) guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person, or otherwise to assure a creditor against loss, in each case, in respect of indebtedness set out in clauses (a) through (f) of a Person other than the Borrower; and (h) indebtedness set out in clauses (a) through (g) of any Person other than Borrower secured by any lien on any asset of the Borrower, whether or not such indebtedness has been assumed by the Borrower.

“Default” means any of the events specified in Section 9 which constitutes an Event of Default or which, upon the giving of notice, the lapse of time, or both pursuant to Section 9 would, unless cured or waived, become an Event of Default.

“Event of Default” has the meaning set forth in Section 9.

“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time.

“Governmental Authority” means the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, municipal or any other level, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of, or pertaining to, government (including any supranational bodies such as the European Union or the European Central Bank).

“Intellectual Property” means any and all intellectual property, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, all rights therein, and all rights to sue at law or in equity for any past, present, or future infringement, violation, misuse, misappropriation or other impairment thereof, whether arising under US, multinational or foreign laws or otherwise, including the right to receive injunctive relief and all proceeds and damages therefrom.

“Interest” shall be payable at the rate of 12% per annum and shall by payable quarterly.  The Noteholder shall by entitled to at least 12 month’s interest even if the Company prepays the Note.

“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. 

“Lien” means any mortgage, pledge, hypothecation, encumbrance, lien (statutory or other), charge or other security interest.

“Loan” has the meaning set forth in the introductory paragraph.

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, properties, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of the Borrower; (b) the validity or enforceability of the Note or Security Agreement; (c) the perfection or priority of any Lien purported to be created under the Security Agreement; (d) the rights or remedies of the Noteholder hereunder or under the Security Agreement; or (e) the Borrower’s ability to perform any of its material payment obligations hereunder or under the Security Agreement.

“Maturity Date” means the earlier of (a) two years from the date of issuance and (b) the date on which all amounts under this Note shall become due and payable pursuant to Section 9.5(e).

“Note” has the meaning set forth in the introductory paragraph.

“Noteholder” has the meaning set forth in the introductory paragraph.

“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.

“Parties” has the meaning set forth in the introductory paragraph.

“Permitted Debt” means Debt (a) existing or arising under this Note and any refinancing thereof; (b) ordinary trade payables, consistent with past practice; (c) existing as of the date of this Note, except as required to be extinguished by the terms hereof (such debt existing immediately after the issuance of this Note and after giving effect to the payment of Debt as required hereunder being referred to as the “Remaining Debt”); (d) which may be deemed to exist with respect to swap contracts; (e) owed in respect of any netting services, overdrafts and related liabilities arising from treasury, depository and cash management services in connection with any automated clearinghouse transfers of funds; and (f) unsecured insurance premiums owing in the ordinary course of business.

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

“Security Agreement” means the Security Agreement, dated as of the date hereof, by and between the Borrower and Noteholder, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms.  The Security Agreement shall be substantially in the form attached at the back of this Note.

2.

Final Payment Date; Optional Prepayments.

2.1

Final 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, at its discretion, 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, provided, however, that one year of interest as calculated under this Note shall be paid in the event that the accrued interest is less than one year of interest. No prepaid amount may be reborrowed.

3.

Use of Proceeds; Priority; Security Agreement.

3.1

The proceeds to the Company under this Note (and the other Notes) shall be first be used on the date of issuance of this Note to pay any and all expenses of the offering of this Note (and the other Notes). 

3.2

After giving effect to the payments required under Section 3.1, above, the proceeds to the Company under this Note (and the other Notes) shall be used within 30 days of this Note to pay (a) any and all Debt owing on any mortgage or other loan relating to the real property of the Company, such that there shall be no mortgages or liens on such real property as of such date except those granted to the Purchasers of the Notes and (b) to pay in full and extinguish any and all Debt that would be deemed senior in right of payment or collection to this Note (and the other Notes).

3.3

After giving effect to the payments required under Sections 3.1 and 3.2, above, the proceeds to the Company under this Note (and the other Notes) shall be used to pay and extinguish at the date of issuance of this Note (or as soon as practicable after the date of this issuance of this Note) all other existing Debt of the Company other than the Remaining Debt (all of which is itemized on Schedule 3.2 to this Note).

3.4

Any proceeds to the Company under this Note (and the other Notes) after giving effect to Sections 3.1, 3.2 and 3.3, above, shall be used to fund the Company’s working capital; provided, that no proceeds of this Note (or the other Notes) shall be used to repay the promissory note owed to Infinity Capital identified on Schedule 3.2 hereto.

3.5

This Note evidences senior secured indebtedness of the Company and shall have priority in right of payment, enforcement and collection over any and all other Debt of the Company, whether existing as of the date of issuance of this Note or incurred thereafter.  So long as this Note is outstanding, the Company shall not incur any Debt except for trade payables in the ordinary course of business, consistent with past practice, unless otherwise first consented to in writing by the holder of this Note (and all of the other Notes).

3.6

The Borrower's performance of its obligations hereunder is, and shall be, secured by a first priority security interest in the collateral specified in the Security Agreement.

4.

Interest.

4.1

Interest Rate. 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.

4.2

Computation of Interest. All computations of interest shall be made on the basis of a year of 360 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 Advance is made, and shall not accrue on the Loan for the day on which it is paid.

4.3

Interest Rate Limitation. If at any time and for any reason whatsoever, the interest rate payable on the Loan shall exceed the maximum rate of interest permitted to be charged by the Noteholder to the Borrower under applicable Law, such interest rate shall be reduced automatically to the maximum rate of interest permitted to be charged under applicable Law/that portion of each sum paid attributable to that portion of such interest rate that exceeds the maximum rate of interest permitted by applicable Law shall be deemed a voluntary prepayment of principal.

5.

Payment Mechanics.

5.1

Manner of Payments. All payments of interest and principal shall be made in lawful money of the United States of America no later than 5:00 PM MST on 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.

5.4

Rescission of Payments. If at any time any payment made by the Borrower under this Note is rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Borrower's obligation to make such payment shall be reinstated as though such payment had not been made. 

6.

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

6.1

Existence; Compliance With Laws. The Borrower is (a) a corporation duly incorporated, validly existing and in good standing under the laws of the state of its jurisdiction of organization and has the requisite power and authority, and the legal right, to own, lease and operate its properties and assets and to conduct its business as it is now being conducted and (b) in compliance with all Laws and Orders except to the extent that the failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. All of the authorized, issued and outstanding securities of the Borrower, including the Warrants, have been, to the extent applicable, duly authorized and are validly issued, fully paid and nonassessable and issued in compliance with all applicable laws.  

6.2

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

6.3

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

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 or the Security Agreement.

6.5

No Violations. The execution and delivery of this Note and the Security Agreement and the consummation by the Borrower of the transactions contemplated hereby and thereby 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. Each of the Note and the Security Agreement 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).

6.7

No Litigation. No action, suit, litigation, investigation or proceeding of, or before, any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its property or assets (a) with respect to the Note , the Security Agreement or any of the transactions contemplated hereby or thereby or (b) that would be expected to materially adversely affect the Borrower's financial condition or the ability of the Borrower to perform its obligations under the Note or the Security Agreement.

6.8

USA PATRIOT Act, OFAC and Other Regulations

(a)

Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates or any of their respective officers, directors, brokers or agents (i) has violated any Anti-Terrorism Laws or (ii) has engaged in any transaction, investment, undertaking or activity that conceals the identity, source or destination of the proceeds from any category of prohibited offenses designated by the Organization for Economic Co-operation and Development's Financial Action Task Force on Money Laundering. 

(b)

Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates or any of their respective officers, directors, brokers or agents] is a Person that is, or is owned or controlled by Persons that are: (i) the subject of any Sanctions, or (ii) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions, including Cuba, Iran, North Korea, Sudan and Syria. 

(c)

Neither the Borrower nor, to the knowledge of the Borrower any of its Affiliates or any of their respective officers, directors, brokers or agents acting or benefiting in any capacity in connection with the Loan (i) conducts any business or engages in making or receiving any contribution of goods, services or money to or for the benefit of any Person, or in any country or territory, that is the subject of any Sanctions, (ii) deals in, or otherwise engages in any transaction related to, any property or interests in property blocked pursuant to any Anti-Terrorism Law or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. 

6.9

SEC Reports; Financial Statements.

(a)

The Borrower has filed with the Securities and Exchange Commission (“SEC”), all Borrower SEC Reports since January 1, 2016. Each of the Borrower SEC Reports, at the time of its filing or being furnished complied, or if not yet filed or furnished, will comply, in all material respects with the applicable requirements of the Exchange Act, the Securities Act and the Sarbanes-Oxley Act, and any rules and regulations promulgated thereunder applicable to the Borrower SEC Reports. As of their respective dates (or, if amended prior to the date hereof, as of the date of such amendment), the Borrower SEC Reports did not, and any Borrower SEC Reports filed with or furnished to the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.

(b)

Each of the audited consolidated statements of income, changes in stockholders’ equity and cash flows of the Borrower included in or incorporated by reference into the Borrower SEC Reports (including any related notes and schedules) (A) have been prepared in accordance with GAAP applied on a consistent basis during the periods involved; (B) present fairly, in all material respects, the consolidated financial position of the Borrower as at the dates thereof and the consolidated results of income, changes in stockholders’ equity and cash flows of the Borrower for the periods then ended; and (C) accurately reflect in all material respects the books of account and other financial records of the Borrower.

(c)

The Borrower does not have any Liabilities except for Liabilities reflected or reserved against on the Borrower’s consolidated audited balance sheet as of December 31, 2015 (or the notes thereto) and not heretofore paid or discharged or Liabilities that would not, individually or in the aggregate, reasonably be likely to have a Material Adverse Effect.

6.10

No Material Adverse Effect. Since December 31, 2015, no development or event has occurred that has had or would reasonably be expected to have a Material Adverse Effect.

6.11

Absence of Undisclosed Liabilities. The Borrower is not obligated under any obligation or liability (whether accrued, absolute, contingent, liquidated or otherwise, whether due or to become due), except to the extent that such obligation or liability (i) is reflected or disclosed in its most recent financial statements or (ii) was incurred after December 31, 2015 in the ordinary course of business (and not as a result of a breach, tort or infringement) and is not individually or in the aggregate material to the business.  The Borrower is not nor at any time has been a party to any bankruptcy proceedings, whether voluntary or involuntary, actual or threatened, or has made an assignment of its assets for the benefit of any creditor or otherwise.

6.12

Schedules of Debt.  Schedule 6.12(a) hereto sets forth all currently existing Debt of the Company.  Schedule 6.12(b) hereto sets forth all Remaining Debt after giving effect to the repayment of Debt as required by this Agreement.  The Company’s financial statements for the quarter ended June 30, 2016 accurately reflect the Company’s financial position.

6.13

Title to Properties and Assets; Liens, Etc. The Borrower has good and marketable title to all of the assets owned by the Borrower or a valid right to lease or license all of the assets leased or licensed by the Borrower, as applicable, in each case, subject to no Liens. All material tangible personal property included within the assets is in good operating condition and repair (ordinary wear and tear excepted) and is reasonably fit and usable for the purpose for which it is proposed to be used by the Borrower after Closing.  Immediately after giving effect to the Closing, the Borrower will own or have the right to use all assets of every kind and description necessary to enable the Borrower to continue to conduct its business in a manner consistent with the manner in which the business has been operated historically in the ordinary course of business.

6.14

Intellectual Property Matters. The Borrower owns, or is licensed to use, all Intellectual Property necessary for the conduct of its business as currently conducted or proposed to be conducted. No material claim has been asserted and is pending by any Person challenging the use, validity or effectiveness of any Intellectual Property, nor is the Borrower aware of any valid basis for any such claim. The use of Intellectual Property by the Borrower does not materially infringe on the rights of any Person.

6.15

Tax Matters. The Borrower has filed, has caused to be filed or has been included in all Federal, state and other tax returns that are required to be filed and has paid all taxes shown thereon to be due, together with applicable interest and penalties, and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority; no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. The Borrower is not party to any tax sharing agreement.

6.16

Brokers’ Fees.  The Borrower has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Note. 

6.17

Other Representations.  Each of the representations and warranties of the Company (together with any related Schedule of Exceptions thereto) made in the Purchase Agreement and the Security Agreement is hereby incorporated herein by reference (as though fully restated herein) and is hereby made to, and in favor of, each Purchaser.

7.

Affirmative Covenants. Until all amounts outstanding in this Note have been paid in full, in addition to the other covenants of the Company set forth above, the Borrower shall:

7.1

Maintenance of Existence. (a) Preserve, renew and maintain in full force and effect its corporate or organizational existence and (b) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

7.2

Compliance. Comply with (a) all of the terms and provisions of its organizational documents; (b) its obligations under its material contracts and agreements, including this Note, the Purchase Agreement and the Security Agreement; and (c) all Laws and Orders applicable to it and its business, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect.

7.3

Payment Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings, and reserves in conformity with GAAP with respect thereto have been provided on its books.

7.4

Notice of Events of Default. As soon as possible and in any event within two (2) Business Days after it becomes aware that a Default or an Event of Default has occurred, notify the Noteholder in writing of the nature and extent of such Default or Event of Default and the action, if any, it has taken or proposes to take with respect to such Default or Event of Default.

7.5

Further Assurances. Upon the request of the Noteholder, promptly execute and deliver such further instruments and do or cause to be done such further acts as may be necessary or advisable to carry out the intent and purposes of this Note and the Security Agreement. 

8.

Negative Covenants. Until all amounts outstanding under this Note have been paid in full, in addition to the other covenants set forth above, the Borrower shall not:

8.1

Indebtedness. Incur, create or assume any Debt, other than Permitted Debt. 

8.2

Liens. Incur, create, assume or suffer to exist any Lien on any of its property or assets, whether now owned or hereinafter acquired except for (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings;  (b) non-consensual Liens arising by operation of law, arising in the ordinary course of business, and for amounts which are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings; and (c) Liens created pursuant to the Security Agreement.

8.3

Compliance With Anti-Terrorism Regulations

(a)

 (i) Violate any Anti-Terrorism Laws, (ii) engage in any transaction, investment, undertaking or activity that conceals the identity, source or destination of the proceeds from any category of prohibited offenses designated by the Organization for Economic Co-operation and Development's Financial Action Task Force on Money Laundering or (iii) knowingly permit any of its Affiliates to violate these laws or engage in these actions.

(b)

 Use, directly or indirectly, the proceeds of the Loans, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, (x) to fund any activities or business of or with any Person, or in any country or territory, that, is, or whose government is, the subject of Sanctions at the time of such funding, or (y) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Loans, whether as underwriter, advisor, investor, or otherwise). 

(c)

(i) Deal in, or otherwise engage in any transaction related to, any property or interests in property blocked pursuant to any Anti-Terrorism Law, (ii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempt to violate, any of the prohibitions set forth in any Anti-Terrorism Law or (iii) knowingly permit any of its Affiliates to do any of the foregoing.  

9.

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

9.1

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 five (5) days after written notice to the Borrower.

9.2

Continued Service. It shall be deemed to be an Event of Default if (i) Michael Feinsod is no longer serving as the Company’s Chairman of the Board or (ii) if Michael Feinsod engages in any business that could be deemed to be in competition with the Company; provided that, Mr. Feinsod shall be permitted to be a passive investor in companies engaged in the cannabis industry provided that he has no greater than a 20% equity interest in such ventures and is not employed by or acting as an officer or director of such entity and such passive activities shall not constitute an Event of Default under Section 9.2 (ii) of this Note. 

9.3

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

9.4

Breach of Covenants. The Borrower fails to observe or perform (a) any covenant, condition or agreement contained in Section 7 or 8 of this Note or (b) any other material covenant, obligation, condition or agreement contained in this Note, the Purchase Agreement or the Security Agreement and such failure continues for ten (10) days after written notice to the Borrower.

9.5

Cross-Defaults. The Borrower fails to pay when due any of its Debt (other than Debt arising under this Note but including any failure to pay under any of the other Notes) or any interest or premium thereon when due (whether by scheduled maturity, acceleration, demand or otherwise) and such failure continues after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt.

9.6

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 Section 9.6(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 sixty (60) days;

(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 sixty (60) 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 Section 9.6(a), Section 9.6 (b) or Section 9.6 (c), above; or

(e)

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

10.

Remedies. Upon the occurrence of any 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) terminate its commitment to make any Advances hereunder; (b) 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 (c) exercise any or all of its rights, powers or remedies under [the Security Agreement or applicable Law; provided, however that, if an Event of Default described in Section 9.6 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. 

11.

Miscellaneous.

11.1

Notices.  

(a)

All notices, requests or other communications required or permitted to be delivered hereunder shall be delivered in writing, in each case to the address specified below or to such other address as such Party may from time to time specify in writing in compliance with this provision:

(i)

If to the Borrower:

General Cannabis Corporation.

6565 East Evans Ave.

Denver, CO 80224

Corporate Phone:  303-759-1300

Attention:  Robert Frichtel

with a copy (which shall not constitute notice) to:

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, New York 10006 

Telephone: (212) 930-9700

Facsimile:   (212) 930-9725

Attention:  Arthur Marcus, Esq

Email:

amarcus@srff.com

(ii)

If to the Noteholder:

[ADDRESS]

Attn: [NAME OF CONTACT]

Telephone: [NUMBER], Facsimile: [NUMBER]

E-mail: [ADDRESS]

with a copy (which shall not constitute notice) to:

(b)

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).

11.2

Expenses. Each of the Parties shall be responsible for their respective expenses and costs incurred in connection with the negotiation, documentation and execution of this Note and the Security Agreement, and all other documents contemplated herein and therein; provided, however, at the time of issuance and funding of this Note, the Company shall pay the fees and expenses of the counsel to the Noteholder and the other Noteholders, as a group, in an amount not to exceed [$8,000].

11.3

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, the Security Agreement and the transactions contemplated hereby and thereby shall be governed by the laws of the State of Colorado.

11.4

Submission to Jurisdiction

(a)

The Borrower hereby irrevocably and unconditionally (i) agrees that any legal action, suit or proceeding arising out of or relating to this Note or the Security Agreement may be brought in the courts of the State of Colorado or of the United States of America for the District of Colorado and (ii) 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. 

(b)

Nothing in this Section 11.4 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.

11.5

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 or the Security Agreement in any court referred to in Section 11.4 and the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

11.6

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, THE SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY. 

11.7

Counterparts; Integration; Effectiveness. This Note, the Security Agreement and any amendments, waivers, consents or supplements hereto and thereto may be executed in counterparts, each of which shall constitute an original, but all taken together shall constitute a single contract. This Note and the Security Agreement constitutes 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 or the Security Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Note or the Security Agreement, as applicable.

11.8

Successors and Assigns. This Note may be assigned or transferred by the Noteholder to any Person. 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 and their permitted assigns.

11.9

Waiver of Notice. The Borrower hereby waives demand for payment, presentment for payment, protest, notice of payment, notice of dishonor, notice of nonpayment, notice of acceleration of maturity and diligence in taking any action to collect sums owing hereunder.

11.10

USA PATRIOT Act. The Noteholder hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify, and record information that identifies the Borrower, which information includes the name of the Borrower and other information that will allow the Noteholder to identify the Borrower in accordance with the US PATRIOT Act, and the Borrower agrees to provide such information from time to time to the Noteholder.

11.11

Interpretation. For purposes of this Note (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Note as a whole. The definitions given for any defined terms in this Note shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. Unless the context otherwise requires, references herein: (x) to Exhibits and 

Sections mean the Exhibits and Sections of this Note; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof; and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Note shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. 

11.12

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. 

11.13

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.

11.14

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.

11.15

Electronic Execution. The words “execution,” “signed,” “signature,” and words of similar import in the Note shall be deemed to include electronic or digital signatures or the keeping of records in electronic form, each of which shall be of the same effect, validity and enforceability as manually executed signatures or a paper-based recordkeeping system, as the case may be, to the extent and as provided for under applicable law, including the Electronic Signatures in Global and National Commerce Act of 2000 (15 USC § 7001 et seq.), the Electronic Signatures and Records Act of 1999 (N.Y. State Tech. Law §§ 301-309), or any other similar state laws based on the Uniform Electronic Transactions Act.

11.16

Severability. If any term or provision of this Note or the Security Agreement 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 the Security Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Note so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Borrower has executed this Secured Promissory Note as of September 21, 2016.

			
	 
	GENERAL CANNABIS CORPORATION:

	 
	 

	 
	By::

	 

	 
	 
	Name:

	 
	 
	Title:

	
	By its acceptance of this Note, the Noteholder acknowledges and agrees to be bound by the provisions of this Agreement 

	 

	 

	NOTE HOLDERExhibit

Exhibit 10.3

FORM OF
SECURITY AGREEMENT

This SECURITY AGREEMENT, dated as of September 21, 2016 (this “Agreement”), made by and between GENERAL CANNABIS CORPORATION, a Colorado corporation (the “Grantor”), in favor _______________, (the “Secured Party”).

WHEREAS, on the date hereof, the Secured Party has made loans to the Grantor (the “Loans”), evidenced by that certain Promissory Note of even date herewith (as amended, supplemented or otherwise modified from time to time, the “Note”), as purchased under the terms of the Promissory Note and Warrant Purchase Agreement of even date herewith (“Purchase Agreement”). Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Note;

WHEREAS, this Agreement is given by the Grantor in favor of the Secured Party to secure the payment and performance of all of the Secured Obligations; and

WHEREAS, this Security Agreement is one of a series of Security Agreements entered into with all other purchasers of the Notes who shall all share the benefits of this Security Agreement on a pari passu basis based on the pro rata amount of the outstanding principal and interest of their respective Loans at the time of any enforcement of this Security Agreement (“Pro Rata Loan Amounts”).

WHEREAS, it is a condition to the obligations of the Lender that the Grantor execute and deliver this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.

Definitions.

(a)

Unless otherwise specified herein, all references to Sections herein are to Sections of this Agreement.

(b)

Unless otherwise defined herein, terms used herein that are defined in the UCC shall have the meanings assigned to them in the UCC. However, if a term is defined in Article 9 of the UCC differently than in another Article of the UCC, the term has the meaning specified in Article 9.

(c)

For purposes of this Agreement, the following terms shall have the following meanings:

“Collateral” has the meaning set forth in Section ?2.

“Event of Default” has the meaning set forth in the Note.

“First Priority” means, with respect to any lien and security interest purported to be created in any Collateral pursuant to this Agreement, such lien and security interest is the most senior lien to which such Collateral is subject (subject only to liens permitted under the Note).

“Proceeds” means “proceeds” as such term is defined in section 9102 of the UCC and, in any event, shall include, without limitation, all dividends or other income from the Collateral, collections thereon or distributions with respect thereto.

“Secured Obligations” has the meaning set forth in Section ?3.

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of Colorado or, when the laws of any other state govern the method or manner of the perfection or enforcement of any security interest in any of the Collateral, the Uniform Commercial Code as in effect from time to time in such state.

2.

Grant of Security Interest. The Grantor hereby pledges and grants to the Secured Party, and hereby creates a continuing First Priority lien and security interest in favor of the Secured Party in and to, all of the Grantor’s right, title and interest in and to each and every asset of the Grantor, including all tangible and intangible property, all cash, real property, leases, contracts, accounts, receivables, claims and intellectual properties of each and every kind, whether now owned or hereafter acquired (collectively, the “Collateral”).  The First Priority lien shall be pari passu and allocated on a pro rata basis among the Lenders based on the Pro Rata Loan Amounts.

3.

Secured Obligations. The Collateral secures the due and prompt payment and performance of the obligations of the Grantor from time to time arising under the Note, the Purchase Agreement and this Agreement (such obligations collectively called the “Secured Obligations”).

4.

Perfection of Security Interest and Further Assurances.

(a)

The Grantor shall, from time to time, as may be required by the Secured Party with respect to all Collateral, take all actions as may be requested by the Secured Party to perfect the security interest of the Secured Party in the Collateral.

(b)

The Grantor hereby irrevocably authorizes the Secured Party at any time and from time to time to file in any relevant jurisdiction any financing statements and amendments thereto that contain the information required by Article 9 of the UCC of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Collateral.  

(c)

The Grantor agrees that at any time and from time to time, at the expense of the Grantor, the Grantor will promptly execute and deliver all further instruments and documents, obtain such agreements from third parties, and take all further action, that may be necessary or desirable, or that the Secured Party may reasonably request, in order to perfect and protect any security interest granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder or under any other agreement with respect to any Collateral. 

(d)

The Grantor shall not relocate any tangible property comprising the Collateral and shall take all reasonable steps to keep same in marketable condition.  The Grantor shall not grant any other security interests in the Collateral without the prior consent of the Secured Party.

5.

Remedies Upon Default. If any Event of Default shall have occurred and be continuing:

(a)

The Secured Party, without any other notice to or demand upon the Grantor, may assert all rights and remedies of a secured party under the UCC or other applicable law, including, without limitation, the right to take possession of, hold, collect, sell, lease, deliver, grant options to purchase or otherwise retain, liquidate or dispose of all or any portion of the Collateral. 

(b)

Any cash held by the Secured Party as Collateral and all cash Proceeds received by the Secured Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in whole or in part by the Secured Party to the payment of expenses incurred by the Secured Party in connection with the foregoing or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Secured Party hereunder.

6.

No Waiver and Cumulative Remedies. The Secured Party shall not by any act (except by a written instrument), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. All rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies provided by law.

7.

Amendments. None of the terms or provisions of this Agreement may be amended, modified, supplemented, terminated or waived, and no consent to any departure by the Grantor therefrom shall be effective unless the same shall be in writing and signed by the Secured Party and the Grantor, and then such amendment, modification, supplement, waiver or consent shall be effective only in the specific instance and for the specific purpose for which made or given.

8.

Addresses For Notices. All notices and other communications provided for in this Agreement shall be in writing and shall be given in the manner and become effective as set forth in the Note, and addressed to the respective parties at their addresses as specified on the signature pages hereof or as to either party at such other address as shall be designated by such party in a written notice to each other party.

9.

Continuing Security Interest; Further Actions. This Agreement shall create a continuing First Priority lien and security interest in the Collateral and shall (a) subject to this Agreement,, remain in full force and effect until payment and performance in full of the Secured Obligations, (b) be binding upon the Grantor, its successors and assigns, and (c) inure to the benefit of the Secured Party and its successors, transferees and assigns.  

10.

Termination; Release. On the date on which all Secured Obligations have been paid and performed in full, the Secured Party will, at the request and sole expense of the Grantor, (a) duly assign, transfer and deliver to or at the direction of the Grantor (without recourse and without any representation or warranty) such of the Collateral as may then remain in the possession of the Secured Party, together with any monies at the time held by the Secured Party hereunder, and (b) execute and deliver to the Grantor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement.

11.

Fees.  The Grantor shall be responsible for all costs incurred by the Secured Party in enforcing its rights hereunder, including reasonable attorneys’ fees.

12.

Governing Law. This Agreement and the 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 Agreement or the Note and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the laws of the State of Colorado. The other provisions of the Note are incorporated herein, mutatis mutandis, as if a part hereof. 

13.

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

[SIGNATURE PAGE FOLLOWS]

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

			
	 
	GENERAL CANNABIS CORPORATION:

	 
	 

	 
	By::

	 

	 
	Name: 

Address for Notices:

6565 E. Evans Avenue

Denver, Colorado 80224

		
	 
	SECURED PARTY:

	 
	 

	 
	 

	 
	 

	 
	Address for Notices:

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