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Today, two of the most well-known marijuana stocks, CannaVest Corp (CANV) and Medical Marijuana Inc. (MJNA), entered into a settlement agreement pertaining to an agreement terminated by CannaVest last year. The agreement that CannaVest terminated granted HempMeds, a subsidiary of MJNA, a non-exclusive, worldwide license and right to promote, market, sell, distribute and service CannaVest products. The agreement also gave HempMeds an exclusive license to distribute the products online through its websites.
Terms of settlement
Pursuant to the agreement, MJNA and its affiliates agreed to pay CannaVest $750,000. CannaVest will receive $150,000 in cash within 5 business days after the escrow agent confirms receipt of all closing deliverables under the settlement agreement and $600,000 through a secured promissory note, which has a 6% annual interest rate. The note is payable in 6 monthly installments of $101,757.27 and will start on August 15, 2015. The note is secured by shares of CANV held by PhytoSPHERE Systems as a third party beneficiary of the settlement agreement.
Pursuant to the agreement, Hemp Deposit and Distribution Corporation and CANV entered into an assignment of domain name rights whereby HDDC transferred and assigned certain domain names associated with CANV’s business to CANV. Also, CANV and MJNA entered into a trademark assignment, whereby CANV transferred and assigned to MJNA all of its right, title and interest in and to the trademarks Real Scientific, Real Scientific Hemp Oil Nutritional Supplement & Design, RSHO, Cannabis Beauty, Cannabis Beauty Defined and Cannabis Beauty Defined & Design, including all goodwill associated therewith.
CannaVest enters into a standstill agreement
On July 17, 2015, CannaVest entered into a standstill agreement with MJNA, Hemp Deposit and Distribution Corporation, HDDC Holdings, Michael Llamas, James J. Mahoney, Stuart Titus and Cross & Company. The parties agreed to certain standstill, voting and other obligations and commitments with respect to its ownership of 7,575,836 shares (combined) of CANV common stock.
The agreement satisfies certain defaulted debt obligations of Roen Ventures. Roen Ventures is owned by Mercia Holdings, LLC and Mai Dun Limited, LLC, entities that are owned and controlled by Bart P. Mackay, one of the CANV’s directors. Under the terms of the agreement, the companies agreed that, until the earlier of:
- 6 years and one day after CANV’s 2014 Annual Meeting of Stockholders
- The time the ownership of the Standstill Parties on an aggregate basis decreases below 5% of the outstanding shares of CANV
- the time CANV was to file for bankruptcy protection or were to commence other insolvency proceedings,
None of the Standstill Parties nor any of its affiliates and associates will, among other things and subject to certain exceptions:
- Participate in any solicitation of proxies with respect to the voting of the company’s securities
- Form or join a voting “group” within the meaning of Section 13(d)(3) of the Exchange Act
- Seek the removal of any member of the Board of Directors of CannaVest
- Propose a director or slate of directors in opposition to a nominee or slate of nominees proposed by management or the Board of Directors.
During the term, each of the Standstill Parties agreed to vote in favor of the nominees for election or reelection as a director of CANV selected by the Board of Directors and otherwise support such director candidates, in accordance with the recommendation of the Company’s Board of Directors with respect to any other proposal submitted by any stockholder of CannaVest.
Notwithstanding the foregoing, the Standstill Parties reserve the right to vote either for or against any recommendation of the Board of Directors relating to:
- The sale or other conveyance of all or substantially all of the company’s assets
- The acquisition of the company
- Any “go-private” transaction or similar arrangement that would cause the de-listing of the company’s stock.
Outlook
We are favorable on this news because it removes a legal headwind and CannaVest will receive $750,000. Shares of CANV are down 57% during the last three months and shares are trading near oversold territory (RSI=33). CannaVest’s volume has started to improve and the company’s 5 day volume is 2% higher than its average 30 day volume.
We will continue to monitor trading following this important development. If you want more information related to this, click here!
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