Form of Securities Purchase Agreement
General Cannabis Corp
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Securities Purchase Agreement
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Series A Convertible Preferred Stock
and
Warrants to Purchase Common Stock
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________, 2021
CONFIDENTIAL
Offering Document No.: _____
CONFIDENTIAL INFORMATION
The offeree, by accepting the Securities Purchase Agreement and the other Offering Documents relating to the Company’s proposed offering of SERIES A CONVERTIBLE PREFERRED STOCK AND WARRANTS TO acquire shares of its common stock, acknowledges and agrees that: (i) the Offering Documents have been furnished to the offeree on a confidential basis solely for the purpose of enabling the offeree to evaluate the Offering; (ii) that the offeree may not further distribute the offering documents without the prior written consent of the Company, except to the Offeree’s legal, financial or other personal advisors, if any, who will use the Offering Documents on the Offeree’s behalf solely for purposes of evaluating the Offering; (iii) any reproduction or distribution of the Offering Documents, in whole or in part, or the direct or indirect disclosure of the contents of the Offering Documents for any other purpose without the prior written consent of the Company is prohibited; and (iv) the Offeree shall be bound by all terms and conditions specified in the offering documents.
THE OFFEREE acknowledges that information concerning the matters that are the subject matter of THE Offering Documents may constitute material non-public information under United States federal securities laws, and that United States federal securities laws prohibit any person who has received material non-public information relating to the Company from purchasing or selling securities of the Company, or from communicating such information to any person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell securities of the Company. Accordingly, until such time as any such non-public information has been adequately disseminated to the public, the OFFEREE shall not purchase or sell any securities of the Company, or communicate such information to any other person.
NOTICE TO OFFEREES
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THIS SECURITIES PURCHASE AGREEMENT AND THE OTHER OFFERING DOCUMENTS DO NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THE SECURITIES ARE BEING SOLD FOR INVESTMENT PURPOSES ONLY, WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE TRANSFERRED, RESOLD OR OFFERED FOR RESALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND EFFECTIVE REGISTRATION OR QUALIFICATION UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, OR THE AVAILABILITY OF AN EXEMPTION THEREFROM.
AN INVESTMENT MADE IN THE SECURITIES OFFERED HEREBY IS SUITABLE ONLY FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL RESOURCES, WHO HAVE NO NEED FOR LIQUIDITY IN THIS INVESTMENT AND WHO UNDERSTAND OR HAVE BEEN ADVISED WITH RESPECT TO THE TAX CONSEQUENCES OF, AND RISK FACTORS ASSOCIATED WITH, THIS INVESTMENT AND WHO ARE ABLE TO BEAR THE RISK OF AN UNSECURED DEBT INVESTMENT THROUGH MATURITY.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR THE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS SECURITIES PURCHASE AGREEMENT OR ANY OF THE OTHER OFFERING DOCUMENTS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is entered into as of _______, 2021 by and between General Cannabis Corp, a Colorado corporation (the “Company”), and the persons and entities identified on the signature page hereof (each individually a “Purchaser,” and collectively, the “Purchasers”).
RECITALS
WHEREAS, in order to provide for its capital needs, the Company wishes to conduct a private offering to accredited investors (the “Offering”) of its securities consisting of an aggregate of up to $2,500,000 (subject to increase by the Company in its sole discretion) of Series A Convertible Preferred Stock (the “Series A Preferred”); and a warrant exercisable for shares of common stock of the Company, par value $0.001 per share (“Common Stock”) in the form attached hereto as Exhibit A (each, a “Warrant” and, collectively, the “Warrants”); such Series A Preferred and Warrants to be sold in “Units” each Unit consisting of one (1) share of Series A Preferred and 300 Warrants.
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchasers hereby agree as follows:
PURCHASE AND SALE OF UNITS
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REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each Purchaser represents and warrants to the Company that:
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(https://www.sec.gov/ix?doc=/Archives/edgar/data/0001477009/000155837021003925/cann-20201231x10k.htm#ITEM1ARISKFACTORS_680263)
The Purchaser unconditionally acknowledges and agrees that it has read the risk factors included within the Company’s filings with the Commission and is purchasing the Securities fully cognizant of such risks and is willing to fully assume such risks.
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that:
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REGISTRATION RIGHTS
The Company covenants and agrees as follows:
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CONDITIONS TO CLOSING
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NOTICES
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The addresses for such communications shall be: If to the Company: General Cannabis Corp 6565 E. Evans Avenue Denver, CO 80224 Attention: David R. Fishkin, General Counsel ***@*** If to the Purchasers: To the address of each Purchaser as set forth on the signature page hereto. |
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A party hereto may from time to time change its address or e-mail for notices under this Section 6.1 by giving at least five (5) days’ prior written notice of such changed address to the other party hereto.
DEFINED TERMS
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MISCELLANEOUS
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** Signature Page Follows **
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IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have caused this Agreement to be executed as of the date set forth below.
Date: | Individual Purchasers: PURCHASER Individual Purchasers: Name: Entity Purchasers: Name of Entity By:___________________________________ Name: Title: All Purchasers Complete: Address: ______________________________ _______________________________________ Email address: ______________________ Social Security/Tax I.D. Number: ___________________________________ |
SUBSCRIPTION AMOUNT: ____________ Units | |
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** Signature Page to Securities Purchase Agreement **
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ACCEPTANCE OF SUBSCRIPTION
(To be completed by General Cannabis Corp)
General Cannabis Corp hereby accepts the above application for subscription for the Units listed below.
GENERAL CANNABIS CORP
By: ______________________________
Name:Adam Hershey
Title:Interim Chief Executive Officer
Date: _________________________
___________ Units
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EXHIBIT A
FORM OF WARRANT
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EXHIBIT B
CERTIFICATE OF DESIGNATION OF SERIES A PREFERRED STOCK
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EXHIBIT C
ACCREDITED INVESTOR QUESTIONNAIRE
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ACCREDITED INVESTOR QUESTIONNAIRE
Execution of this Accredited Investor Questionnaire by a prospective investor does not constitute an offer to sell or a solicitation of an offer to buy any security of General Cannabis Corp (the “Company”).
This questionnaire is separated into three parts. Prospective investors who are individuals should complete Parts I and III only. Prospective investors who will be purchasing in the name of a trust, partnership, corporation or other entity should complete Parts II and III only. If the answer to any question is “none” or “not applicable,” please so indicate.
Your answers will be kept confidential; however, by signing this questionnaire, you agree that the Company may present this questionnaire to such parties (including government entities) as it deems appropriate to establish the availability of exemptions from registration under U.S. federal and state securities laws.
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PART I - Individual Investors
Personal
Name:
(exactly as it should appear on Units)
U.S. Citizen:Yes _____No _____
Number of Dependents: _____
Date of Birth:
Residence Address:
Residence Email Address:
Telephone Number:
Residence Information
a. | Set forth in the space provided below the state(s) in which you have maintained your primary residence during the past three years and the dates during which you resided in each state. |
Income
a. | Was either your yearly income from all sources during each of the last two years in excess of $200,000 or was the joint income of you and your spouse (or spousal equivalent |
b. | 1) from all sources during each of the last two years in excess of $300,0002? |
Yes No
c. | If yes, do you reasonably expect to reach the same level of income in the current year? |
Yes No
Net Worth
a. | As of the date you purchase the securities offered, will your net worth, together with the net worth of your spouse (or spousal equivalent), exceed $1,000,000? Please note that your net worth should not include the net value (unless it is negative)3 of your primary residence even if owned, but |
1 For purposes of this Questionnaire, “spousal equivalent” means a cohabitant occupying a relationship generally equivalent to that of a spouse.
2 For purposes of this Questionnaire, (i) amounts contributed on your behalf to a profit-sharing or pension plan may be included as income to the extent vested and (ii) unrealized capital appreciation should generally not be included as “income.”
3 Note if the amount of indebtedness secured by your primary residence at the time of the sale of securities offered by the Company exceeds the amount of such indebtedness outstanding 60 days before such time, other than as a result of the acquisition of your primary residence, the amount of such excess shall be included as a liability in the net worth determination.
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should include the net value of any shares of stock or options held by you and your spouse (or spousal equivalent) and your and your spouse’s (or spousal equivalent’s) owned personal property (e.g., furniture, jewelry, other valuables). Note also that assets do not need to be held jointly to be included in the calculation, and that the securities being purchased by you relying on the joint net worth standard need not be purchased jointly. |
Yes No
b. | Will the value of any securities or interests acquired in the proposed investment exceed 10% of your net worth, or your joint net worth with your spouse (or spousal equivalent), if any, at the time of the investment? |
Yes No
Education
If you answered “No” to questions (a) or (b) under “Income” above or question (a) under “Net Worth” above, please describe your educational background and degrees obtained, if any.
Affiliation
If you have any pre-existing personal or business relationship with the Company or any of its officers, directors or controlling persons, please describe the nature and duration of such relationship, including whether you are a director or executive officer of the Company. “Executive officer” shall mean the president, any vice president in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy making function, or any other person who performs similar policy making functions at the Company.
Professional Certification, Designations or Other Credentials
Do you currently hold, in good standing, any of the following professional licenses?
a. | General Securities Representative license (Series 7) |
Yes No
b. | Investment Adviser Representative license (Series 65) |
Yes No
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c. | Private Securities Offerings Representative license (Series 82) |
Yes No
Business and Financial Experience
a. | Please describe in reasonable detail the nature and extent of your business, financial and investment experience which you believe gives you the capacity to evaluate the merits and risks of the proposed investment and the capacity to protect your interests. |
b. | Are you purchasing the securities offered for your own account and for investment purposes only? |
Yes No
If no, please state for whom you are investing and/or the reason for investing.
Financial Advisors
In evaluating this investment, will you use the services of any financial advisors?
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PART II - Non-Individual Investors
(Please answer Part II only if the purchase is proposed to be undertaken by a trust, corporation, partnership or other entity.)
IF INVESTMENT WILL BE MADE BY MORE THAN ONE AFFILIATED ENTITY, PLEASE COMPLETE A COPY OF THIS QUESTIONNAIRE FOR EACH ENTITY.
1. | Entity Information |
Exact Legal Name:
(as it should appear on Units)
Physical Address:
Mailing Address (if different):
Telephone: ________________________
Jurisdiction of Formation or Incorporation: ________________________
Date of Formation or Incorporation:
Contact Person:
Telephone Number: ( )
Business Email Address:
Taxpayer Identification No.: _____________________________________
Type of Entity (please check one):
☐ | Limited Partnership |
☐ | General Partnership |
☐ | Corporation |
☐ | Limited Liability Company |
☐ | Revocable Trust (identify each grantor, and indicate under which circumstances the trust is revocable by the grantor)4 |
☐ | Other Type of Trust (indicate type of Trust and, for trusts other than pension trusts, name the grantors and beneficiaries) |
☐ | Other form of organization (indicate form of organization ) |
Was the entity identified above formed for the purpose of acquiring the securities offered by the Company?
Yes No
If the answer is yes, all stockholders, partners or other equity owners must answer Part I of this questionnaire. If the above answer is no, please continue completing this form.
Would the entity, upon making the investment, have more than ten percent of its assets invested in one or more investment companies that rely solely on the exclusion from the definition of
4 Each individual who invests through a revocable trust must complete the Individual Investor section of this questionnaire.
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“investment company” provided in Section 3(c)(1)(A) of the Investment Company Act of 1940, as amended?5
Yes No
If the answer is yes, the undersigned will as of the date of purchase of the securities offered have stockholders or partners, all of whose names and addresses are set forth on a list attached hereto.
2. | Accredited Investor Status |
a. | Please check the appropriate box to indicate which of the following accurately describes the nature of the business conducted by the investing entity identified in question 1 above: |
☐ | a corporation, limited liability company, partnership, Massachusetts or similar business trust with total assets in excess of $5,000,000, in each case not formed for the purpose of this particular investment; |
☐ | an organization described in Section 501(c)(3) of the Internal Revenue Code with total assets in excess of $5,000,000, not formed for the purpose of this particular investment; |
☐ | private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;6 |
☐ | a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; |
☐ | a Rural Business Investment Company as defined in Section 384A of the Consolidated Farm and Rural Development Act; |
☐ | an investment company registered under the Investment Company Act of 1940, as amended, or a business development company as defined in Section 2(a)(48) of that act; |
☐ | a bank as defined in Section 3(a)(2) or a savings and loan association or other institution defined in Section 3(a)(5)(A) of the Securities Act of 1933, as amended, acting in either an individual or fiduciary capacity; |
☐ | an investment adviser registered pursuant to Section 203 of the Investment Advisers Act of 1940 or registered pursuant to the laws of a state; |
☐ | an investment adviser relying on the exemption from registering with the SEC under Section 203(l) or (m) of the Investment Advisers Act of 1940; |
5 Section 3(c)(1)(A) provides, in pertinent part:
“[N]one of the following persons is an investment company...
“(1) Any issuer whose outstanding securities (other than short term paper) are beneficially owned by not more than one hundred persons and which is not making and does not presently propose to make a public offering of its securities. For purposes of this paragraph:
“(A) Beneficial ownership by a company shall be deemed to be beneficial ownership by one person, except that, if the company owns 10 per centum or more of the outstanding voting securities of the issuer, the beneficial ownership shall be deemed to be that of the holders of such company’s outstanding securities (other than short term paper) unless, as of the date of the most recent acquisition by such company of securities of that issuer, the value of all securities owned by such company of all issuers which are or would, but for the exception set forth in this subparagraph, be excluded from the definition of investment company solely by this paragraph, does not exceed 10 per centum of the value of the company’s total assets.”
6 Note that many U.S. venture capital entities qualify as private business development companies; however, due to the technical requirements of the statutory definition, an investor should consult with counsel prior to making a determination as to accreditation status under this category.
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☐ | an insurance company as defined in Section 2(a)(13) of the Securities Act of 1933, as amended; |
☐ | an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, (a) whose investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or (b) whose total assets exceed $5,000,000, or, (c) if a self-directed plan, whose investment decisions are made solely by persons who are accredited investors and have completed Part I of this questionnaire; |
☐ | a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended; |
☐ | a plan7 established and maintained by a state or its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees; provided that, such plan has total assets in excess of $5,000,000; |
☐ | a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as defined in Rule 506(b)(2)(ii) promulgated under the Securities Act of 1933, as amended; |
☐ | an entity in which all of the equity owners are accredited investors8 (A list of the stockholders, partners or beneficiaries of the undersigned, and the “accredited investor” category which each such stockholder, partner or beneficiary satisfies, is attached to this questionnaire); |
☐ | any other type of entity that owns investments (as defined in Rule 2a51-1(b) under the Investment Company Act of 1940) in excess of $5,000,000 and not formed for the purpose of this particular investment; |
☐ | a family office, as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940, that (i) has assets under management in excess of $5,000,000, (ii) is not formed for the purpose of this particular investment, and (iii) has a person directing the prospective investment who has such knowledge and experience in financial and business matters so that the family office is capable of evaluating the merits and risks of the prospective investment; or |
☐ | a family client, as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940, of a family office meeting the requirements of the preceding clause and whose prospective investment in the Company is directed by that family office. |
If none of the foregoing items in this Section 2(a) apply, please answer the questions in Section 2(b).
b. | Business and Financial Experience |
i. | Please provide a summary of the nature and extent of the business, financial and investment experience of the investing entity and its investment manager which it believes gives it the capacity to evaluate the merits and risks of the proposed investment and the capacity to protect its interests. |
7 “Plan” means any bonus, profit-sharing, pension, retirement, thrift, savings, incentive, stock purchase, stock option, stock ownership, stock appreciation, dividend reinvestment, or similar plan; or any dividend or interest reinvestment plan or employee benefit plan.
8 In some instances, an equity owner of an entity is another entity and not a natural person. It is permissible to look through various forms of equity ownership to natural persons in determining the accredited investor status of entities.
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ii. | Is the investing entity purchasing the securities offered for its own account and for investment purposes only? |
Yes No
If no, please state for whom the entity is investing and/or the reason for investing.
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PART III – Signature
The undersigned represents that the information contained herein is complete and accurate and may be relied upon by General Cannabis Corp, and that the undersigned will notify General Cannabis Corp of any material change in any of such information prior to the undersigned’s receipt of securities of General Cannabis Corp.
Executed at ___________________________________, on _____________________.
(City, State and Country) (Date)
_______________________________
(Signature)
_______________________________
Printed Name
_______________________________
Name of Entity (if applicable)
_______________________________
Title (if applicable)
Please execute this questionnaire in exactly
the name as it should appear on the securities documentation.
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