Item 1.01 Entry into a Material
Definitive Agreement.
On August 28, 2019 (the “Execution
Date”), Medicine Man Technologies (the “Company”), a Nevada corporation, entered into a binding term sheet (the
“Term Sheet”) with Starbuds Pueblo LLC, Starbuds Louisville LLC, Starbuds Niwot LLC, Starbuds Longmont LLC and Starbuds
Commerce City, LLC (collectively, the “Targets” ) pursuant to which the Company will purchase the membership interests
of the Targets (the “Acquisition”).
As consideration, the Company shall pay
a total purchase price of $31,005,089 (the “Purchase Price”) consisting of $23,253,816 in cash ($7,751,272.25 of which
is payable over a period of twelve months after the closing as set forth in the Term Sheet) and 2,601,098 shares of its common
stock, par value $0.001 per share. The 2,601,098 shares was determined by averaging the closing price of Company’s common
stock for the five (5) days prior to August 28, 2019, which equated to $2.98 per share. A portion of the stock consideration will
be subject to certain trading restrictions in the first year after issuance, to be defined in the Long-Form Agreement, as defined
below. In addition, claw-back language for fifteen percent (15%) of the stock consideration will also be included in the Long-Form
Agreement, as defined below. The Purchase Price is subject to adjustment in the event of a variance in excess of 10% in the
Targets’ revenues.
The Term Sheet provides for a closing on
or before May 1, 2020, unless the parties agree to an extension.
The obligations of the Company and Seller
under the Term Sheet are conditioned upon the satisfaction or mutual waiver of certain closing conditions (the “Conditions”)
on or before May 1, 2020 or unless the parties agree to a mutual extension, including the following:
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i.
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regulatory approval relating to all applicable filings and expiration or early termination of any
applicable waiting periods;
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ii.
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regulatory approval of the Marijuana Enforcement Division and applicable local licensing authority
approval;
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iii.
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receipt of all material necessary, third party, consents and approvals;
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iv.
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each party's compliance in all material respects with the respective obligations under the Term
Sheet;
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v.
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a tax structure that is satisfactory to both the Company and Seller; and
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vi.
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the execution of leases with right of first refusals for MMT to acquire the underlying real estate
when applicable, in market terms).
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The Term Sheet may be terminated (i) upon
mutual consent of the parties, (ii) by the Company if the Targets shall materially breach the terms of the Term Sheet and fail
to cure such breach after notice or such breach is incurable, (iii) by the Targets if the Company shall materially breach the terms
of the Term Sheet and fail to cure such breach after notice or such breach is incurable, or (iv) by the Targets if the Company
fails to deliver Proof of Funds on or before April 1, 2020, or (v) on November 15, 2019, if the Long-Form Agreement, as defined
below, is not executed by the parties. The Company shall pay the targets a termination fee of one percent of the Purchase Price
or $310,051, in the event of the termination of the Term Sheet on the basis of the conditions set forth above in subparagraphs
(iv) and (v).
Under the terms of the Term Sheet, the
Company and the Targets agreed to indemnification upon the terms and conditions outlined therein.
The Term Sheet contemplates the parties
entering into a long-form agreement and other ancillary documents to memorialize the Acquisition (the “Long-Form Agreement”)
upon the conclusion of all standard legal and business due diligence. In the event the Long-Form Agreement is not agreed to on
or before May 1, 2020 and all of the Conditions are either satisfied or waived, the Acquisition shall be consummated and governed
by the terms of the Term Sheet.
On September 3, 2019, the Company issued
a press release with respect to the foregoing, a copy of which is attached hereto as Exhibit 99.1.