Exhibit 10.4

 

 

 

 

 

 

 

 

 

CannaPharmaRx CANADA CORP.

 

 

- and –

 

 

CannaPharmaRx, INC.

 

 

- and –

 

 

 

 

 

 

SHARE PURCHASE AGREEMENT

 

 

 

 

 

 

 

 

 

 

June 11, 2019

 

 

 

 

 

 

 

   

 

 

TABLE OF CONTENTS

 

Article 1 INTERPRETATION Section 1.1   Defined Terms. 1 Section 1.2   Gender and
Number. 7 Section 1.3   Headings, etc. 8 Section 1.4   Currency. 8
Section 1.5   Certain Phrases, etc. 8 Section 1.6   Knowledge. 8
Section 1.7   References to Persons and Agreements. 8 Section 1.8   Statutes. 8
Section 1.9   Schedules. 8 Section 1.10   Non-Business Days. 8 Article 2
PURCHASE and sale; PURCHASE PRICE Section 2.1   Purchase and Sale. 8
Section 2.2   Purchase Price 9 Section 2.3   Payment of Purchase Price 9
Section 2.4   Closing Indebtedness Statement. 9 Article 3 REPRESENTATIONS AND
WARRANTIES OF THE VENDOR Section 3.1   Representations and Warranties of the
Vendor. 10 Article 4 REPRESENTATIONS AND WARRANTIES as to the PURCHASED
Corporations Section 4.1   Representations and Warranties of the Vendor
regarding the Purchased Corporations. 11 Article 5 REPRESENTATIONS AND
WARRANTIES OF THE PURCHASER AND PURCHASER PARENT Section 5.1   Representations
and Warranties of the Purchaser and Purchaser Parent. 20 Article 6 INTERIM
PERIOD COVENANTS Section 6.1   Conduct of the Business Prior to Closing. 21
Section 6.2   Continued Access. 22 Section 6.3   Notice of Inaccurate
Representation or Warranty 22 Article 7 TAX MATTERS Section 7.1   Tax Matters on
or Prior to Closing. 23 Section 7.2   Cooperation on Tax Matters. 23
Section 7.3   Post-Closing Tax Matters. 23 Section 7.4   Tax Refunds. 23
Section 7.5   Election under Subsection 80.01(4) of the Tax Act 24

 

 

 

 i 

 

 

Article 8 CLOSING CONDITIONS & Covenants

Section 8.1   Closing Conditions for the Benefit of the Purchaser. 24
Section 8.2   Closing Conditions for the Benefit of the Vendor. 26
Section 8.3   Covenants of the Purchaser. 27 Article 9 INDEMNIFICATION
Section 9.1   Duration of Liability 28 Section 9.2   Indemnification in Favour
of the Purchaser. 28 Section 9.3   Indemnification in Favour of the Vendor. 29
Section 9.4   Limitations on Indemnification. 30 Section 9.5   Notification. 30
Section 9.6   Direct Claims. 31 Section 9.7   Procedure for Third Party Claims.
31 Section 9.8   Exclusion of Other Remedies. 32 Section 9.9   Duty to Mitigate.
33 Section 9.10   Right to Set-Off 33 Section 9.11   Adjustment to Purchase
Price 33 Section 9.12   After-Tax Basis 33 Article 10 TErmination
Section 10.1   Termination Rights. 33 Article 11 MISCELLANEOUS
Section 11.1   Guarantee from the Purchaser Parent. 34 Section 11.2   Notices.
35 Section 11.3   Further Assurances. 36 Section 11.4   Third Party
Beneficiaries. 36 Section 11.5   Announcements. 36 Section 11.6   Expenses. 37
Section 11.7   Amendments. 37 Section 11.8   Waiver. 37
Section 11.9   Non-Merger. 37 Section 11.10   Entire Agreement. 37
Section 11.11   Successors and Assigns. 37 Section 11.12   Severability. 37
Section 11.13   Governing Law. 38 Section 11.14   Counterparts. 38

 

 

 

 ii 

 

 

SHARE PURCHASE AGREEMENT

 

THIS SHARE PURCHASE AGREEMENT (the “Agreement”) is dated June 11, 2019, between
CannaPharmaRx Canada Corp. (the “Purchaser”), CannaPharmaRx, Inc. (the
“Purchaser Parent”) and Sunniva Inc. (the “Vendor”).

 

WHEREAS the Vendor is the registered and beneficial owner of all of the issued
and outstanding common shares in the capital of Sunniva Medical Inc. (the
“Corporation”).

 

AND WHEREAS the Vendor wishes to sell to the Purchaser, and the Purchaser wishes
to purchase from the Vendor, all of the issued and outstanding common shares of
the Corporation upon and subject to the terms and conditions contained in this
Agreement.

 

AND WHEREAS the Purchaser Parent is the parent corporation of the Purchaser and
has agreed to guarantee the obligations of the Purchaser pursuant to this
Agreement.

 

NOW THEREFORE, in consideration of the premises and mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged by each Party hereto, the Parties agree as
follows:

 

Article 1
INTERPRETATION

 

Section 1.1Defined Terms.

 

As used in this Agreement, the following terms have the following meanings:

 

“1167025” means 1167025 B.C. Ltd., a company incorporated under the Laws of
British Columbia and a wholly-owned subsidiary the Corporation.

 

“Affiliate” means, with respect to any Person, any other Person that controls or
is controlled by or is under common control with the Person.

 

“Agreement” has the meaning specified in the preamble, as this Agreement may be
amended, restated, replaced, supplemented or novated from time to time in
accordance with the terms hereof.

 

“Authorization” means, with respect to any Person, any order, decree, permit,
certificate, certificate of authorization, approval, registration, waiver,
licence, consent, agreement, directive, notice or similar authorization of any
Governmental Entity having jurisdiction over the Person.

 

“Books and Records” means all information relating to the Purchased Corporations
and in the possession of the Purchased Corporations, including title insurance
policies, deeds and surveys, if any, for all Owned Real Property, books of
account, Tax records, sales and purchase records, customer and supplier lists,
software, formulae, technical documents including specifications, business
reports, plans and projections and all other documents, files, correspondence
and Corporate Records, whether in written or electronic form.

 

“Buildings and Fixtures” means all plant, buildings, structures, erections,
improvements, appurtenances and fixtures (including fixed machinery and fixed
equipment) situated on or under or forming part of any Owned Real Property.

 

“Business Day” means any day of the year, other than a Saturday, Sunday or any
day on which Canadian chartered banks are closed for business in Vancouver,
British Columbia.

 

 

 

 1 

 

 

“Cannabis Act” means the federal Cannabis Act S.C. 2018, c. 16, which came into
force on October 17, 2018.

 

“Cannabis Regulations” means the Cannabis Regulations SOR/2018-144 to the
Cannabis Act.

 

“Closing” means the completion of the purchase and sale of the Purchased Shares
contemplated by this Agreement.

 

“Closing Date” means July 5, 2019, or such later date as the Parties may agree
in writing.

 

“Closing Indebtedness” means the aggregate Indebtedness of the Purchased
Corporations that is outstanding immediately prior to the Closing Time, less the
Excluded Indebtedness.

 

“Closing Time” means 10:00 a.m. on the Closing Date (Vancouver Time) or such
other time on the Closing Date as is agreed between the Parties.

 

“Consent” means, with respect to any Person, the unconditional consent of a
contracting party to, or as a result of, the transactions contemplated by this
Agreement, if required by the terms of any Contract between such contracting
party and such Person.

 

“Consulting Agreement” has the meaning specified in Section 8.1(f).

 

“Contract” means any agreement, contract, instrument, undertaking or commitment,
whether written or oral.

 

“Corporate Records” means the corporate records of the Purchased Corporations,
including: (a) all Governing Documents; (b) all minutes of meetings and
resolutions of shareholders and directors (and any committees); (c) the share
certificates, securities register, register of transfers of shares and register
of directors; and (d) the corporate seal, if any.

 

“Corporation” has the meaning specified in the recitals hereto.

 

“Damages” means any loss, liability, claim, damage, expense, fine, penalty or
interest (whether or not involving a Third Party Claim) including reasonable
costs, fees and expenses of legal counsel (including extra-judicial fees and
costs, which the Parties agree are determinate and determinable), and reasonable
costs on a solicitor-client basis (without reduction for tariff rates or similar
reductions) and other advisors and experts.

 

“Demand” has the meaning specified in Section 11.1(2).

 

“Direct Claim” means any cause, matter, thing, act, omission or state of facts
not involving a Third Party Claim that entitles an Indemnified Party to make a
claim for indemnification under this Agreement.

 

“Environmental Laws” means any and all applicable Laws and all other statutory
requirements relating to public health or the protection of the environment and
all Authorizations issued pursuant to such Laws or statutory requirements.

 

“Estimated Closing Indebtedness Statement” mean has the meaning specified in
Section 2.4(a).

 

“Excluded Indebtedness” means any and all amounts owed by either of the
Purchased Corporations pursuant to an agreement between EllisDon Corporation and
the Corporation dated April 30, 2018, as assigned by the Assignment and
Amendment Agreement between the Corporation, EllisDon Corporation and Partner
Technologies Incorporated dated February 27, 2019, whether such amounts are
invoiced prior to or subsequent to the Closing Date.

 

 

 

 2 

 

 

“Fundamental Representations” means, in respect of the Vendor, the
representations and warranties set out in Section 3.1(a), Section 3.1(b),
Section 3.1(f), Section 3.1(g), Section 3.1(h) Section 4.1(a), Section 4.1(g),
Section 4.1(h), Section 4.1(k) and Section 4.1(s), and, in respect of the
Purchaser, the representations and warranties set out in Section 5.1(a),
Section 5.1(b) and Section 5.1(f).

 

“Governing Documents” means, with respect to any Person: (a) the certificate and
articles of incorporation (or equivalent, including letters patent and
memorandum and articles of association) and the by-laws of such Person; (b) all
shareholders’ or equityholders’ agreements, voting agreements, voting trust
agreements, joint venture agreements, registration rights agreements or other
agreements or documents relating to the organization, management or operation of
such Person or relating to the rights, duties and obligations of the
shareholders or equityholders of such Person; and (c) any amendment or
supplement to any of the foregoing.

 

“Governmental Entity” means: (a) any governmental or public department, central
bank, court, minister, governor-in-council, cabinet, commission, tribunal,
board, bureau, agency, commissioner or instrumentality, whether international,
multinational, national, federal, provincial, state, county, municipal, local,
or other; (b) any subdivision or authority of any of the above; (c) any stock
exchange; and (d) any quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of any of
the above.

 

“Guaranteed Obligations” has the meaning specified in Section 11.1(1).

 

“Hazardous Substance” means any material or substance that may impair the
quality of the environment or that, under Environmental Laws, is deemed to be
“hazardous”, a “pollutant”, “toxic”, “deleterious”, “caustic”, “dangerous”,
“waste”, a “hazardous material”, a “contaminant” or analogous substance
including, without limitation, petroleum and petroleum products, asbestos,
polychlorinated biphenyls, and flammable and radioactive materials.

 

“IFRS” means International Financial Reporting Standards as issued by the
International Accounting Standards Board (or any successor institute) in effect
from time to time.

 

“Indebtedness” means, collectively, and without duplication, with respect to the
Purchased Corporations, in each case on a consolidated basis: (i) all
indebtedness for borrowed money, including any related prepayment fees or
expenses (including overdraft facilities) (whether short term or long term) or
any loans from shareholders, (ii) all obligations for the deferred purchase
price of property, or contingent payments in respect of the acquisition of any
assets, shares or other ownership, equity or proprietary interests in any
Person, (iii) all obligations evidenced by notes, bonds, debentures or other
similar instruments, (iv) the Mortgage, any indebtedness arising under
capitalized leases or other sales, customer, supplier or other Contracts, (v)
any obligation in respect of letters of credit and bankers' acceptances, (vi)
all loans due to any related party (within the meaning of the Tax Act),
including any shareholder, (vii) any bonus, incentive payments or profit-sharing
agreements that were declared, accrued or otherwise payable by any Purchased
Corporation prior to Closing, but not paid as at the Closing Time, as the case
may be, and the employer portion of all payroll or other Taxes applicable
thereon or otherwise payable by a Purchased Corporation, (viii) any incentive
payments, severance payments, change in control payments or similar payments to
any employee, independent contractors, officer or director that become payable
as a result of the consummation of the transactions contemplated by this
Agreement, including any accelerated payments or change of control payments
pursuant to any share appreciation rights, as well as the employer portion of
all payroll Taxes thereon, (ix) all obligations of the Purchased Corporations
for financial debt, including accrued capital expenditures and any related
balances recorded in accounts payable, (x) any liabilities of the Purchased
Corporations for royalty payments or customer credits, (xi) any underfunded
medical or pension benefits, (xii) any fees and expenses (including legal,
accounting and other professional fees and expenses) incurred by any Purchased
Corporation in connection with the transactions contemplated hereby, (xiii) all
accrued interest, fees, prepayment, penalties or other similar obligations with
respect to any of the foregoing, (xiv) the indebtedness of the Purchased
Corporations as at the date hereof specified in Schedule 1.1(1), (xv) any due
but unpaid Taxes of a Purchased Corporation, and (xvi) all indebtedness of
others referred to in paragraphs (i) through (xvi) above guaranteed by any of
the Purchased Corporations.

 

 

 

 3 

 

 

“Indemnified Party” means a Person with indemnification rights or benefits under
Section 9.2 or Section 9.3 or otherwise under this Agreement.

 

“Indemnifying Party” means a Party against which a claim may be made for
indemnification under this Agreement, including pursuant to Article 9.

 

“Independent Accountant” has the meaning specified in Section 2.4(b).

 

“Interim Period” means the period between the close of business on the date of
this Agreement and the sooner of the Closing or the date upon which this
Agreement is terminated in accordance with the terms herein.

 

“Laws” means: (a) all constitutions, treaties, laws, statutes, codes,
ordinances, principles of common law, notices, orders, decrees, rules,
regulations and municipal by-laws, whether domestic, foreign or international;
(b) all judgments, orders, writs, injunctions, decisions, rulings, decrees,
directions, sanctions and awards of any Governmental Entity; and (c) all
policies, practices and guidelines of any Governmental Entity that, although not
actually having the force of law, are considered by such Governmental Entity as
requiring compliance as if having the force of law or that establish the
interpretative position of the Law by such Governmental Entity, in each case
binding on or affecting the Person referred to in the context in which such word
is used.

 

“Lien” means any mortgage, hypothec, charge, pledge, prior claim, security
interest, assignment, lien (statutory or otherwise), Bank Act (Canada) security,
servitude, easement, title defect, restriction on transfer (such as a right of
first refusal), restrictive covenant, conditional sale, resolutory condition,
leasing, title retention agreement or other encumbrance, arrangement or
condition of any nature that, in substance, secures payment or performance of an
obligation.

 

“LTO” means the Kamloops Land Title Office.

 

“Material Adverse Change” means any condition, change, event, development,
circumstance, effect or state of facts that, individually or in the aggregate,
is or would reasonably be expected to be materially adverse to the condition of
the assets, liabilities, operations and financial position of the Purchased
Corporations, other than as a result of (i) changes generally affecting the
economies or the economy of any region in which the Purchased Corporations
conduct business, (ii) changes adversely affecting the industry in which the
Purchased Corporations operate, (iii) changes in Canadian, U.S. or global
financial markets, foreign currency markets or political conditions, acts of
God, acts of war, terrorism or natural disasters; (iv) changes in applicable Law
or generally accepted accounting principles, (v) changes as a result of the
announcement or pendency of the transactions set out in this Agreement
(including any resulting reduction in revenue or any disruption in counterparty
relationships), or (vi) any failure to meet or exceed forecasts, projections or
budgets (it being understood that the causes underlying such failure may be
taken into account in determining whether a Material Adverse Change has
occurred); provided that, in the case of clauses (i), (ii) and (iii) above, the
Purchased Corporations and their assets are not disproportionately adversely
affected thereby relative to other comparable companies operating in the
industry in which the Purchased Corporations operate.

 

 

 

 4 

 

 

“Material Contracts” means any of the following, whether oral or in writing:

 

(a)all continuing contracts providing for payments by either of the Purchased
Corporations of more than $50,000 in the aggregate (excluding applicable Taxes)
that have not yet been billed;

 

(b)all continuing subcontracts with any supplier to either of the Purchased
Corporations providing for payments of more than $50,000 in the aggregate
(excluding applicable Taxes);

 

(c)all continuing commitments for the purchase of materials, supplies, equipment
or services (i) providing for payments by either of the Purchased Corporations
of more than $50,000 in the aggregate in any twelve (12)-month period, or (ii)
that cannot be terminated without penalty on less than thirty (30) days' prior
notice;

 

(d)all continuing contracts pursuant to which either of the Purchased
Corporations is a lessee of any machinery, equipment, motor vehicles, office
furniture, fixtures or other personal property, whether used in the conduct of
the business or otherwise, providing for aggregate payments to the lessor
therefor in any fiscal year of more than $50,000; and

 

(e)all continuing contracts entered into other than in the Ordinary Course.

 

“Mortgage” means the vendor takeback mortgage and assignment of rents granted by
1167025 in favour of Shuttleworth Properties Ltd., and registered at the LTO on
June 15, 2018 under numbers CA6867462 and CA6867463.

 

“Newco” has the meaning specified in Exhibit A.

 

“Newco Note” has the meaning specified in Exhibit A.

 

“Notice” has the meaning specified in Section 11.2.

 

“Objection Notice” has the meaning specified in Section 2.4(b).

 

“Option to Purchase” means the option to purchase dated May 5, 2015, between
Shuttleworth Properties Ltd., as transferee, and Weyerhaeuser Company Limited,
as owner, and registered in the LTO under registration number CA4378484, as
assigned by Shuttleworth Properties Ltd. to 1167025 on June 15, 2018, and
registered in the LTO under registration number CA6867466, granting 1167025 an
option to purchase, for a period of five (5) years from the effective date
thereof, three (3) parcels legally described as PID 009-587-501, PID 007-906-668
and PID 015-972-038, for which a true and complete legal description is
disclosed in Schedule 1.1(1), for a purchase price of $1.00.

 

 

 

 

 5 

 

 

“Ordinary Course” means an action taken by a Person that is consistent with the
past practices of such Person (including with respect to timing and amount) and
is taken in the ordinary course of the normal day-to-day operations of such
Person.

 

“Owned Real Property” has the meaning specified in Section 4.1(l)(i).

 

“Parties” means the Vendor and the Purchaser and any other Person who
subsequently becomes a party to this Agreement, and “Party” means any one of the
Parties.

 

“Permits” has the meaning specified in Section 4.1(i)(ii).

 

“Permitted Liens” means: (i) Liens for Taxes not yet due and delinquent,
(ii) easements, encroachments and other minor imperfections of title that do
not, individually or in the aggregate, detract from the value of or impair the
use or marketability of any Owned Real Property, (iii) Liens imposed or
permitted by Law, such as statutory liens and deemed trusts, carriers’ liens,
builders’ liens, warehousemens’ liens, mechanics’ liens, materialmens’ liens and
other Liens of a similar nature that relate to obligations not due or
delinquent, (iv) Liens disclosed on the balance sheets of either of the
Purchased Corporations, and (v) Liens listed in Schedule 1.1(2).

 

“Person” means an individual, partnership, limited partnership, limited
liability partnership, corporation, limited liability company, unlimited
liability company, joint stock company, trust, unincorporated association, joint
venture or other entity or Governmental Entity.

 

“Pre-Closing Environmental Liabilities” means all environmental conditions at or
arising from operations at the Owned Real Property at any time prior to the
Closing Date, irrespective of the date of its discovery, including arising as a
result of the presence or any Release of any Hazardous Substance on, at, under
or migrating onto or from the Owned Real Property, including any environmental
conditions on, at, under or migrating onto or from the Owned Real Property in
Schedule 1.1(3).

 

“Pre-Closing Reorganization” means the steps set out in Exhibit A.

 

“Purchase Price” has the meaning specified in Section 2.2.

 

“Purchased Corporations” means, collectively, the Corporation and 1167025, and a
“Purchased Corporation” shall mean any one of the Corporation and 1167025, as
applicable.

 

“Purchased Shares” means all of the issued and outstanding shares in the capital
of the Corporation as of Closing, being 200 common shares of the Corporation
registered in the name of the Vendor as of the date hereof and all other shares
in the capital of the Corporation issued pursuant to the Pre-Closing
Reorganization.

 

“Purchaser” means CannaPharmaRx Canada Corp., a company existing under the laws
of the Province of Alberta.

 

“Purchaser Parent” means CannaPharmaRx, Inc., a company existing under the laws
of the State of Delaware.

 

“Release” means any release, spill, leak, emission, discharge, leach, dumping,
migration, pumping, pouring, emitting, emptying, injecting, spraying, burying,
abandoning, incinerating, seeping, escape, disposal or similar or analogous act
as defined in any Environmental Laws.

 

 

 

 6 

 

 

“Straddle Period” has the meaning specified in Section 9.2(1)(d).

 

“Supporting Documentation” has the meaning specified in Section 2.4(a).

 

“Tangible Personal Property” means all vehicles, machinery, equipment,
furniture, office equipment, supplies, materials, parts, communication systems
and other movables or chattels of every kind whether owned or leased, together
with any express or implied warranty by manufacturers or sellers or lessors of
any item or component part thereof and all maintenance records and other
documents related thereto.

 

“Tax Act” means the Income Tax Act (Canada).

 

“Tax Assessment Period” has the meaning specified in Section 9.1(1)(b).

 

“Tax Returns” means any and all returns, reports, declarations, elections,
notices, forms, designations, filings, and statements (including estimated tax
returns and reports, withholding tax returns and reports, and information
returns and reports) filed or required to be filed in respect of Taxes.

 

“Taxes” means: (a) any and all federal, provincial, state, municipal, local and
foreign taxes, assessments, contributions and other governmental charges,
duties, impositions and liabilities, including Canada Pension Plan and
provincial pension plan contributions, provincial health plan contributions,
insurance contributions, unemployment insurance contributions, parental
insurance premiums, worker’s compensation and deductions at source, and
including taxes based on or measured by gross receipts, income, profits, sales,
capital, use, occupation, goods and services, value added, ad valorem, transfer,
franchise, withholding, customs duties, payroll, contributions, premiums,
recapture, employment, excise and property and all Owned Real Property Taxes;
(b) all interest, penalties, fines and additions to tax or other additional
amounts imposed on or with respect to amounts of the type described in paragraph
(a) above; (c) any liability for the payment of any amounts of the type
described in paragraph (a) or (b) above as a result of being a member of an
affiliated, consolidated, combined or unitary group for any period; and (d) any
liability for the payment of any amounts of the type described in paragraph (a)
or (b) above as a result of any express or implied obligation to indemnify any
other Person or as a result of any obligations under any agreements or
arrangements with any other Person with respect to such amounts or as a result
of being a transferee, and including any liability for Taxes of a predecessor
entity.

 

“Third Party Claim” means any action, suit, proceeding, arbitration, claim or
demand that is instituted or asserted by a party who is not a Party to this
Agreement, including a Governmental Entity, against an Indemnified Party that
entitles the Indemnified Party to make a claim for indemnification under this
Agreement.

 

“Urban Systems Agreement” means the Agreement for Consulting Services and Fee
Proposal between the Vendor and Urban Systems Ltd. dated April 23, 2018.

 

“Vendor” means Sunniva Inc.

 

Section 1.2Gender and Number.

 

Any reference in this Agreement to gender includes all genders. Words importing
the singular number only include the plural and vice versa.

 

 

 

 7 

 

 

Section 1.3Headings, etc.

 

The provision of a Table of Contents, the division of this Agreement into
Articles and Sections and the insertion of headings are for convenient reference
only and do not affect the interpretation of this Agreement.

 

Section 1.4Currency.

 

All references in this Agreement to dollars or to $ are expressed in Canadian
currency unless otherwise specifically indicated.

 

Section 1.5Certain Phrases, etc.

 

In this Agreement, the words “including”, “includes” and “include” mean
“including (or includes or include) without limitation”. Unless otherwise
specified, the words “Article”, “Section” or “Schedule” followed by a number
mean and refer to the specified Article, Section or Schedule of or to this
Agreement. In the computation of periods of time from a specified date to a
later specified date, unless otherwise expressly stated, the word “from” means
“from and including” and the words “to” and “until” each mean “to but
excluding”.

 

Section 1.6Knowledge.

 

Where any representation or warranty contained in this Agreement is expressly
qualified by reference to the knowledge of the Vendor, it will be deemed to
refer to the actual knowledge of any of Dr. Anthony Holler, David Negus and
Benjamin Rootman after making reasonable inquiries regarding the relevant
matter.

 

Section 1.7References to Persons and Agreements.

 

Any reference in this Agreement to a Person includes its heirs, administrators,
executors, legal representatives, successors and permitted assigns. The term
“Agreement” and any reference in this Agreement to this Agreement or any other
agreement or document includes, and is a reference to, this Agreement or such
other agreement or document as it may have been, or may from time to time be,
amended, restated, replaced, supplemented or novated and includes all schedules
to it.

 

Section 1.8Statutes.

 

Except as otherwise provided in this Agreement, any reference in this Agreement
to a statute refers to such statute and all rules and regulations made under it
as it or they may have been or may from time to time be amended, re-enacted or
replaced.

 

Section 1.9Schedules.

 

The schedules attached to this Agreement form an integral part of this Agreement
for all purposes.

 

Section 1.10Non-Business Days.

 

Whenever payments are to be made or an action is to be taken on a day that is
not a Business Day, such payment will be made or such action will be taken on or
not later than the next succeeding Business Day.

 

Article 2
PURCHASE and sale; PURCHASE PRICE

 

Section 2.1Purchase and Sale.

 

Subject to the terms and conditions of this Agreement, the Vendor agrees to sell
and transfer to the Purchaser, and the Purchaser agrees to purchase from the
Vendor, as of Closing on the Closing Date, all (but not less than all) of the
Purchased Shares, which Purchased Shares collectively constitute all of the
issued and outstanding shares of the Corporation.

 

 

 

 8 

 

 

Section 2.2Purchase Price

 

Subject to Section 9.11, the aggregate consideration payable by the Purchaser to
the Vendor for the Purchased Shares (the “Purchase Price”) is twenty million
dollars ($20,000,000), less the amount of any Closing Indebtedness.

 

Section 2.3Payment of Purchase Price

 

The Purchase Price shall be paid and satisfied as follows:

 

(a)as to $1,000,000 (the “Deposit Amount”), by payment of the Deposit Amount by
the Purchaser to the Vendor on or prior to June 21, 2019, such Deposit Amount to
be a deposit against the Purchase Price refundable by Vendor to Purchaser only
in accordance with Section 10.1(2); and

 

(b)as to an amount equal to $19,000,000 less the estimated Closing Indebtedness
set out in the Estimated Closing Indebtedness Statement (as defined below), by
payment of such amount by the Purchaser to the Vendor on the Closing Date.

 

All payments under this Section 2.3 will be made by certified cheque, bank draft
or wire transfer of immediately available funds to a bank account or accounts
specified in writing by the Vendor (or the Purchaser, as applicable).

 

Section 2.4Closing Indebtedness Statement.

 

(a)No later than three (3) Business Days prior to the Closing Date, the Vendor
will cause to be delivered to the Purchaser a statement (the “Estimated Closing
Indebtedness Statement”), signed by a senior officer of the Vendor, which sets
forth, by lender or payee, the estimated amount of the Closing Indebtedness and
attaches invoices, statements and any other applicable supporting documentation
from all holders of Closing Indebtedness (including all related parties) in a
form acceptable to the Purchaser, acting reasonably (the “Supporting
Documentation”). The Supporting Documentation will contain amounts owed
(including all pre-payment penalties, if any), per diem interest, payment
instructions and other documents required by the Purchaser to release and
discharge all Closing Indebtedness. Based on the Estimated Closing Indebtedness
Statement and the Supporting Documentation, the Purchaser and the Vendor will
agree upon the amount required to satisfy all Closing Indebtedness.

 

(b)Within 10 Business Days of receipt of the Estimated Closing Indebtedness
Statement, the Purchaser may notify the Vendor in writing of any objections with
respect to the Estimated Closing Indebtedness Statement (an “Objection Notice”),
which Objection Notice will set forth the Purchaser’s calculation of the
relevant Closing Indebtedness amounts and a description of the nature and basis
of any such objection. If an Objection Notice is not so delivered to the Vendor,
the Estimated Closing Indebtedness Statement shall become the “Closing
Indebtedness Statement” for the purposes hereof and the Closing Indebtedness set
forth in the Estimated Closing Indebtedness Statement will be conclusive and
binding on the Parties. If an Objection Notice is so delivered to the Vendor,
then the Parties will forthwith, and in any event within 20 days of receipt by
the Vendor of such Objection Notice, negotiate in good faith to resolve any such
objections. In the event that the Parties are unable to resolve all such
objections within 20 days after Vendor’s receipt of such Objection Notice, the
Purchaser and Vendor will submit such remaining disagreements to an audit
partner of a “big four” accounting firm mutually agreed between the Purchaser
and the Vendor, or if the Purchaser and the Vendor cannot so agree, to an audit
partner of Ernst & Young LLP chosen by the managing partner of the Vancouver
office of Ernst & Young LLP (the “Independent Accountant”), and the Parties
agree to use commercially reasonable efforts to cause the determination of
Closing Indebtedness by the Independent Accountant to be made within 30 days of
the date of such submission. The Independent Accountant shall allow each of the
Parties to submit, in writing, their respective positions regarding the
Estimated Closing Indebtedness Statement, and the Parties shall have the right
to submit additional documents, materials and other written information. The
Independent Accountant’s determination of Closing Indebtedness will be
conclusive and binding on the Parties, absent manifest error, and will become
the “Closing Indebtedness Statement” for purposes hereof. This Section 2.4(b)
will not prohibit any Party from instigating litigation to compel specific
performance of this Section 2.4 or to enforce the determination of the
Independent Accountant.

 

 

 

 9 

 

 

(c)If the Closing Indebtedness set forth in the Estimated Closing Indebtedness
Statement is less than the Closing Indebtedness set forth in the Closing
Indebtedness Statement, the Vendor will pay the amount of such difference to the
Purchaser within 5 Business Days of determination of the Closing Indebtedness
Statement as set out in Section 2.4(b). If the Closing Indebtedness set forth in
the Estimated Closing Indebtedness Statement is greater than the Closing
Indebtedness set forth in the Closing Indebtedness Statement, the Purchaser will
pay the amount of such difference to the Vendor within 5 Business Days of
determination of the Closing Indebtedness Statement as set out in
Section 2.4(b).

 

Article 3
REPRESENTATIONS AND WARRANTIES OF THE VENDOR

 

Section 3.1Representations and Warranties of the Vendor.

 

The Vendor represents and warrants to the Purchaser as follows as of the date
hereof and acknowledges and agrees that the Purchaser is relying upon such
representations and warranties in connection with the purchase by the Purchaser
of the Purchased Shares notwithstanding any investigation by or on behalf of the
Purchaser:

 

(a)Incorporation and Corporate Power. The Vendor is a corporation duly and
validly incorporated, organized and existing under the Laws of its jurisdiction
of incorporation and has the corporate power and authority to own and sell its
property and enter into and perform its obligations under this Agreement.

 

(b)Corporate Authorization. The execution and delivery of, and performance by
the Vendor of, this Agreement and the consummation of the transactions
contemplated by this Agreement have been, or will prior to the Closing Date have
been, duly authorized by all necessary corporate action on the part of the
Vendor.

 

(c)No Conflict. The execution and delivery of and performance by the Vendor of
this Agreement:

 

(i)do not and will not (or would not with the giving of notice, the lapse of
time, or both) result in a breach, default or violation of, or conflict with, or
allow any other Person to exercise any rights under, any term, condition or
provision of: (a) the Governing Documents of the Vendor or any resolutions of
its board of directors, shareholders, trustees or partners, as the case may be;
or (b) any Contracts to which the Vendor is a party or pursuant to which any of
the Vendor’s assets, business, activities, or share capital may be affected; and

 

 

 

 10 

 

 

(ii)do not and will not (or would not with the giving of notice, the lapse of
time, or both) result in a breach or violation of any Law.

 

(d)Required Authorizations. There is no requirement of the Vendor or any of its
Affiliates to make any filing with, give any notice to, or obtain or maintain
any Authorization of, any Governmental Entity as a condition to the lawful
completion of the transactions contemplated by this Agreement.

 

(e)Required Consents. There is no requirement of the Vendor to obtain any
Consent to the completion of the transactions contemplated by this Agreement,
except for the Consents described in Schedule 3.1(e).

 

(f)Execution and Binding Obligation. This Agreement has been duly executed and
delivered by, and constitutes a legal, valid and binding obligation of,
enforceable against, the Vendor in accordance with its terms subject only to any
limitation on enforcement under applicable Laws relating to: (a) bankruptcy,
winding-up, insolvency, arrangement and other Laws of general application
affecting the enforcement of creditors’ rights; and (b) the discretion that a
court may exercise in the granting of extraordinary remedies such as specific
performance and injunction.

 

(g)Title to Purchased Shares. The Vendor is (or will be as of the Closing Time,
in the case of any Purchased Shares issued pursuant to the Pre-Closing
Reorganization) the sole and unconditional owner of the Purchased Shares, with
good and valid title thereto, free and clear of all Liens. At Closing, such
shares will constitute all of the Vendor’s share of the Purchased Shares or
other equity interests in the Corporation, whether issued or unissued, and the
Vendor will transfer good and valid title to the Purchaser of such Purchased
Shares, free and clear of all Liens.

 

(h)No Other Agreements to Purchase. Except for the Purchaser’s right under this
Agreement or as contemplated as part of the Pre-Closing Reorganization, no
Person has any written or oral agreement, option or warrant, or any right or
privilege (whether by Law or by Contract) capable of becoming such, for the
purchase or acquisition from the Vendor of any of the Purchased Shares.

 

(i)No Shareholders Agreement. The Vendor is not a party to, subject to, or
affected by, any shareholders agreement in respect of its shareholdings in the
Corporation.

 

(j)Residence of the Vendor. The Vendor is not a non-resident of Canada within
the meaning of the Tax Act.

 

Article 4
REPRESENTATIONS AND WARRANTIES as to the PURCHASED Corporations

 

Section 4.1Representations and Warranties of the Vendor regarding the Purchased
Corporations.

 

The Vendor represents and warrants to the Purchaser as follows as of the date
hereof, and acknowledges and confirms that the Purchaser is relying upon such
representations and warranties in connection with the purchase by the Purchaser
of the Purchased Shares notwithstanding any investigation by or on behalf of the
Purchaser:

 

 

 

 11 

 

 

(a)Incorporation, Corporate Power and Qualification. Each of the Purchased
Corporations is a corporation duly and validly incorporated, organized, in good
standing and existing under the Laws of its jurisdiction of incorporation and
has the corporate power and authority to own and operate its property, conduct
its business and activities as currently conducted and enter into and perform
its obligations under this Agreement. Each of the Purchased Corporations is duly
qualified, licensed or registered to carry on business in British Columbia and,
in the case of the Corporation only, Alberta. The name of each director and
officer of the Corporation and the position held by each are set out in Schedule
4.1(a).

 

(b)No Default. Neither of the Purchased Corporations is in breach, default or
violation (and no event has occurred that with the giving of notice, the lapse
of time, or both, would constitute a breach, default or violation) of any term,
condition or provision of such Purchased Corporation’s Governing Documents or of
any resolutions of its board of directors or shareholders.

 

(c)No Conflict. The lawful completion of the transactions contemplated by this
Agreement by each of the Purchased Corporations:

 

(i)has been, or will prior to the Closing Date have been, duly authorized by all
necessary corporate action on the part of such Purchased Corporation;

 

(ii)does not and will not (or would not with the giving of notice, the lapse of
time, or both) result in a breach, default or violation of, or conflict with, or
allow any other Person to exercise any rights under, any term, condition or
provision of: (A) such Purchased Corporation’s Governing Documents or of any
resolutions of its board of directors or shareholders; or (B) any Contracts to
which such Purchased Corporation is a party or pursuant to which any of its
assets, business, activities or share capital may be affected;

 

(iii)does not and will not (or would not with the giving of notice, the lapse of
time, or both) result in a breach, default or violation of, or cause the
termination or revocation of, any Authorization held by such Purchased
Corporation or necessary to the ownership or the use of the assets or the
operation of any of the business or activities of such Purchased Corporation;
and

 

(iv)does not and will not (or would not with the giving of notice, the lapse of
time, or both, or the happening of any other event or condition) result in a
breach or violation of any Law.

 

(d)Required Authorizations.

 

(i)Except as disclosed in Schedule 4.1(d)(i), there is no requirement of the
Vendor or either of the Purchased Corporations to make any filing with, give any
notice to, or obtain or maintain any Authorization of, any Governmental Entity
as a condition to the lawful completion of the transactions contemplated by this
Agreement or to the continued operation of any of the business and activities of
the Purchased Corporations.

 

(ii)Schedule 4.1(d)(ii) contains a complete and accurate copy of each
Authorization held by either of the Purchased Corporations whether in connection
with the conduct of the business or otherwise and all applications for
Authorizations or amendments to any Authorizations submitted by either Purchased
Corporation to any Governmental Entity. Except for the Authorizations as
described above, neither of the Purchased Corporations is required to obtain or
maintain any Authorization to conduct the business as presently conducted in
compliance with applicable Laws. Each Authorization disclosed in Schedule
4.1(d)(ii) is valid and in full force and effect. The holder of each such
Authorization is, and at all times since the date of such Authorizations’
respective issuances has been, in material compliance with all of the terms and
requirements of each such Authorization. No event has occurred or circumstance
exists that may (with or without notice or lapse of time) (A) constitute or
result directly or indirectly in a violation of or a failure to comply with any
term or requirement of any Authorization disclosed in Schedule 4.1(d)(ii) that
would reasonably be expected to result in the imposition of a fine or other
penalty against either of the Purchased Corporations in respect of such
violation or failure to comply, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation or termination of, or any
modification to, any such Authorization.

 

 

 

 12 

 

 

(iii)The Authorizations disclosed in Schedule 4.1(d)(iii) collectively
constitute all of the Authorizations necessary to permit either of the Purchased
Corporations to conduct and operate the business in the manner in which it is
currently conducted and in compliance with applicable Laws and to operate the
business and to permit either of the Purchased Corporations to own and use its
assets in the manner in which it currently owns and uses such assets and in
compliance with applicable Laws.

 

(e)Required Consents. Except as disclosed in Schedule 4.1(e), there is no
requirement of either of the Purchased Corporations to obtain any Consent
relating to the transactions contemplated by this Agreement.

 

(f)Authorized and Issued Capital. The authorized and issued capital of each of
the Purchased Corporations is, as at the date of this Agreement, as disclosed in
Schedule 4.1(f). The Purchased Corporations have satisfied all of their
obligations to all current and past shareholders, and none of such current or
past shareholders has any claims, or any basis therefor, against either of the
Purchased Corporations as a shareholder thereof or in any other capacity.
Neither of the Purchased Corporations is a party to any shareholder agreement.

 

(g)Purchased Shares. The Purchased Shares (i) have been (or will be as of the
Closing Time, in the case of any Purchased Shares issued pursuant to the
Pre-Closing Reorganization) duly authorized and validly issued and are
outstanding as fully paid and non-assessable shares and are not subject to any
pre-emptive rights, (ii) have been (or will be as of the Closing Time, in the
case of any Purchased Shares issued pursuant to the Pre-Closing Reorganization)
issued in compliance with all applicable Laws, including applicable securities
Laws and (iii) represent all of the issued and outstanding equity ownership
interests of the Corporation. All transfer restrictions affecting the transfer
of the Purchased Shares to the Purchaser will have been complied with or
effectively waived on Closing.

 

(h)Subsidiaries. Except as disclosed Schedule 4.1(h), neither of the Purchased
Corporations has any subsidiaries, and neither holds any shares or other
ownership, equity or other proprietary interests in any other Person, provided
the Corporation will incorporate and wind up and dissolve Newco during the
Interim Period as part of the Pre-Closing Reorganization.

 

 

 

 13 

 

 

(i)Compliance with Laws.

 

  (i) Other than in respect of United States federal Laws applicable to
cannabis, each of the Purchased Corporations and the operation of such Purchased
Corporation’s business: (A) has complied in all material respects with and is in
compliance now in all material respects with; (B) has not received written
notice, correspondence or warning of any alleged violation, offence or breach
of; and, (C) is not subject to any action or complaint with respect to and has
not, to the knowledge of the Vendor, been threatened to be charged with or
notified of any alleged violation, offence or breach of, any Law applicable to
it, including the Cannabis Act, the Cannabis Regulations and the Controlled
Drugs and Substances Act (Canada) and its associated regulations, any of its
material licences and permits, any applicable Laws relating in whole or in part
to cultivation, production, handling, storage, processing, packaging, labelling,
importing, selling, and distributing of cannabis (including all cannabis
products and derivatives), medical records, medical information privacy,
personal information, employment, employment practices, labour (including pay
equity and wages, termination and severance, and unfair labour practice), health
and safety and Environmental Laws nor, to the knowledge of the Vendor, is either
of the Purchased Corporations under investigation for any of the foregoing.

 

(ii)Each of the Purchased Corporations holds, to the extent necessary for the
conduct and operation of its business as presently conducted, all material
permits, licences, registrations, variances, clearances, consents, commissions,
franchises, exemptions, orders, authorizations, and approvals from any
Governmental Entity (collectively, the “Permits”), including, without
limitation, any Permits required by any Law applicable to such Purchased
Corporation. No suspension, cancellation, non-renewal, or adverse modifications
of any Permit is pending or, to the knowledge of the Vendor, threatened. Each of
the Purchased Corporations is and, since its date of incorporation, has been in
material compliance with the terms of all Permits.

 

(iii)Except as disclosed in Schedule 4.1(i)(iii), neither of the Purchased
Corporations has received any written notices or other written correspondence
from any Governmental Entity: (A) regarding any material violation (or any
investigation, inspection, audit, or other proceeding by any Governmental Entity
involving allegations of any material violation) of any Law; or (B) of any
circumstances that may have existed or currently exist that could lead to a
loss, suspension, or modification of, or a refusal to issue or renew, any
material Permit. To the knowledge of the Vendor, no investigation, inspection,
audit or other proceeding by any Governmental Entity involving allegations of
any material violation of any Law is currently threatened.

 

(iv)The Corporation has filed the applications with Health Canada to obtain the
requisite licences under the Cannabis Act and Cannabis Regulations to cultivate,
process and/or sell cannabis set out in Schedule 4.1(i)(iv)(A). All applications
and materials filed with Health Canada are accurate and true and reasonable
steps have been taken to maintain such applications in good standing. To the
knowledge of the Vendor, there is no reason that Health Canada would not issue
the cannabis licences applied for pursuant to any pending applications. The
individuals listed in Schedule 4.1(i)(iv)(B) hold security clearances required
under the Cannabis Act and Cannabis Regulations and none of these individuals
have previously had security clearances suspended, cancelled or revoked by
Health Canada or have had Health Canada reject an application for security
clearance.

 

 

 

 14 

 

 

(j)Title to Assets. Schedule 4.1(j)(1) contains a complete listing of all
Tangible Personal Property (other than office equipment) owned by either of the
Purchased Corporations, including the year, make, model, or serial number
thereof, if applicable, and for any assets that are leased by either of the
Purchased Corporations pursuant to an operating lease, the name of the lessor
and the expiry date of such lease. All of the assets of either of the Purchased
Corporations are owned by the legal and beneficial owner thereof with good and
marketable title, free and clear of all Liens other than Permitted Liens. No
other Person owns any property or assets that are being used by either of the
Purchased Corporations, except as listed in Schedule 4.1(j)(2).

 

(k)No Options, etc. to Purchase Assets. Except as disclosed in Schedule 4.1(k),
no Person has any written or oral agreement, option, understanding or
commitment, or any right or privilege capable of becoming any of the foregoing,
for the purchase or other acquisition from either of the Purchased Corporations
of any of its assets.

 

(l)Owned Real Property.

 

(i)The Vendor has disclosed in Schedule 4.1(l)(i)(A) a true and complete list of
the municipal address and legal description of all real or immovable property
currently owned by either of the Purchased Corporations (the “Owned Real
Property”), and (B) a true and complete list of any current title insurance
policy issued to either of the Purchased Corporations in respect of any Owned
Real Property, true and complete copies of which have been made available to the
Purchaser. There are no agreements, options, leases, contracts or commitments to
sell, transfer, lease or dispose of any of the Owned Real Property to which
either of the Purchased Corporations is currently bound nor any agreements,
contracts or commitments that would restrict the ability of either of the
Purchased Corporations to transfer or dispose of the Owned Real Property or any
interest therein other than the Mortgage.

 

(ii)Except for the Owned Real Property and the Option to Purchase, neither of
the Purchased Corporations owns, leases or otherwise occupies any other real or
immovable property, and neither is party to any outstanding agreement or option
to purchase, lease or otherwise occupy any real or immovable property or any
interest in any real or immovable property.

 

(iii)1167025, as registered owner and bare trustee, and the Corporation, as sole
beneficial owner, have good and marketable title to the Owned Real Property,
free and clear of all Liens, except for Permitted Liens.

 

(iv)Except as disclosed in Schedule 4.1(l)(iv), there are no improvements or
alterations to any Owned Real Property.

 

(v)Except as disclosed in Schedule 4.1(l)(v), all amounts for labour and
materials relating to the construction and repair of the Buildings and Fixtures
on any Owned Real Property required to be made by either of the Purchased
Corporations prior to the date hereof have been paid in accordance with
contractual arrangements therefor.

 

 

 

 15 

 

 

(vi)There are no outstanding work orders affecting any Owned Real Property
issued by or required by any municipality, police department, fire department,
sanitation, health or safety authorities or from any other Person.

 

(vii)The Owned Real Property is adequate and suitable for the purposes for which
it is presently being used and the Purchased Corporations have adequate rights
of ingress and egress to such Owned Real Property for the operation of the
business as presently conducted.

 

(viii)To the knowledge of the Vendor, the Owned Real Property does not violate
any restrictive covenant, zoning or land use restrictions, site plan or
municipal agreements, or any provision of any Law or encroach on any property
owned by any other Person.

 

(ix)No condemnation or expropriation proceeding is pending or, to the knowledge
of the Vendor, threatened against any Owned Real Property.

 

(x)There are no Taxes, tax arrears, local improvement or capital charges,
special levies or other rates or charges of a similar nature associated with the
Owned Real Property (other than realty taxes accruing from day to day) that are
outstanding and unpaid.

 

(xi)Each of the Purchased Corporations has performed and observed all material
covenants, conditions, agreements, statutory requirements, planning consents,
by-laws, orders and regulations required to be performed or observed by it in
respect of the Owned Real Property and no notice of a breach thereof has been
received by either of the Purchased Corporations.

 

(xii)Except as set forth in Schedule 4.1(l)(xii), neither of the Purchased
Corporations (i) is a party to any arrangement or understanding with an
Aboriginal band, community or group relating to the Owned Real Property; (ii) is
or has been engaged or involved in any disputes, discussions or negotiations
with any Aboriginal band, community or group relating to the Owned Real
Property; or (iii) is aware of or has received notice of any claim, either from
an Aboriginal band, community or group or any Governmental Entity, indicating
that the use or contemplated use of the Owned Property has in any way infringed
upon or has an adverse effect on any Aboriginal title, rights or interests.

  

(m)Environmental Matters.

 

(i)Except as disclosed in Schedule 4.1(m)(i)(1), the operation of the business
and the assets owned or used by either of the Purchased Corporations in the
conduct of the business has been and is currently in material compliance with
all Environmental Laws, including all requirements relating to the Release and
handling of Hazardous Substances. Neither of the Purchased Corporations has
received or is aware of any notice received by a prior owner or occupant of the
Owned Real Property from any Governmental Entity requiring any alteration to the
Owned Real Property or any of its operating practices or procedures in order to
be in compliance with any Environmental Laws. Except as disclosed in Schedule
4.1(m)(i)(2), neither of the Purchased Corporations has received or has
knowledge of any notice received by a prior owner or occupant of the Owned Real
Property from a Governmental Entity that alleges that any owner or occupant of
the Owned Real Property has failed to comply with any Environmental Law.

 

 

 

 16 

 

 

(ii)To the knowledge of the Vendor, there are no underground storage tanks or
above-ground storage tanks located at the Owned Real Property. Except as
disclosed in Schedule 4.1(m)(ii), no removal of any underground storage tank
located at any Owned Real Property has been commissioned by either of the
Purchased Corporations. To the knowledge of the Vendor, there has been no
Release from any underground storage tanks or above-ground storage tanks located
at the Owned Real Property.

 

(iii)Neither of the Purchased Corporations is a party to any indemnification
agreement or other contractual obligation relating to compliance by such
Purchased Corporation with or liability of such Purchased Corporation under any
Environmental Law or otherwise relating to any liability of such Purchased
Corporation for environmental matters or Hazardous Substances.

 

(iv)Neither of the Purchased Corporations has, in the past five (5) years, been
charged with or convicted of any offence for non-compliance with Environmental
Laws, been fined or otherwise sentenced or settled any prosecution for such
non-compliance, short of conviction, or paid any administrative monetary penalty
for non-compliance with Environmental Laws. There are no notices of judgment or
commencement of proceedings of any nature relating to any breach or alleged
breach of Environmental Laws currently pending or, to the knowledge of the
Vendor, threatened against or involving either of the Purchased Corporations,
the business, its operations or any of the Purchased Corporations’ assets.

 

(v)Neither of the Purchased Corporations has handled or discharged, or allowed
or arranged for any third party to handle or discharge, Hazardous Substances or
other waste to, at or upon any location other than a site lawfully permitted to
receive such Hazardous Substances or other waste.

 

(vi)Neither of the Purchased Corporations has received any order or notice (A)
advising it that it is or may have any remedial obligation with respect to any
Release or disposal of any Hazardous Substances or (B) advising it that it is or
may be responsible for the costs of any remedial action taken or to be taken by
any other Persons with respect to any Release, disposal or presence of any
Hazardous Substances or (C) requiring it to perform any remediation,
environmental closure, decommissioning, rehabilitation, restoration or
post-remediation monitoring or investigation on, about or in connection with any
Owned Real Property or any property adjoining any Owned Real Property.

 

(vii)To the knowledge of the Vendor, except as set forth in Schedule 4.1(m)
(vii), there has been no Release of any Hazardous Substances and no Hazardous
Substances have been disposed of, or are otherwise present, in soil or
groundwater at the Owned Real Property for which either of the Purchased
Corporations is responsible contractually or otherwise at Law.

 

  (viii) Disclosed in Schedule 4.1(m)(viii) is a true and complete list of all
reports relating to environmental matters affecting either of the Purchased
Corporations, any predecessor of either of the Purchased Corporations or the
Owned Real Property that are in the possession of either of the Purchased
Corporations, true and complete copies of which have been provided to the
Purchaser. To the knowledge of the Vendor, there are no other reports relating
to environmental matters affecting either of the Purchased Corporations or the
Owned Real Property that have not been provided to the Purchaser, whether by
reason of confidentiality restrictions or otherwise.

 

 

 

 17 

 

 

(n)Labour and Employee Matters.

 

Neither of the Purchased Corporations has as of the date hereof, nor has ever
had, any employees.

 

(o)Tax Matters.

 

(i)Each of the Purchased Corporations has correctly computed all Taxes owing by
it, correctly prepared and duly and timely filed all Tax Returns required to be
filed by it, paid all Taxes which were due and payable by it on or before the
date hereof within the time required by applicable Laws and made adequate
provision for Taxes in the Books and Records. Each of the Purchased Corporations
has made adequate and timely installment payments of Taxes required to be made.

 

(ii)All Tax Returns of either of the Purchased Corporations filed by such
Purchased Corporation have been assessed and there are no outstanding waivers of
any limitation periods or agreements providing for an extension of time for the
filing of any Tax Return or the payment of any Tax by the Purchased Corporations
or any outstanding objections to any assessment or reassessment of Taxes. Any
proposed deficiencies in such Tax Returns have been paid and settled. The Vendor
has no knowledge of any threatened or pending audit or reassessment of Tax of
either of the Purchased Corporations.

 

(iii)Each of the Purchased Corporations has withheld from each payment made to
any of its past and present shareholders, directors, officers, employees and
agents the amount of all Taxes and other deductions required to be withheld and
has remitted such amounts when due, in the form required under applicable Laws
or, if not yet due, has made adequate provision in the Books and Records for the
remittance of such amounts to the proper Governmental Entities.

 

(iv)The Purchased Corporations have collected from each receipt from any of its
past and present customers (or other Persons paying amounts to the Purchased
Corporations) the amount of all Taxes required to be collected and has remitted
such Taxes when due in the form required under applicable Laws or, if not yet
due, has made adequate provision in the Purchased Corporations’ Books and
Records for the payment and remittance of such amounts to the appropriate
Governmental Entities.

 

(v)Neither of the Purchased Corporations have been and are not currently
required to file any Tax Returns with any taxation authority located in any
jurisdiction outside of Canada.

 

(vi)Neither of the Purchased Corporations has, nor has been deemed to have, for
purposes of the Tax Act, acquired or had the use of property for proceeds
greater than the fair market value thereof from, or disposed of property for
proceeds less than the fair market value thereof to, or received or performed
services or had the use of property for other than the fair market value from or
to, any Person with whom such Purchased Corporation does not deal at arm’s
length within the meaning of the Tax Act. For all transactions between the
either of the Purchased Corporations, on the one hand, and any non-resident
Person with whom such Corporation was not dealing at arm’s length, for the
purposes of the Tax Act, on the other hand, during a taxation year commencing
after 1998 and ending on or before the Closing Date, such Corporation has made
or obtained records or documents that satisfy the requirements of paragraphs
247(4)(a) to (c) of the Tax Act.

 

 

 

 18 

 

 

(vii)There are no circumstances existing that could result in the application to
either of the Purchased Corporations (including as a result of the Pre-Closing
Reorganization) of sections 17, 78, 80, 80.01, 80.02, 80.03, 80.04 of the Tax
Act or any analogous provision of any comparable Law of any province or
territory of Canada.

 

(p)Litigation. Except as disclosed in Schedule 4.1(p), there are currently no
outstanding and have not been at any time in the last five (5) years, any (i)
actions, claims, suits or proceedings by any Person (including either of the
Purchased Corporations); (ii) arbitration or alternative dispute resolution
processes; or (iii) administrative or other proceedings by or before (or, to the
knowledge of the Vendor, any investigation by) any Governmental Entity against
or affecting either of the Purchased Corporations or the business, activities or
assets of either of the Purchased Corporations, nor, in each case, are any of
the foregoing, to the knowledge of the Vendor, pending or threatened. Neither of
the Purchased Corporations is, nor has at any time in the last five (5) years
been, subject to any judgment, order or decree entered in any lawsuit or
proceeding, nor has either of the Purchased Corporations settled any claim
before being prosecuted in respect of it. Neither of the Purchased Corporations
is, nor has at any time in the last five (5) years been, the plaintiff or
complainant in any action, claim, suit or proceeding, arbitration or alternative
dispute resolution process.

 

(q)Bank Accounts and Powers of Attorney. The Vendor has disclosed on Schedule
4.1(q) a correct and complete listing of the name, address and bank account
numbers for each bank or other financial institution in which the Purchased
Corporations have an account or safe deposit box and the names of all
individuals authorized to draw on the account(s) or that have access to the
safety deposit box(s). Neither of the Purchased Corporations has granted any
Person a power of attorney.

 

(r)Material Contracts. Disclosed on Schedule 4.1(r)(1) is a list of all Material
Contracts of either of the Purchased Corporations, true and complete copies of
which have been made available to the Purchaser. neither of the Purchased
Corporations is a party to or bound by any Material Contracts that is not
disclosed on Schedule 4.1(r)(1). The applicable Purchased Corporation has
performed all of the material obligations required to be performed by it and is
entitled to all benefits granted to it under the Material Contracts to which it
is a party. Except as disclosed on Schedule 4.1(r)(2) and with respect to
payment obligations of the Purchased Corporations, neither of the Purchased
Corporations is in default or breach of any material term or condition of any
Material Contract to which it is a party and there exists no condition, event or
act which, with the giving of notice or lapse of time or both, would constitute
such a default or breach. To the knowledge of the Vendor, no other party to any
Material Contract is in breach or default of any of its obligations thereunder.
Neither of the Purchased Corporations is currently renegotiating the terms of
any Material Contract to which it is a party.

 

 

 

 19 

 

 

(s)Indebtedness. Except for the Excluded Indebtedness, the Indebtedness
disclosed in Schedule 1.1(1) and any interest or penalties in respect thereof,
the Corporation has no Indebtedness and there is no event or condition that
would (or would result with the giving of notice, the lapse of time, or both)
allow any Person to exercise rights under any Contracts that could be reasonably
expected to result in any such liabilities or obligations..

 

(t)Pre-Closing Reorganization. The Pre-Closing Reorganization does not and will
not (i) violate or conflict with any applicable Law to which any Person involved
in the Pre-Closing Reorganization is subject, (ii) violate or conflict with any
provision of the organizational documents of any Person involved in the
Pre-Closing Reorganization, or (iii) conflict with, result in a breach of,
constitute a default under, any contract or agreement to which any Person
involved in the Pre-Closing Reorganization is a party or by which it is bound or
to which any of its assets is subject.

 

(u)Full Disclosure. To the knowledge of the Vendor, this Agreement does not (i)
contain any untrue statement of a material fact or (ii) omit any statement of a
material fact necessary in order to make the representations and warranties
contained herein not misleading.

 

Article 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND PURCHASER PARENT

 

Section 5.1Representations and Warranties of the Purchaser and Purchaser Parent.

 

Each of the Purchaser and the Purchaser Parent jointly and severally represents
and warrants to the Vendor as follows as of the date hereof and acknowledges and
confirms that the Vendor is relying on such representations and warranties in
connection with the transactions contemplated by this Agreement notwithstanding
any investigation by or on behalf of the Vendor:

 

(a)Incorporation and Corporate Power. Such Party is a corporation duly and
validly incorporated, organized and existing under the Laws of its jurisdiction
of incorporation and has the corporate power and authority to enter into and
perform its obligations under this Agreement.

 

(b)Corporate Authorization. The execution and delivery of and performance by
such Party of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of such Party, as applicable.

 

(c)No Conflict. The execution and delivery of and performance by such Party of
this Agreement:

 

(i)has been duly authorized by all necessary corporate action on the part of
such Party;

 

(ii)does not and will not (or would not with the giving of notice, the lapse of
time, or both, or the happening of any other event or condition) result in a
breach, default or violation of, or conflict with, or allow any other Person to
exercise any rights under, any term, condition or provision of such Party’s
Governing Documents or any resolutions of such Party’s board of directors or
shareholders; and

 

(iii)does not and will not (or would not with the giving of notice, the lapse of
time, or both, or the happening of any other event or condition) result in a
breach or violation of any Law.

 

 

 

 20 

 

 

(d)Required Authorizations. There is no requirement of such Party or any of its
Affiliates to make any filing with, give any notice to, or obtain any
Authorization of any Governmental Entity as a condition to the lawful completion
of the transactions contemplated by this Agreement.

 

(e)Required Consents. There is no requirement of such Party to obtain any
Consents.

 

(f)Execution and Binding Obligation. This Agreement has been duly executed and
delivered by such Party and constitutes a legal, valid and binding obligation of
such Party, enforceable against it in accordance with its terms subject only to
any limitation on enforcement under applicable Laws relating to: (i) bankruptcy,
winding-up, insolvency, arrangement and other similar Laws of general
application affecting the enforcement of creditors’ rights; and (ii) the
discretion that a court may exercise in the granting of extraordinary remedies
such as specific performance and injunction.

 

(g)Securities Laws. The Purchaser is acquiring the Purchased Shares as principal
and not as agent and is acquiring the Purchased Shares for investment purposes
only and not with a view to resale or distribution. The Purchaser is a resident
of the Province of Alberta and is a purchaser described in s. 2.3 of National
Instrument 45-106 – Prospectus Exemptions.

 

(h)Ownership of Purchaser. The Purchaser Parent owns, directly or indirectly,
100% of the issued and outstanding shares of the Purchaser.

 

Article 6
INTERIM PERIOD COVENANTS

 

Section 6.1Conduct of the Business Prior to Closing.

 

(1)Subject to the Pre-Closing Reorganization, during the Interim Period, the
Vendor shall cause the Purchased Corporations to conduct their businesses in the
Ordinary Course.

 

(2)Without limiting the generality of the foregoing, except with the prior
written consent of the Purchaser or as required to carry out the Pre-Closing
Reorganization (which, for greater certainty, will not require the consent of
the Purchaser), the Vendor shall cause each Purchased Corporation to:

 

(a)not cause or permit to exist a breach of any representations and warranties
of the Vendor contained in this Agreement;

 

(b)conduct the business in such a manner that on the Closing Date such
representations and warranties will be true and correct in all material respects
as if they were made on and as of such date;

 

(c)preserve intact the current business organization of the Purchased
Corporations;

 

(d)to the extent reasonably practicable, maintain good relations with, and the
goodwill of, suppliers, creditors and all other Persons having business
relationships with the Purchased Corporations, provided that this
Section 6.1(2)(d) shall not require the Purchased Corporations to make any
payments to such Persons;

 

(e)retain possession and control of the assets of the business and preserve the
confidentiality of any confidential or proprietary information of the Purchased
Corporation;

 

 

 

 21 

 

 

(f)maintain the assets of each of the Purchased Corporation consistent with past
practice;

 

(g)not do any of the following:

 

(i)make any capital expenditure or commitment to do so in respect of either
Purchased Corporation that, individually or in the aggregate, exceeds $10,000;

 

(ii)accrue any new Indebtedness that, individually or in the aggregate, exceeds
$10,000;

 

(iii)sell, transfer, pledge, lease or otherwise dispose of any of the assets of
the Purchased Corporations;

 

(iv)declare or pay any dividend or other distribution on or in respect of any
shares in either of the Purchased Corporations, or purchase, redeem or acquire
any of such shares;

 

(v)fail to notify the Purchaser promptly of any material change in relation to
the Purchased Corporations;

 

(vi)fail to prosecute with commercially reasonable efforts any pending
applications to any Governmental Entities, provided that the Vendor shall not be
required to make any expenditures with respect to any such prosecution;

 

(vii)make any loan or advance to, or any capital contribution or investment in,
or assume, guarantee or otherwise become liable with respect to the liabilities
or obligations of, any Person; or

 

(viii)agree to do any of the foregoing.

 

Section 6.2Continued Access.

 

During the Interim Period, the Vendor shall, and shall, to the extent reasonably
required by the Purchaser, permit the Purchaser and its employees, agents,
counsel, accountants or other representatives to have reasonable access during
normal business hours to (i) the premises of the Purchased Corporations,
including the Owned Real Property, (ii) the assets of the business, including
all Books and Records, whether in the possession of the Vendor or otherwise,
(iii) any information requested by the Purchaser relating to each of the holders
of Closing Indebtedness; (iv) all contracts, and (v) the Key Personnel, and
shall furnish to the Purchaser and/or its employees, agents, counsel,
accountants or other representatives such financial and operating data and other
information with respect to the assets of the business of each of the Purchased
Corporations as the Purchaser from time to time reasonably requests.

 

Section 6.3Notice of Inaccurate Representation or Warranty

 

During the Interim Period, the Vendor shall promptly notify the Purchaser, upon
(i) any representation or warranty made by the Vendor contained in this
Agreement becoming inaccurate; or (ii) the Vendor becoming aware that any such
representation or warranty was inaccurate when it was made on the date of this
Agreement. Any such notification will set out particulars of the inaccurate
representation or warranty and details of any actions of the Vendor to rectify
the inaccuracy.

 

 

 

 22 

 

 

Article 7
TAX MATTERS

 

Section 7.1Tax Matters on or Prior to Closing.

 

From and after the Closing Date, the Purchaser shall cause each of the Purchased
Corporations to duly and timely make, prepare and file all Tax Returns required
to be so made, prepared and filed by such Purchased Corporation, subject to
prior review and approval by the Vendor (which approval must not be unreasonably
withheld): (i) for any period which ends on or before the Closing Date and for
which Tax Returns have not been filed as of such date; and (ii) for periods
beginning before and ending after the Closing Date. Such Tax Returns will be
prepared consistent with prior practice, except where otherwise required under
applicable Tax Law, provided that no reserve or credit will be claimed if doing
so would result in an amount being included in the income of a Purchased
Corporation in a Tax period ending after the Closing Date. The Purchaser shall
provide the Vendor with copies of such Tax Return, along with supporting
workpapers, at least 30 days before the due date for filing thereof. The
Purchaser will cause each of the Purchased Corporations to timely remit any
Taxes shown as owing on its respective Tax Returns, provided that the Vendor
shall promptly reimburse the Purchaser for any such Taxes (excluding any Taxes
already taken into account in the Closing Indebtedness) and the amount of any
such reimbursement will constitute a dollar-for-dollar decrease to the Purchase
Price. At the request of either the Vendor or the Purchaser, an election under
subsection 256(9) under the Tax Act will be filed in respect of each of the
Purchased Corporations’ taxation years ending on the acquisition of control of
the Corporation by the Purchaser.

 

Section 7.2Cooperation on Tax Matters.

 

The Vendor and the Purchaser shall co-operate fully with each other and make
available to each other in a timely fashion such data and other information, and
provide such assistance, as may reasonably be required for the preparation of
any Tax Return of either of the Purchased Corporations, the preparation for any
audit by any Governmental Entity in respect of Taxes and the defense of any
Third Party Claim relating to any Taxes or Tax Return, in respect of any period
ending on, before or including the Closing Date or Straddle Period, and shall
preserve such data and other information until the expiration of any applicable
limitation period under any applicable Tax Laws. The Purchaser and each of the
Purchased Corporations will, upon reasonable request of the Vendor, use all
reasonable commercial efforts to take reasonable steps, including obtaining any
certificate or other document from, or effect any filing with, any Governmental
Entity as may be considered desirable to mitigate, reduce or eliminate any Taxes
that could be imposed on either Purchased Corporation and that could reasonably
give rise to a right of indemnity hereunder.

 

Section 7.3Post-Closing Tax Matters.

 

The Purchaser covenants that it will not, or cause or permit either of the
Purchased Corporations to, make any election or deemed election or make or
change any Tax election, relating to a pre-Closing Tax period, or otherwise
amend any Tax Return for a pre-Closing period, in each case that results in any
increased Tax liability or reduction of any deduction, credit or loss carry-over
of either of the Purchased Corporations in respect of any period ending on or
before, or which includes, the Closing Date. The Purchaser agrees that the
Vendor is to have no liability for any Tax resulting from any action referred to
in the preceding sentence, and agrees to indemnify and hold harmless the Vendor
and its Affiliates against any such Tax.

 

Section 7.4Tax Refunds.

 

The Purchaser shall promptly pay to the Vendor any refunds of Taxes paid with
respect to each of the Purchased Corporations attributable to any periods ending
on or before or which include the Closing Date (plus any interest received with
respect thereto from any applicable Governmental Entity net of any Taxes on such
interest), provided that, for greater certainty, any such refund paid to the
Vendor will be subject to Article 9 to the extent such refund is subsequently
required by a Governmental Entity to be repaid. The amount of any such refund
paid to the Vendor will constitute a dollar-for-dollar increase of the Purchase
Price.

 

 

 

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Section 7.5Election under Subsection 80.01(4) of the Tax Act

 

The Purchaser shall cause the Corporation to elect pursuant to subsection
80.01(4) of the Tax Act, in prescribed form T2027, on or before the day on which
the Corporation is required to file a Tax Return under the Tax Act for the
taxation year of the Corporation that includes the date of the Pre-Closing
Reorganization, so that the Corporation Note settled on Newco winding-up into
the Corporation will be deemed to have been settled pursuant to subsection
80.01(4) of the Tax Act by payment by the Corporation of an amount equal to the
“cost amount” (as defined in the Tax Act for purposes of subsection 80.01(4)) of
the Corporation Note, being the outstanding amount thereof.

 

Article 8
CLOSING CONDITIONS & Covenants

 

Section 8.1Closing Conditions for the Benefit of the Purchaser.

 

The purchase and sale of the Purchased Shares is subject to the following
conditions being satisfied at or prior to Closing, which conditions are for the
exclusive benefit of the Purchaser and may be waived, in whole or in part, by
the Purchaser in its sole discretion:

 

(a)Truth of Representations and Warranties. The representations and warranties
of the Vendor contained in this Agreement were true and correct in all material
respects as of the date of this Agreement and are true and correct in all
material respects as of the Closing Date with the same force and effect as if
such representations and warranties were made on and as of such date (other than
any representations and warranties stated to be made as of a specified date,
which shall be true and correct as of such specified date), and the Vendor will
have executed and delivered a certificate to that effect to the Purchaser;
provided, however, if a representation or warranty is qualified by materiality
it must be true and correct in all respects after giving effect to such
qualification. The Closing will not constitute a waiver by the Purchaser of the
representations and warranties of the Vendor that are contained in this
Agreement. Upon delivery of such certificate, the representations and warranties
of the Vendor in this Agreement will be deemed to have been made on and as of
the Closing Date with the same force and effect as if made on and as of such
date.

 

(b)Performance of Covenants. The Vendor will have fulfilled or complied with, in
all material respects, all of its covenants contained in this Agreement to be
fulfilled or complied with by it at or prior to the Closing, and the Vendor will
have executed and delivered a certificate to that effect to the Purchaser. The
Closing will not constitute a waiver by the Purchaser of the covenants of the
Vendor which are contained in this Agreement.

 

(c)Consents, Approvals Etc. All Consents, approvals, notices, waivers and
filings listed in Schedules 3.1(e) and 4.1(e) will have been made, given or
obtained, as applicable, on terms acceptable to the Purchaser, and all such
consents, approvals, notices, waivers and filings, will be in force and will not
have been modified.

 

(d)Closing Deliveries. The Vendor will have delivered or caused to be delivered
to the Purchaser the following, each in form and substance satisfactory to the
Purchaser or in the form attached to this Agreement:

 

 

 

 24 

 

 

(i)share certificates representing the Purchased Shares duly endorsed in blank
for transfer, or accompanied by an instrument of transfer transferring the
Purchased Shares to the Purchaser or its nominee duly executed by the holder of
record, together with evidence satisfactory to the Purchaser that the Purchaser
or its nominee(s) have been entered upon the books of the Corporation as the
holder of the Purchased Shares;

 

(ii)certified copies of: (A) the Governing Documents of each of the Purchased
Corporations and the Vendor; and (B) all resolutions of the directors, and, if
required, the shareholders, of the Vendor approving the entering into and
completion of the transactions contemplated by this Agreement;

 

(iii)a certificate executed by a senior officer of the Vendor certifying the
matters set out in Section 8.1(a) and 8.1(b);

 

(iv)a certificate of status, compliance, good standing or similar certificate
with respect to each of the Purchased Corporations and the Vendor issued by the
applicable Governmental Entity and, in the case of the Purchased Corporations,
by each jurisdiction in which it carries on business, dated not more than two
(2) Business Days prior to the Closing Date;

 

(v)a duly executed resignation and release, effective at the Closing, from each
of the directors and corporate officers of either of the Purchased Corporations,
substantially in the form of the resignation and release in Schedule 8.1(v);

 

(vi)a duly executed release in favour of the Corporation from the Vendor, in the
form of the release in Schedule 8.1(vi);

 

(vii)the Books and Records of each of the Purchased Corporations; and

 

(viii)such other documents and ancillary agreements as contemplated herein or
therein or as the Purchaser may otherwise reasonably require.

 

(e)Financing. The Purchaser will have received financing sufficient to complete
the transaction of purchase and sale contemplated in this Agreement on terms and
conditions satisfactory to the Purchaser.

 

(f)Consulting Agreement. The Purchaser will have entered into a consulting
agreement (the “Consulting Agreement”) with the Vendor, in a form mutually
agreed between the Vendor and Purchaser, each acting reasonably, pursuant to
which the Vendor will use commercially reasonable efforts to cause the Key
Personnel (to the extent within the control of the Vendor) to provide such
consulting services to the Purchaser as are reasonably necessary for the purpose
of transitioning the applications set out in Schedule 4.1(i)(iv)(A) into the
names of individuals proposed by the Purchaser (which, for greater certainty,
will not include the names of any Key Personnel) who hold security clearances
required under the Cannabis Act and Cannabis Regulations, after which transition
the names of any applicable Key Personnel will be removed from such
applications. The term of the Consulting Agreement will not exceed three months
and, in the case of Thorne, such services will only be provided until the end of
the term of his consulting agreement with the Vendor dated June 1, 2019 and only
to the extent consistent with the terms of such agreement.

 

 

 

 25 

 

 

(g)Delivery of Financial Statements. The Purchaser will have received true and
complete copies of the consolidated audited financial statements of the
Purchased Corporations consisting of a balance sheet, statement of income and
retained earnings, statement of cash flows and notes thereto as at and for the
fiscal years ended December 31, 2017 and 2018 and the interim financial
statements for the three months ending March 31, 2019, and, if the Closing Date
is later than July 31, 2019, the interim financial statements for the six months
ended June 30, 2019 (collectively the “Financial Statements”). The Financial
Statements shall have been prepared and in accordance with IFRS. The Vendor will
cause its auditor to cooperate and provide information and assistance to the
Purchaser or its representatives in respect of the conversion of the Financial
Statements from IFRS into US GAAP.

 

(h)Liens. Evidence in form and substance satisfactory to the Purchaser of the
release of all Liens, other than Permitted Liens, charging any of the Purchased
Shares, the assets of either of the Purchased Corporations or the Owned Real
Property.

 

(i)No Material Adverse Change. Since the date of this Agreement, there shall not
have been any Material Adverse Change.

 

(j)No Legal Action. No action, proceeding, investigation or inquiry will be
pending or threatened by any Person (other than Purchaser) in any jurisdiction,
and no order or notice will have been made, issued or delivered by any
Governmental Entity, seeking, or potentially resulting in any Governmental
Entity seeking, to enjoin, restrict or prohibit, or enjoining, restricting or
prohibiting, on a temporary or permanent basis, any of the transactions
contemplated by this Agreement or imposing any temporary or permanent terms or
conditions on the transactions contemplated by this Agreement or the business of
either of the Purchaser Corporations or the business and activities of the
Purchaser or any of its Affiliates, including requiring that any assets or
shares be held separate or divested or requiring any form of behavioural or
other remedy or otherwise limiting the right of the Purchaser to conduct its
business and activities or the business and activities of the Purchased
Corporations after Closing on substantially the same basis as previously
conducted.

 

(k)Assignment of Urban Systems Agreement. The Vendor shall have assigned the
Urban Systems Agreement to the Corporation.

 

(l)Pre-Closing Reorganization. The Pre-Closing Reorganization will have been
completed as contemplated herein and the Vendor will have provided evidence to
the Purchaser of (i) the number of issued and outstanding shares of the
Purchased Corporations outstanding following completion thereof and (ii) the
discharge of all intercompany debt between the Vendor, the Purchased
Corporations and any of their subsidiaries.

 

Section 8.2Closing Conditions for the Benefit of the Vendor.

 

The purchase and sale of the Purchased Shares is subject to the following
conditions being satisfied at or prior to Closing, which conditions are for the
exclusive benefit of the Vendor and may be waived, in whole or in part, by the
Vendor in its sole discretion.

 

(a)Truth of Representations and Warranties. The representations and warranties
of the Purchaser contained in this Agreement were true and correct in all
material respects as of the date of this Agreement and are true and correct in
all material respects as of the Closing Date with the same force and effect as
if such representations and warranties were made on and as of such date, and the
Purchaser will have executed and delivered a certificate to that effect to the
Vendor; provided, however, if a representation or warranty is qualified by
materiality it must be true and correct in all respects after giving effect to
such qualification. The Closing will not constitute a waiver by the Vendor of
the representations and warranties of the Purchaser that are contained in this
Agreement. Upon delivery of such certificate, the representations and warranties
of the Purchaser in this Agreement will be deemed to have been made on and as of
the Closing Date with the same force and effect as if made on and as of such
date.

 

 

 

 26 

 

 

(b)Performance of Covenants. The Purchaser will have fulfilled or complied with,
in all material respects, all of its covenants contained in this Agreement to be
fulfilled or complied with by it at or prior to the Closing, and the Purchaser
will have executed and delivered a certificate to that effect to the Vendor. The
Closing will not constitute a waiver by the Vendor of the covenants of the
Purchaser which are contained in this Agreement.

 

(c)Consulting Agreement. The Purchaser and the Vendor shall have entered into
the Consulting Agreement.

 

(d)Closing Deliveries. Following receipt of the Vendor’s closing deliveries, the
Purchaser will have delivered or caused to be delivered to the Vendor the
following, in form and substance satisfactory to the Vendor:

 

(i)a wire transfer of immediately available funds, in full satisfaction of the
balance of the Purchase Price, as provided for pursuant to Section 2.3;

 

(ii)certified copies of: (A) the Governing Documents of the Purchaser; and (B)
all resolutions of the board of directors of the Purchaser approving the
entering into and completion of the transactions contemplated by this Agreement;

 

(iii)a certificate executed by a senior officer of the Purchaser certifying the
matters set out in Section 8.2(a) and 8.2(b);

 

(iv)a certificate of status, compliance, good standing or like certificate with
respect to the Purchaser issued by appropriate government official of the
jurisdiction of its incorporation dated not more than two (2) Business Days
prior to the Closing Date;

 

(v)the Consulting Agreement, duly executed by the Purchaser; and

 

(vi)such other documents and ancillary agreements as contemplated herein or
therein or as the Vendor may otherwise reasonably require.

 

(e)Pre-Closing Reorganization. The Pre-Closing Reorganization will have been
completed as contemplated herein.

 

Section 8.3Covenants of the Purchaser.

 

(1)The Purchaser agrees to use commercially reasonable efforts to meet the
condition for the benefit of the Purchaser set out in Section 8.1(e).

 

(2)The Purchaser covenants and agrees to cooperate with the Vendor in respect of
any change of control notifications relating to the transactions contemplated by
this Agreement on request by the Vendor.

 

 

 

 27 

 

 

(3)The Purchaser agrees to, upon or within three (3) Business Day of the Closing
Date, register a change of name of the Corporation with Corporations Canada and
all applicable corporate registries to a name that does not include the word
“Sunniva” or any similar word and to provide the Vendor with reasonable evidence
thereof.

 

Article 9
INDEMNIFICATION

 

Section 9.1Duration of Liability

 

(1)The representations and warranties contained in this Agreement will survive
the Closing and, notwithstanding Closing and any investigation made by or on
behalf of Purchaser, continue in full force and effect for twenty-four
(24) months after the Closing Date, except that:

 

(a)the Fundamental Representations will survive indefinitely or until the latest
date permitted by Law;

 

(b)

 

the representations and warranties set out in Section 4.1(o) [Tax Matters] will
survive and continue in full force and effect until 90 days after the expiration
of the period (“Tax Assessment Period”) during which any tax assessment may be
issued by a Governmental Entity in respect of any taxation year to which such
representation and warranty extends. The Tax Assessment Period will be
determined without having regard to any consent, waiver, agreement or other
document that extends the period during which a Governmental Entity may issue a
tax assessment (except where such consent, waiver, agreement or other document
was given or issued prior to the Closing Date). A tax assessment includes any
assessment, reassessment or other form of recognized document assessing
liability for Taxes under applicable Law; and

 

(c)any representation and warranty involving fraud or fraudulent
misrepresentation by the Party giving that representation and warranty will
survive and continue in full force and effect without limitation of time.

 

(2)No Party has any obligation or liability with respect to any representation
or warranty made by such Party in this Agreement after the end of the applicable
time period specified in Section 9.1(1), except for any such claims that the
Party has been notified of in accordance with the terms of this Agreement prior
to the end of the applicable time period.

 

(3)The indemnities set out in Section 9.2(1)(c) and Section 9.2(1)(f) will
continue in full force and effect for three years after the Closing Date, after
which such indemnities will be of no further force and effect, except with
respect to any claims thereunder of which the Vendor has been notified by the
Purchaser in accordance with the terms of this Agreement prior to the end of
such period.

 

Section 9.2Indemnification in Favour of the Purchaser.

 

(1)Subject to Section 9.1 and Section 9.4, the Vendor shall indemnify and save
each of the Purchaser and the Purchased Corporations and their respective
shareholders, directors, officers, employees, agents and representatives,
successors and permitted assigns harmless of and from, and shall pay for, any
Damages suffered by, imposed upon or asserted against any of them as a result
of, in respect of, connected with, or arising out of, under, or pursuant to:

 

(a)any breach or inaccuracy of any representation or warranty in Section 3.1 and
Section 4.1 for which a notice of claim under Section 9.5 has been provided to
the Vendor within the applicable period specified in Section 9.1;

 

 

 

 28 

 

 

(b)any failure of the Vendor to perform or fulfil any of its covenants or
obligations under this Agreement;

 

(c)all Pre-Closing Environmental Liabilities;

 

(d)all Taxes payable by either of the Purchased Corporations in respect of any
taxation year ending prior to Closing or, in the case of a Tax period beginning
on or beginning before and ending after the Closing Date (a “Straddle Period”),
in respect of that portion of such Straddle Period ending on and including the
Closing Date, allocated in accordance with Section 9.2(2) (excluding any Taxes
already taken into account in the Closing Indebtedness);

 

(e)all Taxes payable by the Corporation (or any successor thereto) as a result
of the Pre-Closing Reorganization;

 

(f)any litigation against the Purchased Corporations in existence before the
Closing Date or arising after the Closing Date with respect to an event or
occurrence prior thereto and any fine or penalty imposed in respect of any
violation of Laws on or prior to the Closing Date; and

 

(g)all reasonable fees and expenses incurred by the Purchaser in enforcing the
provisions of this Section 9.2.

 

(2)In the case of any Straddle Period, the amount of Taxes allocable to the
portion of the Straddle Period ending on the Closing Date shall be:

 

(a)in the case of Taxes imposed on a periodic basis (such as real or personal
property Taxes), the amount of such Taxes for the entire period (or, in the case
of such Taxes determined on an arrears basis, the amount of such Taxes for the
immediately preceding period) multiplied by a fraction, the numerator of which
is the number of calendar days in the Straddle Period up to and including the
Closing Date and the denominator of which is the number of calendar days in the
entire relevant Straddle Period; and

 

(b)in the case of Taxes not described in (a) above (such as franchise Taxes,
Taxes that are based upon or related to income or receipts, or Taxes that are
based upon occupancy or imposed in connection with any sale or other transfer or
assignment of property), the amount of any such Taxes shall be determined as if
such taxable period ended at the time of Closing, except that any Canadian
income Taxes in respect of the taxation year of any of the Purchased
Corporations commencing on the acquisition of control of the Purchased
Corporations by the Purchaser as determined under subsection 256(9) of the Tax
Act shall not be allocable to the portion of the Straddle Period ending on the
Closing Date.

 

Section 9.3Indemnification in Favour of the Vendor.

 

Subject to Section 9.4, the Purchaser shall indemnify and save the Vendor and
its shareholders, directors, officers, employees, Affiliates, agents,
representatives, successors and permitted assigns harmless of and from, and
shall pay for, any Damages suffered by, imposed upon or asserted against it or
any of them as a result of, in respect of, connected with, or arising out of,
under or pursuant to:

 

(a)any breach or inaccuracy of any representation or warranty in Section 5.1 for
which a notice of claim under Section 9.5 has been provided to the Purchaser
within the applicable period specified in Section 9.1;

 

 

 

 29 

 

 

(b)any failure of the Purchaser to perform or fulfil any of its covenants or
obligations under this Agreement; and

 

(c)all reasonable fees and expenses incurred by the Vendor in enforcing the
provisions of this Section 9.3.

 

Section 9.4Limitations on Indemnification.

 

(1)Following Closing, a Party has no obligation or liability for indemnification
or otherwise with respect to any breach or inaccuracy of any representation or
warranty in this Agreement, or any failure to perform or fulfill any covenants
or obligations, if the Party making the claim had knowledge of the breach,
inaccuracy or failure to perform on or prior to Closing.

 

(2)Other than liability or obligation for indemnification under
Section 9.2(1)(a) in respect of any breach or any inaccuracy of a representation
or warranty in Section 3.1(j) or Section 4.1(o), Section 9.2(1)(d), or
Section 9.2(1)(e), the Vendor has no liability or obligation with respect to any
single claim for indemnification or otherwise with respect to the matters
described in Section 9.2 unless the amount of the Damages actually incurred by
the Purchaser with respect to such claim is greater than $25,000, and then,
subject to the further limitations set out in Section 9.4(3) (including, for
greater certainty, the maximum amount set out therein), only for the amount by
which such Damages exceed $25,000.

 

(3)Other than liability or obligation for indemnification under
Section 9.2(1)(a) in respect of any breach or any inaccuracy of a representation
or warranty in Section 3.1(j) or Section 4.1(o), Section 9.2(1)(d), or
Section 9.2(1)(e), the Vendor has no obligation to make any payment for Damages
for indemnification or otherwise with respect to the matters described in
Section 9.2 until the total of all indemnifiable Damages with respect to such
matters exceeds $100,000, and then only for the amount by which such Damages
exceed $100,000, up to a maximum amount equal to 50% of the Purchase Price.

 

(4)The Purchaser has no liability or obligation with respect to any single claim
for indemnification or otherwise with respect to the matters described in
Section 9.3 unless the amount of the Damages with respect to such claim is
greater than $25,000, and then, subject to the further limitations set out in
Section 9.4(5), only for the amount by which such Damages exceed $25,000.

 

(5)The Purchaser has no obligation to make any payment for Damages (for
indemnification or otherwise) with respect to the matters described in
Section 9.3 until the total of all Damages with respect to such matters exceeds
$100,000, and then only for the amount by which such Damages exceed $100,000, up
to a maximum amount equal to 50% of the Purchase Price.

 

(6)Notwithstanding any other provision of this Agreement, the limitations set
out in Section 9.4(4) and Section 9.4(5) will not apply to the obligations of
the Purchaser to pay the Purchase Price as set out in Section 2.3.

 

Section 9.5Notification.

 

(1)If a Third Party Claim is instituted or asserted against an Indemnified
Party, the Indemnified Party will promptly notify the Indemnifying Party in
writing of the Third Party Claim. The notice must specify in reasonable detail
the identity of the Person making the Third Party Claim and, to the extent
known, the nature and amount of the Damages and the estimated amount needed to
investigate, defend, remedy or address the Third Party Claim.

 

 

 

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(2)If an Indemnified Party becomes aware of a Direct Claim, the Indemnified
Party will promptly notify the Indemnifying Party in writing of the Direct
Claim.

 

(3)Notice to an Indemnifying Party under this Section 9.5 of a Direct Claim or a
Third Party Claim is assertion of a claim for indemnification against the
Indemnifying Party under this Agreement. Upon receipt of such notice, the
provisions of Section 9.7 will apply to any Third Party Claim and the provisions
of Section 9.6 will apply to any Direct Claim.

 

Section 9.6Direct Claims.

 

(1)Following receipt of notice of a Direct Claim, the Indemnifying Party has 30
days to investigate the Direct Claim and respond in writing. For purposes of the
investigation, the Indemnified Party shall make available to the Indemnifying
Party the information relied upon by the Indemnified Party to substantiate the
Direct Claim, together with such other information as the Indemnifying Party may
reasonably request.

 

(2)If the Indemnifying Party disputes the validity or amount of the Direct
Claim, the Indemnifying Party shall provide written notice of the dispute to the
Indemnified Party within the 30-day period specified in Section 9.6(1). The
dispute notice must describe in reasonable detail the nature of the Indemnifying
Party’s dispute. During the 15-day period immediately following receipt of a
dispute notice by the Indemnified Party, the Indemnifying Party and the
Indemnified Party shall attempt in good faith to resolve the dispute. If the
Indemnifying Party and the Indemnified Party fail to resolve the dispute within
that 15-day time period, the Indemnified Party is free to pursue all rights and
remedies available to it, subject to this Agreement. If the Indemnifying Party
fails to respond in writing to the Direct Claim within the 30-day period
specified in Section 9.6(1), the Indemnifying Party is deemed to have rejected
the Direct Claim, in which event the Indemnified Party is free to pursue all
rights remedies available to it, subject to this Agreement.

 

Section 9.7Procedure for Third Party Claims.

 

(1)Upon receiving notice of a Third Party Claim, the Indemnifying Party may
participate in the investigation and defence of the Third Party Claim and may
also elect to assume the investigation and defence of the Third Party Claim.

 

(2)In order to assume the investigation and defence of a Third Party Claim, the
Indemnifying Party must give the Indemnified Party written notice of its
election within 20 days of the Indemnifying Party’s receipt of notice of the
Third Party Claim.

 

(3)If the Indemnifying Party assumes the investigation and defence of a Third
Party Claim:

 

(a)the Indemnifying Party will pay for all costs and expenses of the
investigation and defence of the Third Party Claim (including any payment of Tax
required to be paid prior to final settlement of a Third Party Claim in respect
of Taxes related to any taxation year ending prior to Closing or in respect of
that portion of such period ending on and including the Closing Date) except
that the Indemnifying Party will not, so long as it diligently conducts such
defence, be liable to the Indemnified Party for any fees of other counsel or any
other expenses with respect to the defence of the Third Party Claim incurred by
the Indemnified Party after the date the Indemnifying Party validly exercised
its right to assume the investigation and defence of the Third Party Claim; and

 

(b)the Indemnifying Party will reimburse the Indemnified Party for all
reasonable costs and expenses incurred by the Indemnified Party in connection
with the investigation and defence of the Third Party Claim prior to the date
the Indemnifying Party validly exercised its right to assume the investigation
and defence of the Third Party Claim.

 

 

 31 

 

 

(4)If the Indemnified Party undertakes the defence of the Third Party Claim, the
Indemnifying Party will not be bound by any determination of the Third Party
Claim or any compromise or settlement of the Third Party Claim effected without
the consent of the Indemnifying Party (which consent may not be unreasonably
withheld or delayed).

 

(5)The Indemnifying Party will not be permitted to compromise and settle or to
cause a compromise and settlement of a Third Party Claim without the prior
written consent of the Indemnified Party, which consent may not be unreasonably
withheld or delayed, unless:

 

(a)the terms of the compromise and settlement require only the payment of money
for which the Indemnified Party is entitled to full indemnification under this
Agreement;

 

(b)the Indemnified Party is not required to admit any wrongdoing, take or
refrain from taking any action, acknowledge any rights of the Person making the
Third Party Claim or waive any rights that the Indemnified Party may have
against the Person making the Third Party Claim;

 

(c)the Indemnified Party receives, as part of the compromise and settlement, a
legally binding and enforceable unconditional release from any and all
obligations or liabilities it may have with respect to the Third Party Claim;
and

 

(d)the Third Party Claim does not relate to Taxes of an Indemnified Person.

 

(6)The Indemnified Party and the Indemnifying Party agree to keep the other
fully informed of the status of any Third Party Claim and any related
proceedings. If the Indemnifying Party assumes the investigation and defence of
a Third Party Claim, the Indemnified Party will, at the request and expense of
the Indemnifying Party, use its reasonable efforts to make available to the
Indemnifying Party, on a timely basis, those employees whose assistance,
testimony or presence is necessary to assist the Indemnifying Party in
investigating and defending the Third Party Claim. The Indemnified Party shall,
at the request and expense of the Indemnifying Party, make available to the
Indemnifying Party or its representatives, on a timely basis, all documents,
records and other materials in the possession, control or power of the
Indemnified Party reasonably required by the Indemnifying Party for its use
solely in defending any Third Party Claim of which it has elected to assume the
investigation and defence. The Indemnified Party shall cooperate on a timely
basis with the Indemnifying Party in the defence of any Third Party Claim. Where
the Third Party Claim relates to Taxes of an Indemnified Party, the Indemnified
Party shall be entitled to participate fully in the defence of such claim,
including to review and comment on all submissions that will be made to an
applicable Governmental Entity, and to participate in any meetings with any
Governmental Entity.

 

Section 9.8Exclusion of Other Remedies.

 

Except as provided in this Section 9.8, following Closing, the indemnities
provided in Section 9.2 and Section 9.3 constitute the only remedy of the
Purchaser or the Vendor, respectively, against a Party in the event of any
breach of a representation, warranty, covenant or agreement of such Party
contained in this Agreement. The Parties acknowledge that the failure to comply
with a covenant or obligation contained in this Agreement may give rise to
irreparable injury to a Party inadequately compensable in damages. Accordingly,
a Party may seek to enforce the performance of this Agreement by injunction or
specific performance upon application to a court of competent jurisdiction
without proof of actual damage (and without requirement of posting a bond or
other security). Each of the Purchaser and the Vendor expressly waives and
renounces any other remedies whatsoever, whether at law or in equity, that it
would otherwise be entitled to as against any other Party.

 

 

 

 32 

 

 

Section 9.9Duty to Mitigate.

 

Nothing in this Agreement in any way restricts or limits the general obligation
at Law of an Indemnified Party to mitigate any loss that it may suffer or incur
by reason of the breach by an Indemnifying Party of any representation,
warranty, covenant or obligation of the Indemnifying Party under this Agreement.
If any claim can be reduced by any recovery, settlement or otherwise under or
pursuant to any insurance coverage, or pursuant to any claim, recovery,
settlement or payment by or against any other Person, the Indemnified Party
shall take all appropriate steps to enforce such recovery, settlement or payment
and the amount of any Damages of the Indemnified Party will be reduced by the
amount of insurance proceeds actually recoverable by the Indemnified Party.

 

Section 9.10Right to Set-Off

 

(1)Upon notice to the other Party specifying in reasonable detail the basis for
such set-off, the Vendor or the Purchaser may set off any amount to which it is
entitled under this Article 9 against any amounts payable by such Party to the
other Party pursuant to this Agreement.

 

(2)Notwithstanding the foregoing, any right of set-off shall only apply to
amounts that are payable as finally determined in accordance with the terms of
this Agreement or by a court of competent jurisdiction without further appeal.
Where a bona fide indemnity claim is asserted in good faith but not finally
determined in accordance with the terms of this Agreement or by a court of
competent jurisdiction without further appeal, then any amounts that are
otherwise subject to set off at the time of such indemnity claim shall be held
in escrow and subject to release upon the resolution of such indemnity claim.

 

Section 9.11Adjustment to Purchase Price

 

Any payment made by the Vendor as an Indemnifying Party pursuant to this Article
9 will constitute a dollar-for-dollar decrease of the Purchase Price and any
payment made by the Purchaser as an Indemnifying Party pursuant to this Article
9 will constitute a dollar-for-dollar increase of the Purchase Price.

 

Section 9.12After-Tax Basis

 

In determining the amount of any Damages under this Article 9, such Damages will
be increased (or decreased) to take into account any net Tax cost (or net
current or future Tax benefit) incurred or enjoyed by the Indemnified Party as a
result of the matter giving rise to such Damages and the receipt of an indemnity
payment hereunder.

 

Article 10
TErmination

 

Section 10.1Termination Rights.

 

(1)On or prior to the Closing, this Agreement may be terminated by notice in
writing:

 

(a)by mutual consent of the Parties;

 

(b)by the Purchaser, if:

 

(i)there has been a material breach of this Agreement by the Vendor that would
give rise to the failure of any of the deliveries specified in Section 8.1 and
such breach has not been waived by the Purchaser in writing or cured within 5
Business Days by the Vendor following written notice of such breach by
Purchaser; or

 

 

 

 33 

 

 

(ii)if any of the items set forth in Section 8.1 have not been delivered or
waived on or prior to September 30, 2019 (the “Outside Date”), or it becomes
reasonably apparent that any of such deliveries will not be satisfied on or
before the Outside Date (other than as result of the failure of the Purchaser to
perform any of its obligations under this Agreement) and the Purchaser has not
waived such conditions in writing on or prior to the Outside Date; and

 

(c)by the Vendor, if:

 

(i)there has been a material breach of this Agreement by the Purchaser that
would give rise to the failure of any of the deliveries specified in Section 8.2
and such breach has not been waived by the Vendor in writing or cured within 5
Business Days by the Purchaser following written notice of such breach by the
Vendor; or

 

(ii)if any of the items set forth in Section 8.2 have not been delivered or
waived on or prior to the Outside Date or it becomes reasonably apparent that
any of such deliveries will not be satisfied by the Outside Date (other than as
result of the failure of Vendor to perform any of its obligations under this
Agreement) and the Vendor has not waived such condition in writing on or prior
to the Outside Date.

 

(2)

Notwithstanding the termination of this Agreement in accordance with
Section 10.1(1), the Purchaser acknowledges that the Vendor is entitled to
retain the Deposit Amount, except in the case of valid termination of the
Agreement by the Purchaser pursuant to Section 10.1(1)(b)(i) , upon which the
Vendor will reimburse the Purchaser in full for the Deposit A

mount within 5 Business Days of such termination.

 

Article 11
MISCELLANEOUS

 

Section 11.1Guarantee from the Purchaser Parent.

 

(1)The Purchaser Parent hereby irrevocably and unconditionally guarantees to the
Vendor the prompt and full discharge by the Purchaser of all of its covenants,
agreements, obligations, liabilities, indebtedness and other obligations under
this Agreement, including the due and punctual payment of all amounts that are
or may become due and payable by the Purchaser hereunder (including, without
limitation, the Purchase Price) when and as the same shall become due and
payable in accordance with the terms hereof (the “Guaranteed Obligations”).

 

(2)If any default is made by the Purchaser in the payment, performance or
observance of any of the Guaranteed Obligations, the Vendor may recover those
Guaranteed Obligations from Purchaser Parent as primary obligor as a separate
and distinct obligation. Purchaser Parent shall itself pay or perform (or cause
to be paid or performed) such Guaranteed Obligations immediately upon written
notice of demand (the “Demand”) from the Vendor to Purchaser Parent specifying
in summary form the default.

 

(3)In the event the Purchaser is in default of any of the Guaranteed
Obligations, and a Demand Notice has been provided to the Purchaser Parent, the
Purchaser Parent agrees to pay to the Vendor on demand all reasonable fees,
expenses, costs and charges of or incurred by or on behalf of the Vendor in
connection with enforcing any of its rights under this Section 11.1, including
the reasonable fees and disbursements of counsel to the Vendor, court costs,
receivers or agent’s remuneration and other expenses.

 

 

 

 34 

 

 

(4)The guarantee by the Purchaser Parent pursuant to this Section 11.1 may only
be amended, supplemented or otherwise modified by written agreement executed by
the Vendor and the Purchaser Parent. No agreement will have the effect of
diminishing or discharging the liability of the Purchaser Parent hereunder
unless the agreement is in writing and executed by the Vendor.

 

(5)The Purchaser Parent agrees that its liability under this Section 11.1 is
absolute and unconditional and the Guaranteed Obligations will not be
discharged, limited or otherwise affected by anything done, suffered or
permitted by the Vendor in connection with the Purchaser, the Purchaser Parent,
the Guaranteed Obligations, this Agreement or otherwise.

 

(6)If any default is made by Purchaser in the performance or observance of any
of the covenants or agreements which, pursuant to this Agreement are to be
performed or observed by Purchaser, Purchaser Parent will itself perform or
cause to be performed such covenant or agreement immediately upon notice from
the Vendor specifying in summary form the default. If Purchaser makes default as
aforesaid, and if Purchaser Parent fails forthwith to make good such default,
then the Vendor may in its discretion proceed in the enforcement of the rights
given hereby by any remedy provided by applicable Laws whether by legal
proceedings or otherwise to enforce the performance by Purchaser and/or
Purchaser Parent of its obligations under this Agreement.

 

Section 11.2Notices.

 

Any notice, direction or other communication given regarding the matters
contemplated by this Agreement (each, a “Notice”) must be in writing, sent by
personal delivery, courier or electronic mail and addressed:

 

(a)To the Purchaser or Purchaser Parent, addressed as follows:

 

CannaPharmaRx, Inc.

Suite 3600, 808 3rd Street SW

Calgary, AB T2P 5C5

 

Attention: Dominic Colvin

Telephone: +1 949 652 6838
E-mail: ncolvin@cannapharmarx.com

 

With a copy to (which shall not constitute notice):

 

Stikeman Elliott LLP

5300 Commerce Court West, 199 Bay Street

Toronto, ON M5L 1B9

 

Attention: Omar Soliman

Telephone: (416) 869-5670
E-mail: osoliman@stikeman.com

 

(b)To the Vendor, addressed as follows:

 

Sunniva Inc.

1200 Waterfront Centre
200 Burrard Street, PO Box 48600
Vancouver, British Columbia
V7X 1T2

 

 

 

 35 

 

 

Attention: Benjamin Rootman

Telephone: 587 430-0688
E-mail: brootman@sunniva.com

 

With a copy to (which shall not constitute notice):

 

McCarthy Tétrault LLP
Suite 2400, 745 Thurlow Street
Vancouver, British Columbia
V6E 0C5

 

Attention: Robin Mahood

Telephone: (604) 643-5911
E-mail: rmahood@mccarthy.ca

 

A Notice is deemed to be given and received: (i) if sent by personal delivery or
courier, on the date of delivery if it is a Business Day and the delivery was
made prior to 4:00 p.m. (local time in place of receipt) and otherwise on the
next Business Day; or (ii) if sent by electronic mail, when delivered by
electronic transmission. A Party may change its address for service from time to
time by providing a Notice in accordance with the foregoing. Any subsequent
Notice must be sent to the Party at its changed address. Any element of a
Party’s address that is not specifically changed in a Notice will be assumed not
to be changed.

 

Section 11.3Further Assurances.

 

From time to time after the Closing Date, each Party shall, at the request of
any other Party, execute and deliver such additional conveyances, transfers and
other assurances as may be reasonably required to effectively transfer the
Purchased Shares to the Purchaser and carry out the intent of this Agreement.

 

Section 11.4Third Party Beneficiaries.

 

Except as otherwise provided in Section 9.2 and Section 9.3, the Vendor and the
Purchaser intend that this Agreement will not benefit or create any right or
cause of action in favour of any Person, other than the Parties. Except for the
Indemnified Party or as otherwise set out herein, no Person, other than the
Parties, is entitled to rely on the provisions of this Agreement in any action,
suit, proceeding, hearing or other forum. The Parties reserve their right to
vary or rescind, at any time and in any way whatsoever, the rights, if any,
granted by or under this Agreement to any Person who is not a Party, without
notice to or consent of that Person, including any Indemnified Party.

 

Section 11.5Announcements.

 

Each of the Parties agrees to consult with each other before issuing any press
release or making any public statement or disclosure with respect to this
Agreement or the transactions contemplated hereby and agrees not to issue any
such press release or make any such public statement or disclosure without the
prior written consent of the other Parties hereto, provided that a party may,
without the prior written consent of the other Parties, issue any such press
release or make any such public announcements or disclosures if such Party has
(a) notified the other Parties in writing of the details and content of the
press release or announcement to be released at least three (3) Business Days in
advance of such release, and (b) used commercially reasonable efforts to consult
with the other Parties and to obtain the consent of such other Parties but has
been unable to do so prior to the time such press release or public announcement
or disclosure is required to be released pursuant to applicable Laws.

 

 

 

 36 

 

 

Section 11.6Expenses.

 

Except as otherwise expressly provided in this Agreement, each Party will pay
for its own costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby. The fees and expenses referred to in this
Section are those which are incurred in connection with the negotiation,
preparation, execution and performance of this Agreement, and the transactions
contemplated by this Agreement, including the fees and expenses of legal
counsel, investment advisers and accountants.

 

Section 11.7Amendments.

 

This Agreement may only be amended, supplemented or otherwise modified by
written agreement signed by all of the Parties.

 

Section 11.8Waiver.

 

No waiver of any of the provisions of this Agreement will constitute a waiver of
any other provision (whether or not similar). No waiver will be binding unless
executed in writing by the Party to be bound by the waiver. A Party’s failure or
delay in exercising any right under this Agreement will not operate as a waiver
of that right. A single or partial exercise of any right will not preclude a
Party from any other or further exercise of that right or the exercise of any
other right.

 

Section 11.9Non-Merger.

 

Except as otherwise expressly provided in this Agreement, the covenants,
representations and warranties will not merge on and will survive the Closing.
Notwithstanding the Closing or any investigation made by or on behalf of any
Party, the covenants, representations and warranties will continue in full force
and effect. Closing will not prejudice any right of one Party against any other
Party in respect of anything done or omitted under this Agreement or in respect
of any right to damages or other remedies.

 

Section 11.10Entire Agreement.

 

This Agreement constitutes the entire agreement between the Parties with respect
to the transactions contemplated by this Agreement and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties with respect to the subject matter hereof. There are no
representations, warranties, covenants, conditions or other agreements, express
or implied, collateral, statutory or otherwise, between the Parties in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement. The Parties have not relied and are not relying on any
other information, discussion or understanding in entering into and completing
the transactions contemplated by this Agreement.

 

Section 11.11Successors and Assigns.

 

(1)This Agreement becomes effective only when executed by the Parties. After
that time, it will be binding upon and enure to the benefit of the Parties and
their respective heirs, administrators, executors, legal representatives,
successors and permitted assigns.

 

(2)Neither this Agreement nor any of the rights or obligations under this
Agreement may be assigned or transferred, in whole or in part, by any Party
without the prior written consent of the other Parties.

 

Section 11.12Severability.

 

If any provision of this Agreement is determined to be illegal, invalid or
unenforceable by an arbitrator or any court of competent jurisdiction, that
provision will be severed from this Agreement and the remaining provisions will
remain in full force and effect.

 

 

 

 37 

 

 

Section 11.13Governing Law.

 

(1)This Agreement is governed by and will be interpreted and construed in
accordance with the laws of the Province of British Columbia and the federal
laws of Canada applicable therein.

 

(2)Each Party irrevocably attorns and submits to the non-exclusive jurisdiction
of the courts of British Columbia situated in the City of Vancouver and waives
objection to the venue of any proceeding in such court or that such court
provides an inappropriate forum.

 

Section 11.14Counterparts.

 

This Agreement may be executed in any number of counterparts, each of which is
deemed to be an original, and such counterparts together constitute one and the
same instrument. Transmission of an executed signature page by facsimile, email
or other electronic means is as effective as a manually executed counterpart of
this Agreement.

 

[Signature page follows.]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.

 

  CannaPharmaRx CANADA CORP.       By:  /s/ Dominic Colvin     Name: Dominic
Colvin
Title: President & CEO

 

  CannaPharmaRx, Inc.       By:  /s/ Dominic Colvin     Name: Dominic Colvin
Title: CEO

 

  SUNNIVA INC.       By:  /s/ Dr. Anthony Holler     Name: Dr. Anthony Holler
Title: Chairman & CEO

 

 

 

 

 

 

 

 

 

 

 39