Document:

exhibit10_3.htm

Exhibit 10.3

 

SECURITY AGREEMENT

 

This Security Agreement (this “Agreement”) is made and entered into effective as of June 8, 2015, by GROWBLOX SCIENCES, INC., a Delaware corporation (“Borrower”), GB SCIENCES NEVADA LLC, a Nevada limited liability company (“GBS Nevada” and together with Borrower, each a “Grantor”), in favor of PACIFIC LEAF VENTURES, LP (“Secured Party”).

 

RECITALS

 

Secured Party has agreed to make loans to the Borrower in an aggregate principal amount of up to $1,750,000.00 (the “Loans”), which Loans shall be evidenced by a Senior Secured Convertible Promissory Note of even date herewith made by Borrower in favor of Secured Party (the “Note”), which Note has been issued pursuant to that certain Note Purchase Agreement, dated as of June 8, 2015, among Borrower and Secured Party (the “Purchase Agreement”).

 

The proceeds of the Loans will be used to fund the purchase by GBS Nevada, a subsidiary of Borrower, of certain equipment and other hard assets dedicated to the cultivation of cannabis.

 

In order to induce Lender to extend the Loan to Borrower, the Grantors have agreed to grant Secured Party security and assurance in order to secure the payment and performance of all of the Secured Obligations (as defined below), and to that effect to grant Secured Party a security interest in certain of their assets and enter into this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, the parties agree as follows:

 

1. Grant of Security Interest.  Each Grantor hereby grants to Secured Party, a security interest in and so pledges and assigns to the Secured Party, all of its right, title and interest in, to and under, the following properties, assets and rights of such Grantor, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof (all of the same being hereinafter called the “Collateral”): (i) all equipment (as defined in the Uniform Commercial Code) of GBS Nevada, and (ii) Borrower’s membership interest in GBS Nevada, together with the right to receive all cash and other distributions from GBS Nevada with respect to such membership interest.  The security interest in the Collateral shall secure the payment in full of all obligations (the “Secured Obligations”) of Grantors to Secured Party under the Note, the Purchase Agreement and this Agreement. By their execution of this Agreement, each Grantor authorizes Secured Party at any time and from time to time to file in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral, and (b) contain any other information required by part 5 of Article 9 of the Uniform Commercial Code for the sufficiency or filing office acceptance of any financing statement or amendment, including whether the applicable Grantor is an organization, the type of organization and any organization identification number issued to such Grantor.  Each Grantor agrees to furnish any such information to the Secured Party promptly upon request.

 

  

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2. Representations and Warranties Concerning Grantors’ Legal Status. Each Grantor represents and warrants to the Secured Party as follows: (a) such Grantor’s exact legal name is that indicated on the signature page hereof, (b) Borrower is a corporation incorporated in the State of Delaware, and GBS Nevada is a limited liability company organized in the State of Nevada, and (c) the chief executive office and mailing address of each Grantor is 6450 Cameron Blvd., Suite 110A, Las Vegas, Nevada 89118.

 

3. Covenants Concerning Grantors’ Legal Status. Each Grantor covenants with the Secured Party as follows: (a) without providing at least 30 days prior written notice to the Secured Party, such Grantor will not change its name, its place of business or, if more than one, chief executive office, or its mailing address or organizational identification number if it has one, and (b) such Grantor will not change its type of organization, jurisdiction of organization or other legal structure.

 

4. Representations and Warranties Concerning Collateral, Etc.  Each Grantor further represents and warrants to the Secured Party as follows: (a) the applicable Grantor is the owner of the Collateral, free from any adverse lien, security interest or other encumbrance; (b) such Grantor’s execution, delivery and performance of this Agreement are within its corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene its certificate of incorporation or bylaws or certificate of formation or operating agreement, as applicable, (ii) contravene any contractual restriction or applicable law or (iii) result in, or require the creation or imposition of, any lien on its property, except the lien granted hereby; and (c) this Agreement constitutes the legal, valid and binding obligation of such Grantor enforceable against it in accordance with its terms.

 

5. Insurance. Grantors will maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies as shall be in accordance with general practices of businesses engaged in similar activities in similar geographic areas.  Such insurance shall be in such amounts, contain such terms, be in such forms and be for such periods as may be reasonably satisfactory to the Secured Party.

 

6.  Maintenance of Collateral. At all times that Secured Party has a security interest in the Collateral, the Grantors shall maintain the Collateral in good condition, normal wear and tear excepted.

 

7. Right to Inspect. At all times that Secured Party has a security interest in the Collateral under this Agreement, Secured Party shall have the right at reasonable times after prior written notice to the applicable Grantor, to inspect the Collateral wherever the Collateral is located. Upon request from Secured Party, each Grantor shall advise Secured Party as to the location(s) where the Collateral is kept or stored.

 

8. Default. There shall be a default (an “Event of Default”) for purposes of this Agreement if there shall occur and be continuing a default in the payment when due (after the expiry of any applicable grace period stated in the agreements with respect thereto) of any amount due of any of the Secured Obligations, or if any Grantor fails to perform a material obligation under this Agreement.

 

  

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9. Secured Party’s Rights in Event of Default. In the event of an Event of Default, Secured Party shall have all rights of a secured party under the Uniform Commercial Code in each jurisdiction in which the Collateral is located, including, but not limited to, the right to take possession of such amounts of Collateral, and to dispose of such Collateral by public or private sale, as shall be reasonably necessary to assure to Secured Party payment of all of the Secured Obligations.  Any notification of intended disposition of any of the Collateral required by law, shall be deemed reasonably and properly given if given to a Grantor at least ten (10) days before such disposition, provided that each Grantor agrees that Secured Party shall otherwise be subject to no obligation, express or implied, to give any notice as to collection or disposition of any of the Collateral which threatens to decline speedily in value. In the event Secured Party takes possession of and sells Collateral under this Section, Secured Party shall apply all proceeds from such sale in accordance with the provisions of the Uniform Commercial Code.  Any proceeds of any collection or disposition by Secured Party of any of the Collateral may be applied by Secured Party in the following order: to the reasonable expenses of retaking, conserving, collecting (by suit or otherwise) or disposing of (by sale or otherwise) the Collateral, including reasonable attorneys’ fees and legal expenses incurred, and then to the satisfaction of all the Secured Obligations in such order and manner of application as Secured Party elects.  Upon the occurrence of an Event of Default, and irrespective of whether Secured Party shall have pursued any other remedy provided herein, Secured Party shall be entitled to demand and receive all available financial information concerning the Grantors and their businesses, and shall be entitled at all reasonable times to inspect Grantors’ premises and have access to Grantors’ books and records.

 

10. Expenses.  Each Grantor shall, on demand, reimburse Secured Party for all costs and expenses, including without limitation reasonable attorneys’ fees and legal expenses, incurred by Secured Party in seeking to enforce any rights or remedies under this Agreement or in respect of the Collateral, and in case of an Event of Default, incurred by Secured Party in enforcing or attempting to enforce its rights and remedies hereunder.

 

11. Collection of Proceeds of Collateral. Upon the occurrence and during the continuance of an Event of Default, immediately upon notice to a Grantor by Secured Party, such Grantor agrees (i) to hold in trust for Secured Party all payments received in connection with the Collateral and from the sale, lease or other disposition of any Collateral, (ii) to collect and enforce payment of all Collateral until Secured Party shall direct such Grantor to the contrary, and from and after this direction, to fully and promptly cooperate and assist Secured Party (or any other person as Secured Party shall designate) in the collection and enforcement of all Collateral, (iii) to endorse to Secured Party and immediately deliver to Secured Party all payments received by such Grantor on Collateral or from the sale, lease or other disposition of any Collateral or arising from any other rights or interests of such Grantor in the Collateral, in the form received by such Grantor without commingling with any other funds, and (iv) immediately deliver to Secured Party all property in such Grantor’s possession or later coming into such Grantor’s possession through enforcement of such Grantor’s rights or interests in the Collateral. Upon the occurrence and during the continuance of an Event of Default, the Grantors irrevocably authorize Secured Party or any of Secured Party’s agents to endorse the name of the Grantors upon any Collateral or other items which are received in payment of any Collateral, and to do any and all things necessary in order to reduce these items to money.

 

  

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12. Waivers. Each Grantor waives all defenses otherwise available to parties secondarily or in any other degree liable or whose property stands as security, including, without limitation, presentment, demand, protest and notice with respect to any of the Secured Obligations, the enforcement and preservation of any lien otherwise held by Secured Party and the enforcement and preservation of any of the Secured Obligations or any guaranty or other undertaking.  Each Grantor agrees that Secured Party may release any Collateral (or any other security for any of the Secured Obligations) before or after maturity of any such Secured Obligations and may enforce its security interest and liens on any Collateral pledged hereby without being obligated first to enforce any other security whether pledged or owned by any other Grantor or any other person.

 

13. Secured Party Appointed Attorney-In-Fact and Performance by Secured Party.  Upon the occurrence and during the continuance of an Event of Default, each Grantor hereby irrevocably constitutes and appoints Secured Party as such Grantor’s true and lawful attorney-in-fact, with full power of substitution, to execute, acknowledge and deliver any instruments and to do in such Grantor’s name, place and stead, all such acts, things and deeds for and on behalf of and in the name of such Grantor, which such Grantor could or might do or which Secured Party may deem necessary, desirable or convenient to accomplish the purposes of this Agreement, including, without limitation, to execute such instruments of assignment or transfer or orders and to register, convey or otherwise transfer title to the Collateral into Secured Party’s name or the name of any purchaser of the Collateral.  Each Grantor hereby ratifies and confirms all that said attorney-in-fact may so do and hereby declares this power of attorney to be coupled with an interest and irrevocable as long as any Secured Obligations remain outstanding.

 

14. Entire Agreement.  This Agreement sets forth the entire agreement of the parties with respect to the subject matter of this Agreement.  This Agreement shall not be modified except by a writing signed by Secured Party and the Grantors.

 

15. Governing Law; Jurisdiction. This Agreement shall be construed and enforced under and in accordance with the laws of the State of New York without regard to principles of conflicts of laws. EACH GRANTOR IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS SITTING IN NEW YORK COUNTY IN THE STATE OF NEW YORK, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT.  EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT IN ANY SUCH COURT SITTING IN NEW YORK COUNTY IN THE STATE OF NEW YORK AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH GRANTOR CONSENTS TO AND SUBMITS TO THE EXERCISE OF JURISDICTION OVER ITS PERSON BY ANY SUCH COURT HAVING JURISDICTION OVER THE SUBJECT MATTER, WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO SUCH GRANTOR AT ITS ADDRESS SET FORTH BELOW OR TO ANY OTHER ADDRESS FOR IT AS MAY HEREAFTER BE DESIGNATED IN ANY WRITTEN NOTICE BY IT TO SECURED PARTY.

 

  

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16. Parties Bound; Assignment.  This Agreement shall be binding on each Grantor and on each Grantor’s legal representatives, successors and assigns, and shall inure to the benefit of Secured Party, Secured Party’s successors and assigns and any subsequent holders of the any of the Note.

 

17. Notices.  All notices required or permitted to be given under this Agreement shall be given in writing and shall be delivered to the party receiving the notice at the address for notices set forth at the end of this Agreement.

 

 

[Signature Page Follows]

 

  

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

 

GROWBLOX SCIENCES, INC.

 

By _________________________

Name:

Title:

 

GB SCIENCES NEVADA LLC

 

 

By _________________________

Name:

Title:

 

Address for notices for all Grantors:

6450 Cameron Blvd.

 

Suite 110A

 

Las Vegas, Nevada 89118

 

  

6exhibit10_4.htm

Exhibit 10.4

 

ROYALTY AGREEMENT

 

This Royalty Agreement (“Agreement”) dated as of June 8, 2015 (“Effective Date”), is between GrowBlox Sciences, Inc. a Delaware corporation (“GBS Delaware”) and Pacific Leaf Ventures, LP, a Nevada limited partnership (“PACIFIC LEAF”).  GBS Delaware and PACIFIC LEAF may be referred to herein individually as a “Party” or collectively as the “Parties.”

 

RECITALS

 

A.   GBS Delaware is a member of GB Sciences Nevada LLC, a Nevada limited liability company (“GBS Nevada”) and holds both sixty-five percent (65%)of the total membership interest of GBS Nevada and the right to receive sixty-five percent (65%) of all cash available for distribution to members of GBS Nevada (the “Distribution Rights”); and

 

        B.   PACIFIC LEAF has developed certain proprietary know-how and other intellectual property for the cultivation of cannabis and the extraction of oils and other constituents from cannabis (the “Intellectual Property”); and

 

C.  GBS Delaware now desires to acquire the Intellectual Property from PACIFIC LEAF for the use of GBS Nevada in its operations in the State of Nevada.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

ARTICLE I

LICENSE AND ROYALTY

1.1  Transfer of Intellectual Property.  Commencing within thirty (30) days of the Effective Date, PACIFIC LEAF shall provide GBS Delaware with the Intellectual Property in perpetuity for the sole use of GBS Nevada in its operations in the State of Nevada. Any other use or transfer of the Intellectual Property by GBS Delaware shall require the explicit written authorization of PACIFIC LEAF following additional negotiations, agreements, and consideration.  Any and all costs of equipment, related installation expenses, and operational expenses related to the implementation of the Intellectual Property by GBS Nevada shall be the sole responsibility of GBS Delaware and GBS Nevada, provided however that the hiring of all control personnel in connection with the installation, cultivation or extraction operations of GBS Nevada shall require the approval of PACIFIC LEAF, which approval shall not be unreasonably withheld or delayed.

1.2 Royalty Payments.  Within thirty (30) days of the end of each calendar quarter, GBS Delaware shall pay to PACIFIC LEAF the following amounts as a royalty for such calendar quarter: (i) for a period of five (5) years after the Effective Date, a sum equal to Two Dollars ($2.00) per gram of material extracted from cannabis at any facility owned, operated or controlled, directly or indirectly, by GBS Nevada; (ii) a sum equal to fourteen percent (14%) of the gross sales revenue of GBS Delaware attributable to the operations of GBS Nevada for the first five (5) years after the Effective Date; and (iii) a sum equal to seven percent (7%) of the gross sales revenue of GBS Delaware attributable to the operations of GBS Nevada for years six (6) through ten (10) following the Effective Date. 

 

  

  

  

 

If for any reason the Distribution Rights of GBS Delaware decrease in percentage at any time, the percentages designated in 1.2(ii) and 1.2(iii) shall automatically increase proportionately. On the other hand, if for any reason the Distribution Rights of GBS Delaware increase in percentage at any time, the percentages designated in 1.2(ii) and 1.2(iii) shall automatically decrease proportionately.

1.3 Insurance. For a period of fifteen (15) years after the Effective Date, GBS Delaware shall cause GBS Nevada to maintain a commercial general liability insurance policy with limits of at least Two Million Dollars ($2,000,000) per occurrence and per claim issued by a company admitted to write liability insurance in the State of Nevada and rated at least A or better by AM Best or Standard & Poors Ratings Services.

 

ARTICLE II

INFORMATION; AUDITS; DISPUTES

 

2.1 Information. GBS Delaware shall keep and cause GBS Nevada to keep accurate records of date, type, and weight of all cultivated and extracted material produced by GBS Nevada and any other information or data relevant to the calculation of the royalty payments provided herein, including but not limited to settlement sheets, receipts, invoices or other information regarding transactions between GBS Nevada and third parties. In addition, PACIFIC LEAF shall have the right to physically inspect all facilities of GBS Nevada at any time during regular business hours.

 

2.2 Audits. PACIFIC LEAF shall have the right to audit the books and records of GBS Delaware and GBS Nevada related to the calculation of the royalty payments provided herein. The audit may be performed once during any calendar quarter by any person or persons designated by PACIFIC LEAF during regular business hours and in a manner that does not materially interfere with the operations of GBS Delaware and GBS Nevada.

 

2.3 Disputes. Any controversy or claim, whether based on contract, tort, statute or other legal or equitable theory (including, but not limited to, any claim of fraud, misrepresentation or fraudulent inducement or any question of validity or effect of this Agreement, including this clause) arising out of or related to this Agreement (including amendments or extensions), or the breach or termination of this Agreement, shall be settled by arbitration proceedings held within the State of Nevada in accordance with the then current Rules of the American Arbitration Association for Commercial Arbitration.

ARTICLE IV

GENERAL

 

3.1 Confidentiality. GBS Delaware agrees to keep confidential and cause GBS Nevada to keep confidential all information provided to it by PACIFIC LEAF under this Agreement and not to disclose any such information to any third party without the prior written consent of PACIFIC LEAF.

 

3.2 Amendment and Waiver. This Agreement may only be amended by an instrument in writing signed by the Parties. Except for waivers specifically provided for in this Agreement, rights under this Agreement may not be waived except by an instrument in writing signed by the Party to be charged with the waiver. The failure of a Party to insist on the strict performance of any provision of this Agreement or to exercise any right, power or remedy upon a breach of this Agreement will not constitute a waiver of any provision of this Agreement or limit the Party’s rights thereafter to enforce any provision or exercise any right.

 

  

  

  

 

3.3 Severability. If at any time any covenant or provision contained in this Agreement is deemed to be invalid or unenforceable, such covenant or provision shall be considered divisible and shall be deemed immediately amended and reformed to include only such portion of such covenant or provision that is valid and enforceable. Such covenant or provision, as so amended and reformed, shall be valid and binding as though the invalid or unenforceable portion had not been included in this Agreement.

3.4. Entire Agreement. This Agreement constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they relate in any way to the subject matter hereof.

 

3.5 Headings. The subject headings of the Articles, Sections, and Subsections of this Agreement and the Exhibits to this Agreement are included for purposes of convenience only, and shall not affect the construction or interpretation of any of their provisions.

 

3.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without giving effect to any choice or conflicts of law provision or rule (whether of the State of Nevada or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Nevada.

 

3.7 Rules of Construction. Each Party represents that it has been represented by counsel during the negotiation, preparation, and execution of this Agreement. Each such Party therefore waives the application of any law or rule of construction providing that ambiguities in an agreement or other document shall be construed against the drafter of the agreement or document.

 

3.8 Attorneys’ Fees. Except as otherwise specified herein, in the event of a dispute under this Agreement, the prevailing Party shall be entitled to payment of its reasonable attorneys’ fees and costs in arbitrating or litigating the dispute.

 

3.9  No Joint Venture, Partnership, or Agency. This Agreement shall not be construed to create, expressly or by implication, a joint venture, partnership, or agency relationship between the Parties.

3.10 Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties.

 

3.11 Counterparts. This Agreement may be executed in multiple counterparts, and all such counterparts taken together shall constitute the same document.

Executed this ____ day of May 2015.

 

	
GROWBLOX SCIENCES, INC.

	
PACIFIC LEAF VENTURES, LP

	  	  
	  	  
	
By______________________________

	
By________________________________

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