EXHIBIT 10.20
Note: June 7, 2019
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A
PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR
CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL SUM
REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL SUM AND ACCRUED INTEREST
SET FORTH BELOW.
5% PROMISSORY NOTE
OF
UNITED CANNABIS CORPORATION
Issuance Date: June 7, 2019
Total Face Value of Note: $10,000,000
Initial Consideration: $2,500,000
Initial Original Issue Discount: $125,000
Initial Principal Sum Due: $2,625,000
THIS NOTE is a duly authorized Promissory Note of United Cannabis
Corporation a corporation duly organized and existing under the laws of the
State of Colorado (the "Company"), designated as the Company's 5% Promissory
Note in the principal amount of $10,000,000 (the "Note"). This Note will become
effective only upon execution by both parties and delivery of the first payment
of consideration by the Holder (the "Effective Date").
FOR VALUE RECEIVED, the Company hereby promises to pay to the order of
Ambria Investors, LP or its registered assigns or successors-in-interest (the
"Holder") the Principal Sum of $10,000,000 (the "Principal Sum") and to pay
"guaranteed" interest on the principal balance hereof at an amount equivalent to
5% of the Principal Sum, to the extent such Principal Sum and "guaranteed"
interest and any other interest, fees, liquidated damages and/or items due to
Holder herein have not been repaid or converted into the Company's common stock
(the "Common Stock"), in accordance with the terms hereof. The sum of $2,500,000
(the "Initial Consideration") shall be remitted and delivered to the Company,
and $125,000 (the "Initial Original Issue Discount") shall be retained by the
Holder through an original issue discount (the "OID") for due diligence and
legal bills related to this transaction. The OID is set at 5% of any
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Consideration, defined below, paid. The Company covenants that within three (3)
months of the Effective Date of the Note, it shall utilize approximately
$2,500,000 of the proceeds in the manner set forth on Schedule 1, attached
hereto (the "Use of Proceeds"), and shall promptly provide evidence thereof to
Holder, in sufficient detail as reasonably requested by Xxxxxx.
The Holder may pay additional consideration, plus (each, a
"Consideration"), plus the prorated 5% OID (together with the Consideration and
OID, each, a "Tranche") to the Company in such amounts and at such dates (each,
an "Additional Tranche Date"). The Principal Sum due to Holder shall be prorated
based on the Consideration actually paid by Holder (plus the "guaranteed"
interest and 5% OID, both which are prorated based on the Consideration actually
paid by the Holder, as well as any other interest or fees) such that the Company
is only required to repay the amount funded and the Company is not required to
repay any unfunded portion of this Note. The Maturity Date is six months from
the Effective Date of each payment (the "Maturity Date") and is the date upon
which the Principal Amount of this Note, as well as any unpaid interest and
other fees, shall be due and payable.
In addition to the "guaranteed" interest referenced above, and in the Event
of Default pursuant to Section 3.00(a), additional interest will accrue from the
date of the Event of Default at the rate equal to the lower of 12% per annum or
the highest rate permitted by law (the "Default Rate").
This Note will become effective only upon the execution by both parties,
including the execution of Exhibits B, C, D, E, Schedule 1 (collectively, the
"Exhibits"), and the Irrevocable Transfer Agent Instructions (the "Date of
Execution") and delivery of the initial payment of consideration by the Holder
(the "Effective Date"). The Company acknowledges and agrees the Exhibits are
material provisions of this Note.
For purposes hereof the following terms shall have the meanings ascribed to
them below:
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in the City of New York are authorized or required by law
or executive order to remain closed.
"Principal Amount" shall refer to the sum of (i) the original principal
amount of this Note (including the original issue discount, prorated if the Note
has not been funded in full), (ii) all guaranteed and other accrued but unpaid
interest hereunder, (iii) any fees due hereunder, (iv) liquidated damages, and
(v) any default payments owing under the Note, in each case previously paid or
added to the Principal Amount.
"Principal Market" shall refer to the primary exchange on which the
Company's common stock is traded or quoted.
"Trading Day" shall mean a day on which there is trading or quoting for any
security on the Principal Market.
"Underlying Shares" means the shares of common stock into which the Note is
convertible (including interest, fees, liquidated damages and/or principal
payments in common stock as set forth herein) in accordance with the terms
hereof.
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The following terms and conditions shall apply to this Note:
Section 1.00 Repayment.
(a) The Company may pay this Note, in whole or in part, in cash or in other
good funds, according to the following schedule:
Days Since Effective Date Payment Amount
------------------------- ---------------
Under 60 110% of Principal Amount so paid
00-000 000% of Principal Amount so paid
000-000 000% of Principal Amount so paid
(b) After 180 days from the Effective Date, the Company may not pay this
Note, in whole or in part, in cash or in other good funds, without prior written
consent from Holder, which consent may be withheld, delayed, denied, or
conditioned in Xxxxxx's sole and absolute discretion. Whenever any amount
expressed to be due by the terms of this Note is due on any day that is not a
Business Day, the same shall instead be due on the next succeeding day that is a
Business Day. Upon the occurrence of an Event of Default, the Company may not
pay the Note, in whole or in part, in cash or in other good funds without
written consent of the Holder, which consent may be withheld, delayed, denied,
or conditioned in Xxxxxx's sole and absolute discretion. Further, the Company
shall provide the Holder with two weeks' prior written notice of the Company's
determination to pay any or all of its obligations hereunder. During such
two-week period, the Holder may exercise any or all of its conversion rights
hereunder, provided the Note is past the Maturity Date and subject to the terms
and conditions of Section 2.00(c). For purposes of clarity, if the Company
elects to exercise its right to repay the Note on the 150th day following the
Effective Date of the Note, the Company shall provide the Holder with two weeks'
prior written notice of the Company's determination to repay its obligations,
whether in whole or in part, due hereunder, but the Holder could only exercise
its conversion rights hereunder until such time as the Note is past the Maturity
Date and terms and conditions of Section 2.00(c) have been met. In the event
that the Holder does not exercise its conversion rights in respect of any or all
of such noticed, prospective payment, the Company shall tender the full amount
set forth in such notice (less any amount in respect of which the Holder has
exercised its conversion rights) to the Holder within 2 Business Days following
the Holder's exercise (or notification to the Company of non-exercise) of the
Holder's conversion rights in respect of the amount set forth in such notice.
Any such payment by the Company in connection with this provision shall be
deemed to have been made on the date that the Holder first receives the
above-referenced notice.
Section 2.00 Defaults and Remedies.
(a) Events of Default. An "Event of Default" is: (i) a default in payment
of any amount due hereunder; (ii) a default in the timely issuance of underlying
shares upon and in accordance with terms of Section 3.00, which default
continues for 2 Trading Days after the Company has failed to issue shares or
deliver stock certificates within the 3rd Trading Day following the Conversion
Date; (iii) if the Company does not issue the press release or file the Current
Report on Form 8-K, in each case in accordance with the provisions and the
deadlines referenced Section 5.00(j); (iv) failure by the Company for 3 days
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after notice has been received by the Company to comply with any material
provision of this Note; (v) any representation or warranty of the Company in
this Note that is found to have been incorrect in any material respect when
made, including, without limitation, the Exhibits; (vi) failure of the Company
to remain compliant with DTC, thus incurring a "chilled" status with DTC; (vii)
any default of any mortgage, indenture or instrument which may be issued, or by
which there may be secured or evidenced any indebtedness, for money borrowed by
the Company or for money borrowed the repayment of which is guaranteed by the
Company, whether such indebtedness or guarantee now exists or shall be created
hereafter; (viii) if the Company is subject to any Bankruptcy Event; (ix) any
failure of the Company to satisfy its "filing" obligations under Securities
Exchange Act of 1934, as amended (the "1934 Act") and the rules and guidelines
issued by OTC Markets News Service, XXXXxxxxxx.xxx and their affiliates; (x)
failure of the Company to remain in good standing under the laws of its state of
domicile; (xi) any failure of the Company to provide the Holder with information
related to its corporate structure including, but not limited to, the number of
authorized and outstanding shares, public float, etc. within 1 Trading Day of
request by Holder; (xii) failure by the Company to maintain the Required Reserve
in accordance with the terms of Section 3.00(e); (xiii) failure of Company's
Common Stock to maintain a closing bid price in its Principal Market for more
than 3 consecutive Trading Days; (xiv) any delisting from a Principal Market for
any reason; (xv) failure by Company to pay any of its transfer agent fees in
excess of $2,000 or to maintain a transfer agent of record; (xvi) failure by
Company to notify Holder of a change in transfer agent within 24 hours of such
change; (xvii) any trading suspension imposed by the United States Securities
and Exchange Commission (the "SEC") under Sections 12(j) or 12(k) of the 1934
Act; (xviii) failure by the Company to meet all requirements necessary to
satisfy the availability of Rule 144 to the Holder or its assigns, including but
not limited to the timely fulfillment of its filing requirements as a
fully-reporting issuer registered with the SEC, requirements for XBRL filings,
and requirements for disclosure of financial statements on its website; (xix)
failure of the Company to abide by the Use of Proceeds or failure of the Company
to inform the Holder of a change in the Use of Proceeds; or (xx) failure of the
Company to abide by the terms of the right of first refusal contained in Section
5.00(l).
(b) Remedies. If an Event of Default occurs, the outstanding Principal
Amount of this Note owing in respect thereof through the date of acceleration,
shall become, at the Holder's election, immediately due and payable in cash at
the "Mandatory Default Amount". The Mandatory Default Amount means 30% of the
outstanding Principal Amount of this Note will be automatically added to the
Principal Sum of the Note and tack back to the Effective Date for purposes of
Rule 144. Commencing 5 days after the occurrence of any Event of Default that
results in the eventual acceleration of this Note, this Note shall accrue
additional interest, in addition to the Note's "guaranteed" interest, at a rate
equal to the lesser of 12% per annum or the maximum rate permitted under
applicable law. In connection with such acceleration described herein, the
Holder need not provide, and the Issuer hereby waives, any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
acceleration may be rescinded and annulled by the Holder at any time prior to
payment hereunder and the Holder shall have all rights as a holder of the note
until such time, if any, as the Holder receives full payment pursuant to this
Section 2.00(b). No such rescission or annulment shall affect any subsequent
event of default or impair any right consequent thereon. Nothing herein shall
limit the Holder's right to pursue any other remedies available to it at law or
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in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Issuer's failure to timely deliver
certificates representing shares of Common Stock upon conversion of the Note as
required pursuant to the terms hereof.
(c) Variable Conversion Price. If the Note is not retired on or before the
Maturity Date, then at any time and from time to time after the Maturity Date,
and subject to the terms hereof and restrictions and limitations contained
herein, the Holder shall have the right, at the Holder's sole option, to convert
in whole or in part the outstanding and unpaid Principal Amount under this Note
into shares of Common Stock at the Variable Conversion Price. The "Variable
Conversion Price" shall be equal to 70% of the average of the 2 lowest trading
prices of the Company's Common Stock during the 15 consecutive Trading Days
prior to the date on which Holder elects to convert all or part of the Note. For
the purpose of calculating the Variable Conversion Price only, any time after
4:00 pm Eastern Time (the closing time of the Principal Market) shall be
considered to be the beginning of the next Business Day. If the Company is
placed on "chilled" status with the DTC, the discount shall be increased by 10%,
i.e., from 30% to 40%, until such chill is remedied. If the Company is not DWAC
eligible through their transfer agent and DTC's FAST system, the discount will
be increased by 5%, i.e., from 30% to 35%. In the case of both, the discount
shall be a cumulative increase of 15%, i.e., from 30% to 45%.
Section 3.00 Conversion.
Conversion Right. Subject to the terms and conditions of Section 2.00(c),
the Holder shall have the right, at the Holder's sole option, to convert in
whole or in part the outstanding and unpaid Principal Amount under this Note
into shares of Common Stock as per the Variable Conversion Price, but not to
exceed the Restricted Ownership Percentage, as defined in Section 3.00(f). The
date of any conversion notice ("Conversion Notice") hereunder shall be referred
to herein as the "Conversion Date".
(b) Stock Certificates or DWAC. The Company will deliver to the Holder, or
Holder's authorized designee, no later than 2 Trading Days after the Conversion
Date, a certificate or certificates (which certificate(s) shall be free of
restrictive legends and trading restrictions if the shares of Common Stock
underlying the portion of the Note being converted are eligible under a resale
exemption pursuant to Rule 144(b)(1)(ii) and Rule 144(d)(1)(ii) of the
Securities Act of 1933, as amended) representing the number of shares of Common
Stock being acquired upon the conversion of this Note. In lieu of delivering
physical certificates representing the shares of Common Stock issuable upon
conversion of this Note, provided the Company's transfer agent is participating
in Depository Trust Company's ("DTC") Fast Automated Securities Transfer
("FAST") program, the Company shall instead use commercially reasonable efforts
to cause its transfer agent to electronically transmit such shares issuable upon
conversion to the Holder (or its designee), by crediting the account of the
Holder's (or such designee's) broker with DTC through its Deposits and
Withdrawal at Custodian ("DWAC") program (provided that the same time periods
herein as for stock certificates shall apply).
(c) Charges and Expenses. Issuance of Common Stock to Holder, or any of its
assignees, upon the conversion of this Note shall be made without charge to the
Holder for any issuance fee, transfer tax, legal opinion and related charges,
postage/mailing charge or any other expense with respect to the issuance of such
Common Stock. Company shall pay all transfer agent fees incurred from the
issuance of the Common Stock to Holder, as well as any and all other fees and
charges required by the transfer agent as a condition to effectuate such
issuance. Any such fees or charges, as noted in this Section that are paid by
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the Holder (whether from the Company's delays, outright refusal to pay, or
otherwise), will be automatically added to the Principal Sum of the Note and
tack back to the Effective Date for purposes of Rule 144.
(d) Delivery Timeline. If the Company fails to deliver to the Holder such
certificate or certificates (or shares through the DWAC program) pursuant to
this Section (free of any restrictions on transfer or legends, if eligible)
prior to 3 Trading Days after the Conversion Date, the Company shall pay to the
Holder as liquidated damages an amount equal to $2,000 per day, until such
certificate or certificates are delivered. The Company acknowledges that it
would be extremely difficult or impracticable to determine the Holder's actual
damages and costs resulting from a failure to deliver the Common Stock and the
inclusion herein of any such additional amounts are the agreed upon liquidated
damages representing a reasonable estimate of those damages and costs. Such
liquidated damages will be automatically added to the Principal Sum of the Note
and tack back to the Effective Date for purposes of Rule 144.
(e) Reservation of Underlying Securities. The Company covenants that it
will at all times reserve and keep available for Holder, out of its authorized
and unissued Common Stock solely for the purpose of issuance upon conversion of
this Note, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder, five times the number of shares of
Common Stock as shall be issuable (taking into account the adjustments under
this Section 3.00, but without regard to any ownership limitations contained
herein) upon the conversion of this Note (consisting of the Principal Amount),
under the formula in Section 3.00(c) below, to Common Stock (the "Required
Reserve"). The Company covenants that all shares of Common Stock that shall be
issuable will, upon issue, be duly authorized, validly issued, fully-paid,
non-assessable and freely-tradable (if eligible). If the amount of shares on
reserve in Xxxxxx's name at the Company's transfer agent for this Note shall
drop below the Required Reserve, the Company will, within 2 Trading Days of
notification from Holder, instruct the transfer agent to increase the number of
shares so that the Required Reserve is met. In the event that the Company does
not instruct the transfer agent to increase the number of shares so that the
Required Reserve is met, the Holder will be allowed, if applicable, to provide
this instruction as per the terms of the Irrevocable Transfer Agent Instructions
attached to this Note. The Company agrees that the maintenance of the Required
Reserve is a material term of this Note and any breach of this Section 3.00(e)
will result in a default of the Note.
(f) Conversion Limitation. The Holder will not submit a conversion to the
Company that would result in the Holder beneficially owning more than 9.99% of
the then total outstanding shares of the Company ("Restricted Ownership
Percentage").
(g) Conversion Delays. If the Company fails to deliver shares in accordance
with the timeframe stated in Section 3.00(d), the Holder, at any time prior to
selling all of those shares, may rescind any portion, in whole or in part, of
that particular conversion attributable to the unsold shares. The rescinded
conversion amount will be returned to the Principal Sum with the rescinded
conversion shares returned to the Company, under the expectation that any
returned conversion amounts will tack back to the Effective Date.
(h) Shorting and Hedging. Holder may not engage in any "shorting" or
"hedging" transaction(s) in the Common Stock of the Company prior to conversion.
(i) Conversion Right Unconditional. If the Holder shall provide a
Conversion Notice as provided herein, the Company's obligations to deliver
Common Stock shall be absolute and unconditional, irrespective of any claim of
setoff, counterclaim, recoupment, or alleged breach by the Holder of any
obligation to the Company.
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Section 4.00 Representations and Warranties of Holder.
Holder hereby represents and warrants to the Company that:
(a) Holder is an "accredited investor," as such term is defined in
Regulation D of the Securities Act of 1933, as amended (the "1933 Act"), and
will acquire this Note and the Underlying Shares (collectively, the
"Securities") for its own account and not with a view to a sale or distribution
thereof as that term is used in Section 2(a)(11) of the 1933 Act, in a manner
which would require registration under the 1933 Act or any state securities
laws. Holder has such knowledge and experience in financial and business matters
that such Xxxxxx is capable of evaluating the merits and risks of the
Securities. Holder can bear the economic risk of the Securities, has knowledge
and experience in financial business matters and is capable of bearing and
managing the risk of investment in the Securities. Holder recognizes that the
Securities have not been registered under the 1933 Act, nor under the securities
laws of any state and, therefore, cannot be resold unless the resale of the
Securities is registered under the 1933 Act or unless an exemption from
registration is available. Xxxxxx has carefully considered and has, to the
extent Holder believes such discussion necessary, discussed with its
professional, legal, tax and financial advisors, the suitability of an
investment in the Securities for its particular tax and financial situation and
its advisers, if such advisors were deemed necessary, and has determined that
the Securities are a suitable investment for it. Holder has not been offered the
Securities by any form of general solicitation or advertising, including, but
not limited to, advertisements, articles, notices or other communications
published in any newspaper, magazine, or other similar media or television or
radio broadcast or any seminar or meeting where, to Holders' knowledge, those
individuals that have attended have been invited by any such or similar means of
general solicitation or advertising. Xxxxxx has had an opportunity to ask
questions of and receive satisfactory answers from the Company, or any person or
persons acting on behalf of the Company, concerning the terms and conditions of
the Securities and the Company, and all such questions have been answered to the
full satisfaction of Holder. The Company has not supplied Holder any information
regarding the Securities or an investment in the Securities other than as
contained in this Agreement, and Holder is relying on its own investigation and
evaluation of the Company and the Securities and not on any other information.
(b) The Holder is a limited liability company duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and has all requisite corporate power and authority to carry on its business as
now conducted. The Holder is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on its business or properties.
(c) All limited liability company action has been taken on the part of the
Holder, its officers, directors, managers and members necessary for the
authorization, execution and delivery of this Note. The Holder has taken all
limited liability company action required to make all of the obligations of the
Holder reflected in the provisions of this Note, valid and enforceable
obligations.
(d) Each certificate or instrument representing Securities will be endorsed
with the following legend (or a substantially similar legend), unless or until
registered under the 1933 Act or exempt from registration:
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THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR
THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES WHICH IS REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
Section 5.00 General.
(a) Payment of Expenses. The Company agrees to pay all reasonable charges
and expenses, including attorneys' fees and expenses, which may be incurred by
the Holder in successfully enforcing this Note and/or collecting any amount due
under this Note.
(b) Assignment, Etc. The Holder may assign or transfer this Note to any
transferee at its sole discretion. This Note shall be binding upon the Company
and its successors and shall inure to the benefit of the Holder and its
successors and permitted assigns.
(c) Amendments. This Note may not be modified or amended, or any of the
provisions of this Note waived, except by written agreement of the Company and
the Holder.
(d) Funding Window. The Company agrees that it will not enter into a
convertible debt financing transaction, including 3(a)9 and 3(a)10 transactions,
with any party other than the Holder for a period of 45 Trading Days following
the Effective Date and each Additional Tranche Date, as relevant. The Company
agrees that this is a material term of this Note and any breach of this Section
5.00(d) will result in a default of the Note.
(e) Piggyback Registration Rights. The Company shall include on the next
registration statement that the Company files with the SEC (or on the subsequent
registration statement if such registration statement is withdrawn) all shares
issuable upon conversion of this Note. Failure to do so will result in
liquidated damages of 30% of the outstanding Principal Sum of this Note, but not
less than $20,000, being immediately due and payable to the Holder at its
election in the form of a cash payment or an addition to the Principal Sum of
this Note.
(f) Terms of Future Financings. So long as this Note is outstanding, upon
any issuance by the Company or any of its subsidiaries of any convertible debt
security (whether such debt begins with a convertible feature or such feature is
added at a later date) with any term more favorable to the holder of such
security or with a term in favor of the holder of such security that was not
similarly provided to the Holder in this Note, then the Company shall notify the
Holder of such additional or more favorable term and such term, at the Holder's
option, shall become a part of this Note and its supporting documentation.. The
types of terms contained in the other security that may be more favorable to the
holder of such security include, but are not limited to, terms addressing
conversion discounts, terms addressing maturity, conversion look back periods,
interest rates, original issue discount percentages and warrant coverage.
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(g) Governing Law; Jurisdiction.
(i) Governing Law. This Note will be governed by, and construed and
interpreted in accordance with, the laws of the Commonwealth of Puerto Rico
without regard to any conflicts of laws or provisions thereof that would
otherwise require the application of the law of any other jurisdiction.
(ii) Jurisdiction and Venue. Any dispute, claim, suit, action or other
legal proceeding arising out of or relating to this Note or the rights and
obligations of each of the parties shall be brought only in the San Xxxx,
Puerto Rico or in the federal courts of the United States of America
located in San Xxxx, Puerto Rico.
(iii) No Jury Trial. The Company hereto knowingly and voluntarily
waives any and all rights it may have to a trial by jury with respect to
any litigation based on, or arising out of, under, or in connection with,
this Note.
(iv) Delivery of Process by the Holder to the Company. In the event of
an action or proceeding by the Holder against the Company, and only by the
Holder against the Company, service of copies of summons and/or complaint
and/or any other process that may be served in any such action or
proceeding may be made by the Holder via U.S. Mail, overnight delivery
service such as FedEx or UPS, email, fax, or process server, or by mailing
or otherwise delivering a copy of such process to the Company at its last
known attorney as set forth in its most recent SEC filing.
(v) Notices. Any notice required or permitted hereunder (including
Conversion Notices) must be in writing and either personally served, sent
by facsimile or email transmission, or sent by overnight courier. Notices
will be deemed effectively delivered at the time of transmission if by
facsimile or email, and if by overnight courier the business day after such
notice is deposited with the courier service for delivery.
(h) No Bad Actor. No officer or director of the Company would be
disqualified under Rule 506(d) of the Securities Act of 1933, as amended, on the
basis of being a "bad actor" as that term is established in the September 13,
2013 Small Entity Compliance Guide published by the SEC.
(i) Usury. If it shall be found that any interest or other amount deemed
interest due hereunder violates any applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to
equal the maximum rate of interest permitted under applicable law. The Company
covenants (to the extent that it may lawfully do so) that it will not seek to
claim or take advantage of any law that would prohibit or forgive the Company
from paying all or a portion of the principal, fees, liquidated damages or
interest on this Note.
(j) Securities Laws Disclosure; Publicity. The Company shall (a) by 9:30
a.m. Eastern Time on the Trading Day immediately following the Date of
Execution, issue a press release disclosing the material terms of the
transactions contemplated hereby, and (b) file a Current Report on Form 8-K,
including a copy of this Note as an exhibit thereto, with the SEC within the
time required by the 1934 Act. From and after the filing of such press release,
the Company represents to the Holder that it shall have publicly disclosed all
material, non-public information delivered to the Holder by the Company, or any
of its officers, directors, employees, or agents in connection with the
transactions contemplated by this Note. The Company and the Holder shall consult
with each other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor the Holder shall
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issue any such press release nor otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
the Holder, or without the prior consent of the Holder, with respect to any
press release of the Company, none of which consents shall be unreasonably
withheld, delayed, denied, or conditioned except if such disclosure is required
by law, in which case the disclosing party shall promptly provide the other
party with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of the Holder, or include the name of the Holder in any filing with the SEC or
any regulatory agency or Principal Market, without the prior written consent of
the Holder, except to the extent such disclosure is required by law or Principal
Market regulations, in which case the Company shall provide the Holder with
prior notice of such disclosure permitted hereunder.
The Company agrees that this is a material term of this Note and any breach
of this Section 5.00(j) will result in a default of the Note.
(k) Attempted Below-par Issuance. In the event that (i) any requested
conversion hereunder shall be at a Variable Conversion Price that is less than
then-current par value of the Company's Common Stock and that any or all of such
requested conversion would be precluded by state law or otherwise and (ii)
within three business days of the requested conversion, the Company shall not
have reduced its par value such that all of the requested conversion may then be
accomplished, then the Company and the Holder agree to the following conversion
protocol: the Holder shall generate and transmit to the Company (X) a
"preliminary" Conversion Notice for the full number of shares of Common Stock of
the above-referenced conversion at the Variable Conversion Price without regard
to any below-par value conversion issues; (Y) a "par value" Conversion Notice
for the number of shares of Common Stock for the above-referenced conversion
with the Variable Conversion Price increased from the Variable Conversion Price
set forth in the "preliminary" Conversion Notice to a Variable Conversion Price
at par value; and (Z) a "liquidated damages" Conversion Notice for that number
of shares of Common Stock that represents the difference between the number of
shares of Common Stock in the "preliminary" Conversion Notice and the number of
shares of Common Stock in the "par value" Conversion Notice and the Variable
Conversion Price of such "liquidated damages Common Shares" would be the par
value of the Common Stock. The Company acknowledges that any failure by it to
provide the Holder with its full conversion rights under this Note (as a result
of a proposed "below par" conversion) will cause the Holder to incur substantial
economic damages and losses of types and in amounts that are impossible to
compute and ascertain with certainty as a basis for recovery by the Holder of
actual damages and that liquidated damages would represent a fair, reasonable,
and appropriate estimate thereof. Accordingly, in the event that the Holder is
precluded from exercising any or all of its conversion rights hereunder as a
result of a proposed "below par" conversion, the Company agrees that, in lieu of
actual damages for such failure, liquidated damages may be assessed and
recovered by the Holder without being required to present any evidence of the
amount or character of actual damages sustained by reason thereof. The amount of
such liquidated damages shall be an amount equivalent to the trading price
(without discount) utilized in the "preliminary" Conversion Notice multiplied by
the number of shares calculated on the "liquidated damages" Conversion Notice.
Such amount shall be assessed and become immediately due and payable to the
Holder (at its election) in the form of a cash payment, an addition to the
Principal Sum of this Note, or the immediate issuance of that number of shares
of Common Stock as calculated on the "liquidated damages" Conversion Notice.
Such liquidated damages are intended to represent estimated actual damages and
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are not intended to be a penalty, but, by virtue of their genesis and subject to
the election of the Holder (as set forth in the immediately preceding sentence),
will be automatically added to the Principal Sum of the Note and tack back to
the Effective Date for purposes of Rule 144.
(l) Right of First Refusal. From and after the date of this Note and at all
times hereafter while the Note is outstanding, the Parties agree that, in the
event that the Company receives any written or oral proposal (the "Proposal")
containing one or more offers to provide additional capital or equity or debt
financing (the "Financing Amount"), the Company agrees that it shall provide a
copy of all documents received relating to the Proposal together with a complete
and accurate description of the Proposal to the Holder and all amendments,
revisions, and supplements thereto (the "Proposal Documents") no later than 3
business days from the receipt of the Proposal Documents. Following receipt of
the Proposal Documents from the Company, the Holder shall have the right (the
"Right of First Refusal"), but not the obligation, for a period of 5 business
days thereafter (the "Exercise Period"), to invest, at similar or better terms
to the Company, an amount equal to or greater than the Financing Amount, upon
written notice to the Company that the Holder is exercising the Right of First
Refusal provided hereby. In furtherance of the Right of First Refusal, the
Company agrees that it will cooperate and assist the Holder in conducting a due
diligence investigation of the Company and its corporate and financial affairs
and promptly provide the Holder with information and documents that the Holder
may reasonably request so as to allow the Holder to make an informed investment
decision. However, the Company and the Holder agree that the Holder shall have
no more than 5 business days from and after the expiration of the Exercise
Period to exercise its Right of First Refusal hereunder. This Right of First
Refusal shall extend to all purchases of debt held by, or assigned to or from,
current stockholders, vendors, or creditors, all transactions under Sections
3(a)9 and/or 3(a)10 or the Securities Act of 1933, as amended, and all equity
line-of-credit transactions. In the event that the Company does enter into, or
makes any issuance of Common Stock related to a 3(a)(9) Transaction or a
3(a)(10) Transaction while this note is outstanding, without giving Right of
First Refusal to the Holder, a liquidated damages charge of 25% of the
outstanding principal balance of this Note, but not less than $25,000, will be
assessed and will become immediately due and payable to the Holder at its
election in the form of cash payment or addition to the balance of this Note.
Such liquidated damages will be automatically added to the Principal Sum of the
Note and tack back to the Effective Date for purposes of Rule 144.
[Signature Page to Follow.]
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IN WITNESS WHEREOF, the Company has caused this Promissory Note to be duly
executed on the day and in the year first above written.
UNITED CANNABIS CORPORATION
By: /s/ Xxxxxxxx Xxxx
---------------------------
Name: Xxxxxxxx Xxxx
Title: Chief Operating Officer and
Corporate Secretary
Email: xxxx@xxxxx.xx
Address:000 Xxxxxxxxxx Xxxx, Xxxx X
Xxxxxx, XX 00000
This Promissory Note of June 7, 2019 is accepted this 10th day of June, 2019 by:
AMBRIA INVESTORS, LP
By: /s/ Xxxxxx Xxxxxx
--------------------------
Name: Xxxxxx Xxxxxx
Title: Managing Member of Ambria Partners, LLC,
the General Partner of Ambria Investors, LP
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