Document:

srer_ex1017.htm

EXHIBIT 10.17

 

EMPLOYMENT AGREEMENT 

This Employment Agreement is entered this 10th day of January, 2011, by and between General Management Solutions, Inc.,  a California corporation (the “Employer”), and James Johnson, hereinafter referred to as “Employee,” in consideration of the mutual promises made herein, agree as follows:

ARTICLE 1.  AT-WILL EMPLOYMENT

Section 1.1.        At-Will Employment.  Employer hereby employs Employee and Employee hereby accepts employment with Employer on an at-will basis, with both Employer and Employee able to terminate the employment relationship at any time, with or without cause.  This at-will status can only be changed by a writing signed by Employer’s President.

Section 1.2.        Annual Review.  Employer will grant Employee an annual review.  This annual review may result in a corresponding increase in salary to Employee, but any increase in salary is in the sole discretion of Employer.

ARTICLE 2.  DUTIES AND OBLIGATIONS OF EMPLOYEE

Section 2.1.       General Job Responsibilities.  Employee is being hired for the position of Project Manager for the Employer.  Employee represents they have a deep and broad understanding of the web and website governance issues.  Employee shall report directly to President & Chief Strategy Officer Doug Francis, and work in conjunction with David Johnson and Robert Johnson.  In that capacity, Employee shall do and perform the following services:

	
  

	
·

	
Work directly for President & COO Doug Francis

	
  

	
·

	
Manage internet marketing for all current or future entities related to the parent company, General Cannabis, Inc., specifically General Marketing Solutions (“GMS”).

	
  

	
·

	
Assist in ongoing management and training of the call centers

	
  

	
·

	
Assist President in the creation of new development department(s)

	
  

	
·

	
Assist in sales force implementation and best practices across all entities

	
  

	
·

	
Assist President in establishing closed ended metrics via Salesforce and phone system(s)

	
  

	
·

	
Assist in the creation and management of Backbone CMS architecture

	
  

	
·

	
Project manage on the expansion of existing properties and the development of new verticals

	
  

	
·

	
Ongoing development of new opportunities and verticals

	
  

	
·

	
With the President’s approval, creation and implementation of new ideas and the improvement of existing models

Section 2.2.        Matters Requiring Consent of Employer’s. Employee shall not, without specific written approval of the Employer’s President or CEO, do or contract to do any of the following:

	
  

	
(1)

	
Bind the Employer to any contract or agreement outside the Employer’s ordinary course of business (meaning – insert primary business of company) that could cause the Employer to expend in excess of $1,000.00 (One Thousand Dollars); or

	
  

	
(2)

	
Bind the Employer to a liquidation event, such as liquidation, dissolution or winding up of the Employer, whether voluntary or involuntary;

	
  

	
(3)

	
Bind the Employer to a sale of all or substantially all of the assets of the Employer;

 

  

  

  

 

	
  

	
(4)

	
Bind the Employer to a transaction that would result in a change of the control of the Employer;

	
  

	
(5)

	
Bind the Employer to any transaction that would result in the issuance of any shares of any class of stock of the Employer after the date of this Agreement, or any security convertible into or exchangeable for any shares of any class of the Employer’s stock;

	
  

	
(6)

	
Guaranty any debt or obligation in the name of the Employer; or

	
  

	
(7)

	
Any other matter prohibited by the Employer’s written practices and policies that have been, or will be, distributed to Employer’s employees.

Section 2.3.        Devotion to Employer’s Business.

(a)           Subject to the exceptions set forth herein, Employee shall devote his full professional time, attention, best efforts, energy and skill to the business of Employer during the term of his employment necessary to effectively and efficiently execute all job responsibilities set forth in Section 2.1.  Employee may devote time and attention to other activities that do not compete with Employer or interfere with Employee’s obligations, duties and responsibilities to Employer hereunder.

(b)           During Employee’s employment with Employer, Employee shall not engage in any other business duties or pursuits whatsoever, or directly or indirectly render any services of a business, commercial, or professional nature to any other person or organization, whether for compensation or otherwise, that competes or could compete with Employer or interfere with Employee’s obligations, duties and responsibilities to Employer hereunder, without the prior written consent of Employer’s CEO.  However, the expenditure of reasonable amounts of time for educational, charitable, or professional activities shall not be deemed a breach of this agreement if those activities do not materially interfere with the services required under this agreement and shall not require the prior written consent of Employer’s CEO.

(c)           This agreement shall not be interpreted to prohibit Employee from making passive personal investments or conducting private business affairs if those activities do not interfere or conflict with the services required under this agreement.  However, during the term of Employee’s employment, Employee shall not directly or indirectly acquire, hold, or retain any interest in any business competing with or similar in nature to the business of Employer.

Section 2.4.       Competitive Activities.  While Employee is an employee of Employer, and for a period of one (1) year after termination, Employee shall not, directly or indirectly, either as an employee, employer, consultant, agent, principal partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any business that competes with any or all of Employer’s businesses.  Employee acknowledges that this non-compete provision itself survives the termination of the employment agreement.

Section 2.5.       Uniqueness of Employee’s Services.  Employee hereby represents and agrees that the services to be performed by Employee under this agreement are of a special, unique, unusual, extraordinary and intellectual character that gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages in an action at law.  Employee therefore expressly agrees that Employer, in addition to any other rights or remedies that the Employer may posses, shall be entitled to injunctive and other equitable relief to prevent or remedy a breach of this contract by Employee.  The parties are aware that under California law specific performance may not be available to enforce all breaches of this agreement but acknowledge that for all such material breaches of this agreement the non-breaching party would be harmed and both parties agree that this harm will be recoverable through monetary damages.

 

  

  

  

Section 2.6.        Trade Secrets.

(a)           The parties acknowledge and agree that during Employee’s employment and in the course of the discharge of his duties hereunder, Employee shall have access to and become acquainted with information concerning the operation and processes of Employer, including without limitation, financial, personnel, sales, and other information that is owned by Employer’s business, and that such information constitutes Employer’s trade secrets (“Trade Secrets”).

(b)           Employee specifically agrees that she shall not misuse, misappropriate, or disclose any such Trade Secrets, directly or indirectly to any other person or use them in any way, either during the term of this Agreement or at any other time thereafter, except as is required in the course of his employment hereunder.

(c)           Employee acknowledges and agrees that the sale or unauthorized use or disclosure of any of Employer’s Trade Secrets obtained by Employee during the course of his employment with Employer, including information concerning Employer’s current or any future and proposed work, services, or products, the facts that any such work production, as well as any descriptions thereof, would constitute unfair trade practices and unauthorized use of the Employer’s Trade Secrets, whether such information is used during the term of Employee’s employment or at any other time thereafter.

(d)           Employee further agrees that all files, records, documents, drawings, specifications, equipment, and similar items relating to Employer’s business, whether prepared by Employee or others, are also considered Trade Secrets and that they are and shall remain exclusively the property of Employer and that they shall be removed from the premises of Employer only with the express prior written consent of Employer.  Employee shall not solicit or hire any client(s) or employee(s) of Employer for one (1) year following termination of employment.  Trade Secrets do not include: (1) information that was in the public domain at the time of disclosure; or (2) information that subsequently becomes part of public knowledge or literature through a deliberate act of Employer or Employee as of the date of its becoming public.

Section 2.7        Employee Indemnification.  Employee shall indemnify and hold Employer harmless from all liability for loss, damage, or injury to persons or property resulting from the negligence or misconduct of Employee.  In addition, Employee shall indemnify and hold Employer harmless from all liability for loss, damage, or injury to persons or property as a result of a claim against Employer, or any of its employees, from any of Employee’s former employers.

Section 2.8        Discoveries.  All inventions, discoveries, ideas, and other intellectual property rights (“Intellectual Property”) made or conceived by Employee, either solely or jointly with others, whether they can be patented or not, to the extent related to and arising out of Employee’s performance under this Agreement shall be promptly and fully disclosed to the Employer, considered work for hire and all right, title and interest thereto anywhere in the world shall be the Employer’s property.  In the event that such inventions, discoveries and ideas are not considered work for hire for any reason, Employee hereby unconditionally assigns to the Employer all of his right, title and interest therein.  Employee agrees to execute any and all documents deemed necessary by the Employer to effectuate the foregoing at any time, whether before or after the expiration or earlier termination of this Agreement.  Compensation for any such inventions, discoveries or ideas shall be deemed to be included in the compensation paid to Employee hereunder.

 

  

  

  

ARTICLE 3.  OBLIGATIONS OF EMPLOYER

Section 3.1.        General Description.  Employer shall provide Employee with the compensation, incentives, benefits, and business expense reimbursement specified elsewhere in this agreement.

Section 3.2.         Office and Staff.  Employer shall provide Employee with an office, office equipment, supplies, and other facilities and services, suitable to Employee’s position and adequate for the performance of his duties.  Employee shall work from the Employer’s corporate headquarters, which is current located in Costa Mesa, California.  Employee is required to spend time at the Employer’s corporate headquarters and in the field as necessary to effectively carry out his job duties and responsibilities, maintain team continuity and direction, grow and maximize sales, and to achieve his established goals.  Employee understands and agrees that frequent travel may be necessary to accomplish his job responsibilities outlined herein.

ARTICLE 4.  COMPENSATION OF EMPLOYEE

Section 4.1.         Annual Salary.

(a)           As compensation for the services to be rendered hereunder, Employee shall receive a monthly salary at the rate of $12,500.00 payable twice a month.

(b)           Employee may receive such annual increases in salary as may be determined by Employer in its sole discretion on the anniversary of this Agreement or sooner as determined by the Employer.  Nothing herein requires Employer to increase Employee’s salary at any time.

(c)           Employee shall receive a $10,000 signing bonus upon execution of this contract and commencement of employment with the Employer.

Section 4.2.        Tax Withholding.  Employer shall have the right to deduct or withhold from the compensation due to Employee hereunder any and all sums required for federal income and Social Security taxes and all state or local taxes now applicable or that may be enacted and become applicable in the future.

 

  

  

  

ARTICLE 5.  EMPLOYEE INCENTIVES

Section 5.1.        Bonus Plan.  In addition to Employee’s annual salary set forth in Section 4.1, and predicated on Employee’s continuing employment, Employee will be entitled to the following:

Section 5.2.        Bonus Stock Options. Within sixty (60) days after the Securities and Exchange Commission declares the Registration Statement on Form S-1 to be filed by Employer, effective, Employee will be issued an Incentive Stock Option (“ISO”) to purchase up to Seven Hundred Thousand (700,000) shares of Employer’s common stock.  The ISO will have an exercise price equal to 85% of the fair market value of the Employer’s common stock on the date of grant.

The ISO will vest according to the following schedule:

(i)           If GMS’ annual gross sales increase at least Fifty Percent (50%) from January 1st, 2011 through December 31st, 2011, from the annual gross sales from January 1st, 2010 through December 31st, 2010, then employee will vest in one quarter of the ISO shares (i.e. will be able to exercise One Hundred Seventy Five Thousand (175,000) of the Seven Hundred Thousand (700,000)  options to purchase the Employer’s common stock );

(ii)          If GMS’ annual gross sales increase at least Fifty Percent (50%) from January 1st, 2012 to December 31st, 2012 from the annual gross sales from January 1st, 2011 through December 31st, 2011, then Employee will vest in one quarter of the ISO shares (i.e. will be able to exercise One Hundred Seventy Five Thousand (175,000) of the Seven Hundred Thousand (700,000)  options to purchase the Employer’s common stock);

(iii)         If GMS’ annual gross sales increase at least Fifty Percent (50%) from January 1st, 2013 to December 31st, 2013 from the annual gross sales from January 1st, 2012 through December 31st, 2012 then Employee will vest in one quarter of the ISO shares(i.e. will be able to exercise One Hundred Seventy Five Thousand (175,000) of the Seven Hundred Thousand (700,000)  options to purchase the Employer’s common stock);

(iv)        If GMS’ annual gross sales increase at least Fifty Percent (50%) or greater from January 1st, 2014 to December 31st, 2014 from the annual gross sales from January 1st, 2013 through December 31st, 2013 then Employee will vest in one quarter of the ISO shares(i.e. will be able to exercise One Hundred Seventy Five Thousand (175,000) of the Seven Hundred Thousand (700,000)  options to purchase the Employer’s common stock).

Section 5.3.        Must Be Employed.  In order for Employee to earn the incentives listed in this Section, Employee must be employed by Employer in the same capacity as listed in Section 2.1 above, at the time the incentive is earned.  Alternatively, Employee is entitled to the above compensation if Employee is employed by Employer in a different position, if approved by the Employer, at Employer’s sole discretion. If Employee is terminated then any unearned incentives will expire immediately.

ARTICLE 6.  EMPLOYEE BENEFITS

Section 6.1.        Eligibility.  Employee will be entitled to begin accruing the benefits listed in this Section immediately after Employee’s start date, unless otherwise stated below.

Section 6.2.        Annual Vacation.  Employer offers ten days paid vacation leave, to be accrued 12 months after Employees initial start date.

 

  

  

  

 

Section 6.3.        Sick Leave.  Employer offers seven days medical (non-paid) sick leave. Sick leave days are earned via an accrual basis.

Section 6.4.        Medical Coverage.  Employer offers Kaiser medical insurance.

Section 6.5.        Retirement Plan.  Employer offers a 401(k) plan, non-matching at this time.

 

ARTICLE 7.  BUSINESS EXPENSES

Section 7.1.        Reimbursement of Other Business Expenses.

(a)           Employer shall reimburse Employee for all reasonable business expenses incurred by Employee in connection with the business of Employer, conditional on Employee receiving written authorization from the President or CEO, prior to including such expense.

(b)           Each such expenditure shall be reimbursable only if it is of a nature qualifying it as a proper deduction on the federal and state income tax return of Employer.

(c)           Each such expenditure shall be reimbursable only if Employee furnishes to Employer adequate records and other documentary evidence required by federal and state statutes and regulations issued by the appropriate taxing authorities for the substantiation of each such expenditure as an income tax deduction.

ARTICLE 8.  TERMINATION OF EMPLOYMENT

Section 8.1.        Termination At Will.  Employee’s employment hereunder is at will and may be terminated by either Employer or Employee at any time for any reason, with or without cause.

Section 8.2.        Termination Upon Death.  Employee’s employment hereunder shall terminate upon his death, in which event the Employer shall pay to such person as the Employee shall have designated in a written notice filed with the Employer, or if no such person shall have been designated to his estate, all salary, amounts due under benefit plans and profit sharing plans, and reimbursement of business expenses through the date of termination.

Section 8.3.        Termination Upon Disability.  If, as a result of a permanent mental or physical disability, Employee shall have been absent from his duties hereunder on a full-time basis for three (3) consecutive months, (“Disability”) and, within thirty (30) days after the Employer notifies Employee in writing that it intends to replace him, (which notice can be given at the end of the second month during such three-month period), Employee shall not have returned to the complete performance of his duties on a full-time basis, the Employer shall be entitled to terminate Employee’s employment.  In addition, Employee shall, upon his Disability, have the right to terminate his employment with Employer.  If such employment is terminated (whether by the Employer or Employee) as a result of Employee’s Disability, then Employer shall pay, if applicable, to Employee all salary, amounts due under benefit plans and profit sharing plans, and reimbursement of business expenses, through the date of termination.

 

  

  

  

 

Section 8.4.        Termination for Cause.  Employer shall be entitled to terminate Employee’s employment for Cause, in which event Employee shall be entitled, if applicable, to all salary, amounts due under benefit plans and profit sharing plans, and reimbursement of business expenses, through the date of termination.  For purposes of this agreement, “Cause” shall mean (i) the conviction of Employee of a felony, (ii) the commission by Employee of an act of fraud or embezzlement involving assets of the Employer or its customers, suppliers or affiliates, (iii) a willful breach or habitual neglect of Employee’s duties which he is required to perform under the terms of his employment (See Section 2.1, above), (iv) refusal to timely produce any and all documentation related to the Employer’s business to the President upon request there from, or (v) gross misconduct or gross negligence in connection with the business of the Employer or an affiliate which has a material adverse effect on the Employer and any subsidiaries.  Notwithstanding the foregoing, Employee shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to Employee a notice of termination which specifies the grounds for termination and a statement of supporting facts.

Section 8.5         Termination without Cause. Subject to the provisions of Section 8.6 of this Agreement, Employee’s employment hereunder may be terminated by Employer without Cause at any time and without prior notice to Employee.

Section 8.6         Payments upon Termination without Cause.  In the event that Employee’s employment with Employer is terminated by Employer without Cause pursuant to Section 8.5, above, then Employee shall be entitled to receive payment of one (1) month of Employee’s base salary in effect as of the date of such termination.   The severance payments will be made in accordance with the normal payroll cycle of Employer and subject to any required tax withholdings and deductions.  In the event that Employee breaches any of the covenants set forth in Article 2, above, Employer shall have no further obligation to provide, and Employee shall have no further right to receive, any payments or benefits pursuant to this Section 8.6.

Section 8.7         Return of Documents.  Upon the termination of Employee's employment with Employer for any reason, including without limitation termination by the Employer for Cause, Employee shall promptly deliver to Employer all correspondence, manuals, orders, letters, notes, notebooks, reports, programs, proposals, appraisal documents, agreements, and any documents and copies concerning Employer’s customers or concerning products or processes used by Employer and, without limiting the foregoing, will promptly deliver to the Employer any and all other documents or material containing or constituting trade secrets.

ARTICLE 9.  GENERAL PROVISIONS

Section 9.1.        Notices.  Any notices to be given hereunder by either party to the other shall be in writing and may be transmitted by personal delivery or facsimile or overnight mail.  Notices shall be addressed to the parties at the addresses below.  Such notice or communication shall be deemed to have been given or made, as of the date of delivery, as evidenced by a signed declaration under penalty of perjury in the event of personal delivery, as evidenced by a facsimile confirmation sheet in the event of facsimile delivery, or as evidenced by prove of overnight delivery in the event of delivery by overnight courier.

	
If to Employer:

	
General Merchant Solutions, Inc.

	  	
2183 Fairview Road, Suite 101

	  	
Costa Mesa, CA  92627

	  	
Attn.  James Pakulis

	  	
Facsimile (949) 515-1625

	  	  
	
with a copy to:

	
The Lebrecht Group, APLC

	  	
9900 Research Drive

	  	
Irvine, CA  92618

	  	
Attn:  Craig V. Butler, Esq.

	  	
Facsimile:  (949) 635-1244

 

  

  

  

	
If to Employee:

	
James Johnson

	  	
  

	  	
  

	  	
Facsimile:

	
  

Section 9.2.        Arbitration.

(a)           Any controversy between Employer and Employee involving the construction or application of any of the terms, provisions, or conditions of this agreement shall on written request of either party served on the other be submitted to arbitration.

(b)           Employer and Employee shall each appoint one person to hear and determine the dispute.  If the two (2) persons so appointed are unable to agree, then those persons shall select a third impartial arbitrator whose decision shall be final and conclusive upon both parties.

(c)           The cost of arbitration shall be borne by the losing party or in such proportions as the arbitrators decide.

Section 9.3.        Attorney’s Fees and Costs.  If any action at law or in equity is necessary to enforce or interpret the terms of this agreement, the prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary disbursements in addition to any other relief to which that party may be entitled.  This provision shall be construed as applicable to the entire contract.

Section 9.4.        Entire Agreement.  This agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the employment of Employee by Employer and contains all of the covenants and agreements between the parties with respect to that employment in any manner whatsoever.  Each party to this agreement acknowledges that no representation, inducements, promises, or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement, statement, or promise not contained in this agreement shall be valid or binding on either party.

Section 9.5.        Modifications.  Any modification of this agreement will be effective only if it is in writing and signed by the party to be charged.

Section 9.6.        Effect of Waiver.  The failure of either party to insist on strict compliance with any of the terms, covenants, or conditions of this agreement by the other party shall not be deemed a waiver or relinquishment of any right or power at any one time or times be deemed a waiver or relinquishment of that right or power for all or any other times.

Section 9.7.        Partial Invalidity.  If any provision in this agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force without being impaired or invalidated in any way.

Section 9.8.        Law Governing Agreement/Venue.  This Agreement shall be governed by and construed in accordance with the laws of the State of California.  Any legal action, suit, arbitration, or proceeding arising from or relating to this Agreement shall be brought and maintained in the appropriate court or arbitrator located in and with jurisdiction over Orange County, California and the parties hereby submit to the jurisdiction thereof.

 

  

  

  

Section 9.9.        Understanding Agreement. Employee has read and fully understands the points listed above and has agreed to adhere to all sections as presented.  Employee has had an opportunity to seek the advice of legal counsel regarding the terms of this agreement.

Section 9.10.      Assignment.  This Agreement, and the Employee’s rights and obligations hereunder, may not be assigned by the Employee.

Section 9.11.     Amendment.  This Agreement may be amended, modified, superseded, cancelled, renewed or extended and the terms or covenants hereof may be waived, only by a written instrument executed by both parties as hereto, as in the case of a waiver, by the party waiving compliance.

IN WITNESS WHEREOF, the parties hereto, by their duly authorized officers or other authorized signatory, have executed this Amendment as of the date first above written.  This agreement may be signed in counterparts and facsimile signatures are treated as original signatures.

	
“Employer”

	 	
“Employee”

	  	 	  
	
General Management Solutions, Inc.

	 	
David Johnson

	
a California corporation

	 	
an individual

	  	 	  
	
/s/ James Pakulis

	 	
/s/ James Johnson

	
By:  James Pakulis

	 	
By:  James Johnson

	
Its:  Presidentsrer_ex1018.htm

EXHIBIT 10.18

 

GENERAL CANNABIS, INC.

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE.

COMMON STOCK PURCHASE WARRANT

THIS IS TO CERTIFY that, for value received, Crystal Research Associates, LLC (the “Holder”) is entitled, subject to the terms and conditions set forth herein, to purchase from General Cannabis, Inc., (f/k/a LC Luxuries Ltd.), a Nevada corporation (the “Company”) up to Two Hundred Fifty Thousand (250,000) fully paid and nonassessable shares of common stock of the Company (the “Warrant Securities”) at the initial price of $4.00 per share but subject to adjustment as provided in Section 3 below, (the “Exercise Price”), upon payment by cashier’s check or wire transfer of the Exercise Price for such shares of the Common Stock to the Company at the Company’s offices.

This Warrant is being issued to Holder as consideration under that certain Letter of Agreement between Holder and the Company dated October 5, 2010.

1.           Exercisability.  This Warrant may be exercised in whole or in part at any time, or from time to time, between the date hereof and October 5, 2014 by presentation and surrender hereof to the Company of a notice of election to purchase duly executed and accompanied by payment by check or wire transfer of the Exercise Price..

2.           Manner of Exercise.  In case of the purchase of less than all the Warrant Securities, the Company shall cancel this Warrant upon the surrender hereof and shall execute and deliver a new warrant of like tenor for the balance of the Warrant Securities.  Upon the exercise of this Warrant, the issuance of certificates for securities, properties or rights underlying this Warrant shall be made forthwith (and in any event within five (5) business days thereafter) without charge to the Holder including, without limitation, any tax that may be payable in respect of the issuance thereof: provided, however, that the Company shall not be required to pay any tax in respect of income or capital gain of the Holder.

  

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If and to the extent this Warrant is exercised, in whole or in part, the Holder shall be entitled to receive a certificate or certificates representing the Warrant Securities so purchased, upon presentation and surrender to the Company of the form of election to purchase attached hereto duly executed, and accompanied by payment of the purchase price.

3.           Adjustment in Number of Shares.

(A)           Adjustment for Reclassifications.  In case at any time or from time to time after the issue date the holders of the Common Stock of the Company (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefore, other or additional stock or other securities or property (including cash) by way of stock split, spin-off, reclassification, combination of shares or similar corporate rearrangement (exclusive of any stock dividend of its or any subsidiary’s capital stock), then and in each such case the Holder of this Warrant, upon the exercise hereof as provided in Section 1, shall be entitled to receive the amount of stock and other securities and property which such Holder would hold on the date of such exercise if on the issue date he had been the holder of record of the number of shares of Common Stock of the Company called for on the face of this Warrant and had thereafter, during the period from the issue date, to and including the date of such exercise, retained such shares and/or all other or additional stock and other securities and property receivable by him as aforesaid during such period, giving effect to all adjustments called for during such period.  In the event of any such adjustment, the Exercise Price shall be adjusted proportionally.

(B)           Adjustment for Reorganization, Consolidation, Merger.  In case of any reorganization of the Company (or any other corporation the stock or other securities of which are at the time receivable on the exercise of this Warrant) after the issue date, or in case, after such date, the Company (or any such other corporation) shall consolidate with or merge into another corporation or convey all or substantially all of its assets to another corporation, then and in each such case the Holder of this Warrant, upon the exercise hereof as provided in Section 1 at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities or property to which such Holder would be entitled had the Holder exercised this Warrant immediately prior thereto, all subject to further adjustment as provided herein; in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after such consummation.

4.           No Requirement to Exercise.  Nothing contained in this Warrant shall be construed as requiring the Holder to exercise this Warrant.

5.           No Stockholder Rights.  Unless and until this Warrant is exercised, this Warrant shall not entitle the Holder hereof to any voting rights or other rights as a stockholder of the Company, or to any other rights whatsoever except the rights herein expressed, and, no dividends shall be payable or accrue in respect of this Warrant.

 

  

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6.           Exchange.  This Warrant is exchangeable upon the surrender hereof by the Holder to the Company for new warrants of like tenor representing in the aggregate the right to purchase the number of Warrant Securities purchasable hereunder, each of such new warrants to represent the right to purchase such number of Warrant Securities as shall be designated by the Holder at the time of such surrender.

Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it and reimbursement to the company of all reasonable expenses incidental thereto, and upon surrender and cancellation hereof, if mutilated, the Company will make and deliver a new warrant of like tenor and amount, in lieu hereof.

7.           Elimination of Fractional Interests.  The Company shall not be required to issue certificates representing fractions of securities upon the exercise of this Warrant, nor shall it be required to issue scrip or pay cash in lieu of fractional interests.  All fractional interests shall be eliminated by rounding any fraction up to the nearest whole number of securities, properties or rights receivable upon exercise of this Warrant.

8.           Reservation of Securities.  The Company shall at all times reserve and keep available out of its authorized shares of Common Stock or other securities, solely for the purpose of issuance upon the exercise of this Warrant, such number of shares of Common Stock or other securities, properties or rights as shall be issuable upon the exercise hereof.  The Company covenants and agrees that, upon exercise of this Warrant and payment of the Principal Value, all shares of Common Stock and other securities issuable upon such exercise shall be duly and validly issued, fully paid, non-assessable and not subject to the preemptive rights of any stockholder.

9.           Notices to Holder.  If at any time prior to the expiration of this Warrant or its exercise, any of the following events shall occur:

(a)           the Company shall take a record of the holders of any class of its securities for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of current or retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company; or

(b)           the Company shall offer to all the holders of a class of its securities any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option or warrant to subscribe therefor; or

(c)           a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property, assets and business as an entirety shall be proposed.

 

  

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then, in any one or more said events, the Company shall give written notice of such event to the Holder at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholder entitled to such dividend, distribution, convertible or exchangeable securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale.  Such notice shall specify such record date or the date of closing the transfer books, as the case may be.

10.           Transferability.  This Warrant may not be transferred or assigned by the Holder without the express written consent of the Company.

11.           Informational Requirements.  The Company will transmit to the Holder such information, documents and reports as are generally distributed to stockholders of the Company concurrently with the distribution thereof to such stockholders.

12.           Notice.  Notices to be given to the Company or the Holder shall be deemed to have been sufficiently given if delivered personally or sent by overnight courier or messenger, or by facsimile transmission.  Notices shall be deemed to have been received on the date of personal delivery or facsimile transmission.  The address of the Company and of the Holder shall be as set forth in the Company’s books and records.

13.           Consent to Jurisdiction and Service.  The Company consents to the jurisdiction of any court of the State of California, and of any federal court located in California, in any action or proceeding arising out of or in connection with this Warrant.  The Company waives personal service of any summons, complaint or other process in connection with any such action or proceeding and agrees that service thereof may be made at the location provided in Section 12 hereof, or, in the alternative, in any other form or manner permitted by law.  Orange County, California shall be proper venue.

14.           Successors.  All the covenants and provisions of this Warrant shall be binding upon and inure to the benefit of the Company, the Holder and their respective legal representatives, successors and assigns.

15.           Attorneys Fees.  Should either party commence any action, suit or proceeding to enforce this Warrant or any term or provision hereof, then in addition to any other damages or awards that may be granted to the prevailing party, the prevailing party shall be entitled to have and recover from the other party such prevailing party’s reasonable attorneys’ fees and costs incurred in connection therewith.

16.           Governing Law.  THIS WARRANT SHALL BE GOVERNED, CONSTRUED AND INTERPRETED UNDER THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO THE RULES GOVERNING CONFLICTS OF LAW.

 

  

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by the signature of its Chief Executive Officer and to be delivered in Newport Beach, California.

	
Dated: April 13, 2011

	
General Cannabis, Inc.,

	 
	  	
a Nevada corporation

	 
	  	  	 
	  	
/s/  James Pakulis

	 
	  	
By:

	
James Pakulis

	 
	  	
Its:

	
Chief Executive Officer

	 

Acknowledged:

Crystal Research Associates, LLC

	
/s/  signature illegible

	
By:

	  
	
Its:

	  

 

  

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[FORM OF ELECTION TO PURCHASE]

The undersigned, the holder of the attached Warrant, hereby irrevocably elects to exercise the purchase right represented by this Warrant Certificate for, and to purchase securities of General Cannabis, Inc. and herewith makes payment of $__________ therefor, and requests that the certificates for such securities be issued in the name of, and delivered to ___________________, whose address is ______________________________.

Dated: ____________________, 20___

	  	  	  
	  	
By:

	  
	  	
Its:

	  
	  	
(Signature must conform in all respects to name of holder as specified on the face of the Warrant Certificate)

	  	  	  
	  	  	  
	  	
(Insert Social Security or Other

	  	
Identifying Number of Holder)

 

  

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