Exhibit 2.3
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 9, 2022
Medicine Man Technologies, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Nevada | 000-55450 | 46-5289499 | ||
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
|
4880 Havana Street, Suite 201 Denver, Colorado |
80239 |
| (Address of Principal Executive Offices) | (Zip Code) |
| (303) 371-0387 | |
| (Registrant’s Telephone Number, Including Area Code) | |
| Not Applicable | |
| (Former Name or Former Address, if Changed Since Last Report) | |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange On Which Registered | ||
| Not applicable | Not applicable | Not applicable |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Item 2.01. Completion of Acquisition or Disposition of Assets.
On February 9, 2022, Medicine Man Technologies, Inc. (the “Company”) completed the previously announced merger of the Company’s wholly-owned subsidiary Emerald Fields Merger Sub, LLC (“Merger Sub”) with and into MCG, LLC (“Target”), with the Merger Sub continuing as the surviving entity (the “Merger”), pursuant to the terms of the Agreement and Plan of Merger, dated November 15, 2021 (as amended by the Amendment (as defined below), collectively the “Merger Agreement”) by and among (i) the Company; (ii) Merger Sub; (iii) Target; (iv) Target’s owners (collectively, the “Members”); and (v) Donald Douglas Burkhalter and James Gulbrandsen in their capacity as the Member Representatives under the Merger Agreement. In the Merger, the Company acquired Target’s two retail marijuana dispensaries located in Manitou Springs, Colorado and Glendale, Colorado.
As adjusted for estimated Target working capital, indebtedness and non-reimbursable transaction expenses as of the closing, the aggregate closing consideration for the Merger was $29 million consisting of: (i) $16,008,000 in cash; (ii) 6,547,239 shares of the Company’s common stock issued to the Members at a price of $1.63 per share (the “Mission Shares”); and (iii) an aggregate of $2,320,000 was held back as collateral for potential claims for indemnification from the Members and Target under the Merger Agreement as follows: (y) $1,392,000 in cash (“Escrowed Cash”) and (z) 569,325 shares of the Company’s common stock (“Escrowed Shares,” and together with the Escrowed Cash, the “Escrowed Consideration”). The Escrowed Consideration was deposited with an escrow agent and any Escrowed Consideration not used to satisfy indemnification claims will be released as follows: (i) 50% of the Escrowed Consideration will be released on February 9, 2023, with such amount being paid from the Escrowed Cash first; and (ii) 50% of the Escrowed Consideration will be released on August 9, 2023. The Company funded the cash portion of the closing consideration from cash on hand. In addition, the Company reimbursed approximately $723,000 of Target’s expenses incurred in connection with the Merger. The Merger consideration is subject to post-closing adjustment to reflect Target’s actual working capital, indebtedness and non-reimbursable transaction expenses as of the closing.
In connection with the Merger, also on February 9, 2022, the Company, Merger Sub, Target, the Members and Donald Douglas Burkhalter and James Gulbrandsen in their capacity as the Member Representatives under the Merger Agreement entered into Amendment No. 1 to Agreement and Plan of Merger (the “Amendment”), to (i) make a clarifying change to one of the post-closing adjustment provisions; (ii) waive the obligation under the Merger Agreement to enter into a Brand Partnership Agreement at closing of the Merger, (iii) waive the escrow related to the outcome of the Manitou Springs special mail ballot election given that the election was held on January 18, 2022, (iv) provide for a special indemnity for certain matters disclosed by Target in connection with the Merger, and (v) provide that the Company and Merger Sub waive the right to indemnification with respect to certain matters disclosed by Target in connection with the Merger.
The Company entered into a lock-up agreement with the beneficial owners of the Mission Shares providing limitations on the resale of the Mission Shares.
In addition, at the closing of the Merger and pursuant to the Merger Agreement, Merger Sub (i) acquired the real property associated with Target’s medical marijuana dispensary located in Manitou Springs, Colorado for $750,000 in cash under a Contract to Buy and Sell Real Estate (Commercial), dated January 26, 2022 and as subsequently amended, by and between Merger Sub and Manitou Springs Real Estate Development, LLC (the “RE Seller”), an entity affiliated with Target (the “Real Estate Purchase Agreement”); the Company is obligated to pay an additional $250,000 as purchase consideration to the RE Seller’s owners if the RE Seller successfully resolves certain encroachment issues related to the purchased real property on or before February 8, 2023, and (ii) acquired certain non-cannabis assets of 1508 Management, LLC, an entity affiliated with Target, pursuant the terms of a Bill of Sale and Assignment and Assumption Agreement, dated February 9, 2022, by and between Merger Sub and 1508 Management, LLC (the “Bill of Sale”).
The Company previously reported the terms of the Merger Agreement and the transactions contemplated thereby in Item 1.01 of the Company’s Current Report on Form 8-K filed on November 18, 2021. The foregoing description of the Merger, the Merger Agreement, the Amendment, the Real Estate Purchase Agreements, and the Bill of Sale does not purport to be complete and is qualified in its entirety by reference to the copies of the Merger Agreement, the Amendment and the Real Estate Purchase Agreements, and the Bill of Sale attached hereto as Exhibits 2.1, 2.2, 2.3, 2.4, 2.5, 2.6 and 2.7 and incorporated by reference herein
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Item 3.02. Unregistered Sales of Equity Securities.
The information set forth in Item 2.01 of this Current Report on Form 8-K is incorporated into this Item 3.02 by reference.
The issuances of the Mission Shares was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act and Securities Act Rule 506(b). The Company issued such shares in a privately negotiated transaction with accredited and sophisticated investors, and such shares were acquired for the recipients’ own accounts for investment purposes. A legend was placed on the certificates representing shares of common stock referencing the restricted nature of the shares.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On February 9, 2022, the Company’s Board of Directors (the “Board”) appointed (i) Paul Montalbano as a Class A director and (ii) Pratap Mukharji as a Class B director, each to fill existing vacancies on the Board. The Board has not yet determined which Board committees Messrs. Montalbano and Mukharji will be appointed to.
Mr. Montalbano will serve until his term expires at the Company’s 2022 annual meeting of stockholders and until a successor is elected and qualified, or until his earlier death, resignation or removal. Mr. Mukharji will serve until his term expires at the Company’s 2023 annual meeting of stockholders and until a successor is elected and qualified, or until his earlier death, resignation or removal.
The Company’s current policy is to award each director an annual grant of shares of the Company’s common stock worth $50,000 and the Company expects to make such awards to Messrs. Montalbano and Mukharji in the future.
Dr. Paul Montalbano, age 55, is a private practicing neurosurgeon in Boise, Idaho. He is still actively practicing medicine specializing in complex spinal reconstruction. Dr. Montalbano is a partner in the company Neuroscience Associates under which he practices medicine. He became a partner there in 2000. Before joining Neuroscience Associates, Dr. Montalbano was finishing his residency at the University of South Florida located in Tampa, Florida. His residency lasted from 1994-2000. Dr. Montalbano received a Bachelor of Science from Loyola University of Chicago and his M.D. from Northwestern University. Since 2012, Dr. Montalbano has served on the board of Treasure Valley Hospital in Boise, ID. Dr. Montalbano serves on the medical executive, governing and financial board of Treasure Valley. He is also the director of neurosurgery of Treasure Valley where he also serves on the Neurosurgery Center of Excellence committee. The Company and the Board believe that his significant experience with private healthcare companies qualifies him to serve on the Board.
Dr. Montalbano was designated for appointment to the Board by Dye Capital Cann Holdings II, LLC (“Dye Cann II”) pursuant the terms of the letter agreement between the Company and Dye Cann II dated December 16, 2020 (the “Cann II Agreement”), which provides that, for as long as Dye Cann II meets the Ownership Threshold (as defined in the Cann II Agreement), the Company shall take all actions to ensure that two individuals designated by Dye Cann II shall be appointed to the Board if the Board consist of more than five members. The Company previously reported the terms of the Cann II Agreement in the Company’s Current Report on Form 8-K filed December 23, 2020 and attached a copy of the Cann II Agreement as Exhibit 10.3 thereto, and such disclosure and exhibit are incorporated by reference herein.
Pratap Mukharji, age 61, served as a director of the Company between January and December 2021 (as previously reported, he resigned as a director on December 13, 2021). Prior to joining the Company, Mr. Mukharji had a successful career as a senior partner and director at Bain & Company, a global management consulting company, from 2015 to 2020, where he led its Supply Chain and Service Operations practice. Mr. Mukharji retired in May 2020, and he currently serves as an Executive in Residence at the Fuqua School of Business at Duke University. During his time at Bain, Mr. Mukharji gained robust experience in the industrial and retail industries, and he also served in various leadership roles addressing corporate strategy and growth opportunities, mergers and acquisitions, operational efficiencies and cost savings, corporate record review and management, omnichannel, and e-commerce efforts across multiple industries. Prior to joining Bain & Company, Mr. Mukharji worked at Kearney and Booz-Allen & Hamilton Mr. Mukharji received a BA in Economics from Haverford College and an MBA from the Fuqua School of Business at Duke University, where he earned the distinction of Fuqua Scholar. During his career, Mr. Mukharji has also served as an advisor to a number of small and large capitalized companies and advised them on identifying and executing growth opportunities. The Company and the Board believe that his significant experience through consulting, analyzing company financial statements, as well as his experience conducting M&A transactions qualifies him to serve on the Board.
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Mr. Mukharji was designated for appointment to the Board by Brian Ruden and Naser Joudeh pursuant to the terms of the Omnibus Amendment No. 2 to Asset Purchase Agreements, dated December 17, 2020, among the Company and the sellers party thereto (the “StarBuds Agreement”), which provides that, for as long as the Sellers and Members (each, as defined in the StarBuds Agreement) meet specified ownership thresholds, the Company is required to recommend to the Board that Brian Ruden and Naser Joudeh jointly be permitted to designate three directors to the Board if the Board consistent of seven or more members. The Company previously reported the terms of the StarBuds Agreement in the Company’s Current Report on Form 8-K filed December 23, 2020 and attached a copy of the Omnibus Amendment No. 2 as Exhibit 2.1 thereto, and such disclosure and exhibit are incorporated by reference herein.
On December 7, 2021, Mr. Mukharji purchased one of the Company’s 13% senior secured convertible notes due December 7, 2026 with a principal amount of $200,000 for $196,000, reflecting a 2% original issue discount, in the Company’s private placement of such notes, on the same terms as the other investors. The Company previously reported the terms of the private placement and the notes in its Current Report on Form 8-K filed on December 9, 2021 and attached copies of the form of note and relevant transaction documents, and such disclosures and copies are incorporated by reference herein. Mr. Mukharji is a passive, minority part owner of each of Dye Capital Cann Holdings, LLC and Dye Cann II, entities controlled by Justin Dye, the Company’s Chief Executive Officer, one of its directors and the largest beneficial owner of the Company’s common stock, with which the Company previously has entered into various transactions. Mr. Mukharji does not control any of these entities nor does he beneficially own any of the securities held by these entities.
Item 7.01. Regulation FD Disclosure.
On February 10, 2022, the Company issued a press release announcing the closing of the Merger Agreement (as defined in Item 8.01). A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
The information under Item 7.01 of this Current Report on Form 8-K and the press release attached as Exhibit 99.4 are being furnished by the Company pursuant to Item 7.01. In accordance with General Instruction B.2 of Form 8-K, the information under Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. In addition, this information shall not be deemed incorporated by reference into any of the Company’s filings with the Securities and Exchange Commission, except as shall be expressly set forth by specific reference in any such filing.
Item 8.01. Other Events.
The following is biographical information for the director indicated.
Jonathan Berger, age 62, is the retired CEO of Great Lakes Dredge & Dock, Inc. (GLDD Nasdaq). In addition to having been a director of GLDD he was also a director of Boise Paper, Inc. a New York Stock Exchange listed company where he previously served as both chair of the audit and compensation committees. He is currently a director of Alloy - a privately held specialty environmental contractor and Partner with Genesis Business Humanity, a boutique advisory firm helping bring Israeli tech companies to the US. Jon was a partner in KPMG, the international accounting and consulting firm where he ran their corporate finance practice unit on a national level. He previously held a CPA license and securities licenses 7, 24, 63. He received a BS in Human Development from Cornell University and an MBA from Emory University.
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Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired
Any financial statement information required under this Item 9.01 will be filed by amendment to the original Current Report on Form 8-K no later than 71 calendar days after the date on which this Current Report on Form 8-K was required to be filed.
(b) Pro Forma Financial Information
Any pro forma financial information required under this Item 9.01 will be filed by amendment to the original Current Report on Form 8-K no later than 71 calendar days after the date on which this Current Report on Form 8-K was required to be filed.
(d) Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MEDICINE MAN TECHNOLOGIES, INC. | ||
| By: | /s/ Daniel R. Pabon | |
| Date: February 15, 2022 | Daniel R. Pabon General Counsel | |
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Exhibit 2.2
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO Agreement and Plan of Merger (this “Amendment”) is made as of February 9, 2022 (the “Effective Date”) by and among (i) Medicine Man Technologies, Inc., a Nevada corporation (“Parent”); (ii) Emerald Fields Merger Sub, LLC, a Colorado limited liability company (“Merger Sub”); (iii) MCG, LLC, a Colorado limited liability company (the “Company”); (iv) the Members of the Company; and (v) Donald Douglas Burkhalter and James Guldbrandsen, in their capacity as the Member Representatives. Parent, Merger Sub, the Company, the Member Representatives are each sometimes referred to herein as a “Party” and, collectively, the “Parties.” All capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Merger Agreement (as defined below).
RECITALS
WHEREAS, the Parties and the other signatories thereto entered into that certain Agreement and Plan of Merger, dated as of November 15, 2021 (the “Merger Agreement”); and
WHEREAS, the Parties wish to amend and waive certain provisions of the Merger Agreement as set forth below.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained in this Amendment and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
| 1. | Definitions. The following definition set forth in Article 1 of the Merger Agreement is hereby amended and restated as follows: | |
| “Escrow Agent” means Secured Trust Escrow, a California corporation. |
| 2. | Post-Closing Adjustment. Section 2.05(c)(ii) of the Merger Agreement is hereby amended and restated as follows: | |
| If the Final Adjustment Amount is less than negative $59,453.90, then, within five Business Days following the determination of the Final Adjustment Amount in accordance with Section 2.06, the Members shall deliver, in accordance with each Member’s Pro Rata Percentage, the Final Adjustment Amount by (A) wire transfer of immediately available funds to the account or accounts designated in writing by the Members, in a dollar amount equal to 60% of such Member’s Cash Consideration Percentage of the Final Adjustment Amount, and (B) surrender stock certificates for an amount of shares of Parent Common Stock equal to 40% of such Member’s Stock Consideration Percentage of the Final Adjustment Amount divided by the Closing Date Stock Price. |
| 3. | Waiver of Delivery of Brand Partnership Agreement. The Parties hereby (a) waive the obligations of the Member Representatives and Parent, respectively, to deliver an executed Brand Partnership Agreement at the Closing pursuant to Sections 3.02(a)(iv) and 3.02(b)(vi), respectively, and (b) acknowledge and agree that the delivery of the Brand Partnership Agreement shall not be a condition to the obligations of the Parties to consummate the transactions contemplated by the Merger Agreement. |
| 4. | Waiver of Delivery of the Special Election Escrow Amount. The Parties hereby acknowledge and agree that the Manitou voters rejected the Manitou Code Amendment in the Special Election. Accordingly, the Parties hereby waive the obligation to deliver the Special Election Escrow Amount to the Escrow Agent pursuant to Sections 2.09 and 3.02(b)(iii)(B) of the Merger Agreement. |
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| 5. | Indemnification by the Members Related to the Supplement to Disclosure Schedules. The Member Representatives shall jointly and severally, and the other Members, shall severally and not jointly (in accordance with their Pro Rata Percentages), indemnify and defend each of the Parent Indemnitees against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon the Parent Indemnitees based upon, arising out of, with respect to or by reason of the matters disclosed in Section 4.18(a)(iii) and Section 4.28 of the Supplement to Disclosure Schedules of the Merger Agreement dated February 2, 2022 delivered to Parent pursuant to Section 6.11 of the Merger Agreement (the “02/02/22 Schedule Supplement”). The foregoing indemnification obligations shall be governed by and subject to the terms (including, without limitation, the procedures, limitations and satisfaction of Losses first from the Escrow Fund) of the indemnification provisions set forth in Article IX of the Merger Agreement. |
| 6. | Waiver by Parent and Merger Sub to Right to Indemnification Related to Section 4.07(a) of the Supplement to Disclosure Schedules. Notwithstanding anything to the contrary set forth in Section 6.11 or other provisions of the Merger Agreement, Parent and Merger Sub hereby irrevocably waive any right to indemnification under Section 9.02 of the Merger Agreement with respect to the matters disclosed in Section 4.07(a) of the 02/02/22 Schedule Supplement. |
| 7. | Effect of Amendment. Except as and to the extent expressly modified by this Amendment, the Merger Agreement, as so amended by this Amendment, will remain in full force and effect in all respects. Each reference to “hereof,” “herein,” “hereby,” and “this Agreement” in the Merger Agreement will from and after the Effective Date refer to the Merger Agreement as amended by this Amendment. Notwithstanding anything to the contrary in this Amendment, the date of the Merger Agreement, as amended hereby, will in all instances remain as November 15, 2021, and any references in the Merger Agreement to “the date first above written,” “the date of this Agreement,” “the date hereof” and similar references will continue to refer to November 15, 2021. |
| 8. | Entire Agreement. This Amendment, together with the Merger Agreement (including the documents and instruments referred to herein and therein), constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the Parties, or any of them, with respect to the subject matter hereof. |
| 9. | Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. Section 11.11 of the Merger Agreement is incorporated into this Amendment by reference as if fully set forth herein, mutatis mutandis. |
| 10. | Notices. All notices other communications hereunder will be in writing and sent pursuant to the requirements of Section 11.03 of the Merger Agreement. |
| 11. | Counterparts. This Amendment may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties. This Amendment may be executed by pdf signature and a pdf signature shall constitute an original for all purposes. |
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In Witness Whereof, the Parties have caused this Amendment to be executed as of the Effective Date.
Merger Sub:
Emerald Field Merger Sub, LLC
By: Schwazze Colorado, LLC, its Sole Member
By: Medicine Man Technologies, Inc., its Manager
By: /s/ Justin Dye
Name: Justin Dye
Title: Chief Executive Officer
PARENT:
MEDICINE MAN TECHNOLOGIES, INC.
By: /s/ Justin Dye
Name: Justin Dye
Title: Chief Executive Officer
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Company:
MCG, LLC
By: /s/ Donald Douglas Burkhalter
Name: Donald Douglas Burkhalter
Title: Manager
By: /s/ James Gulbrandsen
Name: James Gulbrandsen
Title: Manager
Member Representatives:
/s/ Donald Douglas Burkhalter
Donald Douglas Burkhalter
/s/ James Gulbrandsen
James Gulbrandsen
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MEMBERS:
/s/ Donald Douglas Burkhalter
Donald Douglas Burkhalter
/s/ James Gulbrandsen
James Gulbrandsen
/s/ Michael Thompson
Michael Thompson
/s/ Frank Palmieri
Frank Palmieri
/s/ Jan Talamo
Jan Talamo
/s/ James Bent
James Bent
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Exhibit 2.3
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Exhibit 2.4
This Rider (this “Rider”) is attached to and made a part of the Contract to Buy and Sell Real Estate (Commercial) dated as of January 26, 2022 (the “Contract”), by and between, Manitou Springs Real Estate Development, LLC, a Colorado limited liability company, as Seller, and Emerald Fields Merger Sub, LLC, a Colorado limited liability company, as Buyer, with respect to the Property, as more particularly defined in the Contract
1. Conflicts. This Rider forms a part of the Contract. In the event of any conflict between this Rider and the attached printed form Contract, the terms and provisions of this Rider shall govern.
2. Definitions. Unless otherwise defined in this Rider, word and phrases defined in the printed form portion of the Contract shall have the same definitions when used in this Rider.
Mandatory Removal Items. “Mandatory Removal Items” means each of the following: (i) delinquent taxes or assessments, (ii) any deed of trust, mortgage or other lien or monetary encumbrance affecting the Property or any part thereof and created by, through, or under Seller, (iii) any lis pendens or other form of attachment against any portion of the Property, (iv) any lien, or right to a lien, for services, labor or material heretofore or hereafter furnished to the Seller on the Property, imposed by law and not shown by the Public Records. (v) any encumbrance created by Seller without Buyer’s consent, (vi) any title matters that Seller has agreed in writing to cure in response to a Buyer Notice of Title Objection, and (vii) the standard exception regarding the rights of parties in possession. Notwithstanding anything in the Contract to the contrary, it shall be a condition to Buyer’s obligation to close under the Contract, that each Mandatory Removal Item be removed from title or insured over by Land Title Guarantee Company (the “Title Company”) at Closing. Buyer shall not be required to tender any Notice of Title Objection with respect to any Mandatory Removal Item (except as applicable to the Buyer title objection notice referred to in clause (v) above), but if any Mandatory Removal Item is not so removed or insured over at Closing (in a form or manner reasonably acceptable to Buyer), Seller shall have the right to postpone the Closing by up to ten (10) days to cure the same.
3. New Title Exceptions. If at any time after the delivery of the Title Commitment any update to the Title Commitment discloses any item that affects title to the Property which was not disclosed on any prior version of the Title Commitment or the Existing Survey delivered to Buyer during the Due Diligence Period, or otherwise made known to Buyer during the Due Diligence Period (each, a “New Exception”), Buyer shall have a period of five (5) business days from the date of Buyer’s receipt of such update (the “New Exception Review Period”) to review and to approve or disapprove of the same. If the New Exception is unacceptable to it, Buyer shall provide notice to Seller and Seller shall have five (5) business days to advise as to whether Seller will cure the same (and if Seller so notifies Buyer in writing that it will cure the New Exception, the New Exception will be a Mandatory Removal Item). Failure of Seller to respond shall be deemed that Seller has determined to not cure the matter. Within five (5) business days of Seller’s response or deemed response, as the case may be, (the “New Exception Buyer Election Period”) Buyer may elect to either (a) to terminate the Contract, in which event the Earnest Money shall be promptly returned to Buyer, or (b) to waive such objections and proceed with the transactions contemplated by the Contract, in which event Buyer shall be deemed to have approved the New Exception. If Buyer fails to timely notify Seller of its objection to the New Exception in accordance with the foregoing clause prior to the expiration of the New Exception Review Period, or if Buyer fails to timely notify Seller of its election to terminate in accordance with the foregoing clause prior to the expiration of the New Exception Buyer Election Period, Buyer shall be deemed to have approved and irrevocably waived any objections to the New Exception, and such New Exception will constitute an additional Permitted Exception (as defined below).
4. Seller’s Representations and Warranties. Seller represents and warrants to Buyer the following (collectively, “Seller’s Representations”), as of the effective date of the Contract:
a) Seller is a limited liability company organized, existing and in good standing under the laws of the state of Colorado. Seller has the full right and authority to enter into the Contract and consummate the transaction contemplated by the Contract. All requisite entity action has been taken by Seller in connection with the entering into of the Contract, the instruments referenced herein, and the consummation of the transaction contemplated hereby. Each of the persons and entities signing the Contract on behalf of Seller is authorized to do so. The compliance with or fulfillment of the terms and conditions of the Contract will not conflict with, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, any contract to which Seller is a party or by which Seller is otherwise bound, which conflict, breach or default would have a material adverse effect on Seller’s ability to consummate the transaction contemplated by the Contract or on the Property. The Contract is a valid, binding and enforceable agreement against Seller in accordance with its terms.
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b) Seller is not a “foreign person,” as that term is used and defined in the Internal Revenue Code, Section 1445, as amended.
c) Seller is not a Prohibited Person. For purposes of this Section 4(c) a “Prohibited Person” is (i) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing (effective September 24, 2001) (the “Executive Order”), (ii) a person or entity owned or controlled by, or acting for or on behalf of any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order, (iii) a person or entity that is named as a “specially designated national” or “blocked person” on the most current list published by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) at its official website, http://www.treas.gov/offices/enforcement/ofac, (iv) a person or entity that is otherwise the target of any economic sanctions program currently administered by OFAC, or (v) a person or entity that is affiliated with any person or entity identified in clauses (i), (ii), (iii) and/or (iv) of this Section 4(c)..
d) The Property is not subject to any lease or any other possessory interests of any person, and no other rights of possession or use have been granted to any third party.
e) Seller has not received written notice of any actions, proceedings, litigation or governmental investigations or condemnation actions pending against the Property, and, to Seller’s knowledge, no such actions are threatened.
f) Seller has not received any written notice from any governmental agency of any uncured material violations of any federal, state, county or municipal law, ordinance, order, regulation or requirement affecting the Property.
g) Seller has not entered into or assumed any, and to Seller’s knowledge there exist no other, contracts, subcontracts or agreements affecting the Property other than all liens, encumbrances, covenants, conditions, restrictions, easements and other matters of record (including, without limitation, all matters set forth in the Title Commitment).
h) No filing or petition under the United States Bankruptcy Law or any insolvency laws, or any laws for composition of indebtedness or for the reorganization of debtors has been filed with regard to Seller.
i) Except as disclosed in any environmental or engineering reports or studies delivered by Seller to Buyer or that Buyer obtains prior to closing, (i) there are no pending or, to Seller’s knowledge, threatened environmental claims against Seller; (ii) to Seller’s Knowledge, Seller has not (x) generated, treated, stored, transported, discharged, disposed of or released or cleaned up any Hazardous Materials on the Real Property excepted as permitted under applicable Environmental Laws, or (y) disposed of Hazardous Materials generated on the Real Property at any other location in a manner which is reasonably likely to result in material liability pursuant to Environmental Laws; (iii) Seller has delivered or made available to Buyer true, complete and correct copies of all material environmental reports, analyses, tests or monitoring in its possession pertaining to the Real Property, and (iv) Seller has received no notice of any violation of Environmental Laws which has not been resolved to the satisfaction of any governmental agency with jurisdiction over the matter. As used in this Agreement, “Hazardous Materials” shall mean any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, gasoline and any other petroleum products, polychlorinated biphenyls and urea formaldehyde insulation. As used herein, “Environmental Law” shall mean any and all federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees or requirements of any governmental authority or requirements of law (including common law) relating to or imposing liability or standards of conduct concerning the protection of human health, the environment or natural resources, or the release or threatened release of Hazardous Materials into the environment.
This Section 5 shall survive the Closing and delivery of the Deed to Buyer for a period of one (1) year and shall not be merged into the Deed.
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5. Buyer’s Representations and Warranties. Buyer represents and warrants to Seller the following (collectively, “Buyer’s Representations”), as of the effective date:
a) Buyer is a limited liability company organized, existing and in good standing under the laws of the state of Colorado. Buyer has the full right and authority to enter into the Contract and consummate the transaction contemplated by the Contract. All requisite entity action has been taken by Buyer in connection with the entering into of the Contract, the instruments referenced herein, and the consummation of the transaction contemplated hereby. Each of the persons and entities signing the Contract on behalf of Buyer is authorized to do so. The compliance with or fulfillment of the terms and conditions of the Contract will not conflict with, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, any contract to which Buyer is a party or by which Buyer is otherwise bound, which conflict, breach or default would have a material adverse effect on Buyer’s ability to consummate the transaction contemplated by the Contract or on the Property. The Contract is a valid, binding and enforceable agreement against Buyer in accordance with its terms.
b) Buyer is not a Prohibited Person. For purposes of this Section 6(b), a “Prohibited Person” is (i) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing (effective September 24, 2001) (the “Executive Order”), (ii) a person or entity owned or controlled by, or acting for or on behalf of any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order, (iii) a person or entity that is named as a “specially designated national” or “blocked person” on the most current list published by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) at its official website, http://www.treas.gov/offices/enforcement/ofac, (iv) a person or entity that is otherwise the target of any economic sanctions program currently administered by OFAC, or (v) a person or entity that is affiliated with any person or entity identified in clauses (i), (ii), (iii) and/or (iv) of this Section 6(b).
This Section 6 shall survive the Closing and delivery of the Deed to Buyer for a period of one (1) year and shall not be merged into the Deed.
6. General Operation of the Property. So long as the Contract is in full force and effect, Seller shall:
a) not enter into any lease of all or any portion of the Property or otherwise agreement with respect to the Property;
b) not commence any capital improvements at the Property unless required by law or to address a life safety issue;
c) promptly furnish to Buyer copies of any written notices received by Seller after the effective date, concerning (i) any suit, judgment or other proceeding filed, entered or threatened with respect to the Property or Seller’s use or ownership thereof, or (ii) any actual or contemplated changes in the zoning of the Property; and
d) promptly notify Buyer of (i) any material change in the condition of the Property or any portion thereof which materially affects the Property or any portion thereof, and (ii) any change in circumstance which makes any of Seller’s Representations untrue or incorrect in any material respect, or any covenant or agreement of Seller under the Contract incapable of being performed.
7. Buyer’s Closing Conditions. Buyer’s obligation to close under the Contract is subject to and conditioned upon the fulfillment of each and all of the following conditions precedent (collectively, “Buyer’s Closing Conditions”):
a) Title Policy. The Title Company shall be prepared and irrevocably committed, subject to Buyer’s payment of any title premiums that Buyer is required to pay in accordance with the Contract, to issue to Buyer an owner’s extended coverage title insurance policy (the “Title Policy”) on a standard American Land Title Association form with the standard pre-printed exceptions 4, 5, 6 and 7 deleted, ( standard printed exceptions 1, 2 and 3 will not be deleted), insuring title to the Property in Buyer (or its assignee) in an amount equal to the Purchase Price, subject only to those title exceptions accepted by the Buyer or that the Buyer has failed to timely object, (the “Permitted Exceptions”) and with all endorsements agreed to between Buyer and Title Company..
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b) Accuracy of Seller’s Representations. Seller’s Representations shall remain true and correct in all material respects as of the Closing Date.
c) No Litigation. There shall not be pending any litigation against Seller or the Property which, if determined adversely, would restrain the consummation of any of the transactions contemplated by the Contract or declare illegal, invalid or nonbinding any of the covenants or obligations of the Seller or materially adversely affect the Property after Closing.
d) Bankruptcy. Seller shall not be a debtor in any bankruptcy proceeding nor shall have been in the last twelve (12) months a debtor in any bankruptcy proceeding.
e) Seller’s Deliveries. Seller’s delivery of the documents and payments required of it under the Contract for the Closing.
8. Seller’s Closing Conditions. Seller’s obligation to close under the Contract is subject to and conditioned upon the fulfillment of each and all of the following conditions precedent (collectively, “Seller’s Closing Conditions”):
a) Accuracy of Buyer’s Representations. Buyer’s Representations shall remain true and correct in all material respects as of the Closing Date.
b) No Litigation. There shall not be pending any litigation against Buyer which, if determined adversely, would restrain the consummation of any of the transactions contemplated by the Contract or declare illegal, invalid or nonbinding any of the covenants or obligations of the Buyer.
c) Bankruptcy. Buyer shall not be a debtor in any bankruptcy proceeding nor shall have been in the last twelve (12) months a debtor in any bankruptcy proceeding.
d) Buyer’s Deliveries. Buyer’s delivery of the documents and payments required of it under the Contract for the Closing.
9. Failure of Buyer’s Closing Conditions. If any of Buyer’s Closing Conditions are not met, Buyer may either (a) waive any of Buyer’s Closing Conditions and proceed to Closing on the Closing Date with no offset or deduction from the Purchase Price, (b) terminate the Contract and receive a return of the Earnest Money, or (c) if such failure also constitutes a default by Seller, exercise any of its applicable remedies set forth in the Contract.
10. Remedies of the Parties. Notwithstanding anything in this Contract to the contrary, Seller’s and Buyer’s remedies for the other party’s default or for a failure of title under the Contract shall be solely as follows. Nothing in this Section limits in any way any indemnification obligation under the Contract.
a) Seller shall be in default hereunder if it fails to timely perform the Contract within ten (10) days after written notice of such failure is provided by Buyer to Seller. If Seller defaults hereunder, Buyer may, as Buyer’s sole and exclusive remedies, elect one of the following: (i) terminate the Contract by written notice delivered to Seller on or before the Closing, in which case, the Earnest Money shall be refunded to Buyer; (ii) enforce specific performance of the Contract against Seller; or (iii) in the sole event that the remedy of specific performance is not available to Buyer due to the nature of the Seller default, (A) terminate the Contract by written notice delivered to Seller on or before the Closing, (B) receive refund of the Earnest Money, and (C) be reimbursed by Seller for Buyer’s Out-of-Pocket Costs. “Buyer’s Out-of-Pocket Costs means an amount equal to Buyer’s actual and reasonable out-of-pocket costs and expenses incurred, from and after the effective date up to the date of such Buyer termination, and Buyer’s performance of its obligations to try to achieve closing under the Contract (including reasonable attorney’s and Consultants fees and due diligence costs, etc.); provided, that in no event shall Buyer’s Out-of-Pocket Costs exceed $15,000.00.
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b) Buyer shall be in default hereunder if it fails to timely perform the Contract within ten (10) days after written notice of such failure is provided by Seller to Buyer. If Buyer defaults hereunder, Seller may terminate the Contract by written notice to Buyer and, as Seller’s sole and exclusive remedy, retain the Earnest Money as liquidated damages (the parties recognizing that it would be extremely difficult to ascertain the extent of actual damages caused by Buyer’s breach, and that the Earnest Money represents as fair an approximation of such actual damages as the parties can now determine).
11. Closing. Closing will be effected through escrow with the Title Company. Closing shall occur contemporaneously with the closing of that certain Agreement and Plan of Merger, dated as of November 15, 2021, by and among Buyer, Emerald Fields Merger Sub, LLC, a Colorado limited liability company, MCG, LLC, a Colorado limited liability company, Douglas Burkhalter, James Guldbrandsen and the Members (as defined therein) (the “Merger Agreement”). In the event that the closing of the Merger Agreement does not occur for any reason, this Agreement shall automatically terminate, and the parties shall be released from all obligations hereunder except those that expressly survive termination.
12. Seller Closing Deliveries. Seller shall, on or prior to the Closing Date, deliver to the Title Company each of the following items:
a) One (1) original Special Warranty Deed (the “Deed”), in the form attached to this Rider as Exhibit “A”, subject only to the Permitted Exceptions, executed by Seller.
b) One (1) original Bill of Sale (the “Bill of Sale”), in the form attached to this Rider as Exhibit “B”.
c) A closing statement executed by Seller.
d) A title affidavit or an indemnity in a form to enable Title Company to delete the standard exceptions (other than matters constituting any Permitted Exceptions) from the Title Policy (as defined below).
e) A certification of Seller’s non-foreign status pursuant to Section 1445 of the Internal Revenue Code of 1986, as amended.
f) A Colorado Form DR 1083, in form required by law.
g) Resolutions, certificates of good standing and such other organizational documents as Title Company shall reasonably require evidencing Seller’s authority to consummate this transaction.
13. Buyer Closing Deliveries. Buyer shall, on or prior to the Closing Date, deliver to Closing Company each of the following items:
a) The Purchase Price (with credit for the Earnest Money), plus or minus the adjustments or prorations required by the Contract.
b) Any transfer declaration or other statement or form which may be required to be submitted to the local assessor with respect to the terms of the sale of the Property.
c) A closing statement executed by Buyer.
d) Resolutions, certificates of good standing and such other organizational documents as Title Company shall reasonably require evidencing Buyer’s authority to consummate this transaction.
14. Broker. Seller and Buyer each represents and warrants to the other that it has dealt with no broker or other person or entity entitled to a commission in connection with the proposed sale of the Property. Seller and Buyer shall defend and indemnify the other against any loss, cost, liability or expense, including reasonable attorneys’ fees, relating to or arising out of any claim by any other person or entity to have represented such indemnifying party. The party’s rights and obligations under this paragraph shall survive Closing, and any expiration or termination of the Contract.
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15. Certain Costs. Seller shall pay (a) the cost for the basic Owner’s Title Insurance Policy (without endorsements or extended coverage), and (b) 50% of the escrow fee. Buyer shall pay (i) all state, county, and local transfer taxes imposed by reason of the transfer of title to the Property to Buyer (or its assignee), (ii) the cost of any endorsements or extended coverage to Owner’s Title Insurance Policy, (iii) the cost of any new or updated Survey, if obtained, and (iv) 50% of the escrow fee. Each party shall pay its own legal expenses.
16. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 17):
To Seller:
Manitou Springs Real Estate Development, LLC
27 East Madison Avenue
St. Louis, MO 63122
Attn: Donald Douglas Burkhalter
Email: dburkhalter@missionholdings.us
with a copy (which shall not constitute notice to):
Charles T. Houghton, Esq.
Charles T Houghton, P.C.
1408 East Monument Street
Colorado Springs, CO 80909
Email: cthlaw@msn.com
With a copy (which shall not constitute notice to)
David S. Spewak, Esq.
Berger, Cohen & Brandt, L.C.
8000 Maryland Avenue, Suite 1500
Clayton, MO 63105
Email: DSpewak@bcblawlc.com
To Buyer:
Emerald Fields Merger Sub, LLC
Address: 4880 Havana Street, Suite 201
Denver, CO 80239
E-mail: dan@schwazze.com
Attention: Dan Pabon
with a copy (which shall not constitute notice) to:
Brownstein Hyatt Farber Schreck, LLP
Address: 410 Seventeenth Street, Suite 2200
Denver, CO 80202
E-mail: aagron@bhfs.com
Attention: Adam Agron
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17. Confidentiality. Each party shall keep confidential and not make any public announcement or disclose to any person or entity (a “Person”) the existence or any terms of the Contract, and Buyer shall keep confidential and not disclose to any Person any information disclosed by the inspections and investigations (including any resulting reports and studies) made by or on behalf of Buyer, or in the Seller due diligence materials provided to Buyer or any other documents, materials, data or other information regarding the Property that is not generally known to the public (the “Confidential Information”). Notwithstanding the foregoing, a party shall be permitted to (a) disclose any Confidential Information to any Person on a “need to know” basis to such Party’s shareholders, partners, members, trustees, beneficiaries, directors, officers, employees, attorneys, consultants, engineers, surveyors, lenders, investors, managers, and other Persons whose assistance is required to complete the transaction described in the Contract, or (b) disclose any Confidential Information to the extent required under applicable law, provided that such party shall (i) advise such Person of the confidential nature of such Confidential Information, and (ii) use commercially reasonable efforts to cause such Person to maintain the confidentiality of such Confidential Information. This Section 18 shall survive the Closing or termination of the Contract.
18. Waiver of Jury Trial. SELLER AND BUYER EACH HEREBY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY LITIGATION OR OTHER COURT PROCEEDING WITH RESPECT TO ANY MATTER ARISING FROM OR IN CONNECTION WITH THE CONTRACT OR THE PROPERTY.
19. Assignment. Buyer shall have no right to assign the Contract without Seller’s consent; provided, however, that, notwithstanding anything in the Contract to the contrary (including, without limitation, Section 2.2 thereof), Buyer may, without Seller’s consent, on at least five (5) days’ notice to Seller, (a) designate a Buyer Affiliate (as defined below) to take title for Buyer at Closing, or (b) assign the Contract to a Buyer Affiliate. As used in this Section 20, a “Buyer Affiliate” is a person or entity controlled by, under common control with, or controlling Buyer.
20. Not an Offer. The submission of the Contract, unsigned, by one party to the other shall not constitute an offer. The Contract shall not be binding in any way on either Seller or Buyer until fully executed and delivered by both Seller and Buyer
21. Counterparts. The Contract and this Rider (and any amendment to the Contract) may (A) be executed in counterparts, and all such counterparts shall constitute one and the same document, and (B) be delivered in signed copies via electronic mail (e.g., .pdf) and the same shall be deemed the equivalent of delivery of a hard copy original.
22. Relationship of Parties. Buyer and Seller acknowledge and agree that the relationship established between the parties pursuant to the Contract is only that of a seller and a purchaser of property. Neither Buyer nor Seller is, nor shall either hold itself out to be, the agent, employee, joint venturer or partner of the other party.
23. No Third-Party Beneficiaries. The Contract and this Rider is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of the Contract and this Rider.
24. No Recording. The provision hereof will not constitute a lien on the Property and neither this Agreement nor any notice or memorandum of this Agreement will be recorded by Buyer.
25. Related Agreement. Simultaneous with the execution of the Contract and this Rider, Buyer and entities affiliated with Seller are entering into the Merger Agreement. If the Merger Agreement is terminated for any reason, Buyer may elect to terminate the Contract and receive the return of the Earnest Money.
26. Exclusivity. Seller shall not, and shall cause its officers, directors, employees, and affiliates not to, (i) enter into any agreement for the sale of the Property, (ii) enter into or continue any discussions with other prospective purchasers, potential new partners or new investors with respect to the Property or (iii) with respect to the Property as a standalone asset, solicit any bids or distribute any new marketing materials, until the termination of this the Contract in accordance with the terms hereof.
[signature page follows]
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IN WITNESS WHEREOF, Seller and Buyer have executed this Rider as of the date first written above.
|
Seller: Manitou Springs Real Estate Development, LLC a Colorado limited liability company |
Buyer: Emerald Field Merger Sub, LLC, a Colorado limited liability company | |
| By: _/s/ Donald Douglas Burkhalter | By: | Schwazze Colorado, LLC, | |
| Donald Douglas Burkhalter | its Sole Member | ||
| Title: Owner/Manager |
| By: | Medicine Man Technologies, Inc., | ||
| its Manager |
| By: /s/ James A. Gulbrandsen | By: | /s/ Justin Dye | |
| James A. Gulbrandsen | Name: Justin Dye | ||
| Title: Owner/Manager | Title: Chief Executive Officer |
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EXHIBIT “A”
Form of Special Warranty Deed
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EXHIBIT “B”
Form of Bill of Sale
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Exhibit 2.5
AMENDMENT TO RIDER TO CONTRACT TO BUY AND SELL REAL ESTATE
This Amendment to Rider, (the “Amendment”), is made to the Rider, (the “Rider”) attached to and made a part of the Contract to Buy and Sell Real Estate (Commercial) dated as of January 26, 2022 (the “Contract”), by and between, Manitou Springs Real Estate Development, LLC, a Colorado limited liability company, as Seller, and Emerald Fields Merger Sub, LLC, a Colorado limited liability company, as Buyer, with respect to the Property, as more particularly defined in the Contract.
1. Paragraph 7(a) of the Rider is hereby amended to read as follows:
7(a) Title Policy. The Title Company shall be prepared and irrevocably committed, subject to Buyer’s payment of any title premiums that Buyer is required to pay in accordance with the Contract, to issue to Buyer an owner’s extended coverage title insurance policy (the “Title Policy”) on a standard American Land Title Association form in accordance with the ALTA Commitment for Insurance issued by Capstone Title Company, Order No. 220240, (the Title Insurance Commitment”),with the standard pre-printed exceptions appearing on the Title Insurance Commitment, 1, 2, 5 and 6 deleted, ( standard printed exceptions on the Title Insurance Commitment Nos. 3, 4, 7 and 8 will not be deleted), insuring title to the Property in Buyer (or its assignee) in an amount equal to the Purchase Price, subject only to those title exceptions accepted by the Buyer or that the Buyer has failed to timely object, (the “Permitted Exceptions”) and with all endorsements agreed to between Buyer and Title Company.
2. All other terms and conditions of the Rider shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, Seller and Buyer have executed this Rider as of the date first written above.
|
Seller: Manitou Springs Real Estate Development, LLC a Colorado limited liability company |
Buyer: Emerald Field Merger Sub, LLC, a Colorado limited liability company |
| By: _/s/ Donald Douglas Burkhalter | By: | Schwazze Colorado, LLC, | |
| Donald Douglas Burkhalter | its Sole Member | ||
| Title: Owner/Manager |
| By: | Medicine Man Technologies, Inc., | ||
| its Manager |
| By: /s/ James A. Gulbrandsen | By: | /s/ Justin Dye | |
| James A. Gulbrandsen | Name: Justin Dye | ||
| Title: Owner/Manager | Title: Chief Executive Officer |
Exhibit 2.6
SECOND AMENDMENT TO RIDER TO CONTRACT TO BUY AND SELL REAL ESTATE
This Second Amendment to Rider, (the "Second Amendment"), is made to the Rider, (the "Rider") attached to and made a part of the Contract to Buy and Sell Real Estate (Commercial) dated as of January 26, 2022 (the "Contract"), by and between, Manitou Springs Real Estate Development, LLC, a Colorado limited liability company, as Seller, and Emerald Fields Merger Sub, LLC, a Colorado limited liability company, as Buyer, with respect to the Property, as more particularly defined in the Contract.
1. The parties to the Contract and Rider have discovered that approximately eight (8) parking spaces serving the Property and a portion of the driveway leading to the back of the building located on the west side of the building located on the Property (the "Encroachments"), encroach upon a portion of adjacent Lot 9, which is owned by the City of Manitou Springs, (the "Encroachment Area").
2. The parties agree that the closing of the Property will take place as scheduled on Wednesday, February 9, 2022, but that TWO HUNDRED FIFTY THOUSAND AND NO/100 U.S. DOLLARS, ($250,000,00) of the Purchase Price (as defined in the Contract), will be withheld by the Buyer upon the terms and conditions set forth below, (the "Holdback").
3. Seller will use its commercially reasonable best efforts at its own cost to help secure an Parking Lot Property Right, license, purchase or other similar right for the Encroachments over the Encroachment Area from the City of Manitou Springs, (the "Parking Lot Property Right"), to allow the continued use by the Buyer of the parking areas and driveway located in the Encroachment Area, subject to existing Parking Lot Property Rights and subject further to the City's use of the Lot 9 property for storm drainage and utility purposes. Buyer agrees to reasonably cooperate with Seller's efforts to obtain the Parking Lot Property Right.
4. If the Parking Lot Property Right is obtained on or before February 8, 2023, the Buyer shall pay the $250,000.00 Hold back into the Attorney Trust Account of Charles T. Houghton, P.C. for distribution to the Members of the Seller. Such payment shall be made within 72 hours after the Parking Lot Property Right is signed by the City of Manitou Springs.
5. If the Parking Lot Property Right is not obtained by February 8, 2023, the Buyer shall be entitled to retain the $250,000.00 Holdback as and for its liquidated damages and sole remedy for having the aforementioned Encroachments affect the Prope1ty and/or the operations of the business located thereon, and in full, final and complete settlement of any issues, known or unknown, related to the Encroachments. Buyer and Seller acknowledge and agree that actual damages would be impossible or difficult to ascertain.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
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6. All other terms and conditions of the Contract, Rider and the Amendment to Rider dated February 3, 2022 shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, Seller and Buyer have executed this Rider as of the date first written above.
| Seller: | Buyer: | |
| Manitou Springs Real Estate Development, LLC | Emerald Field Merger Sub, LLC, | |
| a Colorado limited liability company | ||
| By: Schwazze Colorado, LLC, | ||
| By: /s/ Douglas Burkhalter | its Sole Member | |
| Douglas Burkhalter | ||
| Title: Owner/Manager | By: Medicine Man Technologies, Inc., | |
| its Manger | ||
| By: /s/ James A. Gulbrandsen | ||
| James A. Gulbrandsen | By: /s/ Justin Dye | |
| Title: Owner/Manager | Name: Justin Dye | |
| Title: Chief Executive Officer | ||
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Exhibit 2.7
BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT
This Bill of Sale and Assignment and Assumption Agreement (this “Agreement”), dated as of February 9, 2022, is entered into by and among (i) Emerald Fields Merger Sub, LLC, a Colorado limited liability company (“Purchaser”) and (ii) 1508 Management, LLC, a Colorado limited liability company (“Seller”).
WHEREAS, this Agreement is entered into pursuant to that certain Agreement and Plan of Merger, dated as of November 15, 2021, by and among Medicine Man Technologies, Inc., a Nevada corporation, Purchaser, MCG, LLC, a Colorado limited liability company (“MCG”), Donald Douglas Burkhalter and James Guldbrandsen, and the Members (as defined therein) (the “Merger Agreement”).
WHEREAS, Seller wishes to sell and assign to Purchaser, and Purchaser desires to purchase and assume from Seller, all right, title and interest Seller has in the Assets (as defined below).
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser hereby agrees as follows:
Section 1. Purchase and Sale. Seller hereby sells, assigns, transfers, conveys and delivers to Purchaser, and Purchaser hereby purchases and assumes from Seller, free and clear of any mortgages, pledges, liens (statutory or otherwise), charges, security interests, claims or other restrictions or encumbrances of any kind, all of Seller’s right, title and interest in, to and under the assets described on Exhibit A attached hereto, together with the goodwill of Seller's business symbolized by such assets (the “Assets”).
Section 2. Representations and Warranties. Seller represents and warrants to Purchaser that: (a) Seller is the sole owner of all rights, title and interest in and to the Assets, (b) Seller has not assigned, transferred, licensed, pledged or otherwise encumbered the Assets, (c) Seller has full power and authority to enter into this Agreement and to make the assignment set forth herein, (d) Seller is duly organized, validly existing and in good standing under the laws of the State of Colorado, (e) no claim or demand of any person has been made nor is there any proceeding that is pending, or to the knowledge of Seller after due inquiry, threatened, nor is there a reasonable basis therefor, which (i) challenges the rights of Seller with respect to the Assets, (ii) asserts that Seller is infringing or is otherwise in conflict with, or is, required to pay any royalty, license fee, charge or other amount with regard to the Assets, or (iii) claims that any default exists under any agreement or arrangement affecting the Assets, (f) the Assets are not subject to any outstanding order, ruling, decree, judgment or stipulation by or with any court, arbitrator, or administrative agency, or have been the subject of any litigation within the last five years, whether or not resolved in favor of Seller, and (g) the Assets are in good condition and are adequate for the uses to which they are being put, and none of such Assets are in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost.
Section 3. Further Assurances. Seller shall take all such further action and execute, acknowledge, and deliver all such further instruments, notices and other documents and to do such other acts as may be necessary to effectively sell, assign, transfer, convey and deliver the Assets to Purchaser.
Section 4. Parties in Interest. This Agreement shall bind and inure to the benefit of the parties hereto, their respective successors and assigns.
Section 5. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Colorado without giving effect to any choice or conflict of law provision or rule (whether of the State of Colorado or any other jurisdiction).
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Section 6. Entire Agreement. This Agreement, including Exhibit A attached hereto and together with the Merger Agreement, contains the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersedes all prior agreements, negotiations, representations and proposals, written and oral, relating thereto.
Section 7. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
Section 8. Costs and Expenses. Each party shall bear its own costs, expenses, taxes and other charges whatsoever incurred in connection with the execution and performance of this Agreement.
Section 9. Effectiveness. The parties hereto agree that this Agreement will become effective only upon, and the effectiveness of this Agreement is conditioned upon, the closing of the transactions contemplated by the Merger Agreement. If the Merger Agreement is terminated without a closing of the transactions contemplated thereby, this Agreement will be of no further force and effect.
[Signature Page Attached]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first set forth above by their respective officers thereunto duly authorized.
Emerald Field Merger Sub, LLC
By: Schwazze Colorado, LLC, its Sole Member
By: Medicine Man Technologies, Inc., its Manager
By: /s/ Justin Dye
Name: Justin Dye
Title: Chief Executive Officer
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1508 Management, LLC
By: /s/ Donald Douglas Burkhalter
Name: Donald Douglas Burkhalter
Title: President/CEO
| 4 |
Exhibit A
Assets
| • | All inventory and merchandise of any kind, including, without limitation, hats, t-shirts, glassware, and accessories, located at MCG’s Glendale, Colorado and Manitou Springs, Colorado dispensaries |
| • | Winged Fairy Copy Right – US Registration No. VA 2-151-834 |
| • | The following tradenames: |
| • | Emerald Fields, LLC – CO Document No. 20191742748 | |
| • | Emerald Fields Gift Shop – CO Document No. 20191742725 | |
| • | Emerald Fields Gear – CO Document No. 20191576313 |
| • | All furniture, fixtures and equipment and other personalty (including computer hardware and software) located at MCG’s corporate office at 115 North Tejon Street, Unit 110, Colorado Springs, Colorado 80903 |
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Exhibit 99.1
NEWS RELEASE
| For Immediate Release | OTCQX: SHWZ |
SCHWAZZE CLOSES ACQUISITION OF EMERALD FIELDS
Schwazze Continues Colorado Expansion Strategy with
Emerald Fields Cannaboutique Dispensaries in Manitou Springs & Glendale, CO
DENVER, CO – February 10, 2022 – Schwazze, (OTCQX:SHWZ) ("Schwazze" or the “Company"), announced today that it has closed the transaction to acquire MCG, LLC (“Emerald Fields”). Emerald Fields is the owner and operator of two retail cannabis dispensaries, located in Manitou Springs and Glendale, Colorado. This successful acquisition is part of the Company’s ongoing retail expansion plan in Colorado and New Mexico, bringing the total number of dispensaries the Company operates to 32.
Total consideration for the acquisition is $29 million and will be paid as 60% cash and 40% Schwazze common stock upon closing. This is an estimated 3.8 multiple on 2021 Adjusted EBITDA(1).
“Our team is delighted to add the Emerald Fields Cannaboutiques to our growing portfolio of dispensaries and are eager to welcome the team to Schwazze. Manitou Springs and Glendale are attractive locations and valuable assets to our overall growth plan as we continue to build out Colorado. Our team is excited to add another store brand to our house of brands.” said Justin Dye, Schwazze’s CEO.
About Schwazze
Schwazze (OTCQX: SHWZ) is building a premier vertically integrated regional cannabis company with assets in Colorado and New Mexico and will continue to take its operating system to other states where it can develop a differentiated regional leadership position. Schwazze is the parent company of a portfolio of leading cannabis businesses and brands spanning seed to sale. The Company is committed to unlocking the full potential of the cannabis plant to improve the human condition. Schwazze is anchored by a high-performance culture that combines customer-centric thinking and data science to test, measure, and drive decisions and outcomes. The Company's leadership team has deep expertise in retailing, wholesaling, and building consumer brands at Fortune 500 companies as well as in the cannabis sector. Schwazze is passionate about making a difference in our communities, promoting diversity and inclusion, and doing our part to incorporate climate-conscious best practices. Medicine Man Technologies, Inc. was Schwazze’s former operating trade name. The corporate entity continues to be named Medicine Man Technologies, Inc.
Schwazze derives its name from the pruning technique of a cannabis plant to enhance plant structure and promote healthy growth.
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Forward-Looking Statements
This press release contains “forward-looking statements.” Such statements may be preceded by the words “plan,” “will,” “may,”, “predicts,” or similar words. Forward-looking statements are not guarantees of future events or performance, are based on certain assumptions, and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control and cannot be predicted or quantified. Consequently, actual events and results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) our inability to manufacture our products and product candidates on a commercial scale on our own or in collaboration with third parties; (ii) difficulties in obtaining financing on commercially reasonable terms; (iii) changes in the size and nature of our competition; (iv) loss of one or more key executives or scientists; (v) difficulties in securing regulatory approval to market our products and product candidates; (vi) our ability to successfully execute our growth strategy in Colorado and outside the state, (vii) our ability to consummate the acquisition described in this press release or to identify and consummate future acquisitions that meet our criteria, (viii) our ability to successfully integrate acquired businesses and realize synergies therefrom, (ix) the ongoing COVID-19 pandemic, (x) the timing and extent of governmental stimulus programs, (xi) the uncertainty in the application of federal, state and local laws to our business, and any changes in such laws, and (x) out ability to satisfy the closing conditions for the private finding described in this press release. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s website at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise except as required by law.
(1) Adjusted EBITDA represents income (loss) from operations, as reported, before tax, adjusted to exclude non-recurring items, other non-cash items, including stock-based compensation expense, depreciation, and amortization, and further adjusted to remove acquisition related costs, and other one-time expenses, such as severance. The Company uses adjusted EBITDA as it believes it better explains the results of its core business. The Company has not reconciled guidance for adjusted EBITDA to the corresponding GAAP financial measure because it cannot provide guidance for the various reconciling items. The Company is unable to provide guidance for these reconciling items because it cannot determine their probable significance, as certain items are outside of its control and cannot be reasonably predicted. Accordingly, a reconciliation to the corresponding GAAP financial measure is not available without unreasonable effort.
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Investors Joanne Jobin Investor Relations Joanne.jobin@schwazze.com 647 964 0292
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Media Julie Suntrup, Schwazze Vice President | Marketing & Merchandising julie.suntrup@schwazze.com 303 371 0387
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