EXHIBIT 10.1

 

THIS INVESTMENT AGREEMENT made as of the 30th day of October, 2018.

 

AMONG:

 

AUSTRALIS CAPITAL INC., a corporation formed under the laws of Alberta, Canada
(“Australis”)

 

– and –

 

BODY AND MIND INC., a corporation formed under the laws of Nevada, USA (“BaM”)

 

WHEREAS

 

A. Australis wishes to subscribe for and purchase from BaM, and BaM has agreed
to issue and sell to Australis, 16,000,000 Units (as defined herein) of BaM at a
price of $0.40 per Unit;

 

 

B. Australis wishes to subscribe for and purchase from BaM, and BaM has agreed
to issue and sell to Australis, unsecured convertible debentures in the
principal amount of $1,600,000 bearing an interest rate of 8% per annum,
calculated and payable semi-annually, in arrears, and maturing after a period of
twenty four months; and

 

 

C. In consideration of Australis’ agreement to enter into and complete the
transactions contemplated by this Agreement, BaM has agreed to grant Australis
certain additional rights as set out herein.

 

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the respective
promises, covenants, representations, warranties, indemnities and agreements
herein contained and for other good and valuable consideration (the receipt and
sufficiency of which are expressly acknowledged), the Parties (as defined
herein) covenant and agree as follows:

 

ARTICLE 1

 

INTERPRETATION

 

Definitions

 

1.1 In this Agreement, including the recitals hereto, unless the context
otherwise requires, the following words and phrases will have the meanings
specified below:

 

 

(a) “Accelerated Warrant Exercise Period” has the meaning given to it in 2.1(c);

 

 

 

 

(b) “Affiliate” has the meaning ascribed to such term in the Business
Corporations Act (Alberta);

 

 

 

 

(c) “Applicable Laws” means, in relation to any person, property, transaction or
event, all applicable provisions of (i) any federal, provincial, state or local
laws, statutes, rules and regulations, and (ii) orders, judgments, decisions and
official directives of Governmental Authorities to which the person is a party
or by which it is bound or having application to the property, transaction or
event, as the case may be;

 

   

   

 

 

(d) “Applicable Securities Laws” means, collectively, and as the context may
require, the securities legislation having application and the rules, policies,
notices and orders issued by securities regulatory authorities having
application in the circumstances;

 

 

 

 

(e) “Australis” means Australis Capital Inc.;

 

 

 

 

(f) “Australis Nevada” means Australis Capital (Nevada) Inc., a wholly-owned
subsidiary of Australis;

 

 

 

 

(g) “BaM” means Body and Mind Inc.;

 

 

 

 

(h) “Board” means the board of directors of BaM;

 

 

 

 

(i) “Build-Out Funds” has the meaning given to it in Section 2.6(d);

 

 

 

 

(j) “Business Day” means any day, other than a Saturday, Sunday or statutory
holiday in Vancouver, British Columbia;

 

 

 

 

(k) “Closing” means the completion of the issue and sale of the Purchased
Securities as provided herein;

 

 

 

 

(l) “Closing Date” means the date of the Closing, to be on or about November 2,
2018, or such other date as may be agreed to between BaM and Australis;

 

 

 

 

(m) “Commercial Advisory Agreements” has the meaning given to it in Section 2.4;

 

 

 

 

(n) “Commissions” has the meaning given to it in Section 5.2;

 

 

 

 

(o) “Common Share” means one common share in the share capital of BaM;

 

 

 

 

(p) “Consulting Agreement” means the consulting agreement between BaM and Robert
Hasman dated November 14, 2017;

 

 

 

 

(q) “CSE” means the Canadian Securities Exchange;

 

 

 

 

(r) “Debentures” means the unsecured convertible debentures issued by BaM
bearing interest at 8% per annum, calculated and payable semi-annually, in
arrears, and maturing 24 months after the Closing Date;

 

 

 

 

(s) “Debenture Certificate” has the meaning given to it in Section 2.2(a);

 

 

 

 

(t) “Debenture Purchase Price” has the meaning given to it in Section 2.2

 

 

 

 

(u) “Debenture Shares” means the Common Shares of BaM issued on conversion of
the Debentures;

 

 

 

 

(v) “Deposit” has the meaning given to it in Section 7.1;

 

 

 

 

(w) “Exercise Notice” has the meaning given to it in Section 3.5;

 

 

 

 

(x) “Financing” means the non-brokered private placement of the Purchased
Securities under the terms of this Agreement;

 

  -2-

   

 

 

(y) “Governmental Authority” means: (i) any federal, provincial, state, county,
municipal or local government or governmental body, including any department,
agency, commission, board or other authority thereof, exercising any statutory,
regulatory, expropriation or taxing authority; (ii) any quasi-governmental body
acting under the valid authority of any of the foregoing; and (iii) any
domestic, foreign or international judicial, quasi-judicial or administrative
court, tribunal, commission, board, panel or arbitrator having competent
jurisdiction over BaM;

 

 

 

 

(z) “Hazardous Substances” has the meaning given to it in Section 4.1(t);

 

 

 

 

(aa) “License Agreement” has the meaning given to it in Section 2.3;

 

 

 

 

(bb) “Loan Repayment” has the meaning given to it in Section 2.6(b);

 

 

 

 

(cc) “Material Adverse Effect” means a fact, circumstance, change or event that
(individually or in the aggregate with all such other facts, circumstances,
changes or events) is materially adverse to the business, operations, results of
operations, cash flow, revenue, assets, liabilities, obligations (whether
absolute, accrued, conditional or otherwise) or condition (financial or
otherwise) of BaM and its subsidiaries on a consolidated basis, other than a
change, event, violation, inaccuracy or circumstance:

 

 

(i) relating to the global economy or securities markets in general;

 

 

 

 

(ii) resulting from conditions affecting the cannabis industry as a whole;

 

 

 

 

(iii) resulting from general economic, financial, currency exchange, securities
or commodity market conditions in Canada; or

 

 

 

 

(iv) resulting from the rate at which Canadian dollars or United States dollars
can be exchanged for any foreign currency;

 

 

(dd) “Maturity Date” has the meaning given to it in Section 2.2(c);

 

 

 

 

(ee) “Nevada Production Facility” means the production facility owned by BaM
located 3375 Pepper Lane, Las Vegas, NV 89120;

 

 

 

 

(ff) “NMG Ohio” means NMG Ohio LLC;

 

 

 

 

(gg) “NMG Ohio Dispensary” means the dispensary owned by NMG Ohio located 709
Sugar Lane, Elyria, OH 44035

 

 

 

 

(hh) “Notice Period” has the meaning given to it in Section 3.4;

 

 

 

 

(ii) “Offering” means any proposed issuance of Offered Securities pursuant to a
public offering, a private placement or otherwise;

 

 

 

 

(jj) “Offering Notice” has the meaning given to it in Section 3.2;

 

 

 

 

(kk) “Offered Securities” means any equity or voting securities, or securities
convertible into or exchangeable for equity or voting securities, of BaM or a
successor entity of BaM;

 

  -3-

   

 

 

(ll) “Ohio Production Facility” means the cannabis production facility owned by
NMG Ohio located 1710 Sawmill Parkway, Huron, OH 44839

 

 

 

 

(mm) “Parties” means BaM and Australis, collectively;

 

 

 

 

(nn) “Participation Right” has the meaning given to it in Section 3.1;

 

 

 

 

(oo) “PCMLTFA” has the meaning given to it in Section 5.1(p);

 

 

 

 

(pp) “Permits” has the meaning given to it in Section 4.1(v);

 

 

 

 

(qq) “Public Record” means information which has been publicly filed at
www.sedar.com by BaM under Applicable Securities Laws;

 

 

 

 

(rr) “Purchased Securities” means the Debentures and the Units;

 

 

 

 

(ss) “Principal Amount” has the meaning given to it in Section 2.2;

 

 

 

 

(tt) “Promissory Notes” means the promissory notes evidencing the indebtedness
of BaM to the Vendors;

 

 

 

 

(uu) “Subscriptions Funds” means the funds representing the Unit Purchase Price
and the Debenture Purchase Price;

 

 

 

 

(vv) “Third Party Trim Purchases” means trim purchased by BaM from third
parties;

 

 

 

 

(ww) “Transfer Agent” means New Horizon Transfer Agency, the transfer agent for
BaM;

 

 

 

 

(xx) “Unit Purchase Price” has the meaning given to it in Section 2.1;

 

 

 

 

(yy) “Unit Share” means one Common Share issued by BaM as part of each Unit;

 

 

 

 

(zz) “U.S. Person” has the meaning ascribed to such term in Rule 902(k) of
Regulation S under the U.S. Securities Act;

 

 

 

 

(aaa) “U.S. Securities Act” means the United States Securities Act of 1933, as
amended;

 

 

 

 

(bbb) “Vendors” means TI Nevada, LLC; MBK Investments, LLC; the Rozok Family
Trust; KAJ Universal Real Estate Investments, LLC; NV Trees, LLC; and SW Fort
Apache, LLC;

 

 

 

 

(ccc) “Warrant” means one whole transferable common share purchase warrant
issued by BaM, with additional terms described in Section 2.1(b);

 

 

 

 

(ddd) “Warrant Certificate” has the meaning given to it in Section 2.1(b); and

 

 

 

 

(eee) “Warrant Share” means one Common Share to be issued upon the exercise of a
Warrant.

 

  -4-

   

 

Interpretation

 

1.2 Unless the context otherwise requires, the following provisions will govern
the interpretation of this Agreement:

 

(a) the terms “in writing” or “written” include printed or typewritten
communications or any electronic means of communication by which words are
capable of being visually reproduced at a distant point of reception, including
by facsimile;

 

(b) “this Agreement”, “hereto”, “herein”, “hereby”, “hereunder”, “hereof” and
similar expressions refer to this Agreement as a whole, and not to any
particular Article, Section or other subdivision hereof, and includes each and
every instrument varying, amending, modifying or supplementing this Agreement;

 

(c) the division of this Agreement into Articles, Sections and other
subdivisions and the insertion of headings are for convenience of reference only
and will not affect the construction or interpretation of this Agreement; and

 

(d) unless otherwise specified all dollar amounts referred to in this Agreement
are in lawful money of Canada.

 

ARTICLE 2

 

INVESTMENT TRANSACTIONS

 

Unit Purchase

 

2.1 Subject to the terms and conditions set forth herein, Australis hereby
subscribes for and agrees to purchase from BaM, and BaM hereby accepts the
subscription and agrees to issue and sell to Australis, 16,000,000 Units at a
price of $0.40 per Unit for an aggregate purchase price of $6,400,000 (the “Unit
Purchase Price”), in accordance with the following:

 

(a) each Unit will consist of one Common Share and one Warrant;

 

(b) each Warrant will entitle the holder to purchase one Warrant Share at a
price of $0.50 per Warrant Share for a period of 24 months after the Closing
Date, subject to adjustment and acceleration in certain events. The Warrants
will be governed by the terms and conditions set out in the certificate
representing the Warrants in the form attached as Appendix I (the “Warrant
Certificate”); and

 

(c) if at any time after the date of issuance of the Warrants and during the
term of the Warrants the closing price of the Common Shares on the CSE (or if
the Warrants are not then listed on the CSE, such other stock exchange on which
the Common Shares are listed) is equal to or greater than $1.20 for thirty (30)
consecutive trading days, upon BaM providing notice to Australis, the Warrants
will expire on the date that is thirty (30) days from the date of such notice
(“Accelerated Warrant Exercise Period”). During the Accelerated Warrant Exercise
Period, Australis may exercise the Warrants in accordance with the terms of the
Warrant Certificate.

 

  -5-

   

 

Unsecured Convertible Debenture Purchase

 

2.2 Subject to the terms and conditions set forth herein, Australis hereby
subscribes for and agrees to purchase from BaM, and BaM hereby accepts the
subscription and agrees to issue and sell to Australis, the Debentures in the
principal amount of $1,600,000 (the “Principal Amount”) for an aggregate
purchase price of $1,600,000 (the “Debenture Purchase Price”), in accordance
with the following:

 

(a) the Debentures will be duly and validly created and issued pursuant to a
definitive certificate (the “Debenture Certificate”) governing the terms of
issue of the Debentures in the form attached as Appendix II;

 

(b) the Debentures will bear interest from the date of issuance at a rate of 8%
per annum, calculated and payable semi-annually, in arrears;

 

(c) repayment of the Principal Amount on the Debentures, together with accrued
interest thereon, will be made on or prior to 5:00 p.m. (Vancouver time) on the
date that is two years from the date of issuance (the “Maturity Date”);

 

(d) the Debentures will be convertible at the option of Australis into Common
Shares at a conversion price equal to $0.55 per Common Share up to the Maturity
Date, subject to adjustment and acceleration in certain events; and

 

(e) if at any time after the date of issuance of the Debentures and up to the
Maturity Date, the closing price of the Common Shares on the CSE (or if the
Common Shares are not then listed on the CSE, such other stock exchange on which
the Common Shares are listed) is equal to or greater than $1.65 for twenty (20)
consecutive trading days, BaM may force the conversion of the then outstanding
principal amount of the Debentures (and any accrued and unpaid interest thereon)
at the then applicable conversion price on not less than ten (10) Business Days’
notice.

 

License Agreement

 

2.3 The Parties agree that following the Closing Date they will negotiate in
good faith a license agreement (the “License Agreement”), under the terms of
which BaM will grant Australis an exclusive and assignable license to use the
BaM brand outside the United States of America on commercially reasonable terms.
BaM agrees that until the date that is 21 days from the Closing Date,

 

(a) BaM and its representatives will immediately cease all existing discussions
and negotiations, if any, with any other party in respect of any potential
license of the BaM brand outside the United States of America or any other
transaction the consummation of which would or could reasonably be expected to
interfere with or prevent the License Agreement or materially reduce the benefit
of the proposed License Agreement to Australis (collectively, an “Alternative
Transaction”); and

 

(b) BaM will not, directly or indirectly, permit any of its representatives to
solicit, initiate, or encourage proposals or offers from, or participate in
negotiations with, any third party, or provide information to any third party
relating to any Alternative Transaction.

 

  -6-

   

 

Commercial Advisory Agreement

 

2.4 On the Closing Date, BaM will enter into a commercial advisory agreement
with Australis Nevada in the form attached as Appendix III (the “Commercial
Advisory Agreement”), pursuant to which BaM will pay Australis Nevada a fee of
USD $10,000 per month payable on the first day of each month for its advisory
and consulting services for a term ending on the date that is the earlier of:
(i) five years following the Closing Date, and (ii) the date Australis no longer
holds 10% or more of the issued and outstanding common shares of BaM.

 

Robert Hasman Consulting Agreement

 

2.5 On the Closing Date, BaM will enter into an amendment to the Consulting
Agreement with Robert Hasman to extend the non-competition and non-solicitation
provisions to include the state of Ohio. It shall be a condition of Closing that
BaM shall have obtained a waiver of rights from Robert Hasman in relation to
section A7(d) of the Consulting Agreement, whereby Robert Hasman will waive his
right to a termination fee equivalent to six months fees, for a period of six
months after a change of control of BaM.

 

Use of Proceeds

 

2.6 The Subscription Funds will only be used by BaM as follows, unless otherwise
agreed to in writing by Australis:

 

(a) a maximum of $400,000, only $300,000 of which may be payable in cash, will
be used to pay an Investment Advisory Fee to Canaccord Genuity Corp.;

 

(b) USD $1,175,000 will be used by BaM as partial payment of the Promissory
Notes (the “Loan Repayment”), of which USD $1,000,000 will remain owing to the
Vendors after the Loan Repayment;

 

(c) USD $1,925,000 will be used by BaM for strategic acquisitions and/or
investment opportunities within the State of Ohio;

 

(d) USD $1,650,000 (the “Build Out Funds”) will be allocated to the development,
build out and equipment purchases for the NMG Ohio Dispensary and/or Ohio
Production Facility, unless the parties agree to allocate the Build Out Funds to
the development of the Nevada Production Facility;

 

(e) $600,000 will be allocated towards the working capital of Third Party Trim
Purchases; and

 

(f) the balance of the Subscription Funds will be allocated towards the working
capital of BaM.

 

ARTICLE 3

 

INVESTOR RIGHTS AND RESTRICTIONS

 

Participation Right

 

3.1 BaM agrees that, subject to the terms provided herein, Australis has the
right (the “Participation Right”), to subscribe for and to be issued as part of
any Offering completed after the Closing Date at the subscription price per
Offered Security pursuant to the Offering and otherwise on substantially the
terms and conditions of the Offering (provided that, if Australis is prohibited
by Applicable Securities Laws, the rules and policies of any stock exchange on
which the Common Shares of BaM are then listed and posted for trading or other
applicable laws from participating on substantially the terms and conditions of
the Offering, BaM shall use commercially reasonable efforts to enable Australis
to participate on terms and conditions that are as substantially similar as
circumstances permit), up to such number of Offered Securities that will allow
Australis to maintain a percentage ownership interest of the Common Shares,
calculated on a fully-diluted basis, that is equal to its ownership interest
prior to the Offering, provided that such ownership interest does not exceed 40%
of the Common Shares on a fully-diluted basis after giving effect to such
Offering.

 

  -7-

   

 

3.2 BaM will give Australis notice in writing of any proposed Offering on or
prior to the date on which any such Offering is announced (the “Offering
Notice”), and in any event not less than ten (10) Business Days before such
Offering is scheduled to close, together with the form of subscription agreement
(if any) for such Offering and any other documentation required to be completed
by Australis as a subscriber to such Offering. In order to exercise the
Participation Right, Australis must return the completed subscription agreement
(if required) and related subscription documentation, together with certified
funds for the aggregate subscription amount, to BaM (the “Exercise Notice”) not
less than three (3) Business Days before the scheduled closing date of the
Offering specified in the original notice (provided that, if the scheduled
closing date is extended, the date on which Australis must deliver its documents
and subscription funds will be extended for the same period) (the “Notice
Period”), failing which the Participation Right in respect of that Offering will
expire.

 

3.3 The Participation Right will expire at such time as Australis holds less
than 10% of the issued and outstanding Common Shares.

 

3.4 The Participation Right will not extend to securities issued in conjunction
with: (i) the grant or exercise of stock options and other similar issuances
pursuant to any share incentive plan of BaM and other share compensation
arrangements, (ii) the exercise of warrants and other convertible securities
issued by BaM, (iii) a plan of arrangement, merger, business combination,
take-over bid or other acquisition of the business, securities or assets of a
third party; provided that, in the event that Australis’ ownership interest in
the Common Shares on a fully-diluted basis is diluted as a result of issuances
of securities as contemplated in this Section 3.4, then for the purposes of
calculating the number of Offered Securities that Australis will be entitled to
purchase under the Participation Right, securities issued under this Section 3.4
will be excluded from the calculation of Australis’ ownership interest, such
that Australis will be entitled to participate in the Offering to increase its
ownership interest in the Common Shares on a fully-diluted basis to what it
would have been if no securities were issued as contemplated in this Section
3.4.

 

3.5 If BaM receives an Exercise Notice from Australis within the Notice Period,
BaM will:

 

(a) subject to the receipt and continued effectiveness of all required approvals
(including any applicable approval(s) of the CSE, any required approvals under
Applicable Securities Laws and any required shareholder approval);

 

(b) subject to the issuance to Australis or its Affiliate of Common Shares or
other Offered Securities being exempt from prospectus and registration
requirements under Applicable Securities Laws; and

 

(c) subject to the completion of the relevant Offering, issue to Australis,
against payment of the subscription price payable in respect thereof, that
number of Common Shares or other Offered Securities, as applicable, set forth in
the Exercise Notice. The parties agree that the issuance of any Common Shares or
other Offered Securities to Australis pursuant to this Section 3.5 will occur
concurrently with the completion of the relevant Offering.

 

  -8-

   

 

3.6 If BaM is required by the CSE (if applicable) or otherwise to seek
shareholder approval for the issuance of the Offered Securities to Australis or
its Affiliate, then BaM will call and hold a meeting of its shareholders to
consider the issuance of the Offered Securities to Australis as soon as
reasonably practicable, and in any event such meeting will be held within 75
days after the date that BaM is advised that it will require shareholder
approval, and will recommend approval of the issuance of the Offered Securities
and will solicit proxies in support thereof.

 

Nomination of Directors

 

3.7 For as long as Australis owns at least 10% of the issued and outstanding
Common Shares, Australis will be entitled to nominate one (1) director to the
Board. If Australis exercises all of the Warrants purchased in the Financing and
converts all Debentures, Australis will be entitled to nominate a second (2nd)
director to the Board. For as long as Australis maintains at least 25% of the
issued and outstanding Common shares of BaM, Australis will be entitled to
maintain two (2) directors on the Board, provided that each director nominee
must meet the requirements of applicable corporate, securities and other laws
and the rules of the CSE. If permitted by applicable law and CSE rules, BaM will
appoint such director(s) to the Board. In respect of any meeting of shareholders
at which directors are to be elected, BaM will take all actions necessary and
advisable to ensure that (i) proxies are solicited by or on behalf of BaM in
favour of the election of the director nominees nominated in accordance with
this Section 3.7 and (ii) every such nominee is endorsed and recommended in the
applicable management information circular and other proxy solicitation
materials provided by or on behalf of BaM to shareholders. BaM will take all
other commercially reasonable actions necessary to permit the election or
appointment to the Board of such nominees. BaM will notify Australis when such
thresholds are achieved, and at least twenty (20) Business Days prior to the
dissemination of materials for an annual meeting of shareholders, to allow
Australis to identify its nominees (which Australis will provide to BaM at least
five (5) Business Days prior to the dissemination of such materials).

 

Purchase of Additional Common Shares in Connection with Business Acquisition of
Investment within the State of Ohio

 

3.8 In connection with the closing of any business acquisition and/or investment
in the State of Ohio, Australis will be entitled to purchase such number of
Common Shares that will enable Australis to maintain the same ownership interest
in the Common Shares, on a fully diluted basis, that it holds prior to any such
business acquisition and/or investment in the State of Ohio at a purchase price
per Common Share equal to the greater of $0.40 and the maximum permitted
discount allowable under the policies of the CSE. Additional investment by
Australis will include 100% warrant coverage.

 

  -9-

   

 

Information Rights

 

3.9 BaM acknowledges that, as a reporting issuer, Australis has continuous and
timely disclosure obligations under Applicable Securities Laws. In order to
permit Australis to comply with its reporting obligations under Applicable
Securities Laws, BaM agrees that it will, in a timely manner, provide Australis
with all information relating to BaM which is necessary for Australis to comply
with its disclosure obligations. Without limiting the generality of the
foregoing, until it is no longer required for Australis to comply with its
obligations under Applicable Securities Laws, BaM will:

 

(a) provide all financial information required by Australis in connection with
the preparation of its financial statements and management’s discussion and
analysis within 75 days of the end of Australis’ fiscal year and within 35 days
of the end of each quarterly reporting period of Australis;

 

(b) if required under Applicable Securities Laws, deliver to the Company audited
annual financial statements and unaudited interim financial statements of BaM
and corresponding management’s discussion and analysis for those periods as
required by, and prepared in accordance with, Applicable Securities Laws;

 

(c) deliver to the Australis all information necessary in order for Australis to
issue a press release and file a material change report in accordance with
Applicable Securities Laws with respect to any material change in the business,
operations or capital of BaM that would reasonably be expected to have a
significant effect on the market price or value of any securities of Australis;

 

(d) cause each of the directors and senior officers of BaM and BaM’s material
subsidiaries, and, promptly upon his or her assumption of office, each of the
future directors and senior officers of BaM and of BaM’s material subsidiaries,
to file reports in respect of transactions in securities of Australis pursuant
to applicable insider reporting requirements as if he or she were an insider of
the Australis;

 

(e) require each present and future significant shareholder (as defined in
National Instrument 55-104 – Insider Reporting Requirements and Exemptions) of
BaM, and each future or present director or officer of each such significant
shareholder, to file reports in respect of transactions in securities of
Australis pursuant to applicable insider reporting requirements as if he, she or
it were an insider of Australis; and

 

(f) provide to Australis such information regarding BaM and its business as is
required to be included in an annual information form or any other report
required to be filed by Autralis with one or more securities regulators.

 

3.10 BaM acknowledges that a failure of BaM to comply with the information
delivery requirements set forth in Section 3.9 may result in irreparable harm to
Australis and that BaM will be liable to Australis for all damages, including
any consequential damages, which may result to Australis as a result of a breach
of Section 3.9 by BaM.

 

ARTICLE 4
 
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF BAM

 

Representations and Warranties of BaM

 

4.1 BaM represents and warrants to Australis, as at the date hereof and as of
the Closing Date, and acknowledges that Australis is relying upon such
representations and warranties in entering into this Agreement, as follows:

 

(a) BaM is a valid and subsisting corporation under the laws of the state of
Nevada and is qualified or registered to transact business in each jurisdiction
in which failure to be so qualified or registered would reasonably be expected
to constitute a Material Adverse Effect;

 

  -10-

   

 

(b) BaM has the corporate power and capacity to enter into this Agreement and to
perform all of its obligations hereunder. The execution and delivery of this
Agreement, and the consummation by BaM of the transactions hereunder, has been
duly authorized by all necessary corporate action on the part of BaM (including
the approval of the board of directors of BaM) and no other proceedings on the
part of BaM are or will be necessary to authorize this Agreement or the
transactions contemplated hereunder;

 

(c) this Agreement has been duly executed and delivered by BaM and is a legal,
valid and binding obligation of BaM, enforceable against BaM in accordance with
its terms, subject to applicable bankruptcy or similar laws affecting
enforcement of creditors’ rights generally and to the extent that equitable
remedies such as specific performance and injunction are in the discretion of
the court from which they are sought;

 

(d) BaM has the power and authority to create, issue and deliver the Warrants
and the Debentures and perform its obligations under the Debentures;

 

(e) each of the execution and delivery of this Agreement and all documents
contemplated hereunder, the performance by BaM of its obligations hereunder or
thereunder, the issue and sale of the Purchased Securities hereunder and the
consummation of the transactions contemplated hereby, including the issuance and
delivery of the Debentures, Unit Shares and the Warrants comprising the Units,
and the issuance and delivery of the Warrant Shares upon the exercise of the
Warrants and the delivery of the Debenture Shares upon conversion of the
Debentures, do not and will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under (whether
after notice or lapse of time or both), (i) any statute, rule or regulation
applicable to BaM, including Applicable Securities Laws; (ii) the constating
documents or resolutions of BaM which are in effect at the date hereof; (iii)
any debt instrument, material agreement, mortgage, indenture, contract,
agreement, instrument, lease or other document to which BaM is a party or by
which it is bound; or (iv) any judgment, decree or order binding BaM or the
property or assets of BaM;

 

(f) the Unit Shares issued at Closing, when paid for in accordance with the
provisions of this Agreement will be duly and validly issued as fully paid and
non-assessable Common Shares in the capital of BaM;

 

(g) BaM has allotted and reserved for issuance a sufficient number of Warrant
Shares upon the due and proper exercise of the Warrants, and, upon issuance in
accordance with the terms of the Warrant Certificate, such Warrant Shares will
be duly and validly issued as fully paid and non-assessable Common Shares in the
capital of BaM;

 

(h) BaM has allotted and reserved for issuance a sufficient number of Debenture
Shares upon due and proper conversion of the Debentures and, upon issuance in
accordance with the terms of the Certificate, such Debenture Shares will be duly
and validly issued as fully paid and non-assessable Common Shares in the capital
of BaM;

 

(i) to BaM’s knowledge, (i) there is no civil, administrative, regulatory,
criminal or investigative action or proceeding, or arbitration or other dispute
settlement procedure, pending or threatened against BaM by or before any
Governmental Authority; and (ii) no event has occurred that would reasonably be
expected to give rise to any such action, proceeding or procedure where the same
would in each case reasonably be expected to constitute a Material Adverse
Effect;

 

  -11-

   

 

(j) there is no judgment, decree, award or order of any Governmental Authority
outstanding against (and binding upon) BaM that has or is reasonably expected to
constitute a Material Adverse Effect or which prohibits or materially impairs
the conduct of BaM’s business as currently conducted.

 

(k) to the best of the knowledge of BaM, no person, firm or corporation acting
or purporting to act at the request of BaM is entitled to any brokerage, agency
or finder’s fee in connection with the transactions described herein, except as
disclosed to Australis;

 

(l) BaM is a “reporting issuer” in the provinces of British Columbia and Ontario
and the Common Shares are listed on the CSE under the symbol “BAMM”;

 

(m) as of the date hereof, the authorized capital of BaM consists of 900,000,000
Common Shares with a par value of $0.0001, of which 47,774,817 Common Shares are
issued and outstanding as fully paid and non-assessable. Additionally, the
Company has a commitment to issue an aggregate of 352,500 Common Shares, an
aggregate of 125,000 contingently issuable Common shares, 10,106,820 share
purchase warrants and 4,025,000 stock options as previously disclosed to
Australis and, except as disclosed in the Public Record, no person has any
right, agreement or option, present or future, contingent or absolute, or any
right capable of becoming such a right, agreement or option, pre-emptive,
contractual or otherwise, for the issue or allotment of any unissued shares in
the capital of BaM or any other security convertible into or exchangeable for
any such shares, or to require BaM to purchase, redeem or otherwise acquire any
of the issued and outstanding shares in its capital other;

 

(n) the Public Record complies in all material respects with the requirements of
Applicable Securities Laws;

 

(o) the Public Record and all financial, marketing, sales and operational
information provided to Australis are true and correct in all material respects
and do not contain any misrepresentations (as such term is defined in the
Applicable Securities Laws);

 

(p) the financial statements filed with the Commissions or supplied by BaM have
been prepared in accordance with Canadian generally accepted accounting
principles, international financial reporting standards or in conformity with
accounting principles generally accepted in the United States of America, as
applicable; contain no misrepresentations; present fairly, fully and correctly,
in all material respects, the financial position and all material liabilities
(accrued, absolute, contingent or otherwise) of BaM, as of the date thereof; and
there have been no adverse material changes (as defined in Applicable Securities
Laws) in the financial position of BaM since the date thereof and the business
of BaM has been carried on in the usual and ordinary course consistent with past
practice since the date thereof;

 

(q) the auditors of BaM who audited the financial statements of BaM for the most
recent financial year-end and who provided their audit report thereon are
independent public accountants as required under Applicable Securities Laws and
there has never been a reportable event (within the meaning of National
Instrument 51-102) with the present auditors of BaM;

 

(r) BaM has complied and will comply fully with the requirements of all
applicable corporate and securities laws and administrative policies and
directions, including, without limitation, the Applicable Securities Laws in
relation to the issue and trading of its securities and in all matters relating
to the Financing;

 

  -12-

   

 

(s) other than in respect of certain United States federal laws relating to the
cultivation, distribution or possession of marijuana in the United States as
disclosed in the continuous disclosure documents of BaM, BaM is in compliance in
all material respects with all applicable laws in the jurisdictions in which it
carries on business and which may materially affect BaM, has not received a
notice of non-compliance, nor knows of, nor has reasonable grounds to know of,
any facts that could give rise to a notice of non-compliance with any such laws,
regulations and statutes, and is not aware of any pending change or contemplated
change to any applicable law or regulation or governmental position that would
materially affect the business of BaM or the business or legal environment under
which BaM operates;

 

(t) BaM has not caused or permitted the release, in any manner whatsoever, of
any pollutants, contaminants, chemicals or industrial toxic or hazardous waste
or substances (collectively, the “Hazardous Substances”) on or from any of its
properties or assets nor has it received any notice that it is potentially
responsible for a clean-up site or corrective action under any applicable laws,
statutes, ordinances, by-laws, regulations, or any orders, directions or
decisions rendered by any government, ministry, department or administrative
regulatory agency relating to the protection of the environment, occupational
health and safety or otherwise relating to dealing with Hazardous Substances;

 

(u) all operations conducted by BaM on the properties of BaM have been conducted
and are currently conducted in all material respects in accordance with good
engineering practices and any applicable material workers’ compensation, and
health, safety and workplace laws, regulations and policies;

 

(v) BaM has all licences, permits, approvals, consents, certificates,
registrations and other authorizations (collectively the “Permits”) under all
applicable laws and regulations, other than in respect of certain United States
federal laws relating to the cultivation, distribution or possession of
marijuana in the United States as disclosed in the continuous disclosure
documents of BaM, necessary for the operation of the businesses carried on or
proposed to be commenced by BaM and each Permit is valid, subsisting and in good
standing and BaM is not in default or breach in any material respect of any
Permit, and to the best of the knowledge of BaM, no proceeding is pending or
threatened to revoke or limit any Permit;

 

(w) to BaM’s knowledge, information and belief, none of the directors or
officers of BaM is or has been ever been subject to prior regulatory, criminal
or bankruptcy proceedings in Canada or elsewhere;

 

(x) there is not presently, and will not be until the Closing, any material
change or change in any material fact relating to BaM which has not been
disclosed to the public;

 

(y) to the best of BaM’s knowledge, BaM is not in default in the observance of
performance of any terms, covenant, obligation to be performed by BaM, under any
material instrument, document, agreement, or arrangement (including memorandums
of understanding or joint venture agreements) to which BaM or its subsidiaries
is a party or otherwise bound and all such material instruments, contracts,
agreements, or arrangements (including memorandums of understanding or joint
venture agreements) are in good standing and no event has occurred which with
notice or lapse of time or both would constitute such a default by BaM or, to
the best of BaM’s knowledge, any other party;

 

(z) BaM is not a party to any actions, suits or proceedings which could
materially affect its business or financial condition, and to the best of BaM’s
knowledge no such actions, suits or proceedings are contemplated or have been
threatened;

 

  -13-

   

 

(aa) there are no judgments against BaM which are unsatisfied, nor are there any
consent decrees or injunctions to which BaM is subject;

 

(bb) no order ceasing, halting or suspending trading in securities of BaM nor
prohibiting the sale of such securities has been issued to and is outstanding
against BaM or, to the knowledge of BaM, any of its directors, officers or
promoters or against any other companies that have common directors, officers or
promoters and to the knowledge of BaM no investigations or proceedings for such
purposes are pending or threatened;

 

(cc) BaM has filed, or is in the process of filing, all federal, provincial,
local and foreign tax returns which are required to be filed, or have requested
extensions thereof, and has or intends to pay all taxes required to be paid by
BaM, including its subsidiaries and any other assessment, fine or penalty levied
against BaM and/or its subsidiaries, or any amounts due and payable to any
governmental authority, to the extent that any of the foregoing is due and
payable;

 

(dd) BaM has established on its books and records reserves which are adequate
for the payment of all taxes not yet due and payable and there are no liens for
taxes on the assets of BaM, except for taxes not yet due, and there are no
audits of any of the tax returns of which are known by BaM’s management to be
pending, and there are no claims which have been or may be asserted relating to
any such tax returns which, if determined adversely, would result in the
assertion by any governmental agency of any deficiency which would have a
material adverse effect on the properties, business or assets of BaM;

 

(ee) BaM owns or possesses adequate rights to use all material patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
proprietary rights and other intellectual property necessary for the business of
BaM now conducted to the knowledge of BaM, without any conflict with or
infringement of the rights of others. BaM has received no communication alleging
that BaM has violated or, by conducting its business as proposed, would violate
any of the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity;

 

(ff) BaM does not have any loans or other indebtedness outstanding which has
been made to any of its shareholders, officers, directors or employees, past or
present, or any person not dealing at “arm’s length” (as such term is used in
the Income Tax Act (Canada));

 

(gg) BaM will not take any action which would be reasonably expected to result
in the delisting or suspension of its common shares on or from the CSE or on or
from any stock exchange, market or trading or quotation facility on which its
common shares are listed or quoted and BaM will comply, in all material
respects, with the rules and regulations thereof; and

 

(hh) BaM has and will have filed all documents that are required to be filed
under the continuous disclosure provisions of the Applicable Securities Laws,
including annual and interim financial information and annual reports, press
releases disclosing material changes and material change reports.

 

  -14-

   

 

ARTICLE 5

 

REPRESENTATIONS, WARRANTIES

AND COVENANTS OF AUSTRALIS

 

Representations, Warranties and Covenants of Australis

 

5.1 Australis represents and warrants to BaM, as at the date hereof and as of
the Closing Date, and covenants with BaM, and acknowledges that BaM is relying
upon such representations, warranties and covenants in entering into this
Agreement, as follows.

 

(a) Australis is a valid and subsisting corporation under the laws of Alberta,
Canada;

 

(b) Australis is neither a U.S. Person nor subscribing for the Purchased
Securities for the account of a U.S. Person or for resale in the United States
and Australis confirms that the Units have not been offered to Australis and
that this Agreement has not been signed in the United States;

 

(c) the Debentures, Common Shares and Warrants have not been and will not be
registered under the U.S. Securities Act and may not be offered or sold in the
United States or to any U.S. Person, except pursuant to applicable exemptions
from United States federal and state registration requirements;

 

(d) Australis has the corporate power and capacity to enter into this Agreement
and to perform all of its obligations hereunder. The execution and delivery of
this Agreement and the consummation by Australis of the transactions hereunder
have been duly authorized by all necessary corporate action on the part of
Australis;

 

(e) this Agreement has been duly executed and delivered by Australis and is a
legal, valid and binding obligation of Australis, enforceable against Australis
in accordance with its terms, subject to applicable bankruptcy or similar laws
affecting enforcement of creditors’ rights generally and to the extent that
equitable remedies such as specific performance and injunction are in the
discretion of the court from which they are sought;

 

(f) each of the execution and delivery of this Agreement and all documents
contemplated hereunder, the performance by Australis of its obligations
hereunder or thereunder and the consummation of the transactions contemplated
hereby, do not and will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under (whether after
notice or lapse of time or both), (i) any statute, rule or regulation applicable
to Australis; (ii) the constating documents or resolutions of Australis which
are in effect at the date hereof; (iii) any debt instrument, material agreement,
mortgage, indenture, contract, agreement, instrument, lease or other document to
which Australis is a party or by which it is bound; or (iv) any judgment, decree
or order binding Australis or the property or assets thereof;

 

(g) Australis is purchasing the Purchased Securities as principal within the
meaning of Applicable Securities Laws, for its own account and not for the
benefit of any other person, for investment only and not with a view to the
resale or distribution of all or any of the Purchased Securities;

 

(h) Australis is resident in the Province of British Columbia and the Purchased
Securities have an acquisition cost to Australis of not less than C$150,000,
payable in cash at Closing, and Australis was not created and is not being used
solely to purchase or hold securities in reliance on the prospectus exemptions
provided under Section 2.10 of NI 45-106, it pre-existed the Financing and has a
bona fide purpose other than investment in the Purchased Securities;

 

(i) Australis acknowledges that no securities commission, agency, Governmental
Authority, stock exchange or other regulatory body has reviewed or passed on the
merits of the Purchased Securities and there are risks associated with the
purchase of the Purchased Securities;

 

  -15-

   

 

(j) Australis acknowledges that the certificates representing the Purchased
Securities (and any Warrant Shares and Debenture Shares issued before four
months and one day after Closing) will bear the following legends:

 

 

“THE SECURITIES REPRESENTED HEREBY [FOR THE WARRANTS AND DEBENTURES ADD: AND ANY
SECURITIES ISSUABLE UPON CONVERSION THEREOF] HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR
ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE U.S. SECURITIES ACT AND SUCH LAWS COVERING SUCH SECURITIES,
OR THE COMPANY RECEIVES AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY STATING
THAT SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE U.S. SECURITIES ACT AND SUCH LAWS.
THE SECURITIES REPRESENTED BY THE CERTIFICATEHEREBY CANNOT BE THE SUBJECT OF
HEDGING TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH
THE U.S. SECURITIES ACT.

 

 

 

 

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST
NOT TRADE THE SECURITY BEFORE [FOUR MONTHS PLUS ONE DAY FROM THE CLOSING DATE]”

 

  

(k) Australis does not currently hold, directly or indirectly, any Common Shares
nor any other securities of BaM;

 

(l) Australis is able to bear economic risk of loss of its investments in the
Financing and Debentures;

 

(m) Australis is not in possession of any material information concerning BaM
that has not generally been disclosed;

 

(n) Australis understands the political, economic and other business risks of
its investment, including the fact that cannabis is currently registered as a
Schedule 1 drug under the Controlled Substances Act in the United States of
America;

 

(o) Australis is not acting jointly or in concert with any other person in
connection with its purchase of securities of BaM, and is not a party to any
agreement, commitment or understanding with any other person for the acquisition
or holding of securities of BaM, whether by BaM, such other person, or other
third party;

 

(p) Australis acknowledges that there are restrictions under Applicable
Securities Laws on Australis’s ability to resell the Unit Shares, Warrants and
Debentures and that it has been advised to consult its own legal advisors with
respect to the particulars of such resale restrictions, and that it is
Australis’s sole responsibility to find out what those restrictions are and to
comply with them;

 

(q) Australis has not taken any action which will or may result in BaM, or any
its directors, officers, employees or agents breaching any regulatory or legal
requirements of any jurisdiction in connection with the purchase and sale of the
Purchased Securities hereunder;

 

  -16-

   

 

(r) Australis acknowledges that there may be material tax consequences to
Australis from the purchase of the Purchased Securities under Canadian federal,
provincial or local laws or foreign laws, and BaM makes no representations
regarding the tax consequences to Australis;

 

(s) to the best of the knowledge of Australis, this subscription for Purchased
Securities has not been made through or as a result of, and the distribution of
Purchased Securities is not being accompanied by, any form of advertisement,
including, without limitation, in printed public media, radio, television,
internet or telecommunications, including electronic display, or as part of a
general solicitation;

 

(t) none of the funds Australis is using to purchase the Purchased Securities
are, to the knowledge of Australis, proceeds obtained or derived, directly or
indirectly, as a result of illegal activities. The funds being used to purchase
the Purchased Securities which will be advanced by Australis to BaM hereunder
will not represent proceeds of crime for the purposes of the Proceeds of Crime
(Money Laundering) and Terrorist Financing Act (Canada) (the “PCMLTFA”) and
Australis acknowledges that BaM may in the future be required by law to disclose
Australis’s name and other information relating to this Agreement and
Australis’s subscription hereunder, on a confidential basis, pursuant to the
PCMLTFA. To the best of Australis’s knowledge (i) none of the funds to be
provided by Australis are being tendered on behalf of a person who has not been
identified to Australis, and (ii) Australis will promptly notify BaM if
Australis discovers that any of such representations cease to be true, and to
provide BaM with appropriate information in connection therewith;

 

(u) to the best of the knowledge of Australis, no person, firm or corporation is
entitled to any brokerage, agency or finder’s fee in connection with the
transactions described herein, except as disclosed to BaM; and

 

(v) Australis acknowledges that no prospectus has been filed by BaM with any
securities commission or similar authority, in connection with the issuance of
the Debentures, the Units, the Unit Shares or the Warrants, and the issuance and
the sale of the Purchased Securities is subject to such sale being exempt from
the prospectus requirements under Applicable Securities Laws and accordingly:

 

(i) Australis is restricted from using certain civil remedies available under
such legislation;

 

(ii) Australis may not receive information that might otherwise be required to
be provided to it under such legislation; and

 

(iii) BaM is relieved from certain obligations that would otherwise apply under
such legislation.

 

Privacy

 

5.2 Australis provides its consent to the disclosure of personal information by
BaM to the CSE, to the British Columbia Securities Commission and to any other
applicable securities regulatory authorities (the “Commissions”), BaM’s
registrar and transfer agent, legal counsel and any other party involved in the
purchase and sale of the Units for the following purposes;

 

(a) internal use with respect to managing the relationships between and
contractual obligations of BaM and Australis;

 

  -17-

   

 

(b) indirect collection of personal information and queries by the Commissions;

 

(c) use and disclosure to BaM’s transfer agent and registrar;

 

(d) use and disclosure for income tax related purposes, including without
limitation, where required by law, disclosure to Canada Revenue Agency or United
States Internal Revenue Services;

 

(e) disclosure to securities regulatory authorities and other regulatory bodies
with jurisdiction with respect to reports of trade and similar regulatory
filings;

 

(f) disclosure to a governmental or other authority to which the disclosure is
required by court order or subpoena compelling such disclosure and where there
is no reasonable alternative to such disclosure;

 

(g) disclosure to professional advisers of BaM in connection with the
performance of their professional services;

 

(h) disclosure to any person where such disclosure is necessary for legitimate
business reasons and is made with the Australis prior written consent;

 

(i) disclosure to a court determining the rights of the parties under this
Agreement; or

 

(j) for use and disclosure as otherwise required or permitted by law.

 

5.3 In addition, Australis acknowledges that BaM will file with the Commissions
Forms 45-106F1 and 45-106F6, which will be publicly available, and which will
include Australis’ name and the amount of their subscription.

 

ARTICLE 6

 

CONDITIONS PRECEDENT

 

Mutual Conditions

 

6.1 The respective obligations of BaM and Australis under this Agreement are
subject to the fulfillment of the following conditions being satisfied at or
before the Closing:

 

(a) receipt of all required regulatory, shareholder and third party approvals,
and compliance with all applicable regulatory requirements and conditions
necessary to complete the Financing;

 

(b) this Agreement will not have been terminated pursuant to Article 8;

 

(c) there being no prohibition at law against the completion of the subscription
and issuance of the Purchased Securities; and

 

(d) the Purchased Securities issued in connection with the Financing being
issued in a manner that is exempt from applicable prospectus requirements of
Applicable Securities Law.

 

  -18-

   

 

Conditions of Closing in Favour of BaM

 

6.2 The completion of the sale of the Purchased Securities by BaM is conditional
upon the following conditions in favour of BaM being satisfied at or before the
Closing:

 

(a) Australis complying with all the terms, covenants and conditions of this
Agreement on its part to be complied with up to the Closing;

 

(b) the representations and warranties of Australis contained in this Agreement
as of the date of this Agreement being true and correct in all material respects
as of the Closing as if made at and as of the Closing; and

 

(c) Australis having delivered the requisite deliverables contemplated by
Section 7.1of this Agreement.

 

Conditions of Closing in Favour of Australis

 

6.3 The completion of the purchase of the Purchased Securities by Australis is
conditional upon the following conditions in favour of Australis being satisfied
at or before the Closing:

 

(a) BaM complying with all the terms, covenants and conditions of this Agreement
on its part to be complied with up to the Closing;

 

(b) there being no material change or change in a material fact or a new
material fact or an undisclosed material fact or change in respect of BaM which
might be reasonably be expected to have a Material Adverse Effect and Australis
will be satisfied that BaM will not have taken any act, entered into or become a
party to or subject to any agreement or transaction or incurred or become liable
for any obligation except in the ordinary course of business.

 

(c) the representations and warranties of BaM contained in this Agreement as of
the date of this Agreement being true and correct in all material respects as of
the Closing as if made at and as of the Closing;

 

(d) BaM having taken all necessary corporate action to appoint the Australis
nominee to the Board, in accordance with Section 3.7;

 

(e) BaM having made all requisite filings with the CSE in connection with the
Financing in accordance with the policies of the CSE; and

 

(f) BaM having delivered the requisite certificates contemplated by Section 7.2
of this Agreement.

 

ARTICLE 7

 

CLOSING MATTERS

 

Deposit

 

7.1 The Parties acknowledge that Australis has paid a deposit of $100,000 (the
“Deposit”) in respect of the Financing, which is currently held by BaM’s legal
counsel. Upon the Closing, the Deposit, together with the interest thereon,
shall be paid to BaM on account of the payment of the Subscription Funds. If the
Financing is not completed by reason of the non fulfillment of one or more of
the conditions to be fulfilled by BaM under this Agreement, including all
conditions set forth in Section 6.3, then the Deposit, together with the
interest earned thereon, shall be repaid to Australis. If the Financing is not
completed for any other reason, the Deposit, together with the interest earned
thereon, shall be paid to BaM.

 

  -19-

   

 

Closing Deliveries

 

7.2 BaM’s obligation to sell the Purchased Securities at Closing will be
conditional upon the satisfactory receipt by BaM at or before or at Closing of
the following:

 

(a) payment of the Subscription Funds (less the Deposit) made by certified
cheque delivered by Australis to BaM or electronic funds transfer to such
account as may be directed by BaM;

 

(b) the Commercial Advisory Agreement, duly executed by Australis;

 

(c) a Certificate of Status (or equivalent) for Australis dated within one
business day (or such earlier or later date as BaM may accept) of the Closing
Date; and

 

(d) a certified copy of the resolutions of the Board of Directors of Australis
authorizing this Agreement and the transactions contemplated hereby.

 

7.3 Australis’s obligation to purchase the Purchased Securities at the Closing
will be conditional upon the satisfactory receipt by Australis at or before the
Closing of the following:

 

(a) a certificate dated as of the Closing Date in substantially the form as
Appendix IV, signed by the appropriate officer of BaM addressed to Australis;

 

(b) a share certificate representing Unit Shares;

 

(c) a Warrant Certificate representing the Warrants;

 

(d) a Debenture Certificate representing the Debentures;

 

(e) the Commercial Advisory Agreement, duly executed by BaM;

 

(f) evidence of BaM having entered into the amendment and waiver agreements with
Robert Hasman contemplated in Section 2.5 of this Agreement;

 

(g) a Certificate of Status (or equivalent) for BaM dated within one Business
Day (or such earlier or later date as Australis may accept) of the Closing Date;
and

 

(h) a letter from the Transfer Agent as to the number of Common Shares issued
and outstanding as at a date no more than one Business Day prior to the Closing
Date.

 

ARTICLE 8

 

TERM AND TERMINATION

 

Termination

 

8.1 This Agreement may be terminated at any time prior to the Closing Date:

 

(a) by mutual written agreement of the Parties;

 

(b) by Australis if a breach of any representation or warranty or failure to
perform any obligation on the part of BaM as set forth in this Agreement will
have occurred that would cause the conditions set forth in Section 6.1and
Section 6.3 not to be satisfied or such conditions are incapable of being
satisfied by the Closing Date, as reasonably determined by BaM, provided however
that BaM is not then in breach of this Agreement so as to cause any condition in
Section 6.1or Section 6.3 not to be satisfied; or

 

(c) by BaM if a breach of any representation or warranty or failure to perform
any obligation on the part of Australis as set forth in this Agreement will have
occurred that would cause the conditions set forth in Section 6.1or Section 6.2
not to be satisfied, or such conditions are incapable of being satisfied by the
Closing Date as reasonably determined by Australis, provided however, that
Australis is not then in breach of this Agreement so as to cause any condition
in Section 6.1 or Section 6.2not to be satisfied.

 

  -20-

   

 

ARTICLE 9

 

MISCELLANEOUS

 

Confidentiality

 

9.1 Except as required by Applicable Laws, Applicable Securities Laws or
applicable stock exchange requirements, neither BaM nor Australis will make any
public announcement or statement with respect to the transactions contemplated
by and in this Agreement without the approval of the other party, acting
reasonably. Moreover, in any event, each party agrees to give 24 hours prior
notice to the other of any public announcement relating to the transactions
contemplated by and in this Agreement and agrees to consult with the other prior
to issuing each such public announcement.

 

Expenses

 

9.2 Each party will bear its own expenses in connection with this Agreement and
the transactions contemplated herein.

 

Further Assurances

 

9.3 Each party will from time to time hereafter, at the reasonable request of
the other party and without further consideration, do such further acts and
execute and deliver such further instruments and documents as may be reasonably
required in order to fully perform and carry out the terms of this Agreement.

 

Successor and Assigns

 

9.4 This Agreement will enure to the benefit of and will be binding upon the
parties hereto and their respective successors and permitted assigns. Neither
this Agreement nor any rights or obligations hereunder may be assigned by any of
the parties hereto without the express written consent of the other party.

 

Time of Essence

 

9.5 Time is of the essence of this Agreement.

 

  -21-

   

 

Governing Law

 

9.6 This Agreement will be governed by and construed in accordance with the laws
of the Province of British Columbia and the federal laws of Canada applicable
therein, excluding reference to conflicts of laws principles that, if applied,
would require the application of the laws of another jurisdiction. Each of the
parties hereby irrevocably submits to and attorns to the exclusive jurisdiction
of the courts of the Province of British Columbia with respect to any actions,
claims, disputes or proceedings arising out of this Agreement or the transaction
contemplated hereby.

 

Survival

 

9.7 The representations, warranties, covenants and agreements made herein will
survive the Closing and the completion of the transactions hereunder for a
period of two years following the date of the Closing.

 

Notice

 

9.8 Unless otherwise expressly provided in this Agreement, any notice or other
communication to be given under this Agreement (a “notice”) shall be in writing
addressed as follows:

 

 

(a) If to BaM, to:

 

 

 

Body and Mind Inc.

750 – 1095 West Pender Street

Vancouver, BC

V6E 2M6

 

 

 

 

 

Attention: Leonard Clough

Email: len@altuscapital.ca

 

with a copy (for informational purposes only and not constituting notice) to:

 

DLA Piper (Canada) LLP

Suite 6000, 1 First Canadian Place

PO Box 367, 100 King St W

Toronto ON

M5X 1E2

 

Attention: Derek Sigel

Email: derek.sigel@dlapiper.com

 

 

(b) If to Australis, to:

 

 

 

 

 

Australis Capital Inc.

Address: Suite 900, 510 Seymour Street

Vancouver, BC

V6B 1V5

 

Attention: Scott Dowty

Email: scott@ausacap.com

 

with a copy (for informational purposes only and not constituting notice) to:

 

McMillan LLP

1500 – 1550 West Georgia Street

Vancouver, BC V6E 4N7

 

Attention: Mark Neighbor

Email: mark.neighbor@mcmillan.ca

 

or to such other address as any of the parties may designate by notice given to
the others.

 

  -22-

   

 

Each notice shall be personally delivered to the addressee or sent by means of
electronic transmission to the addressee and: (i) a notice which is personally
delivered shall, if delivered on a Business Day, be deemed to be given and
received on that day and, in any other case, be deemed to be given and received
on the first Business Day following the day on which it is delivered; and (ii) a
notice which is sent by means of electronic transmission shall be deemed to be
given and received on the first Business Day following the day on which it is
sent.

 

Amendments and Waivers

 

9.9 Any term of this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and is signed, in the case of an amendment, by
each party to this Agreement, or in the case of a waiver, by the party against
whom the waiver is to be effective.

 

Severability

 

9.10 The invalidity or unenforceability of any particular provision of this
Agreement will not affect or impair the validity or enforceability of the
remaining provisions of this Agreement, and the provision determined to be
invalid or unenforceable will be severable from the remaining provisions hereof.

 

Entire Agreement

 

9.11 This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and will supersede any and all prior
negotiations, understandings and agreements between the parties.

 

Counterparts

 

9.12 This Agreement may be executed and delivered (including by facsimile or
other electronic transmission) by the parties hereto in separate counterparts,
each of which will when executed be deemed an original and all of which taken
together will constitute one and the same agreement. The exchange of copies of
this Agreement and of signature pages by facsimile or electronic transmission
will constitute effective execution and delivery of this Agreement as between
the parties and may be used in lieu of the original agreement for all purposes.
Signatures of the authorized signatories of the parties transmitted by facsimile
or electronic transmission will be deemed to be their original signatures for
all purposes.

 

[Balance of Page Left Blank]

 

  -23-

   

 

IN WITNESS WHEREOF the parties have executed this Agreement as of the day and
year first above written.

 

AUSTRALIS CAPITAL INC.

     

Per:

/s/ Scott Dowty

 

Authorized Signatory       BODY AND MIND INC.  

 

 

Per:

/s/ Leonard Clough

 

 

Authorized Signatory

 

 

  -24-

   

 

APPENDIX I

 

Warrant Certificate

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST
NOT TRADE THE SECURITY BEFORE ·, 2019.

 

THE SECURITIES REPRESENTED HEREBY AND ANY SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THESE SECURITIES MAY NOT BE OFFERED FOR RESALE, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION OR EXCLUSION FROM REGISTRATION
UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE CANNOT BE THE SUBJECT OF HEDGING
TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE U.S.
SECURITIES ACT.

 

THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF A U.S. PERSON OR PERSON IN
THE UNITED STATES UNLESS THIS WARRANT AND SECURITIES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE
APPLICABLE SECURITIES LEGISLATION OF ANY SUCH STATE OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE. “UNITED STATES” AND “U.S. PERSON” ARE AS
DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.

 

THE WARRANTS REPRESENTED HEREBY WILL BE VOID AND OF NO VALUE AFTER 5:00 PM
(VANCOUVER TIME) ON ·, 2020.

 

BODY AND MIND, INC.

 

(Incorporated under the laws of the State of Nevada)

  

Certificate Number: ·

 

**16,000,000* Warrants to Purchase

 

 

**16,000,000** Shares

 

COMMON SHARE PURCHASE WARRANTS

 

THIS IS TO CERTIFY THAT, for value received, AUSTRALIS CAPITAL INC. of Suite
900, 510 Seymour Street Vancouver, BC V6B 1V5 (the “Holder”) is entitled to
subscribe for and purchase up to 16,000,000 fully paid and non-assessable common
shares without par value (collectively the “Shares” and individually, a “Share”)
in the capital of Body and Mind, Inc. (the “Company”) at any time on or before
5:00 p.m. Vancouver time on ·, 2020, subject to acceleration in certain events
(the “Expiry Date”), at a price of CAD$0.50 per Share, subject, however, to the
provisions and upon the Terms and Conditions attached hereto as Schedule “A”.

 

The Warrants will be subject to an accelerated expiry if the closing price of
the Shares on the Canadian Securities Exchange (or if the Company is not listed
on the Canadian Securities Exchange, then such other stock exchange on which the
Shares are listed and where a majority of the trading volume occurs) is equal to
or greater than $1.20 for a period of thirty (30) consecutive trading days, in
which event the Company may, at its election, give notice to the holder that the
Warrants will expire at 5:00 p.m. (Vancouver time) on the date that is thirty
(30) calendar day after the issuance of such notice.

 

The rights represented by this Warrant Certificate may be exercised by the
Holder, in whole or in part (but not as to a fraction of a Share) by surrender
of this Warrant Certificate (properly endorsed as required), together with a
Warrant Exercise Form in the form attached hereto as Appendix “B”, duly
completed and executed, to the Company at 750 - 1095 West Pender Street,
Vancouver, British Columbia V6E 2M6 (Attention: Chief Executive Officer), or
such other address as the Company may from time to time in writing direct,
together with a certified cheque or bank draft payable to or to the order of the
Company in payment of the purchase price of the number of Shares subscribed for.
The Holder is advised to read “Instruction to Holders” attached hereto as
Appendix “A” for details on how to complete the Warrant Exercise Form (as such
term is defined in Schedule “A”).

 

[REST OF PAGE INTENTIONALLY LEFT BLANK]

 

  -2-

   

 

IN WITNESS WHEREOF the Company has caused this Warrant Certificate to be
executed by its duly authorized officer, this ______ day of _____________, 2018.

 

BODY AND MIND, INC.

     

Per:

 

Authorized Signatory  

 

  -3-

   

 

SCHEDULE “A”

 

TERMS AND CONDITIONS

ATTACHED TO COMMON SHARE PURCHASE WARRANTS

ISSUED BY BODY AND MIND, INC.

(the “Company”)

  

Each Warrant of the Company, whether single or part of a series, is subject to
these Terms and Conditions as they were at the date of issue of the Warrant.

 

PART 1

 

DEFINITIONS AND INTERPRETATION

 

Definitions

 

1.1 In these Terms and Conditions, except as otherwise expressly provided
herein, the following words and phrases will have the following meanings:

 

(a) “Company” means Body and Mind, Inc. and includes any successor corporations;

 

(b) “Company’s auditor” means the accountant duly appointed as auditor of the
Company;

 

(c) “Exercise Price” means CAD$0.50 per Share or as may be adjusted as per Part
5;

 

(d) “Expiry Date” means the date defined as such on the face page of the Warrant
Certificate;

 

(e) “Expiry Time” means 5:00 p.m. Vancouver time on the Expiry Date;

 

(f) “Holder” means the registered holder of a Warrant;

 

(g) “person” means an individual, corporation, partnership, trustee or any
unincorporated organization, and words importing persons have a similar meaning;

 

(h) “Shares” or “shares” means the common shares in the capital of the Company
as constituted at the date of issue of a Warrant and any shares resulting from
any event referred to in Part 5;

 

(i) “Warrant” means a warrant as evidenced by the certificate, one (1) Warrant
entitles the holder to purchase one (1) common share of the Company (subject to
adjustment) on or before the Expiry Date at the Exercise Price set forth on the
Warrant Certificate;

 

(j) “Warrant Certificate” means the certificate evidencing the Warrant;

 

(k) “Warrant Exercise Form” means Appendix “B” hereof; and

 

(l) “Warrant Transfer Form” means Appendix “C” hereof.

 

   

   

 

Interpretation

 

1.2 In these Terms and Conditions, except as otherwise expressly provided
herein:

 

(a) the words “herein”, “hereof”, and “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular Part,
clause, subclause or other subdivision;

 

(b) a reference to a Part means a Part of these Terms and Conditions and the
symbol § followed by a number or some combination of numbers and letters refers
to the section, paragraph or subparagraph of these Terms and Conditions so
designated;

 

(c) the headings are for convenience only, do not form a part of these Terms and
Conditions and are not intended to interpret, define or limit the scope, extent
or intent of these Terms and Conditions or any of its provisions;

 

(d) all dollar amounts referred to herein are expressed in Canadian funds;

 

(e) time will be of the essence hereof; and

 

(f) words importing the singular number include the plural and vice versa, and
words importing the masculine gender include feminine and neuter genders.

 

Applicable Law

 

1.3 The Warrants will be construed in accordance with the laws of the Province
of British Columbia and the laws of Canada applicable thereto and will be
treated in all respects as legal contracts under the laws of the Province of
British Columbia.

 

PART 2

 

ISSUE OF WARRANTS

 

Additional Warrants

 

2.1 The Company may at any time and from time to time issue Warrants or grant
options or similar rights to purchase shares in its capital.

 

Issue in Substitution for Lost Warrants

 

2.2 In case a Warrant Certificate will become mutilated, lost, destroyed or
stolen, the Company in its discretion may issue and deliver a new Warrant
Certificate of like date and tenor as the one mutilated, lost, destroyed or
stolen in exchange for, and in place of, and upon cancellation of such mutilated
Warrant Certificate, or in lieu of and in substitution for such lost, destroyed
or stolen Warrant Certificate, and the Warrants represented by such substituted
Warrant Certificate will be entitled to the benefit hereof and rank equally in
accordance with its terms with all other Warrants of the same issue. The Company
may charge a reasonable fee for the issuance and delivery of a new Warrant
Certificate.

 

2.3 The applicant for the issue of a new Warrant Certificate pursuant hereto
will bear the cost of the issue thereof and in the case of loss, destruction or
theft furnish to the Company such evidence of ownership, and of loss,
destruction or theft of the Warrant Certificate so lost, destroyed or stolen as
will be satisfactory to the Company in its discretion; and such applicant may
also be required to furnish indemnity in amount and form satisfactory to the
Company in its discretion and will pay the reasonable charges of the Company in
connection therewith.

 

Holder not a Shareholder

 

2.4 The holding of a Warrant will not constitute the Holder a shareholder of the
Company, nor entitle the Holder to any right or interest in respect thereof,
except as expressly provided in the Warrant Certificate.

 

  -2-

   

 

PART 3

 

OWNERSHIP AND TRANSFER OF Warrant

 

Exchange of Warrants

 

3.1 A Warrant Certificate in any authorized denomination, upon compliance with
the reasonable requirements of the Company, may be exchanged for a Warrant
Certificate(s) in any other authorized denomination of the same issue entitling
the Holder to purchase an equal aggregate number of Shares at the same Exercise
Price and on the same terms as the Warrant Certificate so exchanged.

 

3.2 Warrants may be exchanged only with the Company. Any Warrants tendered for
exchange will be surrendered to the Company and cancelled.

 

3.3 The Warrants are transferable on the terms and conditions contained herein
and by the Holder completing and submitting to the Company a completed and duly
executed Warrant Transfer Form.

 

Charges for Exchange

 

3.4 On exchange of Warrants, the Company, except as otherwise herein provided,
may charge a reasonable fee for each new Warrant Certificate issued, and payment
of any transfer taxes or governmental or other charges required to be paid will
be made by the party requesting such exchange.

Ownership of Warrants

 

3.5 The Company may deem and treat the Holder of a Warrant as the absolute owner
of such Warrant for all purposes and will not be affected by any notice or
knowledge to the contrary.

 

Notice to Holder

 

3.6 Unless herein otherwise expressly provided, any notice to be given hereunder
to a Holder will be deemed to be validly given, if mailed to the address of the
Holder as set out on the Warrant Certificate. Any notice so given will be deemed
to have been received five days from the date of mailing to the Holder or any
market intermediary then holding the Warrants of the Holder in any trust
account.

 

PART 4

 

EXERCISE OF WARRANTS

 

Method of Exercise of Warrants

 

4.1 The right to purchase Shares conferred by a Warrant may be exercised by the
Holder surrendering the Warrant Certificate, together with a duly completed and
executed Warrant Exercise Form and a certified cheque or bank draft payable to,
or to the order of Company at the address as set out on the Warrant Certificate,
for the purchase price applicable at the time of surrender in respect of the
shares subscribed for in lawful money of Canada to the Company at the address as
set out on the Warrant Exercise Form.

 

  -3-

   

 

Effect of Exercise of Warrants

 

4.2 Upon surrender and payment as aforesaid, the shares so subscribed for will
be deemed to have been issued, and the Holder will be deemed to have become the
holder of such shares on the date of such surrender and payment, and such shares
will be issued at the Exercise Price as may be adjusted in the events and in the
manner described herein.

 

4.3 Within 10 business days after surrender and payment as aforesaid, the
Company will forthwith cause to be delivered to the person in whose name the
shares are directed to be registered as specified in such Warrant Exercise Form,
or if no such direction is given, the Holder, a certificate for the appropriate
number of shares not exceeding those which the Holder is entitled to purchase
pursuant to the Warrant Certificate surrendered.

 

Subscription for Less than Entitlement

 

4.4 The Holder may purchase a number of shares less than the number which the
Holder is entitled to purchase pursuant to the surrendered Warrant Certificate.
In the event of any purchase of a number of shares less than the number which
can be purchased pursuant to this Warrant Certificate, the Holder, upon exercise
thereof, will, in addition to certificates representing shares issued on such
exercise, and be entitled to receive a new Warrant Certificate in respect of the
balance of the shares which the Holder was entitled to purchase pursuant to the
surrendered Warrant Certificate but which were not then purchased.

 

Warrants for Fractions of Shares

 

4.5 To the extent that the Holder is entitled to receive on the exercise or
partial exercise thereof a fraction of a share, such right may be exercised in
respect of such fraction only in combination with another Warrant which in the
aggregate will entitle the Holder to receive a whole number of shares.

 

Expiration of Warrants

 

4.6 After the Expiry Date, all rights under the Warrants will wholly cease and
terminate, and the Warrants will thereupon be void and of no effect.

 

Exercise Price

 

4.7 The price per share which must be paid to exercise a Warrant is the Exercise
Price, as may be adjusted in the events and in the manner described herein.

 

PART 5

 

ADJUSTMENTS

 
Adjustments

 

5.1 If and whenever the Shares will be subdivided into a greater or consolidated
into a lesser number of shares, or in the event of any payment by the Company of
a stock dividend (other than a dividend paid in the ordinary course), or in the
event that the Company conducts a rights offering to its shareholders, the
exercise price will be decreased or increased proportionately as the case may
be. Upon any such subdivision, consolidation, payment of a stock dividend or
rights offering, the number of shares deliverable upon the exercise of a Warrant
and the exercise price of the Warrant will be increased or decreased
proportionately as the case may be.

 

  -4-

   

 

5.2 In case of any reclassification of the capital of the Company, or in the
case of the merger, reorganization or amalgamation of the Company with, or into
any other company (including, for greater certainly, any triangular or
three-cornered amalgamation to which the Company is party) or of the sale of
substantially all of the property and assets of the Company to any other company
(in each case, a “Corporate Event”), each Warrant will, after such Corporate
Event, confer the right to purchase that number of shares or other securities or
property of the Company or of the company resulting from such Corporate Event,
or to which such sale will be made, as the case may be, which the Holder would
then hold if the Holder had exercised the Holder’s rights under the Warrant
before the Corporate Event; and in any such case, if necessary, appropriate
adjustments will be made in the application of the provisions set forth in this
Part 5 with respect to the rights and interest thereafter of the Holders to the
end that the provisions set forth in this Part 5 will thereafter correspondingly
be made applicable as nearly as may reasonably be in relation to any Shares or
other securities or property thereafter deliverable on the exercise of a
Warrant.

 

5.3 In case of any Corporate Event which results in Warrants becoming
exercisable for shares, securities or other property of a corporate entity other
than the Company, such corporate entity may elect to deliver to the Holder a new
warrant certificate in the name of such corporate entity reflecting the terms of
the Warrants, as adjusted pursuant to Section 5.2, and upon receipt of such
replacement warrant certificate this Warrant Certificate will be deemed
cancelled.

 

5.4 The adjustments provided for in this Part 5 are cumulative.

 

Determination of Adjustments

 

5.5 If any question will at any time arise with respect to any adjustments to be
made under this Part 5, such question will be conclusively determined by the
Company’s auditor, or, if the Company’s auditor declines to so act, any other
chartered accountant in Vancouver, British Columbia that the Company may
designate (acting reasonably) and who will have access to all appropriate
records, and such determination will be binding upon the Company and the Holder.

 

Resale Restrictions

 

5.6 This Warrant and the Shares to be issued upon its exercise have not been and
will not be registered under the United States Securities Act of 1933, as
amended (the “U.S. Securities Act”), or the securities laws of any state of the
United States. This Warrant may not be exercised in the United States, or by or
for the account or benefit of a U.S. person or a person in the United States,
unless (i) the Shares are registered under the U.S. Securities Act and the
applicable laws of any such state, or (ii) an exemption from such registration
requirements is available, and (iii) the holder has complied with the
requirements set forth in the Warrant Exercise Form attached hereto as Appendix
B. “United States” and “U.S. person” are as defined in Regulation S under the
U.S. Securities Act (“Regulation S”).

 

  -5-

   

 

5.7 Any Shares issued upon exercise of this Warrant in the United States, or to
or for the account or benefit of a U.S. person or a person in the United States,
will be “restricted securities”, as defined in Rule 144(a)(3) under the U.S.
Securities Act. The certificates representing such Shares, as well as all
certificates issued in exchange or in substitution therefor, until such time as
is no longer required under the applicable requirements of the U.S. Securities
Act, or applicable state securities laws, will bear, on the face of such
certificate, the following legends:

 

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THESE SECURITIES MAY NOT BE
OFFERED FOR RESALE, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION OR EXCLUSION
FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE CANNOT BE THE
SUBJECT OF HEDGING TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN
COMPLIANCE WITH THE U.S. SECURITIES ACT.

 

 

PART 6

 

COVENANTS BY THE COMPANY

 

 

Reservation of Shares

 

6.1 The Company will reserve, and there will remain unissued out of its
authorized capital, a sufficient number of shares to satisfy the rights of
purchase provided for in all Warrants from time to time outstanding.

 

PART 7

 

RESTRICTION ON EXERCISE

 

Compliance with Securities Laws

 

7.1 Notwithstanding any provision to the contrary contained herein, no Shares
will be issued pursuant to the exercise of any Warrant if the issuance of such
securities would constitute a violation of the securities laws of any applicable
jurisdiction, and the certificates evidencing the Shares thereby issued may bear
such legend as may, in the opinion of legal counsel to the Company, be necessary
in order to avoid a violation of any securities laws of any applicable
jurisdiction or to comply with the requirements of any stock exchange on which
the Shares of the Company are listed, provided that, at any time, in the opinion
of legal counsel to the Company, such legends are no longer necessary in order
to avoid a violation of any such laws, or the holder of any such legended
certificate, at that holder’s expense, provides the Company with evidence
satisfactory in form and substance to the Company (which may include an opinion
of legal counsel satisfactory to the Company) to the effect that such holder is
entitled to sell or otherwise transfer such Shares in a transaction in which
such legends are not required, such legended certificate may thereafter be
surrendered to the Company in exchange for a certificate which does not bear
such legend.

 

PART 8

 

MODIFICATION OF TERMS, SUCCESSORS

 

Modification of Terms and Conditions for Certain Purposes

 

8.1 From time to time the Company may, subject to the provisions of the Warrant
Certificate, when so directed by the Holders, modify the terms and conditions
hereof, for any one or more or all of the following purposes:

 

(a) adding to the provisions hereof such additional covenants and enforcement
provisions as, in the opinion of counsel for the Company, are necessary or
advisable in the circumstances;

 

  -6-

   

 

(b) making such provisions not inconsistent herewith as may be necessary or
desirable with respect to matters or questions arising hereunder or for the
purpose of obtaining a listing or quotation of Warrants on any stock exchange or
house;

 

(c) adding to or altering the provisions hereof in respect of the registration
of Warrants making provision for the exchange of Warrant Certificates of
different denominations; and making any modification in the form of Warrant
Certificates which does not affect the substance thereof;

 

(d) for any other purpose not inconsistent with the terms hereof, including the
correction or rectification of any ambiguities, defective provisions, errors or
omissions herein; and

 

(e) to evidence any succession of any corporation and the assumption by any
successor of the covenants of the Company herein and in the Warrants contained
as provided hereafter in this Part 8.

 

Company may Amalgamate on Certain Terms

 

8.2 Nothing herein contained will prevent any amalgamation or merger of the
Company with or into any other company, or the sale of the property or assets of
the Company to any company lawfully entitled to acquire the same; provided
however that the company formed by such merger or amalgamation or which acquires
by conveyance or transfer all or substantially all the properties and assets of
the Company will be a company organized and existing under the laws of Canada or
of the United States of America or any Province, State, District or Territory
thereof, which will, simultaneously with such amalgamation, merger, conveyance
or transfer, assume the due and punctual performance and observance of all the
covenants and conditions hereof to be performed or observed by the Company and
will succeed to and be substituted for the Company, and such changes in
phraseology and form (but not in substance) may be made in the Warrant
Certificate as may be appropriate in view of such amalgamation, merger or
transfer.

 

Additional Financings

 

8.3 Nothing herein contained will prevent the Company from issuing any other
securities or rights with respect thereto during the period within which a
Warrant is exercisable, upon such terms as the Company may deem appropriate.

 

[End of Schedule “A”]

 

  -7-

   

 

APPENDIX “A”

 

INSTRUCTIONS TO HOLDER

 

TO EXERCISE:

 

To exercise Warrants, the Holder must complete, sign and deliver the Warrant
Exercise Form, attached as Appendix “B” and deliver the Warrant Certificate(s)
to the Company, indicating the number of common shares to be acquired.

 

TO TRANSFER:

 

To transfer Warrants, the Holder must complete, sign and deliver the Warrant
Transfer Form, attached as Appendix “C” and deliver the Warrant Certificate(s)
to the Company. The Company may require such other certificates or opinions to
evidence compliance with applicable securities legislation in Canada.

 

To transfer Warrants, the Warrant Holder’s signature on the Warrant Transfer
Form must be guaranteed by an authorized officer of a chartered bank, trust
company or an investment dealer who is a member of a recognized stock exchange.

 

GENERAL:

 

If forwarding any documents by mail, registered mail must be employed.

 

If the Warrant Exercise Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person acting in a
fiduciary or representative capacity, the Warrant Certificate must also be
accompanied by evidence of authority to sign satisfactory to the Company.

 

 

The address of the Company is:

 

Body and Mind, Inc.

750 - 1095 West Pender Street

Vancouver, BC V6E 2M6

 

Attention: Chief Executive Officer

 

[End of Appendix “A”]

 

   

   

 

APPENDIX “B”

 

WARRANT EXERCISE FORM

 

TO:

Body and Mind, Inc.

750 - 1095 West Pender Street

Vancouver, BC V6E 2M6

 

 

 

Attention: Chief Executive Officer

 

The undersigned Holder of the within Warrants hereby subscribes for ____________
common shares (the “Shares”) of BODY AND MIND, INC. (the “Company”) pursuant to
the within Warrants on the terms and price specified in the Warrants. This
subscription is accompanied by a certified cheque or bank draft payable to or to
the order of the Company for the whole amount of the purchase price of the
Shares.

 

The undersigned hereby directs that the Shares be registered as follows:

 

 

NAME(S) IN FULL

 

ADDRESS(ES)

 

NUMBER OF SHARES

       

 

As at the time of exercise hereunder, the undersigned Holder represents,
warrants and certifies as follows (check one):

 

 

¨

(A)  

the undersigned holder at the time of exercise of the Warrant is not in the
United States, is not a “U.S. person” as defined in Regulation S under the
United States Securities Act of 1933, as amended (the “U.S. Securities Act”),
and is not exercising the Warrant for the account or benefit of a U.S. person or
a person in the United States (as defined in Regulation S), and did not execute
or deliver this exercise form in the United States; OR

 

 

 

 

 

¨ 

(B)

the undersigned holder is resident in the United States, is a U.S. person, or is
exercising the Warrant for the account or benefit of a U.S. person or a person
in the United States (a “U.S. Holder”), and is an “accredited investor”, as
defined in Rule 501(a) of Regulation D under the U.S. Securities Act (a “U.S.
Accredited Investor”), and has completed the U.S. Accredited Investor Status
Certificate in the form attached to this exercise form; OR

 

 

 

 

 

¨ 

 (C)

if the undersigned holder is a U.S. Holder, the undersigned holder has delivered
to the Company and the Company’s transfer agent an opinion of counsel of
recognized standing (which will not be sufficient unless it is in form and
substance satisfactory to the Company) or such other evidence satisfactory to
the Company to the effect that with respect to the Shares to be delivered upon
exercise of the Warrant, the issuance of such securities has been registered
under the U.S. Securities Act and applicable state securities laws, or an
exemption from the registration requirements of the U.S. Securities Act and
applicable state securities laws is available.

  

   

   

 

Note: Certificates representing common shares will not be registered or
delivered to an address in the United States unless box (B) or (C) immediately
above is checked.

 

If the undersigned Holder has indicated that the undersigned Holder is a U.S.
Accredited Investor by marking box (B) above, the undersigned Holder
additionally represents and warrants to the Company that:

 

1 the undersigned Holder has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Shares, and the undersigned is able to bear the economic risk
of loss of his or her entire investment;

 

 

2. the undersigned is: (i) purchasing the Shares for his or her own account or
for the account of one or more U.S. Accredited Investors with respect to which
the undersigned is exercising sole investment discretion, and not on behalf of
any other person; (ii) is purchasing the Shares for investment purposes only and
not with a view to resale, distribution or other disposition in violation of
United States federal or state securities laws; and (iii) in the case of the
purchase by the undersigned of the Shares as agent or trustee for any other
person or persons (each a “Beneficial Owner”), the undersigned holder has due
and proper authority to act as agent or trustee for and on behalf of each such
Beneficial Owner in connection with the transactions contemplated hereby;
provided that: (x) if the undersigned holder, or any Beneficial Owner, is a
corporation or a partnership, syndicate, trust or other form of unincorporated
organization, the undersigned holder or each such Beneficial Owner was not
incorporated or created solely, nor is it being used primarily to permit
purchases without a prospectus or registration statement under applicable law;
and (y) each Beneficial Owner, if any, is a U.S. Accredited Investor; and

 

3. the undersigned has not exercised the Warrants as a result of any form of
general solicitation or general advertising (as such terms are used in Rule 502
of Regulation D under the U.S. Securities Act), including advertisements,
articles, notices or other communications published in any newspaper, magazine
or similar media, or broadcast over radio, television, the Internet or other
form of telecommunications, or any seminar or meeting whose attendees have been
invited by general solicitation or general advertising.

 

The undersigned acknowledges and agrees that:

 

1. the Company has provided to the undersigned the opportunity to ask questions
and receive answers concerning the terms and conditions of the offering, and the
undersigned has had access to such information concerning the Company as the
undersigned has considered necessary or appropriate in connection with the
undersigned’s investment decision to acquire the Shares;

 

 

2. if the undersigned decides to offer, sell or otherwise transfer any of the
Shares, the undersigned must not, and will not, offer, sell or otherwise
transfer any of such Shares directly or indirectly, unless:

 

 

(a) the sale is to the Company;

 

 

 

 

(b) the sale is made outside the United States in a transaction meeting the
requirements of Rule 904 of Regulation S under the U.S. Securities Act and in
compliance with applicable local laws and regulations;

 

 

 

 

(c) the sale is made pursuant to the exemption from the registration
requirements under the U.S. Securities Act provided by Rule 144 thereunder, if
available, and in accordance with any applicable state securities or “blue sky”
laws; or

 

 

 

 

(d) the Shares are sold in a transaction that does not require registration
under the U.S. Securities Act or any applicable state laws and regulations
governing the offer and sale of securities, and

 

 

 

 

the undersigned has prior to such sale pursuant to subsection (c) or (d),
furnished to the Company an opinion of counsel of recognized standing in form
and substance satisfactory to the Company to such effect;

 

 

-B2-

   

 

3. the Shares are “restricted securities” under applicable federal securities
laws and that the U.S. Securities Act and the rules of the United States
Securities and Exchange Commission provide in substance that the undersigned may
dispose of the Shares only pursuant to an effective registration statement under
the U.S. Securities Act or an exemption therefrom;

 

 

4. the Company has no obligation to register any of the Shares;

 

 

5. the certificates representing the Shares (and any certificates issued in
exchange or substitution for the Shares) will bear a legend stating that such
securities have not been registered under the U.S. Securities Act or the
securities laws of any state of the United States, and may not be offered for
sale or sold unless registered under the U.S. Securities Act and the securities
laws of all applicable states of the United States, or unless an exemption from
such registration requirements is available;

 

 

6. the legend may be removed by delivery to the registrar and transfer agent and
the Company of an opinion of counsel, of recognized standing in form and
substance satisfactory to the Company, that such legend is no longer required
under applicable requirements of the U.S. Securities Act or state securities
laws;

 

 

7. the financial statements of the Company have been prepared in accordance with
Canadian generally accepted accounting principles or International Financial
Reporting Standards, which differ in some respects from United States generally
accepted accounting principles, and thus may not be comparable to financial
statements of United States companies;

 

 

8. there may be material tax consequences to the undersigned of an acquisition
or disposition of the Shares;

 

 

9. funds representing the subscription price for the Shares which will be
advanced by the undersigned to the Company upon exercise of the Warrants will
not represent proceeds of crime for the purposes of the Proceeds of Crime (Money
Laundering) and Terrorist Financing Act (Canada) (the “PCMLA”) or the United
States Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism Act (the “PATRIOT Act”), and the undersigned
acknowledges that the Company may in the future be required by law to disclose
the undersigned’s name and other information relating to this exercise form and
the undersigned’s subscription hereunder, on a confidential basis, pursuant to
the PCMLA or the PATRIOT Act. No portion of the subscription price to be
provided by the undersigned (i) has been or will be derived from or related to
any activity that is deemed criminal under the laws of the United States of
America, Canada, or any other jurisdiction, or (ii) is being tendered on behalf
of a person or entity who has not been identified to or by the undersigned, and
it shall promptly notify the Company if the undersigned discovers that any of
such representations cease to be true and provide the Company with appropriate
information in connection therewith; and

 

 

10. the undersigned consents to the Company making a notation on its records or
giving instructions to any transfer agent of the Company in order to implement
the restrictions on transfer set forth and described in this Warrant Exercise
Form.

 

In the absence of instructions to the contrary, the securities or other property
will be issued in the name of or to the holder hereof and will be sent by first
class mail to the last address of the holder appearing on the register
maintained for the Warrants.

 

 

-B3-

   

 

DATED this _________ day of _______________, 20_____.

 

In the presence of:

 

 

 

 

Signature of Witness

 

Signature of Holder

 

 

 

 

 

 

Witness’s Name

 

Name and Title of Authorized Signatory for the Holder

 

 

 

 

 

 

Please print below your name and address in full.

 

 

Legal Name

 

 

Address

 

 

 

 

 

 

INSTRUCTIONS FOR SUBSCRIPTION

 

The signature to the subscription must correspond in every particular with the
name written upon the face of the Warrant Certificate without alteration. If the
registration in respect of the certificates representing the Shares to be issued
upon exercise of the Warrants differs from the registration of the Warrant
Certificates the signature of the registered holder must be guaranteed by an
authorized officer of a Canadian chartered bank, or of a major Canadian trust
company, or by a medallion signature guarantee from a member recognized under
the Signature Medallion Guarantee Program, or from a similar entity in the
United States, if this exercise form is executed in the United States, or in
accordance with industry standards

 

In the case of persons signing by agent or attorney or by personal
representative(s), the authority of such agent, attorney or representative(s) to
sign must be proven to the satisfaction of the Company.

 

If the Warrant Certificate and the form of subscription are being forwarded by
mail, registered mail must be employed.

 

 

-B4-

   

 

U.S. ACCREDITED INVESTOR STATUS CERTIFICATE

 

In connection with the exercise of certain outstanding warrants of BODY AND
MIND, INC. (the “Company”) by the holder, the holder hereby represents and
warrants to the Company that the holder, and each beneficial owner (each a
“Beneficial Owner”), if any, on whose behalf the holder is exercising such
warrants, satisfies one or more of the following categories of Accredited
Investor (please write “W/H” for the undersigned holder, and “B/O” for each
beneficial owner, if any, on each line that applies):

 

_______ (1)

Any bank as defined in Section 3(a)(2) of the United States Securities Act of
1933, as amended (the “U.S. Securities Act”), or any savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the U.S.
Securities Act whether acting in its individual or fiduciary capacity; any
broker or dealer registered pursuant to Section 15 of the U.S. Securities
Exchange Act of 1934; any insurance company as defined in Section 2(a)(13) of
the U.S. Securities Act; any investment company registered under the U.S.
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the U.S.
Small Business Investment Act of 1958; any plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees, if such plan
has total assets in excess of US$5,000,000; any employee benefit plan within the
meaning of the U.S. Employee Retirement Income Security Act of 1974 if the
investment decision is made by a plan fiduciary, as defined in Section 3(21) of
such Act, which is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee benefit plan has
total assets in excess of US$5,000,000, or, if a self-directed plan, with
investment decisions made solely by persons that are “accredited investors” (as
such term is defined in Rule 501 of Regulation D of the U.S. Securities Act);

 

 

_______ (2)

Any private business development company as defined in Section 202(a)(22) of the
U.S. Investment Advisers Act of 1940;

 

 

_______ (3)

Any organization described in Section 501(c)(3) of the U.S. Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities offered, with total
assets in excess of US$5,000,000;

 

 

_______ (4)

Any trust with total assets in excess of US$5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is directed
by a sophisticated person (being defined as a person who has such knowledge and
experience in financial and business matters that he or she is capable of
evaluating the merits and risks of the prospective investment);

 

 

-B2-

   

 

_______ (5)

A natural person whose individual net worth, or joint net worth with that
person’s spouse, at the time of purchase, exceeds US$1,000,000 (for the purposes
of calculating net worth, (i) the person’s primary residence shall not be
included as an asset; (ii) indebtedness that is secured by the person’s primary
residence, up to the estimated fair market value of the primary residence at the
time of this certification, shall not be included as a liability (except that if
the amount of such indebtedness outstanding at the time of this certification
exceeds the amount outstanding 60 days before such time, other than as a result
of the acquisition of the primary residence, the amount of such excess shall be
included as a liability); and (iii) indebtedness that is secured by the person’s
primary residence in excess of the estimated fair market value of the primary
residence shall be included as a liability);

 

_______ (6)

 

A natural person who had annual gross income during each of the last two full
calendar years in excess of US$200,000 (or together with his or her spouse in
excess of US$300,000) and reasonably expects to have annual gross income in
excess of US$200,000 (or together with his or her spouse in excess of
US$300,000) during the current calendar year, and no reason to believe that his
or her annual gross income will not remain in excess of US$200,000 (or that
together with his or her spouse will not remain in excess of US$300,000) for the
foreseeable future;

 

_______ (7)

 

Any director or executive officer of the Company; or

 

_______ (8)

 

Any entity in which all of the equity owners meet the requirements of at least
one of the above categories – if this alternative is selected you must identify
each equity owner and provide statements from each demonstrating how they
qualify as an accredited investor.

 

[End of Appendix “B”]

 

 

-B3-

   

 

APPENDIX “C”

 

WARRANT TRANSFER FORM

 

TO:

Body and Mind, Inc.

750 - 1095 West Pender Street

Vancouver, BC V6E 2M6

 

 

 

Attention: Chief Executive Officer

  

FOR VALUE RECEIVED, the undersigned holder (the “Transferor”) of the within
Warrants hereby sells, assigns and transfers to _______________________________
(the “Transferee”), ________________ Body and Mind, Inc. (the “Company”)
registered in the name of the undersigned on the records of the Company and
irrevocably appoints ________________ the attorney of the undersigned to
transfer the said securities on the books or register with full power of
substitution.

 

The undersigned hereby directs that the Warrants hereby transferred be issued
and delivered as follows:

 

 

NAME IN FULL

 

ADDRESS

 

NUMBER OF WARRANTS

   

 

The Transferor hereby certifies that (check either A or B):

 

____ (A) the transfer of the Warrants is being completed pursuant to an
exemption from the registration requirements of the United States Securities Act
of 1933, as amended (the “U.S. Securities Act”), in which case the Transferor
has delivered or caused to be delivered by the Transferee a written opinion of
U.S. legal counsel of recognized standing in form and substance satisfactory to
the Company to the effect that the transfer of the Warrants is exempt from the
registration requirements of the U.S. Securities Act; or

 

 

____ (B) the transfer of the Warrants is being made in reliance on Rule 904 of
Regulation S under the U.S. Securities Act, and certifies that:

 

 

(1) the undersigned is not an “affiliate” (as defined in Rule 405 under the U.S.
Securities Act) of the Company (except solely by virtue of being an officer or
director of the Company) or a “distributor”, as defined in Regulation S, or an
affiliate of a “distributor”;

 

 

 

 

(2) the offer of such securities was not made to a person in the United States
and either (a) at the time the buy order was originated, the buyer was outside
the United States, or the seller and any person acting on its behalf reasonably
believe that the buyer was outside the United States or (b) the transaction was
executed on or through the facilities of a designated offshore securities market
within the meaning of Rule 902(b) of Regulation S under the U.S. Securities Act,
and neither the seller nor any person acting on its behalf knows that the
transaction has been prearranged with a buyer in the United States;

 

   

   

 

 

(3) neither the seller nor any affiliate of the seller nor any person acting on
their behalf engaged in any directed selling efforts in connection with the
offer and sale of the Warrants;

 

 

 

 

(4) the sale is bona fide and not for the purpose of “washing off” the resale
restrictions imposed because the Warrants are “restricted securities” (as such
term is defined in Rule 144(a)(3) under the U.S. Securities Act);

 

 

 

 

(5) the Transferor does not intend to replace the securities sold in reliance on
Rule 904 of the U.S. Securities Act with fungible unrestricted securities; and

 

 

 

 

(6) the contemplated sale is not a transaction, or part of a series of
transactions which, although in technical compliance with Regulation S, is part
of a plan or a scheme to evade the registration provisions of the U.S.
Securities Act.

 

Unless otherwise specified, terms used herein have the meanings given to them by
Regulation S under the U.S. Securities Act. If Option B is checked, the Company
may, in its sole discretion, require the Transferor or the Transferee to furnish
a written opinion of U.S. legal counsel or other documentation acceptable to the
Company to the effect that the transfer of the Warrants is excluded from the
registration requirements of the U.S. Securities Act.

 

DATED this _________ day of _______________, 201_____.

 

 

 

Signature of Warrant Holder

 

Signature Guaranteed

 

INSTRUCTIONS FOR TRANSFER

 

Signature of the Warrant Holder must be the signature of the person appearing on
the face of this Warrant Certificate.

 

If the Transfer Form is signed by a trustee, executor, administrator, curator,
guardian, attorney, officer of a corporation or any person acting in a fiduciary
or representative capacity, the certificate must be accompanied by evidence of
authority to sign satisfactory to the Company.

 

The signature on the Transfer Form must be guaranteed by a chartered bank or
trust company, or a member firm of an acceptable Medallion Signature Guarantee
Program (STAMP, SEMP, MSP). the stamp must bear the words “Signature Medallion
Guaranteed”.

 

In the United States of America, signature guarantees must be done by members of
a Medallion Signature Guarantee Program only. Signature guarantees are not
accepted from Treasury Branches, Credit Unions or Caisses Populaires unless they
are members of an acceptable Medallion Program.

 

If the Transferor is in a jurisdiction that does not have a Medallion Signature
Guarantee Program, then the Transferor will provide such other documentation as
reasonably required by the Company or its transfer agent, as applicable.

 

  -C2-

   

 

TRANSFEREE ACKNOWLEDGMENT

 

The Transferee acknowledges and agrees that the Warrants may not be offered,
sold, pledged or otherwise transferred in the absence of: (a) an effective
registration statement under the United States Securities Act of 1933, as
amended (the “U.S. Securities Act”), relating thereto; or (b) an exemption from
the registration requirements of the U.S. Securities Act. Each Warrant
Certificate, and each certificate representing Shares issuable upon exercise
thereof, shall contain a legend on the face thereof, in the appropriate form,
setting forth the restrictions on transfer referred to in the Warrant
Certificate, unless in the opinion of counsel for the holder thereof (which
counsel shall be reasonably satisfactory to the Company), the securities
represented thereby are not, at such time, required by law to bear such legend,
or in the case of the Shares, are transferred pursuant to an effective
registration statement under the U.S. Securities Act. The holder acknowledges
and agrees that the Warrants represented by this Warrant Certificate, and the
Shares issuable upon exercise thereof, constitute “restricted securities” under
the U.S. Securities Act.

 

Any certificate issued at any time in exchange or substitution for any
certificate bearing a restrictive legend shall also bear such legend unless in
the opinion of counsel for the holder thereof (which counsel shall be reasonably
satisfactory to the Company), the securities represented thereby are not, at
such time, required by law to bear such legend.

 

In connection with this transfer the undersigned transferee (the “Transferee”)
certifies that the Transferor or Transferee is delivering a written opinion of
U.S. legal counsel acceptable to the Company to the effect that this transfer of
Warrants has been registered under the U.S. Securities Act or is exempt from
registration thereunder.

 

DATED the ___ day of __________, 20__

 

 

 

 

In the presence of:

 

(Signature of Transferee)

 

 

 

 

(Witness)

 

(Name of Transferee – Please print)

 

 

 

 

(Name of Witness – Please print)

 

(Capacity of Authorized Representative)

 

The Warrants and the Shares issuable upon exercise of the Warrants shall only be
transferable in accordance with applicable laws. The Warrants may only be
exercised in the manner required by the Warrant Certificate and the Warrant
Exercise Form attached thereto. Any securities acquired pursuant to this
exercise of Warrants shall be subject to applicable hold periods and any
certificate representing such securities may bear restrictive legends.

 

[End of Appendix “C”]

 

  -C3-

   

  

APPENDIX II

 

Debenture Certificate

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST
NOT TRADE THE SECURITY BEFORE ●, 2019.

 

THE SECURITIES REPRESENTED HEREBY AND ANY SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THESE SECURITIES MAY NOT BE OFFERED FOR RESALE, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE
SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION OR EXCLUSION FROM REGISTRATION
UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE CANNOT BE THE SUBJECT OF HEDGING
TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE U.S.
SECURITIES ACT.

 

THIS DEBENTURE MAY NOT BE CONVERTED BY OR ON BEHALF OF A U.S. PERSON OR PERSON
IN THE UNITED STATES UNLESS THIS DEBENTURE AND SECURITIES ISSUABLE UPON EXERCISE
OF THIS DEBENTURE HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE
APPLICABLE SECURITIES LEGISLATION OF ANY SUCH STATE OR AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS IS AVAILABLE. “UNITED STATES” AND “U.S. PERSON” ARE AS
DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.

 

UNSECURED CONVERTIBLE DEBENTURE

BODY AND MIND, INC.

(a corporation existing under the laws of the state of Nevada)

 

DEBENTURE

 

 

CERTIFICATE NUMBER: ·

 

PRINCIPAL AMOUNT: $1,600,000

 

BODY AND MIND, INC. (the “Borrower”), for value received, hereby acknowledges
itself indebted and promises to pay to Australis Capital Inc. (hereinafter
referred to as the “Lender”), the principal amount of $1,600,000 (the “Principal
Amount”) in lawful money of Canada in the manner hereinafter provided at the
address of the Lender set forth in Section 8.2, or at such other place or places
as the Lender may designate by notice in writing to the Borrower, on the date
that is two years from the date of issuance of this Debenture (the “Maturity
Date”), subject to acceleration in certain events in accordance with Section
3.12 hereof, and to pay interest on the Principal Amount outstanding from time
to time owing hereunder to the date of payment as hereinafter provided.

 

The Lender has the right, from time to time and at any time prior to 5:00 p.m.
(Vancouver Time) on the earlier of: (i) the Business Day (as defined herein)
immediately preceding the Maturity Date; and (ii) the Business Day prior to
receiving notice of a Forced Conversion (as defined herein), to convert all or
any portion of the outstanding Principal Amount into Common Shares (as defined
herein), at a price, with respect to the Principal Amount, equal to the
Conversion Price (as defined herein), subject to adjustment in certain events.
Accrued and unpaid interest relating to the debenture shall be calculated and
payable semi-annually in accordance with the terms hereof.

 

Unless the Lender exercises the conversion rights attached to this Debenture,
including forced conversion, the Principal Amount owing, or the portion of the
Principal Amount which has yet to be converted, together with any amounts now or
hereafter payable hereunder including accrued and unpaid interest (collectively,
the “Obligations”) shall be due and payable on the Maturity Date in accordance
with the terms hereof. This Debenture is issued subject to the terms and
conditions appended hereto as Schedule A.

 

(See terms and conditions attached hereto)

 

   

   

 

IN WITNESS WHEREOF, the Borrower has caused this Debenture to be executed by a
duly authorized officer.

 

DATED for reference this _____ day of ________________, 2018.

 

 

BODY AND MIND, INC.

       

Per:

 

 

Authorized Signatory

 

 

   

   

 

Schedule A

 

TERMS AND CONDITIONS OF UNSECURED CONVERTIBLE DEBENTURE

 

Article 1 – Interpretation

 

Section 1.1 Definitions

 

In this Debenture, the following terms shall have the following meanings:

 

(1) “Business Day” means a day other than a Saturday, Sunday or other day on
which commercial banks in Vancouver, British Columbia, Canada are authorized by
law to close;

 

(2) “Applicable Securities Laws” means the Securities Act (British Columbia) and
the securities laws of any other province, state or territory of Canada and the
United States, if applicable, and the rules, regulations and policies of any
securities regulatory authority administering such securities laws, as the same
shall be in effect from time to time;

 

(3) “Common Shares” means the common shares in the capital of the Borrower or
the common shares of the continuing corporation or other resulting issuer formed
as a result of a Merger;

 

(4) “Conversion Amount” has the meaning attribute thereto in Section 3.2;

 

(5) “Conversion Price” initially means the Original Conversion Price, and
thereafter any adjustment thereto in accordance with the terms and conditions of
this Debenture;

 

(6) “Conversion Right” has the meaning attributed thereto in Section 3.1;

 

(7) “Corporate Event” has the meaning attributed thereto in Section 3.3;

 

(8) “Debenture” means this unsecured convertible debenture;

 

(9) “Event of Default” has the meaning attributed thereto in Section 5.1;

 

(10) “Exchange” means the Canadian Securities Exchange or such other stock
exchange on which the Common Shares are listed and posted for trading;

 

(11) “Forced Conversion” has the meaning attributed thereto in Section 3.10;

 

(12) “Forced Conversion Notice” has the meaning attributed thereto in Section
3.10

 

(13) “Interest Amount” means any interest amount accrued but unpaid in
accordance with the provisions of this Debenture, including, without limitation,
interest accrued but unpaid on overdue interest;

 

(14) “Interest Rate” means eight (8%) per annum, payable semi-annually in
arrears;

 

(15) “Investment Agreement” means the investment agreement dated · between
Australis Capital Inc. and Body and Mind, Inc.;

 

(16) “Issue Date” has the meaning attributed thereto in Section 3.2(1);

 

   

   

 

(17) “Maturity Date” means the date that is two years from the date of issuance
of this Debenture, subject to acceleration in accordance with Section 3.12;

 

(18) “Merger” means any transaction (whether by way of arrangement,
amalgamation, merger, transfer, sale or lease) whereby all or substantially all
of the Borrower’s assets would become the property of any other Person, or, in
the case of any such arrangement, amalgamation or merger, of the continuing
corporation or other entity resulting therefrom;

 

(19) “Offering” means the offering of Debentures in the aggregate principal
amount of $1,600,000 to be issued by the Borrower, pursuant to the Investment
Agreement;

 

(20) “Original Conversion Price” means $0.55 per Common Share;

 

(21) “Person” means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof;

 

(22) “Regulation S” has the meaning attributed thereto in Section 3.5.

 

(23) “Taxes” means any present or future income and other taxes, levies, rates,
royalties, deductions, withholdings, assessments, fees, dues, duties, imposts
and other charges of any nature whatsoever, together with any interest and
penalties, additions to tax and other additional amounts, levied, assessed or
imposed by any governmental authority;

 

(24) “trading day” means a day on which the Exchange is open for trading (or if
the Borrower’s Common Shares are not then listed on the Exchange, such other
recognized stock exchange or quotation system on which the Common Shares may
trade or be quoted); and

 

(25) “U.S. Securities Act” has the meaning attributed thereto in Section 3.5.

 

Section 1.2 Headings

 

The inclusion of headings in this Debenture is for convenience of reference only
and shall not affect the construction or interpretation hereof.

 

Section 1.3 Currency

 

Unless otherwise indicated, all amounts in this Debenture are stated and shall
be paid in the lawful currency of Canada.

 

Section 1.4 Number, Gender and Persons

 

Unless the context otherwise requires, words importing the singular in number
only shall include the plural and vice versa, words importing the use of gender
shall include the masculine, feminine and neuter genders and words importing
Persons shall include individuals, corporations, partnerships, associations,
trusts, unincorporated organizations, governmental bodies and other legal or
business entities.

 

Section 1.5 Severability

 

If any provision of this Debenture is determined by a Court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such
determination shall not impair or affect the validity, legality or
enforceability of the remaining provisions hereof, and each such provision shall
be interpreted in such a manner as to render them valid, legal and enforceable
to the greatest extent permitted by applicable law. Each provision of this
Debenture is declared to be separate, severable and distinct.

 

  2

   

 

Section 1.6 Entire Agreement

 

This Debenture, including any schedules attached hereto, constitutes the entire
agreement between the Borrower and the Lender relating to the subject matter
hereof, and supersedes all prior agreements, representations, warranties,
statements, promises, information, arrangements, understandings, conditions or
collateral agreements, whether oral or written, express or implied, with respect
to the subject matter hereof.

 

ARTICLE 2 – PAYMENT OF PRINCIPAL, INTEREST AND OTHER CONSIDERATIONS

 

Section 2.1 Repayment of Principal

 

The Borrower, for value received, hereby acknowledges itself indebted and
promises to pay, subject to Article 3 below, to the Lender or any subsequent
holder or holders of this Debenture, the Principal Amount in the lawful money of
Canada on the Maturity Date or such other time specified herein, at such places
as the Lender may designate by notice in writing to the Borrower.

 

Section 2.2 Interest Payable

 

This Debenture shall bear interest commencing on the Issue Date at 8%per annum,
calculated and payable semi-annually, in arrears. Any interest accrued and
unpaid shall be paid with a cheque and delivered to the holder’s registered
address on a semi-annual basis.

 

ARTICLE 3 – CONVERSION

 

Section 3.1 Conversion Right.

 

(1) Subject to this Article 3, the Lender shall have the right at any time prior
to the Maturity Date, to cancel this Debenture and convert the Principal Amount,
into fully paid and non-assessable Common Shares at the Conversion Price (the
“Conversion Right”). The Conversion Price shall be subject to adjustment as
provided in Section 3.3.

 

(2) The Conversion Right shall extend only to the maximum number of whole Common
Shares into which the Principal Amount of this Debenture or any part thereof may
be converted in accordance with this Section 3.1. Fractional interests in Common
Shares shall be adjusted in the manner provided in Section 3.6.

 

Section 3.2 Conversion Procedure

 

(1) The Conversion Right may be exercised by the Lender by completing and
signing the notice of conversion (the “Conversion Notice”) attached hereto as
Schedule B, and delivering the Conversion Notice and this Debenture to the
Borrower. The Conversion Notice shall provide that the Conversion Right is being
exercised, shall specify the Principal Amount being converted (the “Conversion
Amount”) and shall set out the date (the “Issue Date”) on which Common Shares
are to be issued upon the exercise of the Conversion Right (such date to be no
earlier than five (5) Business Days and no later than ten (10) Business Days
after the day on which the Conversion Notice is issued). The conversion shall be
deemed to have been effected immediately prior to the close of business on the
Issue Date and the Common Shares issuable upon conversion shall be deemed to be
issued as fully paid and non-assessable at such time. Within ten (10) Business
Days after the Issue Date, a certificate for the required number of Common
Shares shall be issued to the Lender. If less than all of the Principal Amount
of this Debenture is the subject of the Conversion Right, then within ten (10)
Business Days after the Issue Date, the Borrower shall deliver to the Lender a
replacement Debenture in the form hereof in the principal amount of the
unconverted principal balance hereof, and this Debenture shall be cancelled. If
the Conversion Right is being exercised in respect of the entire Principal
Amount of this Debenture, this Debenture shall be cancelled.

 

  3

   

 

Section 3.3 Adjustments

 

If and whenever the Common Shares will be subdivided into a greater or
consolidated into a lesser number of shares, or in the event of any payment by
the Borrower of a stock dividend (other than a dividend paid in the ordinary
course), or in the event that the Borrower conducts a rights offering to its
shareholders, the exercise price will be decreased or increased proportionately
as the case may be. Upon any such subdivision, consolidation, payment of a stock
dividend or rights offering, the number of shares deliverable upon conversion of
this Debenture and the Conversion Price will be increased or decreased
proportionately as the case may be.

 

In case of any reclassification of the capital of the Borrower, or in the case
of the merger, reorganization or amalgamation of the Borrower with, or into any
other company (including, for greater certainly, any triangular or
three-cornered amalgamation to which the Borrower is party) or of the sale of
substantially all of the property and assets of the Borrower to any other
company (in each case, a “Corporate Event”), the Conversion Right will, after
such Corporate Event, confer the right to convert into that number of shares or
other securities or property of the Borrower or of the company resulting from
such Corporate Event, or to which such sale will be made, as the case may be,
which the Lender would then hold if the Lender had exercised the Lender’s
Conversion Right before the Corporate Event; and in any such case, if necessary,
appropriate adjustments will be made in the application of the provisions set
forth in this Section 3.3 with respect to the rights and interest thereafter of
the Lender to the end that the provisions set forth in this Section 3.3 will
thereafter correspondingly be made applicable as nearly as may reasonably be in
relation to any Common Shares or other securities or property thereafter
deliverable on the conversion of this Debenture.

 

The adjustments provided for in this Section 3.3 are cumulative.

 

Section 3.4 Determination of Adjustments

 

If any question will at any time arise with respect to any adjustments to be
made under Section 3.3, such question will be conclusively determined by the
Borrower’s auditor, or, if the Borrower’s auditor declines to so act, any other
chartered accountant in Vancouver, British Columbia that the Borrower may
designate (acting reasonably) and who will have access to all appropriate
records, and such determination will be binding upon the Borrower and the
Lender.

 

Section 3.5 Resale Restrictions

 

This Debenture and the Common Shares to be issued upon its conversion, or forced
conversion in accordance with Section 3.12, have not been and will not be
registered under the United States Securities Act of 1933, as amended (the “U.S.
Securities Act”), or the securities laws of any state of the United States. This
Debenture may not be converted in the United States, or by or for the account or
benefit of a U.S. person or a person in the United States, unless (i) the Common
Shares are registered under the U.S. Securities Act and the applicable laws of
any such state, or (ii) an exemption from such registration requirements is
available, and (iii) the holder has complied with the requirements set forth in
the Conversion Notice attached hereto as Schedule B. “United States” and “U.S.
person” are as defined in Regulation S under the U.S. Securities Act
(“Regulation S”).

 

  4

   

 

Any Common Shares issued upon conversion of this Debenture in the United States,
or to or for the account or benefit of a U.S. person or a person in the United
States, will be “restricted securities”, as defined in Rule 144(a)(3) under the
U.S. Securities Act. The certificates representing such Common Shares, as well
as all certificates issued in exchange or in substitution therefor, until such
time as is no longer required under the applicable requirements of the U.S.
Securities Act, or applicable state securities laws, will bear, on the face of
such certificate, the following legends:

 

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THESE SECURITIES MAY NOT BE
OFFERED FOR RESALE, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION OR EXCLUSION
FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE CANNOT BE THE
SUBJECT OF HEDGING TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN
COMPLIANCE WITH THE U.S. SECURITIES ACT.

 

 

Section 3.6 No Requirement to Issue Fractional Common Shares

 

The Borrower shall not be required to issue fractional Common Shares upon the
conversion of the Debenture pursuant to this Article 3. If any fractional
interest in a Common Share, would, except for the provisions of this Section
3.6, be deliverable upon the conversion of any amount hereunder, the number of
Common Shares to be issued shall be rounded down to the nearest whole Common
Share.

 

Section 3.7 Entitlement to Payment of Interest Amount

 

The Lender, on surrender of the Debenture for conversion, in whole or in part,
in accordance with this Debenture shall be entitled to any Interest Amount
payable on the Conversion Amount to the Issue Date.

 

Section 3.8 Borrower to Reserve Common Shares

 

The Borrower covenants with the Lender that it will at all times reserve and
keep available out of its authorized Common Shares, solely for the purpose of
issue upon exercise of the Conversion Right, and conditionally allot to the
Lender, such number of Common Shares as shall then be issuable upon the
conversion of this Debenture. The Borrower covenants with the Lender that all
Common Shares which shall be so issuable shall be duly and validly issued as
fully paid and non-assessable.

 

Section 3.9 Certificate as to Adjustment

 

The Borrower shall from time to time, immediately after the occurrence of any
event which requires an adjustment or readjustment as provided in Section 3.3,
deliver an officer’s certificate to the Lender specifying the nature of the
event requiring the same and the amount of the adjustment necessitated thereby
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based. Subject to the dispute resolution
procedure in Section 3.3(6), such certificate shall be binding and determinative
of the adjustment to be made, absent manifest error.

 

  5

   

 

Section 3.10 Certificate Legends

 

Certificates representing the Common Shares issuable upon conversion of the
Debenture as provided for in this Article will bear such legend(s) denoting the
restrictions on transferability posed by applicable corporate and securities
laws. The Lender agrees to sell, assign or transfer such Common Shares only in
accordance with the requirements of all such legends and all applicable
corporate laws and securities laws.

 

Section 3.11 Shareholder of Record

 

For all purposes, on the Issue Date or the applicable date specified in Section
3.2 the Lender shall be deemed to have become the holder of record of the Common
Shares into which the Principal Amount of this Debenture (or a portion thereof)
is converted in accordance with Section 3.2.

 

Section 3.12 Forced Conversion

 

Notwithstanding anything herein to the contrary, if at any time prior to the
Maturity Date, the closing price of the Common Shares is equal to or greater
than $1.65 per Common Share for twenty (20) consecutive trading days, the
Borrower may deliver written notice to the Lender attached hereto as Schedule D
(a “Forced Conversion Notice”), to cause the Lender to convert all but not less
than all of the then outstanding Principal Amount of this Debenture, at a date
no less than ten (10) Business Days after delivery of the Forced Conversion
Notice in accordance with the provisions of Article 3 (a “Forced Conversion”).
The Debentures shall be converted into Common Shares at the then applicable
Conversion Price and upon delivery of the Forced Conversion Notice, the Lender
shall be entered in the books of the Borrower, as at the date of the conversion
with no further action of the Lenders., as the holder of the number of Common
Shares into which the Debenture is convertible and, as soon as practicable, the
Borrower shall deliver to the Lender a certificate or certificates for such
common shares and he debentures will be deemed cancelled and of no further force
and effect.

 

ARTICLE 4 – COVENANTS OF THE BORROWER

 

Section 4.1 Positive Covenants

 

The Borrower covenants and agrees, for as long this Debenture remains
outstanding, that:

 

(1) Maintain Corporate Existence. The Borrower shall maintain its corporate
existence, and preserve its rights, powers, licenses and privileges which are
necessary or material to the conduct of its business, and not materially change
the nature of its business;

 

(2) Compliance with Laws. The Borrower shall comply in all material respects
with all applicable laws, rules, governmental restrictions and regulations;

 

(3) Payment of Taxes. The Borrower shall pay and discharge promptly all Taxes
assessed or imposed upon it or its property as and when the same become due and
payable save and except where it contests in good faith the validity thereof by
proper legal proceedings;

 

(4) Payment of Obligations. The Borrower shall pay all principal and other
amounts owing to the Lender hereunder promptly when due;

 

(5) Performance of Covenants. The Borrower shall promptly perform and satisfy
all covenants and obligations to be performed by it under this Debenture;

 

  6

   

 

(6) Maintain Listing. The Borrower shall use reasonable commercial efforts to
maintain the listing of the Common Shares on the Exchange and to maintain the
Borrower’s status as a “reporting issuer” not in default of the requirements of
Applicable Securities Laws;

 

(7) Notice of Event of Default. The Borrower shall promptly, and in any event
within five (5) Business Days after a responsible officer of the Borrower
becoming aware, give notice to the Lender of the existence of any Event of
Default.

 

ARTICLE 5 – EVENTS OF DEFAULT

 

Section 5.1 Events of Default

 

(1) Any of the following shall constitute an Event of Default under this
Debenture (each an “Event of Default”):

 

 

(a) if the Borrower makes default in payment of the principal or interest on
this Debenture when the same becomes due and payable under this Debenture, and
such default is not waived, cured or remedied within thirty (30) days of
Borrower receiving written notification of such an event by the Lender;

 

 

 

 

(b) if the Borrower defaults in the observation or performance of any covenant,
condition, representation, warranty or obligation contained in this Debenture
and such default is not waived, cured or remedied within thirty (30) days of
Borrower receiving written notification of such an event by the Lender;

 

 

 

 

(c) if any material change occurs in the financial condition or prospects of the
Borrower which impairs to a material extent the ability of the Borrower to
satisfy the obligations under this Debenture compromises the remedies of the
Lender or may otherwise have a material adverse effect on the business,
operations or assets of the Borrower;

 

 

 

 

(d) if a decree or order of a court having jurisdiction in the premises is
entered adjudging the Borrower a bankrupt or insolvent under the applicable laws
of Alberta or any other bankruptcy, insolvency or analogous laws, or issuing
sequestration or process of execution against, or against any substantial part
of, the property of the Borrower or appointing a receiver of, or of any
substantial part of, the property of the Borrower or ordering the winding-up or
liquidation of its affairs, or

 

 

 

 

(a) if a resolution is passed for the winding-up or liquidation of the Borrower
or if proceedings are instituted against the Borrower under the applicable laws
or any other bankruptcy, insolvency or analogous laws, or consents to the filing
of any such petition or to the appointment of a receiver of, or of any
substantial part of, the property of the Borrower or if the Borrower makes a
general assignment for the benefit of creditors, or admits in writing its
inability to pay its debts generally as they become due or takes corporate
action in furtherance of any of the aforesaid purposes

 

(2) If an Event of Default shall occur and be continuing and the Borrower shall
fail forthwith to pay the amounts owing hereunder, the Lender shall be entitled
and empowered to institute any action or proceedings at law or in equity for the
collection of the sums so due and unpaid, and may prosecute any such action or
proceedings to judgment or final decree, and may enforce any such judgment or
final decree against the Borrower or other obligors upon this Debenture and
collect in the manner provided by law out of the property of the Borrower or
other obligors upon this Debenture wherever situated the monies adjudged or
decreed to be payable. In addition, the Lender may, in their discretion, proceed
to protect and enforce the rights vested in them by this Debenture by such
appropriate judicial proceedings as the Lender shall deem most effectual to
protect and enforce any of such rights, either at law or in equity and either in
bankruptcy or otherwise.

 

  7

   

 

(3) The Lender may, by instrument in writing signed by the Lender or by an
authorized officer of the Lender, but not otherwise, waive any breach by the
Borrower of any of the provisions contained in this Debenture or any default by
the Borrower in the observance or performance of any covenant, agreement or
condition required to be kept, observed or performed by the Borrower under the
terms of this Debenture; provided always that no act or omission of the Lender
in the premises shall extend to or be taken in any manner whatsoever to affect
any subsequent breach or default or to affect the rights of the Lender resulting
therefrom.

 

ARTICLE 6 – MUTILATION, LOSS, THEFT OR DESTRUCTION OF DEBENTURE CERTIFICATE

 

In case this Debenture certificate shall become mutilated or be lost, stolen or
destroyed, the Borrower, shall issue and deliver, a new replacement debenture
certificate upon surrender and cancellation of the mutilated Debenture
certificate or, in the case of a lost, stolen or destroyed Debenture
certificate, in lieu of and in substitution for the same. In the case of loss,
theft or destruction, the applicant for a substituted debenture certificate
shall furnish to the Borrower such evidence of the loss, theft or destruction of
the Debenture certificate as shall be satisfactory to the Borrower in its
discretion and shall also furnish an indemnity and surety bond satisfactory to
the Borrower in its discretion. The applicant shall pay all reasonable expenses
incidental to the issuance of any substituted debenture certificate.

 

ARTICLE 7 – GENERAL

 

Section 7.1 Taxes, etc.

 

All payments made by the Borrower to the Lender under this Debenture shall be
made free and clear of, and without deduction for or on account of, any
withholding Taxes now or hereafter imposed by any official body in any
jurisdiction. If any such withholding Taxes are required to be withheld or
deducted from any amounts payable by the Borrower to the Lender hereunder, the
Borrower shall:

 

 

(a) within the time period for payment permitted by applicable law, pay to the
appropriate governmental body the full amount of such withholding Taxes and any
additional Taxes in respect of the payment required under Section 8.1(b) hereof
and make such reports and filings in connection therewith in the manner required
by applicable law; and

 

 

 

 

(b) pay to the Lender an additional amount which (after deduction of all
withholding Taxes incurred by reason of the payment or receipt of such
additional amount) will be sufficient to yield to the Lender the full amount
which would have been received by it had no deduction or withholding been made.

 

Upon the request of the Lender, the Borrower shall furnish to the Lender the
original or a certified copy of a receipt for (or other satisfactory evidence as
to) the payment of each of the withholding Taxes (if any) payable in respect of
such payment. If the Lender receives a refund of any withholding Taxes with
respect to which the Borrower has paid any additional amount under this Section
8.1, the Lender shall pay over such refund to the Borrower. Nothing herein is
intended to require payment by the Borrower to or for the Lender in respect of
any Taxes payable by the Lender in respect of Taxes on the Lenders’ own income,
capital, capital gains, dividends, or other earnings realized pursuant to
payments made pursuant to the terms of this Debenture.

 

  8

   

 

Section 7.2 Notice

 

Unless otherwise expressly provided in this Debenture, any notice or other
communication to be given under this Agreement (a “notice”) shall be in writing
addressed as follows:

 

 

(a) If to the Borrower, to:

 

 

 

 

Body and Mind Inc.

750 – 1095 West Pender Street

Vancouver, BC

V6E 2M6

 

Attention: Leonard Clough

Email: len@altuscapital.ca

 

 

 

with a copy (for informational purposes only and not constituting notice) to:

 

DLA Piper (Canada) LLP

Suite 6000, 1 First Canadian Place

PO Box 367, 100 King St W

Toronto ON

M5X 1E2

 

Attention: Derek Sigel

Email: derek.sigel@dlapiper.com

 

(b) If to the Lender, to:

 

Australis Capital Inc.

Address: Suite 900, 510 Seymour Street

Vancouver, BC

V6B 1V5

 

Attention: Scott Dowty

Email: scott@ausacap.com

 

with a copy (for informational purposes only and not constituting notice) to:

 

McMillan LLP

1500 – 1550 West Georgia Street

Vancouver, BC V6E 4N7

 

Attention: Mark Neighbor

Email: mark.neighbor@mcmillan.ca

 

or to such other address as any of the parties may designate by notice given to
the others.

 

Each notice shall be personally delivered to the addressee or sent by means of
electronic transmission to the addressee and: (i) a notice which is personally
delivered shall, if delivered on a Business Day, be deemed to be given and
received on that day and, in any other case, be deemed to be given and received
on the first Business Day following the day on which it is delivered; and (ii) a
notice which is sent by means of electronic transmission shall be deemed to be
given and received on the first Business Day following the day on which it is
sent.

 

  9

   

 

Section 7.3 Merger of Borrower

 

By its acceptance hereof, each of the Borrower and the Lender acknowledges and
agrees that in the event a Merger occurs, then all references herein to the
Borrower shall extend to and include the entity resulting therefrom or which
thereafter will carry on the business of the Borrower.

 

Section 7.4 Amendments

 

This Debenture may not be amended or otherwise modified except by an instrument
in writing executed by the Borrower and the Lender.

 

Section 7.5 Waivers

 

The Lender shall not, by any act, delay, omission or otherwise, be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and executed by an authorized officer of
the Lender. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by the Lender of any right, power and/or remedy on
any one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which the Lender would otherwise have on any future
occasion, whether similar in kind or otherwise.

 

Section 7.6 Transfer of Debenture

 

No transfer of this Debenture shall be valid unless made in accordance with
applicable laws, including all Applicable Securities Laws. If the Lender intends
to transfer this Debenture or any portion thereof, it shall deliver to the
Borrower the transfer form attached to this Debenture as Schedule C, duly
executed by the Lender. Upon compliance with the foregoing conditions and the
surrender by the Lender of this Debenture, the Borrower shall execute and
deliver to the applicable transferee a new Debenture registered in the name of
the transferee. If less than the full Principal Amount of this Debenture is
transferred, the Lender shall be entitled to receive, in the same manner, a new
Debenture registered in its name evidencing the portion of the Principal Amount
of this Debenture not so transferred. Prior to registration of any transfer of
this Debenture, the Lender and the applicable transferee shall be required to
provide the Borrower with necessary information and documents, including
certificates and statutory declarations, as may be required to be filed under
applicable laws.

 

Section 7.7 Release and Discharge

 

If the Lender exercises all conversion rights attached to this Debenture
pursuant to Article 3 hereof or if the Borrower pays all of the Obligations in
full to the Lender, the Lender shall release this Debenture and the Borrower
shall be, and shall be deemed to have, discharged of all its obligations under
this Debenture.

 

Section 7.8 Successors and Assigns

 

This Debenture shall enure to the benefit of the Lender and its successors and
assigns, and shall be binding upon the Borrower and its successors and permitted
assigns.

 

Section 7.9 Time

 

Time shall be of the essence of this Debenture.

 

  10

   

 

Section 7.10 Governing Law

 

This Debenture shall be governed by and interpreted in accordance with the laws
of the Province of British Columbia and the federal laws of Canada applicable
therein.

 

Section 7.11 Further Assurances

 

The Borrower shall forthwith, at its own expense and from time to time, do or
file, or cause to be done or filed, all such things and shall execute and
deliver all such documents, agreements, opinions, certificates and instruments
reasonably requested by the Lender or its counsel as may be necessary or
desirable to complete the transactions contemplated by this Debenture and carry
out its provisions and intention.

 

  11

   

 

SCHEDULE B

 

FORM OF CONVERSION NOTICE

 

TO: BODY AND MIND, INC. (the “Company”)

 

Pursuant to the Unsecured Convertible Debenture (the “Debenture”) of the Company
issued to the undersigned on ______________, 2018, the undersigned hereby
notifies the Company that $___________________________ of the principal amount
outstanding under the Debenture shall be converted into Common Shares of the
Company, all in accordance with the terms of the Debenture on ________________,
2018.

 

The undersigned hereby directs that the Common Shares subscribed for be
registered and delivered as follows:

 

NAME(S) IN FULL

 

ADDRESS(ES)

 

NUMBER OF COMMON SHARES

   

 

As at the time of exercise hereunder, the undersigned represents, warrants and
certifies as follows (check one):

 

 

¨

(A)

the undersigned holder at the time of conversion of the Debenture is not in the
United States, is not a “U.S. person” as defined in Regulation S under the
United States Securities Act of 1933, as amended (the “U.S. Securities Act”),
and is not converting the Debenture for the account or benefit of a U.S. person
or a person in the United States (as defined in Regulation S), and did not
execute or deliver this conversion notice in the United States; OR

 

 

 

 

 

¨

(B)

the undersigned holder is resident in the United States, is a U.S. person, or is
converting the Debenture for the account or benefit of a U.S. person or a person
in the United States (a “U.S. Holder”), and is an “accredited investor”, as
defined in Rule 501(a) of Regulation D under the U.S. Securities Act (a “U.S.
Accredited Investor”), and has completed the U.S. Accredited Investor Status
Certificate in the form attached to this exercise form; OR

 

 

 

 

 

¨

(C)

if the undersigned holder is a U.S. Holder, the undersigned holder has delivered
to the Company and the Company’s transfer agent an opinion of counsel of
recognized standing (which will not be sufficient unless it is in form and
substance satisfactory to the Company) or such other evidence satisfactory to
the Company to the effect that with respect to the Common Shares to be delivered
upon conversion of this Debenture, the issuance of such securities has been
registered under the U.S. Securities Act and applicable state securities laws,
or an exemption from the registration requirements of the U.S. Securities Act
and applicable state securities laws is available.

  

   

   

 

Note: Certificates representing Common Shares will not be registered or
delivered to an address in the United States unless box (B) or (C) immediately
above is checked.

 

If the undersigned has indicated that the undersigned is a U.S. Accredited
Investor by marking box (B) above, the undersigned additionally represents and
warrants to the Company that:

 

1 the undersigned has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Common Shares, and the undersigned is able to bear the economic risk of loss
of his or her entire investment;

 

 

2. the undersigned is: (i) purchasing the Common Shares for his or her own
account or for the account of one or more U.S. Accredited Investors with respect
to which the undersigned is exercising sole investment discretion, and not on
behalf of any other person; (ii) is purchasing the Common Shares for investment
purposes only and not with a view to resale, distribution or other disposition
in violation of United States federal or state securities laws; and (iii) in the
case of the purchase by the undersigned of the Common Shares as agent or trustee
for any other person or persons (each a “Beneficial Owner”), the undersigned
holder has due and proper authority to act as agent or trustee for and on behalf
of each such Beneficial Owner in connection with the transactions contemplated
hereby; provided that: (x) if the undersigned holder, or any Beneficial Owner,
is a corporation or a partnership, syndicate, trust or other form of
unincorporated organization, the undersigned holder or each such Beneficial
Owner was not incorporated or created solely, nor is it being used primarily to
permit purchases without a prospectus or registration statement under applicable
law; and (y) each Beneficial Owner, if any, is a U.S. Accredited Investor; and

 

 

3. the undersigned has not converted the Debenture as a result of any form of
general solicitation or general advertising (as such terms are used in Rule 502
of Regulation D under the U.S. Securities Act), including advertisements,
articles, notices or other communications published in any newspaper, magazine
or similar media, or broadcast over radio, television, the Internet or other
form of telecommunications, or any seminar or meeting whose attendees have been
invited by general solicitation or general advertising.

 

The undersigned acknowledges and agrees that:

 

1. the Company has provided to the undersigned the opportunity to ask questions
and receive answers concerning the terms and conditions of the offering, and the
undersigned has had access to such information concerning the Company as the
undersigned has considered necessary or appropriate in connection with the
undersigned’s investment decision to acquire the Common Shares;

 

 

2. if the undersigned decides to offer, sell or otherwise transfer any of the
Common Shares, the undersigned must not, and will not, offer, sell or otherwise
transfer any of such Common Shares directly or indirectly, unless:

 

 

(a) the sale is to the Company;

 

 

 

 

(b) the sale is made outside the United States in a transaction meeting the
requirements of Rule 904 of Regulation S under the U.S. Securities Act and in
compliance with applicable local laws and regulations;

 

 

 

 

(c) the sale is made pursuant to the exemption from the registration
requirements under the U.S. Securities Act provided by Rule 144 thereunder, if
available, and in accordance with any applicable state securities or “blue sky”
laws; or

 

 

 

 

(d) the Common Shares are sold in a transaction that does not require
registration under the U.S. Securities Act or any applicable state laws and
regulations governing the offer and sale of securities, and

 

 

 

 

(e) the undersigned has prior to such sale pursuant to subsection (c) or (d),
furnished to the Company an opinion of counsel of recognized standing in form
and substance satisfactory to the Company to such effect;

 

  2

   

 

3. the Common Shares are “restricted securities” under applicable federal
securities laws and that the U.S. Securities Act and the rules of the United
States Securities and Exchange Commission provide in substance that the
undersigned may dispose of the Common Shares only pursuant to an effective
registration statement under the U.S. Securities Act or an exemption therefrom;

 

 

4. the Company has no obligation to register any of the Common Shares;

 

 

5. the certificates representing the Common Shares (and any certificates issued
in exchange or substitution for the Common Shares) will bear a legend stating
that such securities have not been registered under the U.S. Securities Act or
the securities laws of any state of the United States, and may not be offered
for sale or sold unless registered under the U.S. Securities Act and the
securities laws of all applicable states of the United States, or unless an
exemption from such registration requirements is available;

 

 

6. the legend may be removed by delivery to the registrar and transfer agent and
the Company of an opinion of counsel, of recognized standing in form and
substance satisfactory to the Company, that such legend is no longer required
under applicable requirements of the U.S. Securities Act or state securities
laws;

 

 

7. the financial statements of the Company have been prepared in accordance with
Canadian generally accepted accounting principles or International Financial
Reporting Standards, which differ in some respects from United States generally
accepted accounting principles, and thus may not be comparable to financial
statements of United States companies;

 

 

8. there may be material tax consequences to the undersigned of an acquisition
or disposition of the Common Shares;

 

 

9. the undersigned consents to the Company making a notation on its records or
giving instructions to any transfer agent of the Company in order to implement
the restrictions on transfer set forth and described in this Conversion Notice.

 

In the absence of instructions to the contrary, the securities or other property
will be issued in the name of or to the holder hereof and will be sent by first
class mail to the last address of the holder appearing on the records of the
Company.

 

DATED this _________ day of _______________, 20_____.

 

In the presence of:

 

 

 

 

Signature of Witness

 

Signature of Holder

 

 

 

 

 

 

Witness’s Name

 

Name and Title of Authorized Signatory for the Holder

 

Please print below your name and address in full.

 

Legal Name _______________

 

Address _________________

 

  3

   

 

INSTRUCTIONS FOR SUBSCRIPTION

 

The signature to the subscription must correspond in every particular with the
name written upon the face of the Debenture Certificate without alteration. If
the registration in respect of the certificates representing the Common Shares
to be issued upon exercise of the Debenture differs from the registration of the
Debenture Certificate the signature of the registered holder must be guaranteed
by an authorized officer of a Canadian chartered bank, or of a major Canadian
trust company, or by a medallion signature guarantee from a member recognized
under the Signature Medallion Guarantee Program, or from a similar entity in the
United States, if this exercise form is executed in the United States, or in
accordance with industry standards

 

In the case of persons signing by agent or attorney or by personal
representative(s), the authority of such agent, attorney or representative(s) to
sign must be proven to the satisfaction of the Company.

 

If the Debenture Certificate and the form of subscription are being forwarded by
mail, registered mail must be employed.

 

  4

   

 

U.S. ACCREDITED INVESTOR STATUS CERTIFICATE

 

In connection with the conversion of certain outstanding debentures of BODY AND
MIND, INC. (the “Company”) by the holder, the holder hereby represents and
warrants to the Company that the holder, and each beneficial owner (each a
“Beneficial Owner”), if any, on whose behalf the holder is exercising such
debentures, satisfies one or more of the following categories of Accredited
Investor (please write “W/H” for the undersigned holder, and “B/O” for each
beneficial owner, if any, on each line that applies):

 

_______ (1)

Any bank as defined in Section 3(a)(2) of the United States Securities Act of
1933, as amended (the “U.S. Securities Act”), or any savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the U.S.
Securities Act whether acting in its individual or fiduciary capacity; any
broker or dealer registered pursuant to Section 15 of the U.S. Securities
Exchange Act of 1934; any insurance company as defined in Section 2(a)(13) of
the U.S. Securities Act; any investment company registered under the U.S.
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the U.S.
Small Business Investment Act of 1958; any plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees, if such plan
has total assets in excess of US$5,000,000; any employee benefit plan within the
meaning of the U.S. Employee Retirement Income Security Act of 1974 if the
investment decision is made by a plan fiduciary, as defined in Section 3(21) of
such Act, which is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee benefit plan has
total assets in excess of US$5,000,000, or, if a self-directed plan, with
investment decisions made solely by persons that are “accredited investors” (as
such term is defined in Rule 501 of Regulation D of the U.S. Securities Act);

 

_______ (2)

 

Any private business development company as defined in Section 202(a)(22) of the
U.S. Investment Advisers Act of 1940;

 

_______ (3)

 

Any organization described in Section 501(c)(3) of the U.S. Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities offered, with total
assets in excess of US$5,000,000;

 

_______ (4)

 

Any trust with total assets in excess of US$5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is directed
by a sophisticated person (being defined as a person who has such knowledge and
experience in financial and business matters that he or she is capable of
evaluating the merits and risks of the prospective investment);

 

  5

   

 

_______ (5)

A natural person whose individual net worth, or joint net worth with that
person’s spouse, at the time of purchase, exceeds US$1,000,000 (for the purposes
of calculating net worth, (i) the person’s primary residence shall not be
included as an asset; (ii) indebtedness that is secured by the person’s primary
residence, up to the estimated fair market value of the primary residence at the
time of this certification, shall not be included as a liability (except that if
the amount of such indebtedness outstanding at the time of this certification
exceeds the amount outstanding 60 days before such time, other than as a result
of the acquisition of the primary residence, the amount of such excess shall be
included as a liability); and (iii) indebtedness that is secured by the person’s
primary residence in excess of the estimated fair market value of the primary
residence shall be included as a liability);

 

_______ (6)

 

A natural person who had annual gross income during each of the last two full
calendar years in excess of US$200,000 (or together with his or her spouse in
excess of US$300,000) and reasonably expects to have annual gross income in
excess of US$200,000 (or together with his or her spouse in excess of
US$300,000) during the current calendar year, and no reason to believe that his
or her annual gross income will not remain in excess of US$200,000 (or that
together with his or her spouse will not remain in excess of US$300,000) for the
foreseeable future;

 

_______ (7)

 

Any director or executive officer of the Company; or

 

_______ (8)

 

Any entity in which all of the equity owners meet the requirements of at least
one of the above categories – if this alternative is selected you must identify
each equity owner and provide statements from each demonstrating how they
qualify as an accredited investor.

  6

   

 

SCHEDULE C

 

FORM OF TRANSFER

 

TO:

BODY AND MIND, INC. (the “Company”)

 

FOR VALUE RECEIVED, the undersigned (the “Transferor”) hereby sells, assigns and
transfers unto
__________________________________________________________________________________
(include name and address of the transferee) (the “Transferee”) $_______________
principal amount of Unsecured Convertible Debenture of the Company registered in
the name of the undersigned on the register of the Borrower maintained therefor,
and hereby irrevocably appoints _________________________________ the attorney
of the undersigned to transfer the said securities on the books maintained by
the Company with full power of substitution.

 

The Transferor hereby certifies that (check either A or B):

 

____ (A) the transfer of the Debentures is being completed pursuant to an
exemption from the registration requirements of the United States Securities Act
of 1933, as amended (the “U.S. Securities Act”), in which case the Transferor
has delivered or caused to be delivered by the Transferee a written opinion of
U.S. legal counsel of recognized standing in form and substance satisfactory to
the Company to the effect that the transfer of the Debentures is exempt from the
registration requirements of the U.S. Securities Act; or

 

 

____ (B) the transfer of the Debentures is being made in reliance on Rule 904 of
Regulation S under the U.S. Securities Act, and certifies that:

 

 

(1) the undersigned is not an “affiliate” (as defined in Rule 405 under the U.S.
Securities Act) of the Company (except solely by virtue of being an officer or
director of the Company) or a “distributor”, as defined in Regulation S, or an
affiliate of a “distributor”;

 

 

 

 

(2) the offer of such securities was not made to a person in the United States
and either (a) at the time the buy order was originated, the buyer was outside
the United States, or the seller and any person acting on its behalf reasonably
believe that the buyer was outside the United States or (b) the transaction was
executed on or through the facilities of a designated offshore securities market
within the meaning of Rule 902(b) of Regulation S under the U.S. Securities Act,
and neither the seller nor any person acting on its behalf knows that the
transaction has been prearranged with a buyer in the United States;

 

 

 

 

(3) neither the seller nor any affiliate of the seller nor any person acting on
their behalf engaged in any directed selling efforts in connection with the
offer and sale of the Debentures;

 

 

 

 

(4) the sale is bona fide and not for the purpose of “washing off” the resale
restrictions imposed because the Debentures are “restricted securities” (as such
term is defined in Rule 144(a)(3) under the U.S. Securities Act);

 

 

 

 

(5) the Transferor does not intend to replace the securities sold in reliance on
Rule 904 of the U.S. Securities Act with fungible unrestricted securities; and

 

 

 

 

(6) the contemplated sale is not a transaction, or part of a series of
transactions which, although in technical compliance with Regulation S, is part
of a plan or a scheme to evade the registration provisions of the U.S.
Securities Act.

 

   

   

 

Unless otherwise specified, terms used herein have the meanings given to them by
Regulation S under the U.S. Securities Act. If Option B is checked, the Company
may, in its sole discretion, require the Transferor or the Transferee to furnish
a written opinion of U.S. legal counsel or other documentation acceptable to the
Company to the effect that the transfer of the Debentures is excluded from the
registration requirements of the U.S. Securities Act.

 

DATED this _________ day of _______________, 201_____.

 

 

 

Signature of Debenture Holder

 

 

Signature Guaranteed

 

INSTRUCTIONS FOR TRANSFER

  

Signature of the Debenture Holder must be the signature of the person appearing
on the face of this Debenture Certificate.

  

If the Transfer Form is signed by a trustee, executor, administrator, curator,
guardian, attorney, officer of a corporation or any person acting in a fiduciary
or representative capacity, the certificate must be accompanied by evidence of
authority to sign satisfactory to the Company.

  

The signature on the Transfer Form must be guaranteed by a chartered bank or
trust company, or a member firm of an acceptable Medallion Signature Guarantee
Program (STAMP, SEMP, MSP). the stamp must bear the words “Signature Medallion
Guaranteed”.

  

In the United States of America, signature guarantees must be done by members of
a Medallion Signature Guarantee Program only. Signature guarantees are not
accepted from Treasury Branches, Credit Unions or Caisses Populaires unless they
are members of an acceptable Medallion Program.

  

If the Transferor is in a jurisdiction that does not have a Medallion Signature
Guarantee Program, then the Transferor will provide such other documentation as
reasonably required by the Company or its transfer agent, as applicable.

 

  2

   

 

TRANSFEREE ACKNOWLEDGMENT

 

The Transferee acknowledges and agrees that the Debentures may not be offered,
sold, pledged or otherwise transferred in the absence of: (a) an effective
registration statement under the United States Securities Act of 1933, as
amended (the “U.S. Securities Act”), relating thereto; or (b) an exemption from
the registration requirements of the U.S. Securities Act. Each Debenture
Certificate, and each certificate representing Shares issuable upon exercise
thereof, shall contain a legend on the face thereof, in the appropriate form,
setting forth the restrictions on transfer referred to in the Debenture
Certificate, unless in the opinion of counsel for the holder thereof (which
counsel shall be reasonably satisfactory to the Company), the securities
represented thereby are not, at such time, required by law to bear such legend,
or in the case of the Shares, are transferred pursuant to an effective
registration statement under the U.S. Securities Act. The holder acknowledges
and agrees that the Debentures represented by this Debenture Certificate, and
the Shares issuable upon exercise thereof, constitute “restricted securities”
under the U.S. Securities Act.

 

Any certificate issued at any time in exchange or substitution for any
certificate bearing a restrictive legend shall also bear such legend unless in
the opinion of counsel for the holder thereof (which counsel shall be reasonably
satisfactory to the Company), the securities represented thereby are not, at
such time, required by law to bear such legend.

 

In connection with this transfer the undersigned transferee (the “Transferee”)
certifies that the Transferor or Transferee is delivering a written opinion of
U.S. legal counsel acceptable to the Company to the effect that this transfer of
Debentures has been registered under the U.S. Securities Act or is exempt from
registration thereunder.

 

DATED the ___ day of __________, 20__

 

 

 

 

 

 

 

In the presence of:

 

(Signature of Transferee)

 

 

 

 

(Witness)

 

(Name of Transferee – Please print)

 

 

 

 

(Name of Witness – Please print)

 

(Capacity of Authorized Representative)

 

The Debentures and the Common Shares issuable upon exercise of the Debentures
shall only be transferable in accordance with applicable laws. The Debentures
may only be converted in the manner required by the Debenture Certificate and
the Conversion Notice attached thereto. Any securities acquired pursuant to the
conversion of the Debentures shall be subject to applicable hold periods and any
certificate representing such securities may bear restrictive legends.

 

  3

   

 

SCHEDULE D

 

FORM OF FORCED CONVERSION NOTICE

 

TO: The holders of the outstanding debentures (the “Debentures”) of Body and
Mind, Inc. (the “Company”) issued pursuant to the unsecured convertible
debenture certificate dated ·, 2018 (the “Debenture Certificate”)

 

 

FROM:

Body and Mind, Inc.

 

 

DATE:

___________________

 

The Company has elected to exercise its right under Section 3.12 of the
Debenture Certificate to convert (the “Conversion”) all of the principal amount
of the Debentures into common shares of the Company (the “Common Shares”).
Pursuant to the terms of the Debenture Certificate, the Company may force the
conversion of the Debentures at the conversion price of $0.55 per Common Share
when the closing price of the Common Shares on the Canadian Securities Exchange
(the “Exchange”) for 20 consecutive trading days equals or exceeds $1.65.

 

As of close of the market on ______________, the closing price of the Common
Shares on the Exchange for 20 consecutive trading days was $__________. The
Conversion is scheduled to be effective ___________________.

 

Pursuant to the terms of the Debenture Certificate, the directors of the Company
have determined that, on the Conversion, holders of Debentures will receive, for
each $______________ principal amount of Debentures and unpaid interest thereon,
approximately __________ Common Shares. Therefore, on ________________, the
estimated remaining total of $_____________ of principal amount of Debentures
outstanding will be converted into approximately ______________ Common Shares.
The Company will not issue fractional Common Shares on the conversion. Instead,
the Company shall, in lieu of delivering a certificate representing such
fractional interest, the number of Common Shares to be issued shall be rounded
down to the nearest whole Common Share, in accordance with the Debenture
Certificate.

 

Body and Mind, Inc.

 

___________________________

Chief Financial Officer 

 

   

   

  

APPENDIX III

 

Commercial Advisory Agreement

 

COMMERCIAL ADVISORY AGREEMENT

 

This Commercial Advisory Agreement (this “Agreement”) is entered into as of this
· day of ·, 2018 by and between Body and Mind Inc., a Nevada corporation (the
“Company”) having an office at 750 – 1095 West Pender Street Vancouver, BC V6E
2M6, and Australis Capital (Nevada) Inc. (“Advisor”), a Nevada corporation
having an office at 376 East Warm Springs Road in Las Vegas, Nevada.

 

1. Advisory Relationship. During the Term (as defined below), Advisor shall be a
non-exclusive provider to the Company of the advisory services (the “Services”)
described in Exhibit A attached hereto. Advisor shall use commercially
reasonable efforts to perform the Services in accordance with industry standards
and a manner satisfactory to the Company.

 

2. Fees and Expenses. As consideration for the Services to be provided by
Advisor and other obligations set forth in this Agreement, the Company shall pay
to Advisor an advisory fee of Ten Thousand United States Dollars (USD $10,000)
per month. The advisory fee will be payable in advance on the first day of each
month. Payments that are late in excess of 10 calendar days will accrue interest
at a rate of 10% per annum.

 

3. Term and Termination. Advisor shall provide the Services to the Company for a
period commencing on the date hereof and ending on the earlier of five years
from the date of this Agreement or the date Australis Capital Inc. ceases to
hold 10% or more of the issued and outstanding shares of the Company on a
fully-diluted basis (the “Term”).

 

4. Independent Contractor. Advisor’s relationship with the Company shall be that
of an independent contractor and not that of an employee. Advisor shall not be
eligible for any employee benefits, nor shall the Company make deductions from
amounts payable to Advisor for taxes, all of which will be Advisor’s
responsibility. Advisor agrees to indemnify and hold the Company harmless from
liability for, or assessment of, any such taxes imposed on the Company by
relevant taxing authorities as a result of this Section 4. Advisor shall have no
authority to enter into contracts that bind the Company or create obligations on
the part of the Company.

 

5. Use of Information. The Company agrees to furnish (or use reasonable efforts
to cause other parties to furnish) Advisor with such information as it
reasonably requests in connection with Advisor’s performance of the Services
(the “Information”). Advisor will use this information for the benefit of the
Company only. The Company agrees to inform Advisor upon becoming aware that any
of the Information is materially inaccurate, incomplete or misleading during the
Term and the Company agrees that Advisor bears no responsibility for the
accuracy and completeness of the Information and that Advisor will be using and
relying on the Information without performing independent verification or
evaluation of any part of the Information.

 

The Company acknowledges that any written or oral advice that Advisor provides
in connection with this Agreement and the Services is exclusively for use by the
Board of Directors and senior management of the Company and may not be disclosed
to any third party or circulated or referred to publicly without Advisor’s prior
written consent.

 

6. Potential for Conflicts of Interest. The Company acknowledges and understands
that Advisor may currently represent or may represent in the future other
clients that operate in the Company’s industry that the Company may view as a
competitor. Advisor’s representation of any of its clients (past, present and
future) will not limit, in any way the Company’s obligation under this Agreement
and the Advisor agrees that he will not take any actions which could reasonably
be perceived as competing against the Company.

 

   

   

 

7. Indemnification. The Company agrees to the provisions with respect to its
indemnification of Advisor as set forth in Annex A, which is incorporated by
reference into this Agreement.

 

8. Miscellaneous.

 

(a) Amendments and Waivers. The terms of this Agreement may be amended or waived
only with the written consent of the parties.

 

(b) Entire Agreement. This Agreement, including the exhibits and annex attached
hereto and thereto, constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and supersede all oral negotiations and
prior writings with respect to the subject matter hereof and thereof, as
applicable.

 

(c) Notices. Any notice required or permitted by this Agreement shall be in
writing and shall be deemed effective: (i) upon personal delivery or by email;
(ii) upon confirmed transmission by telecopy or telex; or (iii) three (3)
business days after deposit by registered first class mail, postage prepaid.

 

(d) Choice of Law. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Province of British
Columbia, without giving effect to the principles of conflict of laws.

 

(e) Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties hereto agree to renegotiate such
provision(s) in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision(s), then: (i)
such provision(s) shall be excluded from this Agreement; (ii) the balance of
this Agreement shall be interpreted as if such provision(s) were so excluded;
and (iii) the balance of this Agreement shall be enforceable in accordance with
its terms.

 

(f) Counterparts. This Agreement may be executed in counterparts and delivered
electronically or by fax, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

 

[signature page follows]

 

  -2-

   

 

The parties have executed this Agreement on the respective dates set forth
below.

 

 

BODY AND MIND INC.

        By:

 

Name:

    Title:  

 

 

 

 

 

AUSTRALIS CAPITAL (NEVADA) INC.

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

  -3-

   

 

EXHIBIT A

 

DESCRIPTION OF ADVISORY SERVICES

 

Advisor will provide the following services:

 

 

· assist the company with introductions to potential business partners in the
cannabis industry through Advisor’s network of contacts;

 

· seek to identify new business opportunities for the Company and areas of
expansion;

 

· advise the Company’s management from time to time on the Company’s strategy,
business development activities, potential acquisitions, and other business
development matters; and

 

· review strategic opportunities for the Company.

 

  -4-

   

 

ANNEX A: INDEMNIFICATION

 

The Company agrees to indemnify and hold harmless Advisor (the “Indemnified
Party”) from and against any losses, claims, damages and liabilities, joint or
several (collectively, “Damages”), to which such Indemnified Party may become
subject in connection with or otherwise caused by or arising from any
transaction contemplated by this Agreement or the engagement of or performance
of services by the Indemnified Party thereunder and will reimburse the
Indemnified Party for all reasonable fees and expenses (including the reasonable
fees and expenses of counsel) (collectively, “Expenses”) as incurred in
connection with investigating, preparing, pursuing or defending any threatened
or pending claim, action, proceeding or investigation (collectively, the
“Proceedings”) arising therefrom, whether or not the Indemnified Party is a
formal party to such Proceeding; provided, that the Company will not be liable
to any such Indemnified Party for any Damages and related Expenses to the extent
that any Damages are found to have resulted from the gross negligence, bad faith
or willful misconduct of the Indemnified Party. The Company also agrees the
Indemnified Party will not have any liability (whether direct or indirect, in
contract, tort or otherwise) to the Company or any person asserting claims on
behalf of the Company arising out of or in connection with any transactions
contemplated by this Agreement or the engagement of or performance of services
by any Indemnified Party thereunder except to the extent that any Damages are
found to have resulted from the gross negligence, bad faith or willful
misconduct of such Indemnified Party.

 

Promptly after receipt by the Indemnified Party of notice or commencement of any
Proceeding in respect of which indemnity may be sought, the Indemnified Party
will notify the Company in writing of the receipt or commencement thereof;
provided, that the failure so to notify the Company will not relieve the Company
from any liability which the Company may have on account of this indemnity or
otherwise, except to the extent the Company has been materially prejudiced by
such failure. The Company may at its option assume the defense of such
Proceeding and in such event will provide counsel reasonably satisfactory to the
Indemnified Party. In any Proceeding assumed by the Company to which the
Indemnified Party is requested or required to participate, the Indemnified Party
may, but need not, retain separate counsel at its expense to assist the
Indemnified Party in connection with the defense of such Proceedings.
Notwithstanding the foregoing, the Indemnified Party will have the right to
assume the defense of a Proceeding in respect of which indemnity may be sought
and to retain separate counsel, at the Company’s expense, if (i) the Company has
failed to assume the defense of such Proceeding in a prompt manner or (ii) the
Indemnified Party has been advised by its own counsel that there exists actual
or potential conflicting interests between the Company and the Indemnified
Party, including the availability of one or more legal defenses which are
different from or in addition to those available to the Company. In any event,
the Company will not, in connection with any Proceeding or separate but
substantially similar or related Proceedings in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the Expenses
of more than one separate firm of attorneys (in addition to local counsel) for
all Indemnified Parties unless the defense of one Indemnified Party is unique or
separate from that of another Indemnified Party subject to the same claim or
action.

 

  -5-

   

 

The Company agrees not to enter into any waiver, release or settlement of any
proceeding (whether or not Advisor or any other Indemnified Party is a formal
party to such Proceeding) in respect of which indemnification may be sought
hereunder without the prior written consent of Advisor (which consent will not
be unreasonably withheld), unless such waiver, release or settlement includes an
unconditional release of Advisor and each Indemnified Party from all liability
arising out of such Proceeding. No Indemnified Party shall enter into any
waiver, release or settlement of any proceeding in respect of which
indemnification may be sought hereunder without the prior written consent of the
Company (which consent shall not be unreasonably withheld).

 

The indemnity, reimbursement and contribution obligations of the Company
hereunder will be in addition to any liability which the Company may otherwise
have to any Indemnified Party and will be binding upon and inure to the benefit
of any successors, assigns, heirs and personal representatives of the Company or
an Indemnified Party. The provisions hereunder will survive the modification,
termination or expiration of this Agreement.

  

 

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APPENDIX IV

 

Form of Corporation Officer’s Certificate

 

This certificate is provided pursuant to the Investment Agreement dated for
reference October 30, 2018, 2018 (the “Investment Agreement”) between Body and
Mind Inc. (the “Company”) and Australis Capital Inc. (the “Subscriber”) in
relation to an offering of units and debentures of the Company.

 

I, Leonard Clough, signing in my capacity as the Chief Executive Officer of the
Company, and I, Darren Tindale, signing in my capacity as the Chief Financial
Officer of the Company and not in our personal capacities, hereby certify to the
best of our knowledge, information and belief, after having made due inquiry,
that:

 

1. the representations and warranties made by the Company in the Investment
Agreement remain true and correct in all material respects as of the date hereof
and the Company has complied with all the covenants and satisfied all of the
conditions contained therein;

 

 

2. since the date of the Investment Agreement no transaction out of the ordinary
course of business, which is of a nature material to the Company, has been
entered into by the Company;

 

 

3. there are no actions, suits, proceedings or inquiries pending or threatened
against or affecting the Company at law or in equity or before or by any
federal, provincial, municipal or other governmental department, commission,
board, bureau or agency, domestic or foreign, which may in any way materially
and adversely affect the Company;

 

 

4. no order ceasing or suspending trading in securities of the Company nor
prohibiting the sale of such securities has been issued to the Company or its
directors, officers or promoters or to any reporting companies that have common
directors, officers or promoters and no proceedings for such purposes are
pending or threatened;

 

 

5. the offering and the sale of its securities by the Company does not and will
not conflict with or result in a breach of or constitute a default under or
result in a violation of, whether after notice or lapse of time or both, any of
the terms, conditions or provisions of the constating documents, by‑laws or
resolutions of the Company or any indenture or other agreement or instrument to
which the Company is a party or by which it is bound or any order, decree,
statute, by‑law, regulation, covenant or restriction applicable to the Company
or any of its assets;

 

 

6. the Company is not presently in default in the performance of any covenant or
obligation contained in any indenture or other agreement which creates,
evidences or secures the indebtedness of the Company;

 

 

7. there are no persons, firms or corporations having any agreement or option or
any right or privilege capable of becoming an agreement for the purchase,
subscription or issuance of any securities of the Company;

 

 

8. the Company’s directors and officers have been duly elected or appointed; and

 

 

9. the Company is not in default with respect to any material filings it is
required to make with the Canadian Securities Exchange or the applicable
securities regulatory authorities.

 

   

   

 

DATED ·

 

 

Leonard Clough

 

Darren Tindale

Chief Executive Officer

 

Chief Financial Officer

 

 

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