JOINT VENTURE AGREEMENT

 

Made and Entered into By and Between

 

GLOBAL HEMP GROUP INC., a company duly incorporated under the British Columbia
Business Corporations Act and having its registered office located at #106 –
1169 Mt. Seymour Road, North Vancouver, BC V7H 2Y4, hereby represented by
Charles Larsen, President and CEO, duly authorized as he so declares;

(“GHG”)

 

AND

MARIJUANA COMPANY OF AMERICA INC., a company duly incorporated under the laws of
the state of Utah and having its registered office located at 1340 West Valley
Parkway, Escondido, CA 92029, hereby represented by Donald Steinberg, President
and CEO, duly authorized as he so declares;

 

(“MCOA”)

 

AND

TTO ENTERPRISES LTD., a company duly incorporated under the laws of the state of
Oregon, USA and having its registered office located at 41389 Hwy 226, Scio, OR
97374, hereby represented by John Giese, President, duly authorized as he so
declares;

(“TTO”)

 

 

(GHG, MCOA and TTO hereinafter collectively referred to as the “Parties”)

 

 

 

WITH THE INTERVENTION OF:

 

COVERED BRIDGE ACRES LTD., a company incorporated under the Laws of the State of
Oregon, having its registered office for the purposes hereof at41389 Hwy 226,
Scio, OR 97374), hereby represented for the purposes hereof by Jeff Kilpatrick
duly authorized as he so declares;

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1.             INTERPRETATION

 

In this Agreement, Section headings are for convenience purposes only and shall
not be used in its interpretation. Unless the context clearly indicates a
contrary intention: -

1.1a word or an expression which denotes: -

1.1.1any gender includes the other genders

1.1.2a natural person includes an artificial or juristic person and vice versa

1.1.3a singular includes the plural and vice versa

1.2the following word and expressions shall bear the meanings assigned to the
below and cognate words and expressions bear corresponding meanings: -

1.2.1“Agreement” – this document together with its schedules, as amended from
time to time;

1.2.2“Approved Business Plan” means a business plan for the Joint Venture
Company in respect of the Project that has been approved by the Parties (namely
its Board) and forming an integral part of this Agreement;

1.2.3“Auditors” - means the auditors of the Joint Venture Company as may from
time to time be appointed by the Board of the Joint Venture Company;

1.2.4“Authority” – means any local, municipal, provincial, state or another
authority or official which has the power to impose or has a responsibility to
apply any law whether in Canada, in the State of Oregon or elsewhere;

1.2.5“Board” – means the Board of Directors of the Joint Venture Company as
constituted from time to time;

1.2.6“Business Day” – any calendar day which is not a Saturday, a Sunday or an
official public holiday in Vancouver, British Columbia;

1.2.7“Confidential Information” – the facts and details of the investigations
and negotiations between the Parties concerning the subject matter of this
Agreement, as well as all information which any Party discloses, furnishes or
makes available to another Party regarding the subject matter of this Agreement
whether prior to, in contemplation of, during or after negotiations and
irrespective of whether such information is marked “confidential” or
“proprietary” or otherwise. The confidential information accordingly namely
includes, without limitation, all communications (whether written, oral or in
any other form legally recognized), all reports, statements, schedules and other
data concerning any financial, technical, labour, marketing, administrative,
accounting and other matters, provided that, notwithstanding the foregoing, the
confidential information shall not include the information referred to in
Section 11;

1.2.8“CSE” means the Canadian Securities Exchange;

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1.2.9“Effective Date” - means the date of last signature of this Agreement;

1.2.10“Encumbrance” – any encumbrance over or security interest in any form over
property, including any pledge, cession, mortgage, notarial bond, lien, right or
hypothec, but excluding normal and usual servitudes or conditions in title
deeds;

1.2.11“Escrow Pool” means the escrow pool of common shares and common share
purchase warrants of GHG and MCOA (which will form the units offered pursuant to
the performance bonification offered to various individuals which are
instrumental to the Project) to be released to Participants upon the occurrence
of the Escrow Release milestones, as provided in Schedule “A” hereto;

1.2.12“Force Majeure” – means any circumstance beyond the reasonable control of
a Party and shall include (but shall not be limited to) any act of God,
insurrection, riot, vandalism, mob violence, civil commotion, criminal activity,
sabotage, acts of the military, police or civil authorities, any requirement of
any authority, any court order, international restriction, epidemic, quarantine,
restriction in the freedom of movement of persons and assets, material,
transportation, electricity, water, utilities or other necessary resources,
earthquake, excessive rainfall, floods and other effect of whether elements to
which the Parties have no control;

1.2.13“Joint Venture Company” – a company to be incorporated in United States by
the Parties as a vehicle to undertake the business detailed in the objectives of
this Agreement as contemplated in Section 3 the issued initial share capital of
which company shall be held as detailed in Section 2.3;

1.2.14“Parties” – collectively GHG, MCOA or TTO or their respective nominees;

1.2.15“Participants” – means the participants to the Escrow Pool;

1.2.16“Project” – means the definition provided in Section 3.2 below;

1.2.17“Shares” – means issued shares of any class in the share capital of the
Joint Venture Company;

1.2.18“Signature Date” – the date of signature of this Agreement by the
signatory which signs it last.

1.2.19“USD” – United States of America dollars being the lawful currency in the
United States of America.

1.3Any reference to any statute, regulation or other legislation shall be a
reference to that statute, regulation or other legislation as at the Signature
Date and as amended or substituted from time to time.

1.4If in any provision in a definition is a substantive provision conferring a
right or imposing an obligation on any Party then, notwithstanding that it is
only in a definition, effect shall be given to that provision as if it were a
substantive provision in the body of this Agreement.

1.5Any reference to days (other than a reference to business days), or months or
years shall be a reference to calendar days, months or years.

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1.6Schedules and exhibits to this Agreement form an integral part hereof and
words and expressions defined in this Agreement shall bear, unless the context
otherwise requires, the same meaning in such schedules or schedules, and vice
versa. To the extent that there is any conflict between the schedules or
exhibits to this Agreement and the provisions of this Agreement, the provisions
of this Agreement shall prevail.

1.7Where any term is defined within the context of any particular Section in
this Agreement, the term so defined, unless it is clear from the Section in
question that the term so defined has limited application to the relevant
Section, shall bear the same meaning as ascribed to it for all purposes in terms
of this Agreement, notwithstanding that that term has not been defined in this
interpretation Section.

1.8The rule of construction that, in the event of ambiguity, the contract shall
be interpreted against the Party responsible for the drafting thereof shall not
apply in the interpretation of this Agreement.

1.9This Agreement shall be binding on and enforceable by the Administrators,
Trustees, permitted Assigns or Liquidators of the Parties as fully and
effectually as if they had signed this Agreement in the first instance and
reference to any Party shall be deemed to include such Party’s Administrators,
Trustees, permitted Assigns or liquidators.

1.10Where figures are referred to in numerals and in words, if there is any
conflict between the two, the amount in words shall prevail.

 

2.0       PREAMBLE

 

The preamble hereto shall form an integral part hereof.

 

2.1The Parties wish to enter into this Agreement and provide funding as well as
financial, technical, management and operational expertise upon the terms and
conditions of this Agreement, in order to develop the Project, as defined
hereinafter;

 

2.2The Parties shall incorporate a Joint Venture Company in Oregon, United
States, for implementing the Project;

 

2.3The initial issued common shares of the Joint Venture Company shall be
subscribed for and be held as follows; 42.5% by GHG, 42.5% by MCOA and 15% by
TTO which shareholding shall be subject to variation in accordance with Section
7 of this Agreement.

 

2.4The Shareholders shall be entitled to dividends from the Joint Venture
Company in accordance with their respective shareholding in the Joint Venture
Company, as more fully outlined in section 7.2 if prior to the Escrow Release,
or provided for in section 7.2.2 if after the First Escrow Release or 7.2.3 if
after Second Escrow Release.

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3.0       OBJECT

 

 3.1       Establishment of the Joint Venture

 

The Parties hereby shall jointly establish a joint venture (hereinafter referred
to as the
“Joint Venture”.

3.2        Purpose of the Joint Venture

 

The purpose of the Joint Venture shall be to carry on a business of
commercializing the cultivation of high yielding CBD industrial hemp and the
extraction of cannabinoids on properties located in the Scio, Oregon area
(hereinafter referred to as the "Project").

 

3.4        Head Office

 

The head office of the Joint Venture shall be located at the offices of GHG at
the address indicated on the first page of this Agreement.

 

4.0CONDITIONS PRECEDENT

4.1 This Agreement, by which the Parties shall be bound, is entirely conditional
upon:

 

4.1.1Within thirty (30) days from the Signature Date all regulatory and legal
approvals, consents and waivers required, including but not limited to those to
be obtained from the Canadian Securities Exchange and the British Columbia
Securities Commission, as principal regulator, which shall be obtained by GHG,
and the Securities and Exchange Commission, which shall be obtained by MCOA or
its nominee, for the Project.

 

4.1.2Within thirty (30) days from the Signature Date, GHG or its nominee
providing financial proof acceptable to the Joint Venture Company, confirming
that GHG and MCOA or their respective nominee(s) shall meet their financial
obligations, in terms of this Agreement when called upon by the Joint Venture
Company to do so.

 

4.2Each Party shall act in good faith and use its best endeavors to ensure the
fulfillment by it of the conditions precedent in respect of which it bears an
obligation to fulfill.

 

4.3The conditions precedent herein may not be waived, other than by written
Agreement between the Parties.

 

4.4If any condition precedent is not fulfilled for any reason whatever and is
not waived in terms of Section 4.3, then:

 

4.3.1This whole Agreement (other than the Sections referred to in Section 3.1 by
which the Parties shall be bound) shall be of no force or effect;

 

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4.3.2Subject to Section 4.3.3, the Parties shall be entitled to be restored as
near as possible to the positions in which they would have been, had this
Agreement not been entered;

 

4.3.3No Party shall have any claim against the other in terms of this Agreement,
except for such claims (if any) as may arise from a breach of the Sections
referred to in Section 3.1 or the action or inaction of a Party thereby causing
a condition precedent not to be fulfilled.

 

5.0OPERATION AND MANAGEMENT

5.1 The Joint Venture Company shall be managed by a Board of Directors. The
Board shall be comprised of not less than three (3) Members. GHG shall be
entitled to appoint one (1) Member to the Board, MCOA or its nominee shall
appoint one (1) Member to the Board and TTO shall be entitled to appoint one (1)
Member to the Board.

5.2The quorum of the Board shall be two (2) Board Members provided that one (1)
Director from GHG or its nominee and one (1) from MCOA or its nominee are
present.

5.3All meetings of the Directors of the Joint Venture Company shall be held in
accordance with the provisions of the Business Corporation Act (British
Columbia) and the Memorandum and Articles of Association of the Joint Venture
Company.

5.4Save and except as herein otherwise specifically provided, any question,
resolution and matters whatsoever submitted for decision or action at any
meeting of the Board shall be determined by a majority vote of the Directors
present.

5.5The Parties agree that all management systems and reports shall be in the
English language and further that all Financial reporting shall comply with
International Financial Reporting Standards.

It is agreed that the provisions in this Section 5.0 shall be incorporated into
the Shareholders Agreement mutatis mutandis.

6.0DUTIES

 

The Board shall take all decisions and appropriate measures in order to achieve
the Joint Venture's purposes and to harmoniously and efficiently fulfill its
obligations as to the Project. More specifically but without restricting the
aforesaid, the Board shall:

 

i)have control and supervision over the Joint Venture and Project administrative
and financial management;

 

ii)prepare the operating budget and submit it to the Parties before the
realization of the Project and, from time to time or upon request by the
Parties, prepare and submit a revised budget while in progress;

 

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iii)distribute among the Parties the services to be rendered, the work to be
performed and the materials to be supplied for the Project, taking into account
the participation of each Party in the Joint Venture;

 

iv)sign (or appoint a Board member to sign) any contract, amendment, change
order, addition, reduction or any other agreement with third parties, for and on
behalf of the Joint Venture;

 

v)subcontract whole or part of any required work and sign (or appoint a Board
member to sign) any pertaining purchase order or contract;

 

vi)open one or several bank accounts with a certified financial institution and
deposit all sums of money and bills of exchange in connection with the Joint
Venture or the Project;

 

vii)authorize all Project's necessary expenses;

 

viii)plan, have control and supervision over the Project realization and time
schedule;

 

ix)coordinate and control all stages of the Project;

 

x)appoint any authorized person to bind the Joint Venture on a financial basis;

 

xi)have the bookkeeping made and the Joint Venture's financial statement
prepared by an independent accounting firm, in accordance with generally
accepted accounting principles;

 

xii)subscribe to any appropriate and sufficient insurance policy in connection
with the Project;

 

xiii)settle, in a rapid and efficient manner, any dispute arising during the
Project realization;

 

xiv)retain the services of a legal advisor to act for and on behalf of the Joint
Venture, depending on the situation and the needs;

 

xv)report to the Parties, periodically or upon request, on the financial
situation of the Joint Venture and on the Project status;

 

xvi)authorize, from time to time, any monetary surplus distribution resulting
from the Project realization;

 

xvii) remit to the Parties, in proportion to their share in the Joint Venture,
their attributable share once all debts and obligations have been paid; and

  

xviii)after the termination of the Project, liquidate the Joint Venture and
render a full account to the Parties.

 

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7.0       CONTRIBUTION AND PARTICIPATION

 

7.1Contributions of the Parties:

 

a)Initial Contribution:

 

The initial contribution of the Parties (the “Initial Contribution”) shall be:

GHG: US$600,000 contribution in cash and common shares of the Company

MCOA US$600,000 contribution in cash

TTO US$180,000 contribution in kind

Total: US$1,380,000

 

b)MCOA Contribution Schedule

 

MCOA’s Initial Contribution to the Joint Venture, of a total amount of
US$600,000 shall be satisfied upon the following schedule (the “MCOA
Contribution Schedule”):

 

i)US$200,000 upon execution of this Agreement;

ii)US$238,780 on or before July 31, 2018;

iii)US$126,445 on or before October 31, 2018; and

iv)US$34,775 on or before January 31, 2018.

 

Total MCOA Initial Contribution: $US$600,000

 

In the event that MCOA would not be able to proceed to the payment of its
Initial Contribution on or prior to the scheduled MCOA Contribution Schedule pr,
MCOA shall be entitled to a five (5) days cure period during which MCOA shall be
permitted to pay its Initial Contribution without further prejudice, and without
being considered to have defaulted its commitments under the terms and
provisions of this Agreement (the “Cure Period”) 

 

c)Subsequent Contributions:

 

Future contributions of the Parties, required in the interest of the Joint
Venture, shall upon decision by the Board be in proportion to each Party's share
in the Joint Venture, being understood that the Parties’ respective
participation in the Joint Venture shall be determined at the moment such future
additional contribution is required, in accordance with the provisions of
Section 7.2 and following subsections below.

 

d)Failure to comply with MCOA Contribution Schedule

 

Should (i) MCOA fail to provide its respective Initial Contribution to the Joint
Venture in a timely manner, in accordance with the MCOA Contribution Schedule
provided in Section 7.1.b) hereinabove (the “MCOA Contribution Default”) and
following the expiration of the Cure Period and (ii) should GHG be responsible
to make any of the aforementioned payment comprising the MCOA Contribution
Schedule in order to remedy the MCOA Contribution

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Default under this Agreement, it is hereby agreed and understood that GHG and
MCOA’s respective Initial Participation in the Joint Venture, provided in
Section 7.2.1. and following subsection below, will be readjusted in proportion
equal to the relevant MCOA Contribution Default, on a pro rata basis in
accordance with the actual respective Initial Contribution of GHG and MCOA, in
order to reflect the additional contribution of GHG to the Joint Venture to
remedy the MCOA Contribution Default.

 

7.2Parties' Participation

 

7.2.1 Initial Participation

 

Subject to the provisions of Section 7.1.d) hereinabove, the Parties’ initial
share participation in the Joint Venture shall be as follows (the “Initial
Participation”):

 

GHG: Forty-two point five per cent (42.5%)

MCOA: Forty-two point five per cent (42.5%)

TTO: Fifteen percent (15.0%)

TOTAL one hundred percent (100.0%)

 

7.2.2 Purchase of TTO’s First Tranche Participation

 

Once the First Escrow Release milestone is reached, as this term is defined in
Section 7.4.2 i) herein, being the date when 20,000 hemp clones have been
planted at the Scio farm, TTO, in exchange for the purchase by GHG and MCOA of
five percent (5.0%) of his Initial Participation, will receive the following
from GHG and MCOA, as more fully detailed in Schedule “A” attached hereto, being
understood and agreed upon by the Parties hereto, that such purchase of the
First Tranche Participation shall be made in accordance with the terms and
conditions of a separate share purchase agreement to be entered between GHG,
MCOA and TTO, containing appropriate and mandatory representations and
warranties from GHG, MCOA and TTO that are customary in similar transactions:

 

-250,000 common shares from the share capital of GHG, issued at a price of
US$0.12 per common share, for a total pre-Project value of US$30,000 based on
the capital expenditures of the Project;

 

-250,000 common share purchase warrants entitling its holder to purchase one
common share in the share capital of GHG at a price of US$0.12 per common share
for a period of 60 months from the date of issuance;

 

-1,000,000 common shares from the share capital of MCOA, issued at a price of
US$0.03 per common share for a total pre-Project value of US$30,000 based on the
capital expenditures of the Project; and

 

-1,000,000 common share purchase warrants entitling its holder to purchase one
common share in the share capital of MCOA at a price of $0.03 per common share
for a period of 60 months from the date of issuance.

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GHG: Forty-seven point five per cent (47.5%)

MCOA: Forty-seven point five per cent (47.5%)

TTO: Five percent (5.0%)

TOTAL One hundred percent (100.0%)

 

Being hereby understood that these proportions are provided in the event that
MCOA respects the MCOA Contribution Schedule and that GHG is not responsible to
make any payment to remedy to MCOA Contribution Default, as described in Section
7.1. d) hereinabove.

 

7.2.3 Purchase of TTO’s Second Tranche Participation

 

Once the Second Escrow Release milestone is reached, as this term is defined in
Section 7.4.2 ii) herein, being the date when the Joint Venture will reach
Earnings before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) by
the sale of the products developed by the Joint Venture as part of the Project,
of an amount of no less than one million dollars (US$1,000,000), TTO, in
exchange for the purchase by GHG and MCOA of five percent (5.0%) of his Initial
Participation, will receive the following from GHG and MCOA, as more fully
detailed in Schedule “A” attached hereto, being understood and agreed upon by
the Parties hereto, that such purchase of the Second Tranche Participation shall
be made in accordance with the terms and conditions of a separate share purchase
agreement to be entered between GHG, MCOA and TTO, containing appropriate and
mandatory representations and warranties from GHG, MCOA and TTO that are
customary in similar transactions:

 

-250,000 common shares from the share capital of GHG, issued at a price of
US$0.12 per common share, for a total pre-Project value of US$30,000 based on
the capital expenditures of the Project;

 

-250,000 common share purchase warrants entitling its holder to purchase one
common share in the share capital of GHG at a price of US$0.12 per common share
for a period of 60 months from the date of issuance;

 

-1,000,000 common shares from the share capital of MCOA, issued at a price of
US$0.03 per common share for a total pre-Project value of US$30,000 based on the
capital expenditures of the Project; and

 

-1,000,000 common share purchase warrants entitling its holder to purchase one
common share in the share capital of MCOA at a price of $0.03 per common share
for a period of 60 months from the date of issuance.

 

GHG: Forty-seven point five per cent (47.5%)

MCOA: Forty-seven point five per cent (47.5%)

TTO: Five percent (5.0%)

TOTAL One hundred percent (100.0%)

 

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Being hereby understood that these proportions are provided in the event that
MCOA respects the MCOA Contribution Schedule and that GHG is not responsible to
make any payment to remedy to MCOA Contribution Default, as described in Section
7.1. d) hereinabove.

 

7.2.4 Property acquisition

 

In reference to the Project disclosed herein, 41389 Farms Ltd. will acquire a
land described herein as being a real property with all improvements located
thereon commonly know as 41389 Hwy 226, Scio, Linn Country, Oregon (the
“Property”), which will be owned, in equal proportion by GHG (50%) and MCOA
(50%).

 

The purchase price paid for the acquisition of the Property shall be paid as
follows: on behalf of GHG, the issuance of 2,100,000 common shares of GHG
representing an aggregate amount of US$275,000. As for MCOA, it shall pay its
proportionate share in the Property by providing a cash payment of US$137,500
(the “MCOA Payment”). Until MCOA is financially capable to provide the MCOA
Payment, GHG will advance the funds in lieu of MCOA. The MCOA Payment may be
reimbursed to GHG, to the sole and unique prerogative of GHG, at the Harvest of
the crops (the “MCOA’s Profit Share”). GHG will receive a priority payment from
any profit whatsoever deriving from the Harvest of the crops on the Property
until the MCOA Payment is completely reimbursed. The advance from GHG to MCOA of
the funds required by MCOA to make the MCOA Payment contemplated in this
Section, shall be the object of a separate loan agreement or similar type of
agreement that will comprise and provide all mandatory representations and
warranties that are customary in such transactions.

 

7.3       Sharing the Profits

 

The Parties shall share the profits of the Joint Venture in proportion to the
above stated percentages, being understood that the percentages that each Party
is entitled to shall be modified to reflect whether the Parties holds the
Initial Participation or the Resulting Participation at the time such profits
are being distributed.

 

7.4       Escrow Pool and Escrow Release

 

7.4.1 Escrow Pool

 

It is hereby agreed between the Parties that GHG and MCOA will create an escrow
pool of common shares and common share purchase warrants of GHG and MCOA (the
“Escrow Pool”) comprised of the following, the whole as more fully described in
Schedule “B” hereto (collectively referred to as the “Escrowed Shares”):

 

-A total of 2,500,000 common shares of GHG issued at a price of CDN$0.20 per
common share;

 

-A total of 2,500,000 common share purchase warrants of GHG to purchase one
common share in the share capital of GHG at a price of CDN$0.36 per common share
for a period of 36 months from the date of issuance;

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-A total of 11,000,000 common shares of MCOA issued at a price of $0.046 per
common share; and

 

-A total of 11,000,000 common share purchase warrants of MCOA to purchase one
common share in the share capital of MCOA at a price of $0.083 per common share
for a period of 36 months from the date of issuance.

 

7.4.2    Escrow Release Milestones

 

The following two (2) events (the “Escrow Release Milestones”) will trigger the
release from the Escrow Pool of the Escrowed Shares, the whole as more fully
described in Schedule “B” attached hereto:

 

i)                 First Escrow Release Milestone: Once the EBITDA of the Joint
Venture reaches $1,000,000 (one million dollars); and

 

ii)               Second Escrow Release Milestone: Once the EBITDA of the Joint
Venture reaches $2,000,000 (two million dollars).

 

7.4.3        Participant’s Percentage of Escrowed Shares

 

The Participant shall receive an amount of Escrowed Shares equal to their
respective interest in the Escrow Pool, being the following percentage, the
whole as more fully described in Schedule “C” attached hereto, being understood
and agreed upon by the Parties hereto, that such purchase of the Second Tranche
Participation shall be made in accordance with the terms and conditions of a
separate share purchase agreement to be entered between GHG, MCOA and TTO,
containing appropriate and mandatory representations and warranties from GHG,
MCOA and TTO that are customary in similar transactions:

 

TTO 100.00%

 

Total 100.0%

 

Upon the occurrence of the First Escrow Release Milestone or the Second Escrow
Release Milestone, the Participant shall receive its respective corresponding
amount of Escrowed Shares from the Escrow Pool, the whole in accordance with the
provisions of Schedule “D” attached hereto, as described below:

 

i)Upon occurrence of the First Escrow Release Milestone: half (1/2) of the
Escrowed Shares shall be released from the Escrow Pool to the Participant in the
respective proportion of their interest in the Escrow Pool, as provided
hereinabove and more fully disclosed in Schedule “D” attached hereto; and

 

ii)Upon occurrence of the Second Escrow Release Milestone: the remaining half
(1/2) of the Escrowed Shares shall be released from the Escrow Pool to the
Participant in the respective

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proportion of their interest in the Escrow Pool, as provided hereinabove and
more fully disclosed in Schedule “D” attached hereto.

 

7.5       Sharing the Assets

 

When liquidating the Joint Venture, the Parties shall share the assets in
proportion to the stated percentages in section 7.2.1 if prior to the Escrow
Release, or stated in section 7.2.2 if after the Escrow Release.

 

7.6       Sharing the Losses

 

The Parties shall share the losses of the Joint Venture in proportion to the
stated percentages in section 7.2.1 if prior to the Escrow Release, or stated in
section 7.2.2 if after the Escrow Release.

 

7.7       Working Capital Account

 

Upon the Board request and in proportion to the above stated percentages, each
Party shall, from time to time, contribute to the Joint Venture working capital
account. Should a Party not be in a financial position to contribute in its
proportionate share, the defaulting Party will see its shareholding be reduced
to the benefit of the other contributing shareholder.

 

8.0        SPECIAL PROVISIONS

 

8.1       Suretyship

 

Each Party shall provide sums of money or guarantees requested by any surety
company as to any suretyship in connection with the Project realization (tender
bond, performance bond, workmanship bond, etc.) in proportion to his share in
the Joint Venture. Each Party shall also fill in and sign any form requested by
such company.

 

8.2       Books

 

All books of the Joint Venture, including the accounting books, shall be
continuously updated. The Parties and the accountants appointed by them may have
access to these books at all times during the business hours of the Joint
Venture, for examination or copying. These books shall be kept at the head
office of the Joint Venture.

 

8.3       Fiscal Year

 

The fiscal year of the Joint Venture shall end on September 30 of each year or
on any other date as determined by the Board.

 

8.4       Costs and Expenses

 

The Joint Venture shall not reimburse Parties for costs or expenses they have
incurred on its behalf in the tendering process. Moreover, the Joint Venture
shall not pay any costs or expenses to Parties or

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members of the Board for their presence to the meetings. However, expenses first
approved by the Board shall be paid on presentation of supporting documents.

 

8.5       Compliance with the Law

 

Each Party shall comply with and enforce any law or by-law in connection to
services, work and materials he shall provide or supply in relation to his share
of the Project attributed to him.

 

8.6       Permits and Licenses

 

Each Party shall apply for, at his expense, or shall hold and keep in force any
necessary license, permit or authorization to perform the share of the Project
attributed to him.

 

8.7       Taxes

 

Each Party shall pay to appropriate authorities any tax, duty, charge,
withholding, or other mandatory contribution imposed by any law, by-law or order
in connection with his interest in this Agreement or the share of the Project
attributed to him.

 

8.8       Absence of Joint Liability

 

Notwithstanding any jointly and solidarily obligation of the Parties towards a
third person as members of the Joint Venture, they shall be liable among them to
fulfill such obligation and ensuing payment only in proportion to the share they
hold in the Joint Venture.

 

8.9 Sums of Money due to a Party

 

Any amount paid in excess or advance made to the Joint Venture by a Party may be
claimed from the other Party in proportion to the share it holds in the Joint
Venture and shall bear interest at the rate of five per cent (5%) annually from
its disbursement.

 

8.10       Restrictions on the Transfer of Shares

 

None of the Parties may sell, transfer, assign, secure by mortgage, engage,
pledge, alienate, dispose of or affect in any manner whatsoever, its share in
the Joint Venture, as well as any loans granted to the Joint Venture, without
the written consent of the other Parties.

 

8.11       Undertaking Not to Compete

 

Each Party may, for his own behalf or on behalf of a third party, continue to
perform his regular activities as long as it does not conflict with this joint
venture and as long as this party is a participant to said Agreement.

 

8.11.1Right of First Refusal

 

Each Party may exercise its right of first refusal pursuant to other projects,
as long as the contemplated projects do not compete with the business of the
Joint Venture.

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8.12 Reciprocal Undertaking Not to Solicit Personnel

 

During the term of this Agreement and for a further period of twenty-four (24)
months following its termination, each of the Parties shall not, directly or
indirectly, solicit, employ, hire or otherwise retain the services of any of the
other Party’s employees. If a Party fails to abide by this obligation, it shall
immediately pay to the other Party, as a penalty, an amount equal to twenty-four
(24) months of remuneration for the employee in question at the time of the
default.

8.13       Collaboration

 

The Parties shall collaborate in the Joint Venture and bring mutual support
(including their cooperation at the technical, commercial, and industrial
levels) and as to all required resources in order to harmoniously and
efficiently perform the Project

 

8.14       Absence of Commitment

 

At the signing of this Agreement and throughout the realization of the Project,
Parties are not committing and shall not commit themselves in other activities
which can prevent them to fully collaborate or bring the above-mentioned
resources, to perform their share of the Project or to fulfill their obligations
under this Agreement.

 

8.15       Defect and Poor Workmanship

 

Each Party shall be liable towards the Joint Venture for any poor workmanship,
defect and other problem which may occur from time to time following the
rendering of services, the performance of work and the supply of materials.

 

8.17       Joint Venture's Property

 

Any property acquired by the Joint Venture for the Project (equipment, tools,
furniture, machinery, rolling stock, etc.) shall belong to the Joint Venture. At
the time of the Joint Venture liquidation, the said property shall be
distributed among the Parties as per their respective share.

 

8.18       Use of Joint Venture Property

 

Each Party may use the property of the Joint Venture, provided it shall use it
in the interest of the Joint Venture and according to its destination, and in
such a way as not to prevent the other Party from using it as it is entitled to.

 

8.19       Subsidiaries

 

Parties, as well as their subsidiaries which may be involved in the Project,
shall be bound by this Agreement.

 

 

 

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8.20       Association with a Third Party

 

Subject to any of the provisions contained herein, none of the Parties may
associate itself with a third party for the purposes of sharing its share in the
Joint Venture, or allowing a third party to enter into the Joint Venture without
the written consent of the other Party.

 

 

8.21       Maintaining of Common Property

 

Any Party may compel the other Party to incur any expenses necessary for the
preservation of the common property, but shall not proceed with any
modifications as to the state of such property without the written consent of
the other Party, regardless of how advantageous such changes may be.

 

8.22       Absence of Mandate

 

None of the Parties may act as the other Party's mandatary, or contract or
fulfill an obligation on its behalf without the latter's prior written consent.

 

8.23       Independent Parties

 

This Agreement binds Parties only to the performance of the Project.
Consequently, the provisions contained herein shall not be interpreted, in any
way, as to establish some partnership between the Parties or as to restrict the
Parties to operate their respective businesses.

 

8.24       Loss of Status as Party

 

Any Party shall lose its status as member of the Joint Venture in any of the
following circumstances:

 

a)its dissolution or voluntary or forced bankruptcy;

 

b)it seeks the protection of the Bankruptcy and Insolvency Act or any other
similar law;

 

c)by its own will or if a judgment orders the seizure of its property;

 

d)if it fails to comply with any provision contained herein and fails to remedy
the said default within fifteen (15) days following the receipt of the other
Party's formal notice of default.

 

In any one of the above-mentioned situations, this Agreement shall terminate,
and the following terms and conditions shall then apply:

 

a)The other Party shall liquidate the Joint Venture and may then continue and
complete the Project to its own benefit;

 

b)The former Party or its legal representatives, as the case may be, shall be
deprived of any right previously held by the former Party in this Agreement, in
the Joint Venture, in its assets and in any surplus made after the loss of
status as member of the Joint Venture; and

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c)Despite the loss of its status as member of the Joint Venture, the former
Party shall remain liable, in proportion to its share, for any deficit of the
Joint Venture until the Project has been completed.

 

9.0       DISSOLUTION AND LIQUIDATION OF THE JOINT VENTURE

 

When dissolving the Joint Venture, the Board:

 

a)shall act as liquidator;

 

b)shall take the seizure of the Joint Venture's property and act as an
administrator of others' property entrusted with full power to administrate;

 

c)shall be entitled to require from the Parties any document and any explanation
concerning the rights and obligations of the Joint Venture;

 

d)shall repay the debts and then, reimburse the capital contribution;

 

e)if applicable, shall proceed to the partition of the assets among Parties in
proportion to their respective shares, and;

 

f)shall remit to the Parties a final rendering of account, prepared by an
independent accounting firm in accordance with generally accepted accounting
principles.

 

After the Joint Venture's liquidation, Parties shall make adjustments among
them, if any, and give themselves mutual discharge.

 

10.0EXCLUSIVITY

10.1Each of the Parties undertake that it shall not, during the tenure of this
Agreement, enter into any negotiation or conclude an agreement with any third
Party regarding the Project.

 

10.2The provisions of this Section shall apply mutatis mutandis to any company,
business, firm or partnership over which any of the Parties has direct or
indirect control, and each Party undertakes to procure that any company,
business, firm or partnership over which it has such control complies with the
provisions of this Section.

 

11.0CONFIDENTIALITY

 

11.1Having regards to the fact that each Party has disclosed and may subsequent
to the Signature Date, disclose Confidential Information to the other Parties,
each Party ("the receiving Party") undertakes from and after the Signature Date,
not to use, disclose or divulge, directly or indirectly, the Confidential
Information of another Party hereto ("the divulging Party") to any third Party.

 

11.2The receiving Party shall take all such steps as may be reasonably necessary
to prevent the divulging Party's Confidential Information falling into the hands
of unauthorized third Parties.

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11.3Any documentation or records relating to the divulging Party's Confidential
Information which comes into the possession of the receiving Party at any time:

 

11.3.1shall be deemed to form part of the confidential information of the
divulging Party;

 

11.3.2shall be deemed to be property of the divulging Party;

 

11.3.3shall be surrendered, together with any copies thereof, to the divulging
Party on demand, and the receiving Party shall not retain extracts therefrom,
unless the parties otherwise agree in writing.

 

11.4 The Parties shall ensure that any of the employees or other persons who may
have the opportunity of receiving any of the Confidential Information of the
divulging Party are aware of and are bound by the obligations of confidentiality
in this Agreement. The Parties agree to use their best endeavors to ensure that
such employees or persons shall be bound by this Agreement even after their
employment relationship has been terminated.      11.5The undertaking and
obligations contained in Sections 11.1 to 11.4 do not apply to information
which:

11.5.1is publicly available at the date of disclosure or there after becomes
publicly available from sources other than the Parties;

 

11.5.2the receiving Party demonstrates, to the reasonable satisfaction of the
disclosing Party, that it was already in its possession prior to its receipt by
or disclosure to such receiving Party;

 

11.5.3is required by law or any regulatory authority to be disclosed; and

 

11.5.4after being disclosed to the receiving Party subsequently comes lawfully
into the possession of the receiving Party from a third Party.

 

12.0PARTY GUARANTEES AND INDEMNITIES

12.1GHG hereby irrevocably and unconditionally:

 

12.1.1Guarantees and undertakes as a principal and independent obligation in
favour of the Joint Venture to punctually perform any and all obligations which
may be owing from time to time by GHG and/or GHG's nominee (if applicable) in
terms of or as a result of this Agreement. The debts and obligations of GHG
and/or its nominee (if applicable) referred to in this Section are hereinafter
collectively referred to as "the GHG guaranteed obligations";

 

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12.1.2Indemnifies the Joint Venture against any and all claims, losses,
liabilities, damages costs and/or expenses (but excluding any consequential
and/or indirect losses, damages and/or costs) which the Joint Venture may
actually suffer or incur in connection with a breach by GHG or its nominee if
applicable, of the GHG guaranteed obligations.

 

12.2The rights of the Joint Venture under this guarantee shall in no way be
affected or diminished if the Joint Venture at any time obtains additional
suretyships, guarantees, securities or indemnities in connection with the GHG
guaranteed obligations.

 

12.3GHG shall use its best endeavors to procure the fulfillment of the
guaranteed obligations and shall refrain from taking or permitting to be taken
any action which may prevent, hamper or detrimentally affect the fulfillment by
GHG or its nominee (if applicable) of the GHG guaranteed obligations under this
Agreement.

 

12.4        MCOA hereby irrevocably and unconditionally:

 

12.4.1Guarantees and undertakes as a principal and independent obligation in
favor of the Joint Venture to punctually perform any and all obligations which
may be owing from time to time by MCOA and/or MCOA’s investor’s nominee (if
applicable), in terms of or as a result of this Agreement. The debts and
obligations of MCOA referred to in this Section are hereinafter collectively
referred to as "the MCOA guaranteed obligations";

 

12.4.2Indemnifies the Joint Venture against any and all claims, losses,
liabilities, damages, costs and/or expenses (but excluding any consequential
and/or indirect losses, damages and/or costs) which the Joint Venture may
actually suffer or incur in connection with a breach by MCOA or its nominee if
applicable, of the MCOA guaranteed obligations.

 

12.5The rights of the Joint Venture under this guarantee shall in no way be
affected or diminished if the Joint Venture at any time obtains additional
suretyships, guarantees, securities or indemnities in connection with the MCOA
guaranteed obligations.

 

12.6MCOA shall use its best endeavors to procure the fulfillment of the
guaranteed obligations and shall refrain from taking or permitting to be taken
any action which may prevent, hamper or detrimentally affect the fulfillment by
GHG or its nominee (if applicable) of the MCOA guaranteed obligations under this
Agreement.

 

13.0GOOD FAITH AND FAIR IMPLEMENTATION

13.1The Parties undertake that in the implementation of this Agreement, they
shall observe the utmost good faith and shall not do or omit to do anything,
which might prejudice or detract from the rights or interests of the other
Parties.

 

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13.2         The Parties further undertake:

 

13.2.1To do whatever may be necessary to enable the reciprocal rights and
obligations of the Parties to be exercised.

 

13.2.2To use their best endeavors always to procure the effective implementation
of this agreement and to cooperate with each other to that end.

 

13.3If there are any changes in the laws of Canada or, the State of Utah
(Oregon?) or, if other circumstances arise that materially affect any of the
rights of the Parties or that render difficult or impractical the implementation
of this Agreement in accordance with a strict interpretation thereof the parties
shall enter into bona fide discussions with a view to alleviating the situation
and to reaching mutual written agreement directed at implementing fair and
reasonable alternative arrangements;

 

13.4If agreement on alternative arrangements cannot be reached, the dispute
preventing such agreement shall be resolved in accordance with the dispute
resolution provisions of Section 14.

 

14.0DISPUTE RESOLUTION

 

14.1Should any dispute disagreement or claim arise between the Parties (“the
dispute”) concerning this Agreement the Parties shall endeavour to resolve the
dispute amicably in the first instance. This entails one of the Parties inviting
the other in writing to meet and attempt to resolve the dispute within fourteen
(14) days from the date of delivery of the written invitation.

 

14.2If the dispute has not been resolved within fourteen (14) days from the date
of delivery of the written invitation referred to in Section 14.1 above, then
the dispute may be referred, by either Party, to arbitration.

 

14.3The Parties shall agree on a single internationally accredited and
recognized Arbitrator within seven (7) business days of either Party delivering
to the other written notice detailing the issues in dispute and the identity and
qualifications of a proposed Arbitrator, failing which the internationally
accredited and recognized Arbitrator shall be appointed in accordance with the
Rules of Arbitration of the International Chamber of Commerce on the written
request of either Party, which request shall be copied to the other Party.

 

14.4The Arbitration shall take place in Salem Oregon, United States, which shall
constitute its seat.

 

14.5       The proceedings shall be conducted in English Language throughout.

 

14.6The decision of the Arbitrator shall be written in logical format setting
out the basis on which it is made.

 

14.7The Arbitrator shall make his award within thirty (30) days of the final
hearing;

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14.8The decision of the Arbitrator shall be final and binding on the Parties.

 

14.9Nothing in this Section 14 shall preclude a Party from obtaining
interlocutory relief, on an urgent basis or other basis, from a court of
competent jurisdiction within the State of Oregon (in the judicial district of
the City of Salem).

 

15.0FORCE MAJEURE

15.1Should a Party (“affected Party”) be prevented from fulfilling any of its
obligations in terms of this Agreement as a result of an event of Force Majeure,
then:

 

15.2those obligations shall be deemed to have been suspended to the extent that
and for so long as the affected Party is so prevented from fulfilling them and
the corresponding obligations of the other Party ("unaffected Party") shall be
suspended to the corresponding extent;

 

15.2.1the affected Party shall immediately notify the unaffected Party in
writing of such event of force majeure and such notice shall include an
estimation of the approximate period for which the suspension shall endure. Such
estimate shall not be binding on the affected Party; and

 

15.2.2the duration of this Agreement as well as each period within which and
each date by which any obligation is required to be performed in terms of this
Agreement shall be extended or postponed, as the case may be, by the period of
suspension.

 

15.3Should the affected Party partially or completely cease to be prevented from
fulfilling its obligations by the event of Force Majeure, the affected Party
shall immediately give written notice to the unaffected Party of such cessation
and the affected Party shall fulfill its obligations which were previously
suspended; provided that in the event and to the extent that fulfilment is no
longer possible or the unaffected Party has given written notice that it no
longer requires such fulfillment, the affected Party shall not be obliged to
fulfill its suspended obligations and the unaffected Parties shall not be
obliged to fulfill its corresponding obligations.

 

15.4Should any event of Force Majeure continue for more than twelve (12) months
after the date of the notice referred to in Section 15.2.1 and notice of
cessation in terms of Section 15.2 has not been given, then either Party shall
be entitled (but not obliged) to terminate this Agreement by giving thirty (30)
days written notice to the other Party to that effect; provided that any such
notice of termination shall be deemed not to have been given if a notice of
cessation is received by the unaffected Party prior to the expiry of such thirty
(30) day period.

 

16.0TERMINATION

16.1                 This Agreement shall terminate in any one or combination of
the following ways:

 

16.2                 In terms of Section 4.1 above

 

16.3                 By mutual agreement between the Parties in writing; or

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16.4By virtue of expiry of the ten (10) year period.

 

16.5                 On account of supervening impossibility in terms of Section
15; or

 

16.6                 in account of fundamental breach in terms of Section 17.

 

 

17.0FUNDAMENTAL BREACH

17.1Should any Party materially breach any provisions of this Agreement and fail
to remedy such breach within thirty (30) Business Days after receiving written
notice from the other Party requiring such remedy, then the Party aggrieved by
such breach shall be entitled, without prejudice to their other rights in law
including any right to claim damages, to cancel this Agreement or to claim
immediate specific performance of all of the defaulting Party’s obligations the
due for performance at the time of breach.

 

17.2For the avoidance of doubt and notwithstanding the foregoing, if the breach
constitutes repudiation, any Party aggrieved by such breach shall be required to
provide written notice requesting the remedy thereof, before cancelling this
Agreement, without prejudice to their rights in law including right to damages.

 

18.0        GENERAL PROVISIONS

 

Unless otherwise stated in this Agreement, the following provisions shall apply.

 

18.1        Severability

 

If all or part of any section, paragraph or provision of this Agreement is held
invalid or unenforceable, it shall not have any effect whatsoever on any other
section, paragraph or provision of this Agreement, nor on the remainder of the
said section, paragraph or provision, unless otherwise expressly provided for in
this Agreement.

 

18.2       Notices

 

Any notice intended for either Party shall be deemed to be validly given if it
is in writing and is sent by registered or certified mail, by bailiff or by
courier service to such Party’s address as set forth in this Agreement, or to
any other address which the Party in question may have indicated in writing to
the other Party. A copy of any notice sent by e-mail shall also be sent
according to one of the above-mentioned delivery modes.

 

18.3       Headings

 

The headings in this Agreement have been inserted solely for ease of reference
and shall not modify, in any manner whatsoever, the meaning or scope of the
provisions hereof.

 

 

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18.4       Schedules

 

The Schedules to this Agreement shall be deemed to form an integral part hereof
if they have been duly initialled by all the Parties.

 

18.5       No Waiver

 

Under no circumstances shall the failure, negligence or tardiness of a Party as
regards the exercise of a right or a recourse provided for in this Agreement be
considered to be a waiver of such right or recourse.

 

18.6       Cumulative Rights

 

All rights set forth in this Agreement shall be cumulative and not alternative.
The waiver of a right shall not be interpreted as the waiver of any other right.

 

18.7       Entire Agreement

 

This Agreement constitutes the entire understanding between the Parties.
Declarations, representations, promises or conditions other than those set forth
in this Agreement shall not be construed in any way so as to contradict, modify
or affect the provisions of this Agreement.

 

18.8       Amendments

 

This Agreement shall not be amended or modified except by another written
document duly signed by all the Parties.

 

18.9       Number and Gender

 

Where appropriate, the singular number set forth in this Agreement shall be
interpreted as the plural number, and the gender shall be interpreted as
masculine, feminine or neuter, as the context dictates.

 

18.10       No Right to Transfer

 

Neither of the Parties may, in any manner whatsoever, assign, transfer or convey
its rights in this Agreement to any third party, without the prior written
consent of the other Party.

 

18.11       Calculating Time Periods

 

In calculating any time periods under this Agreement:

 

a)the first day of the period shall not be taken into account, but the last one
shall;

b)the non-juridical days, i.e. Saturdays, Sundays and public holidays, shall be
taken into account; and

c)whenever the last day is a non-juridical day, the period shall be extended to
the next juridical day.

 

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18.12        Currency

 

The currency used for purposes of this Agreement shall be United States dollars
except otherwise indicated.

 

18.13       Counterparts

 

Each counterpart of this Agreement shall be considered to be an original when
duly initialled and signed by all the Parties, it being understood, however,
that all of these counterparts shall constitute one and the same Agreement.

 

18.14       Successors

 

This Agreement shall bind the Parties hereto as well as their respective
successors, heirs and assigns.

 

18.15       Joint and Several Liability

 

Whenever one of the Parties is constituted of two or more persons, these persons
shall be jointly and severally liable towards the other Party.

 

18.16       Law and Jurisdiction

 

This Agreement shall be governed by and construed in accordance with the laws of
the State of Oregon, United States of America and the federal laws of the United
States of America applicable therein. The Parties hereby attorn to the
jurisdiction of the competent Courts of the judicial district of Salem, Oregon
for any dispute that may arise hereunder.

 

19.0       EFFECTIVE DATE

 

This Agreement becomes effective as of the Signature Date.

 

20.0       ACKNOWLEDGEMENT BY THE PARTIES

 

THE PARTIES HEREBY ACKNOWLEDGE AS FOLLOWS:

 

A)DUE NEGOTIATIONS TOOK PLACE BETWEEN THEM PRIOR TO THE DRAFTING OF THIS
AGREEMENT;

 

B)THIS AGREEMENT TRULY AND COMPLETELY DEFINES THE UNDERSTANDING REACHED BETWEEN
THEM;

 

C)EACH AND EVERY ONE OF THE PROVISIONS OF THIS AGREEMENT IS LEGIBLE;

 

D)THEY DID NOT ENCOUNTER ANY DIFFICULTIES IN UNDERSTANDING THE PROVISIONS OF
THIS AGREEMENT;

 

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E)BEFORE SIGNING THIS AGREEMENT, EACH PARTY HAD THE OPPORTUNITY TO CONSULT A
LEGAL ADVISER; AND

 

F)EACH PARTY OBTAINED A COPY OF THIS AGREEMENT IMMEDIATELY AFTER IT WAS SIGNED
BY ALL THE PARTIES.

 

SIGNED IN THREE (3) COUNTERPARTS,

 

IN VANCOUVER, PROVINCE OF BRITISH COLUMBIA

 

ON THE _______ DAY OF MAY, 2018

 

    GLOBAL HEMP GROUP INC.  ________________________  
____________________________________ WITNESS   Per: Charles Larsen, President &
CEO           MARIJUANA COMPANY OF AMERICA INC. ________________________  
___________________________________ WITNESS   Per: Donald Steinberg, President &
CEO           TTO ENTERPRISES LTD. ________________________  
___________________________________ WITNESS   John Giese, Authorized Signatory  
    WITH THE INTERVENTION OF:         COVERED BRIDGE ACRES LTD.    
___________________________________    

Per: Jeff Kilpatrick, duly authorized for the purposes hereof.

 

 

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SCHEDULE “A”: PURCHASE OF TTO’S FIRST TRANCHE AND SECOND TRANCHE PARTICIPATION

 

 

 

[image_001.jpg]

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE “B”: ESCROW POOL AND ESCROW RELEASES

 

 

[image_002.jpg]

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SCHEDULE “C”: PARTICIPATION IN THE ESCROW POOL

 

 

Share of Escrow Pool to be Released to Participants

 

[image_003.jpg]

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SCHEDULE “D”: Release Schedule

 

 

 

[image_004.jpg]

 

 

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