Document:

Exhibit

Exhibit 10.1

SUBSCRIPTION AGREEMENT

General Cannabis Corp

6565 E. Evans Avenue

Denver, CO 80224

Ladies and Gentlemen:

The undersigned (collectively, the “Investor”) hereby confirms its agreement with you as follows: 

1.

This Subscription Agreement, including the Terms and Conditions For Purchase of Securities attached hereto as Annex I (collectively, this “Agreement”), is made as of the date set forth below between General Cannabis Corp, a Colorado corporation (the “Company”), and the Investor.

2.

The Company has authorized the sale and issuance to certain investors of shares of its common stock (“Common Stock”) and warrants to purchase shares of its Common Stock (“Warrants” and, together with the shares of Common Stock and the Warrant Shares (as defined below), the “Securities”).  The offering and sale of the Securities to the Investor (the “Offering”) shall consist of a minimum of $2,185,000 of Securities and a maximum of $3,000,000 of Securities in the aggregate.  The purchase price of the Securities (which, for the avoidance of doubt, shall be the same at the First Closing (as defined below), the Second Closing (as defined below) and, if applicable, the Third Closing (as defined below)) shall be as follows: (i) each share of Common Stock shall be purchased for a price per share equal to $0.3983 (such purchase price, the “Price Per Share”); and (ii) for each one dollar invested by the Investor, such Investor shall receive a Warrant to purchase a number of shares of Common Stock equal to 75% of the number of shares of Common Stock purchased by the Investor pursuant to clause (i), at an exercise price per share equal to $0.5565.  The shares issuable upon the exercise of the Warrants are referred to herein as the “Warrant Shares.”  The form of the Warrant is attached hereto as Exhibit B.

3.

The Company and the Investor agree that the Investor will purchase from the Company and the Company will issue and sell to the Investor the number of Securities set forth below for the aggregate purchase price set forth below.  The Investor agrees that there are no closing conditions to the Investor’s consummation of the purchases pursuant to the First Closing, the Second Closing and, if applicable, the Third Closing, other than the bank of the Investor processing the wire transfer request submitted by the Investor to such bank to pay to the account designated by the Company the purchase price for the Securities to be purchased by the Investor at the applicable Closing.  The Securities shall be purchased pursuant to the Terms and Conditions for Purchase of Securities attached hereto as Annex I and incorporated herein by this reference as if fully set forth herein.

4.

The Investor understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “Act”), by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Investor’s representations as expressed herein. The Investor understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Investor must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission (the “Commission”) and qualified by state authorities, or an exemption from such registration and qualification requirements is available.  The Investor further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Investor’s control, and which the Company is under no obligation and may not be able to satisfy.

5.

The executed Warrant shall be delivered in accordance with the terms thereof.

6.

The Investor represents that, except as set forth below, (a) it has had no position, office or other material relationship within the past three years with the Company or persons known to it to be affiliates of the Company, (b) it is not a FINRA member or an Associated Person (as such term is defined under the FINRA rules) as of the Closing, and (c) neither the Investor nor any group of Investors (as identified in a public filing made with the Commission) of which the Investor is a part in connection with the Offering of the Securities, acquired, or obtained the right to acquire, 20% or more of the Common Stock (or securities convertible into or exercisable for Common Stock) or the voting power of the Company on a post-transaction basis.

7.

Each party shall be responsible for its own expenses and costs incurred in connection with the negotiation, documentation and execution of this Agreement and the other agreements, and documents contemplated herein and therein.

[Signature page follows]

First Closing Number of Shares of Common Stock: 2,008,536

First Closing Number of Warrants: 1,506,402

First Closing Purchase Price Per Share: $0.3983

First Closing Aggregate Purchase Price: $800,000

Second Closing Number of Shares of Common Stock: 3,477,278

Second Closing Number of Warrants: 2,670,958

Second Closing Purchase Price Per Share: $0.3983

Second Closing Aggregate Purchase Price: $1,385,000

Please confirm that the foregoing correctly sets forth the agreement between us by signing in the space provided below for that purpose.

Dated as of: May 29, 2020

HERSHEY STRATEGIC CAPITAL, LP

INVESTOR

By:

Hershey Strategic Capital GP, LLC,

Its General Partner

By:  /s/ Adam Hershey                                           

Print Name: Adam Hershey

Title: Managing Member

Address: 6 Pompano Road

Rumson, New Jersey 07760

SHORE VENTURES III, LP

INVESTOR

By:

Hershey Management IV, LLC

Its General Partner

By:  /s/ Adam Hershey                                           

Print Name: Adam Hershey

Title: Managing Member

Address: 6 Pompano Road

Rumson, New Jersey 07760

Agreed and Accepted

this 29th day of May, 2020:

GENERAL CANNABIS CORP

By:  /s/ Steve Gutterman                                           

Name: Steve Gutterman

Title: Chief Executive Officer

2

ANNEX I

TERMS AND CONDITIONS FOR PURCHASE OF SECURITIES 

OF

GENERAL CANNABIS CORP

1.

Authorization and Sale of the Securities.  Subject to the terms and conditions of this Agreement, the Company has authorized the sale of the Securities.

2.

Agreement to Sell and Purchase the Securities.

2.1

At the Closings (as defined in Sections 3.1 and 3.2), the Company will sell to the Investor, and the Investor will purchase from the Company, upon the terms and conditions set forth herein, the number of Securities set forth on the last page of the Agreement to which these Terms and Conditions for Purchase of Securities are attached as Annex I (the “Signature Page”) for the aggregate purchase price therefor set forth on the Signature Page.

3.

Closings and Delivery of the Securities and Funds.

3.1

First Closing.  The completion of the purchase and sale of the initial $800,000 of the Securities (the “First Closing”) shall occur no later than May 29, 2020 (the “First Closing Date”).  At the First Closing, (a) the Company shall cause the Transfer Agent to deliver to the Investor the applicable number of shares set forth on the Signature Page registered in the name of the Investor or, if so indicated on the Investor Questionnaire attached hereto as Exhibit A, in the name of a nominee designated by the Investor, (b) the Company shall cause to be delivered to the Investor a Warrant to purchase the applicable number of whole shares of Common Stock as set forth on the signature page hereto, and (c) the applicable aggregate purchase price for the Securities being purchased by the Investor at the First Closing will be delivered by or on behalf of the Investor to the account designated by the Company.

3.2

Second Closing.   The completion of the purchase and sale of the subsequent $1,385,000 of the Securities (the “Second Closing”) shall occur no later than June 5, 2020 (the “Second Closing Date”); provided that the Investor shall use its best efforts to consummate the Second Closing prior to June 3, 2020; provided further, that the Company may extend the Second Closing Date in its sole and absolute discretion upon the Investor’s request.  The Investor may allocate such investment at the Second Closing between Shore Ventures III, LP and Hershey Strategic Capital, LP in its discretion. At the Second Closing, (a) the Company shall cause the Transfer Agent to deliver to the Investor the applicable number of shares set forth on the Signature Page registered in the name of the Investor or, if so indicated on the Investor Questionnaire attached hereto as Exhibit A, in the name of a nominee designated by the Investor, (b) the Company shall cause to be delivered to the Investor a Warrant to purchase the applicable number of whole shares of Common Stock as set forth on the signature page hereto, and (c) the applicable aggregate purchase price for the Securities being purchased by the Investor at the Second Closing will be delivered by or on behalf of the Investor to the account designated by the Company.  The Investor’s failure to purchase the Securities at the Second Closing on the Second Closing Date shall constitute a breach of this Agreement by the Investor; provided, that the foregoing shall not constitute a breach of this Agreement by the Investor if the failure is due to the refusal by the bank of the Investor to process the wire transfer request submitted by the Investor to such bank to pay to the Company the purchase price for the Securities to be purchased by the Investor at the Second Closing.  

3.3

Potential Third Closing.  The completion of the purchase and sale of the subsequent $815,000 of the Securities (the “Third Closing” and, together with the First Closing and the Second Closing, the “Closings”) shall be subject to and conditioned upon the determination by the MED (as defined below) that Adam Hershey is “Approved for Suitability” within one-year of the date of this Agreement.  Upon the MED’s determination that Mr. Hershey is “Approved for Suitability,” the Company shall immediately thereafter deliver written notice to the Investor of the consummation of the Third Closing. The Third Closing shall occur on the 10th business day following the Investor’s receipt of such written notice by the Company (the “Third Closing Date”).  The amount of the Securities to be purchased by the Investor at the Third Closing shall be $815,000 on the Third Closing Date.  The Investor shall be bound to purchase such Securities at the Third Closing upon the receipt of the Company’s written notice to consummate the Third Closing.  The Investor may allocate such investment at the Third Closing between Shore Ventures III, LP and Hershey Strategic Capital, LP in its discretion. At the Third Closing, (a) the Company shall cause the Transfer Agent to deliver to the Investor the applicable number of shares registered in the name of the Investor, (b) the Company shall cause to be delivered to the Investor a Warrant to purchase the applicable number of whole shares of Common Stock, and (c) the applicable aggregate purchase price for the Securities being purchased by the Investor at the Third Closing will be delivered by or on behalf of the Investor to the account designated by the Company.  The Investor’s failure to purchase the Securities at the Third Closing on the Third Closing Date shall constitute a breach of this Agreement by the Investor, and the Company’s failure to sell the Securities at the Third Closing on the Third Closing Date shall constitute a breach of this Agreement by the Company; provided, that the foregoing shall not constitute a breach of this Agreement by the Investor if the failure is due to the refusal by the bank of the Investor to process the wire transfer request submitted by the Investor to such bank to pay to the Company the purchase price for the Securities to be purchased by the Investor at the Third Closing.

3.4

Conditions to the Company’s Obligations.  The Company’s obligation to issue and sell the Securities to the Investor shall be subject to: (i) the receipt by the Company of the purchase price for the Securities being purchased hereunder as set forth on the Signature Page and (ii) the accuracy of the representations and warranties made by the Investor and the fulfillment of those undertakings of the Investor to be fulfilled prior to each Closing.

3.5

Conditions to the Investor’s Obligations.  The Investor’s obligation to purchase the Securities at the First Closing will be subject to the accuracy of the representations and warranties made by the Company and the fulfillment of those undertakings of the Company to be fulfilled prior to the First Closing Date.  Upon the consummation of the First Closing, the parties agree that the Investor’s obligation to purchase the Securities at the Second Closing (and, if applicable, the Third Closing) shall be binding in all respects on the Investor and there shall be no conditions precedent to such obligation of the Investor to purchase the Securities at the Second Closing (and, if applicable, the Third Closing), other than the bank of the Investor processing the wire transfer request submitted by the Investor to such bank to pay to the Company the purchase price for the Securities to be purchased by the Investor at the Second Closing (and, if applicable, the Third Closing).  

4.

Representations, Warranties and Covenants of the Investor.

The Investor acknowledges, represents and warrants to, and agrees with, the Company that:

4.1

The Investor (a) is knowledgeable, sophisticated and experienced in making, and is qualified to make decisions with respect to, investments in shares presenting an investment decision like that involved in the purchase of the Securities, including investments in securities issued by the Company and investments in comparable companies, and (b) has answered all questions on the Signature Page and the Investor Questionnaire and the answers thereto are true and correct as of the date hereof and will be true and correct as of the First Closing Date. The Investor is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Act.

4.2

The Investor acknowledges that (a) the Investor has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and (b) this Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

4.3

The Investor understands that nothing in this Agreement or any other materials presented to the Investor in connection with the purchase and sale of the Securities constitutes legal, tax or investment advice.  The Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Securities.

4.4

Since the date on which the Investor was first contacted about the Offering, the Investor has not engaged in any transactions in the securities of the Company (including, without limitation, any Short Sales (as defined below) involving the Company’s securities).  The Investor covenants that it will not engage in any Short Sales at any time while holding any of the Securities acquired pursuant to this Agreement until such time that (i) the Investor is no longer subject to the beneficial ownership reporting requirements under Section 13 or Section 16 of the Exchange Act (as defined below), (ii) the Investor no longer has the right to a board observer or to designate a director on the Company’s Board of Directors pursuant to Sections 6.1 and 6.2 hereof, and (iii) no such person designated by the Investor as a board observer or a director pursuant to Sections 6.1 and 6.2 hereof serves in such capacity.  Subject to the foregoing, the Investor agrees that it will not use any of the shares acquired pursuant to this Agreement to cover any short position in the Common Stock if doing so would be in violation of applicable securities laws.  For purposes hereof, “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not against the box, and all types of direct and indirect stock pledges, forward sales contracts, options, puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements (including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated brokers.

5.

Representations and Warranties of the Company.

Subject to the Disclosure Schedules attached hereto as Schedule A, the Company acknowledges, represents and warrants to, and agrees with, the Investor that, as of the date of this Agreement:

5.1

Organization; Good Standing and Qualification; Subsidiaries. The Company and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the State of its jurisdiction of incorporation or formation, as applicable, and has all requisite corporate or company power and authority to carry on its business as 

now conducted and as proposed to be conducted. The Company and each of its Subsidiaries is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a Material Adverse Effect (as defined below) on its business or properties and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.  “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 Company; or (b) the validity or enforceability of this Agreement and the Warrants (collectively, the “Transaction Documents”).  Each entity of which the Company owns ten percent (10%) or more of the outstanding voting securities (each a “Subsidiary”) is listed in Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any liens or encumbrances, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

5.2

Authorization. The Transaction Documents have been duly authorized by the Board of Directors of the Company. The Transaction Documents when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

5.3

Effect of Agreement. The execution, delivery and performance by the Company of the Transaction Documents to which it is a party, will not violate the charter documents, bylaws or formation documents as applicable of the Company or any law to which the Company is subject, or any judgment, award or decree or any material indenture, material agreement or other material instrument to which the Company is a party, or by which the Company or its properties or assets are bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under, any such indenture, agreement or other instrument, or result in the creation or imposition of any lien of any nature whatsoever upon any of the properties or assets of the Company, except to the extent the effect thereof will not be materially adverse to the Company’s ability to fulfill its obligations under the Transaction Documents to which it is a party.

5.4

No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Company, and the consummation by the Company of the transactions contemplated hereby and thereby, do not and will not: (a) result in a violation of the Company’s certificate or articles of incorporation, by-laws or other organizational or charter documents, (b) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any lien upon any of the properties or assets of the Company, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, instrument or any “lock-up” or similar provision of any agreement to which the Company is a party, or (c) result in a violation of any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company or any Subsidiary is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect), nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing (other than federal law with respect to the operation of the Company’s business in the cannabis industry).   In order for the Company to execute, deliver or perform any of its obligations under the Transaction Documents (other than any securities filings that may be required to be made by the Company subsequent to any closing), there is no governmental consent, authorization or order required to be obtained by the Company from any court or governmental agency.

5.5

Legal Proceedings.  There is no order or action pending, or, to the knowledge of the Company, threatened against or affecting the Company either (A) in connection with the Company’s performance hereunder or (B) that would, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. There is no matter as to which the Company, or, to the knowledge of the Company, any affiliate of the Company has received any notice, claim or assertion which otherwise has been threatened against or affecting the Company that either (A) is in connection with the Company’s performance hereunder or (B) would, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  

5.6

No General Solicitation; No Integrated Offering. Neither the Company nor any of its affiliates, nor any person acting on its behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Act) in connection with the offer or issuance of the Securities.  Neither the Company, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the Securities Act of the issuance of the Securities to the Investors. The issuance of the Securities to the Investors will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

5.7

Title.   The Company and its Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens and, except for liens as do not materially affect the value of such property 

and do not materially interfere with the use made and proposed to be made of such property by the Company or its Subsidiaries and liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under lease by the Company or its Subsidiaries is held under valid, subsisting and enforceable leases with which the Company or its applicable Subsidiary is in compliance with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or its Subsidiaries.

5.8

Insurance. The Company and its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company reasonably believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged.  Neither the Company nor any Subsidiary has been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it or any Subsidiary will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its applicable business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its Subsidiaries, taken as a whole.

5.9

Regulatory Permits. The Company possesses all material certificates, authorizations and permits issued by the appropriate state regulatory authorities necessary to conduct its businesses, and the Company has not received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.  Except such as have already been obtained or the failure to obtain would not reasonably be expected to result in a Material Adverse Effect, no certificates, authorizations and permits from any state or local regulatory authorities are required to sell the Company’s products to any cannabis growers, cultivators, dispensaries, cannabis-infused-products producers, or other cannabis-related company (including any company that “touches” the cannabis plant).

5.10

Compliance.  Neither the Company nor any of its Subsidiaries: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived) or (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority.

5.11

Issuance of the Securities.  The shares of Common Stock to be issued to the Investor are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens or encumbrances imposed by the Company; and the issuance of such shares is not subject to any preemptive or similar rights. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement.  The Warrants are duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued. The Warrant Shares have been duly authorized, and, when issued and delivered upon exercise of the Warrants against payment of the exercise price with respect to the Warrants, will be fully paid and non-assessable and will not be subject to any preemptive or similar rights. The Company has duly authorized the reservation of the Warrant Shares.

5.12

Capitalization.  The capitalization of the Company is as set forth on Section 5.12 of the Disclosure Schedules.  

5.13

Exchange Act Reports; Financial Statements.  Since January 1, 2019 (the “Reference Date”), the Company has filed all reports required to be filed by it under the Act and the Exchange Act (the “SEC Reports”), or filed a valid extension of such time of filing and has filed the SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports (the “Financial Statements”) comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. The Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the footnotes thereto, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. The Company has never been an issuer subject to Rule 144(i) under the Act.

5.14

Tax Matters.  Since the Reference Date: (i) the Company and each of its Subsidiaries has filed all U.S. federal, state, local and foreign tax returns which are required to be filed by each of them and all such returns are true and correct in all material respects, except for such failures to file which would not have a Material Adverse Effect; (ii) the Company and each of its Subsidiaries has paid all taxes required to be paid pursuant to such returns or pursuant to any assessments received by any of them, and have withheld any amounts which any of them are obligated to withhold from amounts owing to any employee, creditor or third party; and (iii) the Company and each of its Subsidiaries has properly accrued all taxes required to be accrued and/or paid pursuant to 

applicable law, except where the failure to accrue would not have a Material Adverse Effect. To the knowledge of the Company, the tax returns of the Company and its Subsidiaries are not currently being audited by any state, local or federal authorities. Neither the Company nor any of its Subsidiaries has waived any statute of limitations with respect to taxes or agreed to any extension of time with respect to any tax assessment or deficiency.

5.15

Material Contracts.  The SEC Reports contain all material contracts, agreements, commitments, arrangements, leases, policies or other instruments to which either the Company or any of its Subsidiaries is a party or by which any of them is bound, which are required to be filed pursuant to the Act or the Exchange Act (the “Material Contracts”). The Material Contracts are valid and in full force and effect, enforceable against the Company and any of the Subsidiaries party thereto and, to the Company’s knowledge, against the other parties thereto. Neither the Company nor any Subsidiary is in violation of, or default under (and there does not exist any event or condition which, after notice or lapse of time or both, would reasonably be expected to constitute such a default under), any Material Contract, that would reasonably be expected to have a Material Adverse Effect. To the Company’s knowledge, none of the other parties to any Material Contract are in violation of or default under any Material Contract in any material respect. Neither the Company nor any Subsidiary has received any notice of cancellation or any written communication threatening cancellation of any Material Contract which is currently in effect by any other party thereto.

5.16

Sarbanes-Oxley. The Company is in compliance with all provisions of the Sarbanes-Oxley Act of 2002, as amended, which are applicable to it.

5.17

Investment Company. The Company is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

6.

Covenants and Other Agreements of the Company.

6.1

Effective as of and subject to the Second Closing Date, the Company shall invite Mr. Adam Hershey to attend all meetings of the Board of Directors in a nonvoting observer capacity; provided, however, that such Mr. Hershey agrees in writing to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and, provided further, that the Company reserves the right to withhold any information and to exclude Mr. Hershey from any meeting or portion thereof if access to such information or attendance at such meeting could reasonably be expected to adversely affect the attorney-client privilege between the Company and its counsel or would result in disclosure of trade secrets to Mr. Hershey.   The board observer right set forth in this Section 6.1 shall terminate on the date on which Mr. Hershey or such other individual designated by the Investor is appointed to the Company’s Board of Directors or, if earlier, the date on which Hershey Strategic Capital, L.P. and Shore Ventures III, LP no longer hold in aggregate at least one-half of the shares of Common Stock purchased by them in aggregate pursuant to this Agreement (without giving effect to the exercise of the Warrants).  

6.2

Subject to the consummation of the Second Closing, upon the earlier of December 31, 2020, or the closing of the Company’s pending acquisition of The Organic Seed, LLC (doing business under the name Cannasseur) (or the termination of such pending acquisition), the Company shall submit a formal request to the State of Colorado’s Marijuana Enforcement Division (“MED”) to determine whether Mr. Hershey is “Approved for Suitability.”  Upon the MED’s determination that Mr. Hershey is “Approved for Suitability,” the Company’s Board of Directors shall thereafter immediately appoint Mr. Hershey to the Company’s Board of Directors.  Upon the MED’s determination that Mr. Hershey is not “Approved for Suitability,” then the Investor shall have the right to designate a new potential director to the Board of Directors (and the Company shall submit a formal request to the MED to determinate whether any such new director is “Approved for Suitability”) until such time as the MED determines that such potential director is “Approved for Suitability,” at which time the Company’s Board of Directors shall appoint such individual to the Board of Directors.  The Company’s Board of Director shall nominate Mr. Hershey (or such other director designated by the Investor) for re-election to the Company’s Board of Directors at the Company’s annual stockholder meetings held in 2020, 2021 and 2022, as applicable, provided that as of the date of each such annual meeting Hershey Strategic Capital, L.P. and Shore Ventures III, LP continue to hold in aggregate at least one-half of the shares of Common Stock purchased by them in aggregate pursuant to this Agreement (without giving effect to the exercise of the Warrants).  For the avoidance of doubt, the foregoing rights in this Section 6.2 to designate a director for election or re-election to the Company’s Board of Directors shall terminate on the earlier of (i) the date immediately preceding the Company’s annual meeting of stockholders in 2023, or (ii) the date on which Hershey Strategic Capital, L.P. and Shore Ventures III, LP fail to hold in aggregate at least one-half of the shares of Common Stock purchased by them in aggregate pursuant to this Agreement (without giving effect to the exercise of the Warrants).   The service on the Company’s Board of Directors by Mr. Hershey or such other director designated by the Investor shall be subject to the qualification and similar requirements applicable equally to all directors as may be set forth from time to time in the Company’s bylaws or any applicable director resignation policy of the Company.

6.3

In connection with and subject to the Second Closing, Mr. Hershey and the Company shall enter into a consulting agreement, in substantially the form attached hereto as Exhibit C, pursuant to which Mr. Hershey shall serve as a strategy consultant to the Company.

6.4

For so long as Mr. Hershey serves on the Company’s Board of Directors or as a strategic consultant to the Company, the trading in the Company’s securities by Hershey Strategic Capital, L.P. and Shore Ventures III, LP shall be subject to the terms of the Company’s insider trading policy, including that any trades be made during open trading windows under such policy. 

6.5

The Company shall at all times while the Warrants are outstanding maintain a reserve from its duly authorized shares of Common Stock of a number of shares of Common Stock sufficient to allow for the issuance of the Warrant Shares.

6.6

The Company agrees: (i) if the Company applies to have the Common Stock traded on any other trading market, it will include in such application the Warrant Shares, and will take such other action as is necessary or desirable to cause the Warrant Shares to be listed on such other trading market as promptly as possible; (ii) it will comply in all material respects with the Company’s reporting, filing and other obligations under the rules of the principal trading market of the Common Stock; and (iii) for so long as the Board of Directors determines that it remains advisable and in the Company’s best interest, the Company will take all commercially reasonable actions necessary to continue the listing and trading of its Common Stock on a trading market.

6.7

Until none of the Securities issued to the Investor remain outstanding, the Company covenants to file all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as any of the Securities issued to the Investor remain outstanding, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Investor and make publicly available in accordance with Rule 144(c) under the Act such information as is required for the Investor to be able to sell the Securities under Rule 144 under the Act within the requirements provided thereby. The Company further covenants that it will take such further action as the Investor may reasonably request, to the extent required from time to time, to enable the Investor to sell its Securities without registration under the Act within the requirements of Rule 144.

6.8

The Company and the Investor hereby agree that the Company shall, during the ninety (90) day period immediately following the Second Closing Date (the “Negotiation Period”), endeavor to cause the holders of the promissory notes of the Company having an outstanding balance in the amount of approximately $2,331,000 as of the date hereof (the “Total Note Amount”) that are due on or about January 31, 2021 (the “Existing Notes”), to extend the maturity date of the Existing Notes to a date that is not earlier than January 31, 2022.  If, at the end of the Negotiation Period, all of the Existing Notes have not been amended to extend the maturity dates thereof as set forth in this Section 6.8, then the Company shall issue to Hershey Strategic Capital, L.P. and Shore Ventures III, LP, on a pro rata basis based on their investment in this Offering, promptly (and in no event more than five (5) business days) following the end of the Negotiation Period, warrants to purchase up to such number of shares of Common Stock as is equal to the outstanding balance (as of the date hereof) of the Existing Notes that were not extended in the manner set forth in this Section 6.8 (subject to adjustment for stock splits, stock combinations and similar events), with such warrants having an exercise price equal to the to 100% of the 30-day volume weighted average price of the Company’s Common Stock on the last day of the Negotiation Period, provided that such exercise price shall not be lower than $0.45 per share nor higher than $0.56 per share. So, by way of example, if the maturity dates of Existing Notes with an outstanding balance as of the date hereof of $1,000,000 have not been amended as set forth in this Section 6.8 as of the end of the Negotiation Period, the Company shall issue to Hershey Strategic Capital, L.P. and Shore Ventures III, LP, on a pro rata basis, warrants to purchase up to one million shares of Common Stock (subject to adjustment).

6.9

Participation in Future Financings and Related Matters.

(a) 

Subject to the terms and conditions set forth in this Section 6.9 and until the one-year anniversary of the Second Closing (but provided that the Investor continues to hold not less than seventy-five percent (75%) of the total number of shares of Common Stock purchased by the Investor pursuant to this Agreement (without giving effect to any shares of Common Stock issuable upon exercise of the Warrants), the Investor has the right to purchase from the Company an amount of any securities that the Company may, from time to time, propose to issue and sell (the “New Securities”) equal to the Investor’s percentage stake in the Company  (the “Ownership Percentage”) (calculated as of the date of delivery of such Notice of Issuance (as defined below)), which shall be equal to the number of shares of Common Stock then held by the Investor (excluding any convertible securities held by the Investor, including any Warrants), divided by the number of shares of Common Stock then outstanding).  Notwithstanding the foregoing, the foregoing participation right of the Investor shall only apply to the extent such New Securities are actually issued by the Company.

(b) 

In the event the Company proposes to undertake an issuance of New Securities, it shall give the Investor written notice of its intention, describing the type of New Securities and the price and terms upon which the Company proposes to issue such New Securities (a “Notice of Issuance”). The Investor shall have three (3) days from the date of delivery of a Notice of Issuance to the Investor to agree to purchase a portion of the New Securities equal to the Investor’s Ownership Percentage (calculated as of the date of delivery of such Notice of Issuance), for the price and upon the terms specified in the Notice of Issuance. On or prior to the expiration of such three (3) day period, the Investor shall deliver a revocable written notice to the Company stating the quantity of New Securities to be purchased by the Investor (the “Investor Response”).

(c) 

The Company shall have 120 days following the earlier of (i) the expiration of the three (3) day period described in Section 6.9(b) and (ii) the delivery of the Investor Response to sell or enter into an agreement to sell the New Securities with respect to which the Investor’s right to purchase was not exercised, at a price and upon terms no more favorable than those specified in the Notice of Issuance. If the Company does not sell such New Securities or enter into an agreement to sell such New Securities within such 120-day period, then the Company shall not thereafter issue or sell any New Securities without first offering such New Securities to the Investor in the manner provided in Section 6.9(b). 

(d)

For the sixty (60) day period following the Second Closing Date, the Company agrees that it will not issue any debt securities without first obtaining the written consent of the Investor; provided, however, that the Company may during such sixty (60) day period (i) sell unsecured 15% promissory notes and warrants (on substantially the same terms as previously issued by the Company on a Form 8-K filed on February 24, 2020), and (ii) for the avoidance of doubt, enter into an exchange agreement with the holders of the Company’s warrants previously issued by the Company as reported on a Form 8-K filed on June 4, 2019, pursuant to which warrants are exchanged for new securities on terms approved by the Company’s Board of Directors, and any transactions in the foregoing clauses (i) and (ii) shall not be deemed “New Securities” for purposes of this Section 6.9 and the Investor shall have no consent rights over any such transactions during such sixty (60) day period.

7.

Survival of Representations, Warranties and Agreements.  Notwithstanding any investigation made by any party to this Agreement, all covenants, agreements, representations and warranties made by the Company and the Investor herein will survive the execution of this Agreement, the delivery to the Investor of the Securities being purchased and the payment therefor.

8.

Notices.  All notices, requests, consents and other communications hereunder will be in writing, will be mailed (a) if within the domestic United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid or (b) if delivered from outside the United States, by International Federal Express, and will be deemed given (i) if delivered by first-class registered or certified mail domestic, three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed and (iii) if delivered by International Federal Express, two business days after so mailed, and will be delivered and addressed as follows:

if to the Company, to:

General Cannabis Corp

6565 E. Evans Avenue

Denver, CO 80224

Attn: Steve Gutterman, Chief Executive Officer

or at such other address or addresses as may have been furnished to the Investor in writing, with copies to: 

Morrison & Foerster LLP

425 Market Street

San Francisco, CA 94105

Attn: Murray Indick and John Rafferty

if to the Investor, at its address on the Signature Page hereto, or at such other address or addresses as may have been furnished to the Company in writing.

9.

Changes.  This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the Investor.

10.

Headings.  The headings of the various sections of this Agreement have been inserted for convenience of reference only and will not be deemed to be part of this Agreement.

11.

Severability.  In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein will not in any way be affected or impaired thereby.

12.

Governing Law; Venue.  This Agreement will be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to the principles of conflicts of law that would require the application of the laws of any other jurisdiction. Each party agrees that all proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement shall be commenced exclusively in the state and federal courts sitting in the Southern District of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the Southern District of New York for the adjudication of any proceeding related to this Agreement or the transactions contemplated hereby, and hereby irrevocably waives, and agrees not to assert in any proceeding that it is not personally subject to the jurisdiction of any such court, that proceeding is improper or is an inconvenient venue for such proceeding.

13.

Remedies.  The Investor acknowledges and agrees that the Company will be irreparably damaged in the event any of the provisions of this Agreement are not performed by the Investor in accordance with their specific terms or are otherwise breached.  Accordingly, it is agreed that the Company shall be entitled to an injunction to prevent breaches of this Agreement, and to specific enforcement of this Agreement and its terms and provisions in any action instituted in any court of the United States or any state having subject matter jurisdiction, provided, that the Company shall not be entitled to specific performance if the applicable breach arises from the failure by the bank of the Investor to process the wire transfer request submitted by the Investor to such bank to pay to the account designated by the Company the purchase price for the Securities to be purchased by the Investor at the applicable Closing.  All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

14.

Counterparts.  This Agreement may be executed in two or more counterparts, each of which will constitute an original, but all of which, when taken together, will constitute but one instrument, and will become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties. Delivery of executed signature pages by facsimile transmission or pdf shall constitute effective and binding execution and delivery of this Agreement.Exhibit

Exhibit 10.2

GENERAL CANNABIS CORP

WARRANT

TO PURCHASE SHARES OF COMMON STOCK

No. GCCW-__

GENERAL CANNABIS CORP, a Colorado corporation (the “Company”), for value received, hereby certifies that Hershey Strategic Capital, LP, or registered assigns (the “Holder”), is entitled to purchase from the Company, at the Purchase Price,                       shares of the duly authorized, validly issued, fully paid and nonassessable shares the Company’s common stock with a par value of $0.001 (“Common Stock”), at any time or from time to time prior to 5:00 P.M., New York City time, on the Expiration Date, all subject to the terms, conditions and adjustments set forth below.  

This is the Warrant (the “Warrant”, such term to include any such warrants issued in substitution therefor) referred to in and issued pursuant to the terms of that certain Subscription Agreement between the Company and the Holder (the “Agreement”).  This Warrant is entitled to the benefits of the Agreement and is also subject to the obligations imposed by the Agreement, including as relates to any restrictions on transfer of ownership of the Warrant. 

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned such terms in the Agreement.

1.

Definitions.  As used herein, unless the context otherwise requires, the following terms shall have the meanings indicated:

“Acquisition” shall mean any sale or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than a majority of the outstanding voting securities of the surviving entity after the transaction.

“Business Day” shall mean any day other than a Saturday or a Sunday or a day on which commercial banking institutions in the City of New York are authorized by law to be closed.  Any reference to “days” (unless Business Days are specified) shall mean calendar days.  In any circumstance where a date of determination under this Warrant falls on a date that is not a Business Day, it shall be deemed to be the next Business Day.

“Common Stock” shall have the meaning assigned to it in the introduction to this Warrant, such term to include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock, and all other stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference.

“Company” shall have the meaning assigned to it in the introduction to this Warrant, such term to include any corporation or other entity which shall succeed to or assume the obligations of the Company hereunder.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations thereunder, or any successor statute.

“Expiration Date” shall mean May 29, 2025. 

“Person” shall mean any individual, firm, partnership, corporation, trust, joint venture, association, joint stock company, limited liability company, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof, and shall include any successor (by merger or otherwise) of such entity.

“Purchase Price” shall mean $0.5565 per Warrant Share, subject to adjustment and readjustment from time to time as provided in Section 3, and, as so adjusted or readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by Section 3.

“Securities Act” shall mean the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder, or any successor statute.

“Trading Day” means a day on which the principal Trading Market is open for trading.

“Trading Market” means the OTCQB tier of the OTC Markets; provided, that if the Common Stock ceases to be listed thereon, “Trading Market” shall mean (i) any other securities market or exchange on which the Common Stock is principally listed or quoted for trading on the date in question, including the NYSE MKT, the NASDAQ Capital Market, the Nasdaq Global Market or the Nasdaq Global Select Market (or any successors to any of the foregoing) or (ii) if the Common Stock is not then listed or quoted for trading on any such securities market or exchange and if prices for the Common Stock are then reported in the “Pink Sheets,” OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices).

“Warrant Shares” shall mean the number of shares of Common Stock that can be purchased upon exercise of this Warrant.

2.

Exercise of Warrant. 

2.1.

Manner of Exercise; Payment of the Purchase Price. 

(a)

This Warrant may be exercised by the Holder hereof, in whole or in part, at any time or from time to time prior to the Expiration Date, by surrendering to the Company at its principal office this Warrant, with the form of Election to Purchase Shares attached hereto as Exhibit ‘A’ (or a reasonable facsimile thereof) duly executed by the Holder and (unless this Warrant is exercised in accordance with the cashless exercise provisions hereof) accompanied by payment of the Purchase Price for the number of shares of Common Stock specified in such form.

(b)

Payment of the Purchase Price (unless this Warrant is exercised in accordance with the cashless exercise provisions hereof) shall be made in United States currency by cash or delivery of a check payable to the order of the Company or by wire transfer to the Company.

(c)

In addition to the exercise process set forth in Section 2.1(a), this Warrant may also be exercised by means of a “cashless exercise” to the extent described in Section 4 hereof, in which event the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the closing price of the Common Stock on the Trading Market on the Trading Day immediately preceding the date on which the Holder elects to exercise this Warrant (or this Warrant is automatically exercised by its terms, as applicable) by means of a “cashless exercise,”, or if the Common Stock is not quoted or reported on a Trading Market, the fair market value of the Common Stock as determined by the Company’s Board of Directors in good faith;

(B) = the Purchase Price of this Warrant, as adjusted hereunder; and

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

(d)

The Company shall not effect any exercise of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Election to Purchase Shares, the Holder (together with the Holder’s affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Any determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (B) a more recent public 

2

announcement by the Company or (C) a more recent written notice by the Company setting forth the number of shares of Common Stock outstanding. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon not less than 61 days’ prior notice to the Company, may increase the Beneficial Ownership Limitation provisions of this Section 2(d) solely with respect to the Holder’s Warrant. Any such increase will not be effective until the 61st day after such notice is delivered to the Company. The Holder may also decrease the Beneficial Ownership Limitation provisions of this Section 2(d) solely with respect to the Holder’s Warrant at any time, which decrease shall be effectively immediately upon delivery of notice to the Company. The foregoing provisions shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

2.2.

When Exercise Effective.  Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to, and (unless this Warrant is exercised in accordance with the cashless exercise provisions hereof) the Purchase Price shall have been received by, the Company and at such time the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such exercise shall be deemed to have become the holder or holders of record thereof for all purposes.

2.3.

Delivery of Stock Certificates, Etc.; Charges, Taxes and Expenses.

(a)

As soon as practicable after each exercise of this Warrant, in whole or in part, the Company shall cause to be issued in such denominations as may be requested by the Holder in the Election to Purchase Shares, in the name of and delivered to the Holder or, subject to applicable securities laws, as the Holder may direct, the following:

(i)

a certificate or certificates for the number of Warrant Shares to which the Holder shall be entitled upon such exercise plus, if applicable, in lieu of issuance of any fractional share to which the Holder would otherwise be entitled, a Company check pursuant to Section 7.4, and

(ii)

in case such exercise is for less than all of the Warrant Shares a new Warrant or Warrants of like tenor, covering the balance of the Warrant Shares.

(b)

Issuance of Warrant Shares upon the exercise of this Warrant shall be made without charge to the Holder hereof for any issue tax or other incidental expense, in respect of the issuance of such certificates, all of which such taxes and expenses shall be paid by the Company; provided, however, the Holder shall pay any applicable transfer or similar tax resulting from the issuance of Warrant Shares to any Person other than the Holder.

3.

Stock Dividends, Splits.  In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on the outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then, in each such event, the Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price then in effect.  The Purchase Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 3.  The number of Warrant Shares that the Holder shall thereafter be entitled to receive on the exercise hereof as provided in Section 2, shall be adjusted to a number determined by multiplying the number of Warrant Shares that would otherwise (but for the provisions of this Section 3) be issuable on such exercise by a fraction of which the numerator is the Purchase Price that would otherwise (but for the provisions of this Section 3) be in effect, and the denominator is the Purchase Price in effect on the date of such exercise.

4.

Acquisition of Company.  In the event of a proposed Acquisition of the Company, the Company shall provide the Holder all information with respect to the Acquisition that is otherwise provided to shareholders of the Company at such time and from time to time during the pendency of the Acquisition, and in any event not less than twenty (20) days prior to the anticipated closing of the Acquisition, including (but not limited to) the proposed price to be paid in the proposed Acquisition.  The Holder shall have the right to exercise this Warrant on or prior to the closing date with respect to the proposed Acquisition in accordance with the terms of this Warrant. 

3

In the event that the Holder does not exercise this Warrant on or prior to the closing of the Acquisition, then, notwithstanding anything herein to the contrary, and unless the Holder notifies the Company otherwise, this Warrant shall be automatically exercised via cashless exercise in accordance with the formula set forth in Section 2.1(c) immediately prior to the closing of the Acquisition.

5.

Certificate as to Adjustments.  In each case of any adjustment or readjustment pursuant to Section 3, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate, signed by the Chief Financial Officer, or Corporate Secretary of the Company, setting forth such adjustment or readjustment (including but not limited to the Purchase Price and number of Warrant Shares purchasable hereunder after giving effect to such adjustment or readjustment) and showing in reasonable detail the method of calculation thereof.  Such certificate shall constitute an amendment to this Warrant and shall be delivered to the Holder in the manner provided in Section 7.  Upon request of the Holder, the Company shall issue a new Warrant that reflects the terms of any such adjustment or readjustment reflected in any such certificate issued hereunder. 

Regardless of any adjustment or readjustment in the Purchase Price or the number of Warrant Shares or other securities actually purchasable under the Warrant (or the issuance of any certificate with respect thereto pursuant to this Section 5), any Warrant may continue to express the Purchase Price and the number of Warrant Shares purchasable under the Warrant as the price and number of shares were expressed on the Warrant when initially issued, subject to the Holder’s rights hereunder to exchange the Warrant for a new Warrant that reflects the terms of any such adjustment or readjustment.

6.

Reservation of Stock, Etc.  The Company shall at all times reserve and keep available, solely for issuance and delivery upon exercise of the Warrants, 100% of the number of Warrant Shares from time to time issuable upon exercise of all Warrants at the time outstanding.  All Warrant Shares issuable upon exercise of any Warrants shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable with no liability on the part of the holders thereof, and, in the case of all securities, shall be free from all taxes, liens, security interests, encumbrances, preemptive rights and charges, except for the payment of applicable transfer or similar taxes by the Holder upon issuance to a Person other than the Holder.  Subsequent to the Expiration Date, no shares of stock need be reserved in respect of any unexercised portion of this Warrant.

7.

Registry and Transfer of Warrants, Etc.

7.1.

Warrant Register; Ownership of Warrants.  Each Warrant issued by the Company shall be numbered and shall be registered in a warrant register (the “Warrant Register”) as it is issued and transferred, which Warrant Register shall be maintained by the Company at its principal office or, at the Company’s election and expense, by a warrant agent or the Company’s Transfer Agent.  The Company shall be entitled to treat the registered Holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other Person, and shall not be affected by any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes.  A Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued.

7.2.

Transfer of Warrants and Compliance with Securities Laws.  Neither this Warrant nor any interest therein may be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the Holder and the transferee or assignee thereof.  Subject to such compliance, this Warrant and all rights hereunder are transferable in whole or in part, without charge to the Holder hereof, upon surrender of this Warrant with a properly executed Form of Assignment, attached hereto as Exhibit B, at the principal office of the Company.  Upon any partial transfer, the Company shall at its expense issue and deliver to the Holder a new Warrant of like tenor, in the name of the Holder, which shall be exercisable for such number of shares of Common Stock with respect to which rights under this Warrant were not so transferred and to the transferee a new Warrant of like tenor, in the name of the transferee, which shall be exercisable for such number of shares of Common Stock with respect to which rights under this Warrant were so transferred.

7.3.

Replacement of Warrants.  On receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender of such Warrant to the Company at its principal office and cancellation thereof, the Company at its expense shall execute and deliver, in lieu thereof, a new Warrant of like tenor.

4

7.4.

Fractional Shares.  Notwithstanding any adjustment pursuant to Section 3, if the Common Stock shall be listed on a national securities exchange, the Company then shall not be required to issue fractions of shares upon exercise of this Warrant or to distribute certificates which evidence fractional shares.  In lieu of fractional shares, the Company then shall make payment to the Holder of an amount in cash equal to such fraction multiplied by the closing bid price on the principal trading market of a share of Common Stock on the date of exercise of this Warrant.

7.5

No Impairment.  The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of this Warrant against impairment.

8.

Notices.  Any notices, consents, waivers or other communications required or permitted to be given hereunder must be in writing and will be deemed to have been given (i) upon receipt, when delivered personally; (ii) three days after being sent by U.S. certified mail, return receipt requested; or (iii) one day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same.  The addresses for such communications shall be:

If to the Company:

General Cannabis Corp

6565 E. Evans Avenue

Denver, CO 80224

Attention:  Steve Gutterman

If to the Holder:

[          ]

Each party shall provide five days’ prior written notice to the other party of any change in address.  Notwithstanding the foregoing, the exercise of this Warrant shall be effective in the manner provided in Section 2.

9.

Amendments.  This Warrant and any term hereof may be amended, modified, supplemented or terminated, and waivers or consents to departures from the provisions hereof may be given, by written instrument duly executed by the Company and the Holder.   

10.

Descriptive Headings, Etc. The headings in this Warrant are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein.  Unless the context of this Warrant otherwise requires:  (a) words of any gender shall be deemed to include each other gender; (b) words using the singular or plural number shall also include the plural or singular number, respectively; (c) the words “hereof”, “herein” and “hereunder” and words of similar import when used in this Warrant shall refer to this Warrant as a whole and not to any particular provision of this Warrant, and Section and paragraph references are to the Sections and paragraphs of this Warrant unless otherwise specified; (d) the word “including” and words of similar import when used in this Warrant shall mean “including, without limitation,” unless otherwise specified; (e) ”or” is not exclusive; and (f) provisions apply to successive events and transactions.

11.

Governing Law.  This Warrant shall be governed by, and construed in accordance with, the laws of the State of New York (without giving effect to the conflict of laws principles thereof). Any disputes arising out of this Warrant and the transactions contemplated hereby shall be subject to the exclusive jurisdiction of the state and federal courts sitting in the Southern District of New York.

[Signature Page Follows]

5

IN WITNESS WHEREOF, the Company has caused this Warrant to be issued as of the ___th day of _____, 2020.

			
	 
	GENERAL CANNABIS CORP

	 
	 
	 

	 
	 
	 

	 
	By:

	 

	 
	Name:

	Steve Gutterman

	 
	Title:

	Chief Executive Officer

6

EXHIBIT A to Warrant

GENERAL CANNABIS CORP

ELECTION TO PURCHASE SHARES

The undersigned hereby irrevocably elects to purchase __ shares of no par value Common Stock (“Common Stock”), of GENERAL CANNABIS CORP (the “Company”) by exercising the warrant (the “Warrant”) dated _______ __, 20__ and issued to the undersigned, and hereby makes payment of $___________ therefor .  The undersigned hereby requests that the certificate(s) for such shares and payment for fractional shares be issued and made as follows:

ISSUE/PAY TO*: _____________________________________________________________

(NAME)

____________________________________________________________________________

(ADDRESS, INCLUDING ZIP CODE)

____________________________________________________________________________

(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)

DELIVER TO: ________________________________________________________________

(NAME)

____________________________________________________________________________

(ADDRESS, INCLUDING ZIP CODE)

If the number of shares of Common Stock purchased hereby is less than the number of shares of Common Stock covered by the Warrant, the undersigned requests that a new Warrant representing the number of shares of Common Stock not so purchased be issued and delivered as follows:

ISSUE TO*: __________________________________________________________________

(NAME OF HOLDER)

____________________________________________________________________________

(ADDRESS, INCLUDING ZIP CODE)

DELIVER TO: ________________________________________________________________

(NAME)

____________________________________________________________________________

(ADDRESS, INCLUDING ZIP CODE)

In order to induce the Company to give instructions to its transfer agent to issue the shares of Common Stock being purchased upon exercise of the Warrant, the undersigned hereby represents and warrants that the undersigned is an “accredited investor” as that term is defined in Regulation D under the Securities Act of 1933, as amended.

[Signature page follows]

                                                

*   If other than the Holder specified on the Warrant delivered with this Election to Purchase Shares, the transfer is subject to compliance with applicable securities laws and the payment by the Holder of any applicable transfer or similar taxes.

A-1

[Signature Page to Election to Purchase Shares]

				
	Individual(s):

 

 

 

	 
	 

	Signature (exactly as name appears on stock certificate(s) tendered)

 

 

	 
	Signature of spouse, joint tenant, tenant in common, or other required signature

	Print or type name

	 
	Print or type name

	 

Entity:

 

 

 

	 
	 

	Print or type name of entity (exactly as name appears on stock certificate(s) tendered)

	 
	 

	 
	 
	 

	 
	 
	 

	By:

	 
	 
	 

	Name:

	 
	 

	Title:

	 
	 

(Unless waived by the Company, all signatures must be guaranteed by an eligible guarantor institution that is a member of a recognized medallion signature guarantee program.)

A-2

EXHIBIT B to Warrant

ASSIGNMENT

FOR VALUE RECEIVED, and subject to compliance with applicable securities laws and payment of any applicable transfer taxes, the undersigned hereby sells, assigns, and transfers unto the Assignee named below all of the rights of the undersigned to purchase no par value Common Stock of GENERAL CANNABIS CORP (the “Company”) represented by the Warrant dated ______________, with respect to the number of shares of Common Stock set forth below:

			
	Name of Assignee

	Address

	No. of

Warrant Shares

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

and does hereby irrevocably constitute and appoint any officer of the Company to make such transfer on the books of the Company maintained for that purpose, with full power of substitution in the premises.

Date: ____________________

(Unless waived by the Company, all signatures must be guaranteed by an eligible guarantor institution that is a member of a recognized medallion signature guaranty program.)

B-1

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