EXHIBIT 10.1

 

Execution Copy

 

THIS SHARE PURCHASE AGREEMENT made this 18th day of April, 2018 (the “Effective
Date”).

 

B E T W E E N:

 

KEYSTONE LABS INC., a corporation existing under the laws of the Province of
Alberta

(hereinafter called the “Corporation”)

 

OF THE FIRST PART

 

- and -

 

JODI MCDONALD, an individual resident in the City of Edmonton, in the Province
of Alberta

(hereinafter called “Jodi”)

 

OF THE SECOND PART

 

- and –

 

DARREN MCDONALD, an individual resident in the City of Edmonton, in the Province
of Alberta

(hereinafter called “Darren” and, together, with Jodi, the “Vendors”)

 

OF THE THIRD PART

 

- and -

 

EVIO CANADA INC., a corporation existing under the laws of the Federal laws of
Canada

(hereinafter called the “Purchaser”)

 

OF THE FOURTH PART

 

WHEREAS prior to the Pre-Closing Reorganization (as hereinafter defined), Jodi
owns 100 class A common voting shares in the capital of the Corporation (the
“Class A Shares”), Darren owns 100 class B common non-voting shares in the
capital of the Corporation (the “Class B Shares”), and Clare Rhyasen owns 2,500
Class D preferred non-voting shares in the capital of the Corporation (the
“Class D Shares”), which together constitute 100% of the issued and outstanding
shares in the capital of the Corporation, as more particularly set out in
Exhibit “A” attached hereto;

 

AND WHEREAS following completion of the Pre-Closing Reorganization, Jodi owns
100 Class A Shares and Darren owns 100 Class B Shares (collectively, the
“Corporation Shares”), which together constitute 100% of the issued and
outstanding shares in the capital of the Corporation, as more particularly set
out in Exhibit “A” attached hereto;

 

 - 1 -

  

 

AND WHEREAS Jodi wishes to sell to the Purchaser, and the Purchaser wishes to
purchase from Jodi, 45 Class A Shares, and Darren wishes to sell to the
Purchaser, and the Purchaser wishes to purchase from Darren, 45 Class B Shares,
in accordance with the terms of this Agreement (the “Sale Transaction”);

 

AND WHEREAS after giving effect to the Sale Transaction, the Pre-Closing
Reorganization and the Purchaser Subscription (as hereinafter defined), the
Purchaser will own 50% of the issued and outstanding shares in the capital of
the Corporation and the Vendors will collectively own 50% of the issued and
outstanding shares in the capital of the Corporation;

 

NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual
covenants herein contained, and other good and valuable consideration, receipt
whereof is by them acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE 1 INTERPRETATION

 

1.01 As used in this Agreement or any amendment or supplement hereof, the
following words and phrases have the following meanings, respectively:

 

“Accounts Receivable” means all accounts receivable, notes receivable and other
debts due or accruing due to the Corporation;

 

“Affiliate” has the meaning ascribed to that term in the Business Corporations
Act (Alberta), as amended;

 

“Agreement” means this Share Purchase Agreement among the parties hereto as the
same may be amended from time to time in accordance with the terms hereof;

 

“Ancillary Agreements” means, collectively, all agreements, certificates and
other instruments delivered or given pursuant to or in connection with this
Agreement and “Ancillary Agreement” has the corresponding meaning;

 

“ASPE” means accounting standards for private enterprises from time to time
approved by the Chartered Professional Accountants of Canada, or any successor
organization, applicable as of the date on which such calculation is made or
required to be made in accordance with such standards;

 

“Authorization” means, with respect to any Person, any authorization, order,
permit, approval, grant, licence, consent, right, franchise, privilege,
certificate, judgement, writ, injunction, award, determination, direction,
decree, variance, permission, to or from, or filings, notices, or recordings to
or with or by rule or regulation of any Governmental Authority having
jurisdiction over such Person;

 

“Benefit Plans” means all employee benefit plans relating to the employees of
the Corporation, including profit sharing, deferred compensation, stock option,
employee stock purchase, bonus, retirement, health or insurance plans (oral or
written) which are disclosed as benefit plans on the Disclosure Schedule;

 

“Business” means the business carried on by the Corporation as at the Effective
Date, consisting of analytical and microbiological testing services for
pharmaceutical, biotechnology, medical device, nutraceutical, medical cannabis
and related industries, but excludes production, processing and packaging
services;

 

 - 2 -

  

 

“Business Day” means any day other than a Saturday, Sunday or any other day on
which the banking institutions located in Toronto, Ontario or Edmonton, Alberta
are authorized or obliged by Law to close;

 

“Claim” means, in respect of any Person, any claim of any nature whatsoever
against such Person, including any demand, liability, obligation, debt, cause of
action, suit, proceeding, judgement, award, assessment or reassessment;

 

“Clare Loan” means the loan in the amount of $174,000 owing by the Corporation
to Clare Rhyasen;

 

“Clare Loan Note” means the promissory note bearing interest at a rate of 8% per
annum to be issued by the Corporation to Clare Rhyasen on the Closing Date in
respect of the Clare Loan, which promissory note will provide for the repayment
of the Clare Loan in five annual lump sum installments of $34,800;

 

“Closing Date” means May 1, 2018 or such other date that the parties may
mutually agree to in writing;

 

“Consents” means the consents of contracting parties to any Contract to the
transactions contemplated in this Agreement and the Ancillary Agreements (as
required pursuant to the terms of such Contract or in connection with the
Pre-Closing Reorganization), and “Consent” means any one of such Consents;

 

“Contracts” (individually, a “Contract”) means all written or oral outstanding
contracts and agreements (including quotations, orders and rebates), work in
progress, leases, third-party licences, insurance policies, deeds, indentures,
instruments, entitlements, commitments, undertakings and orders made by or to
which an entity is a party or by which an entity is bound or under which an
entity has, or will have, any rights or obligations;

 

“Corporation Financial Statements” means the financial statements of the
Corporation for the year ended July 31, 2017 together with the nine-month
interim period ended March 31, 2018, prepared in accordance with ASPE as
attached hereto in Schedule 1.01(a);

 

“Credit Agreement” means a credit agreement to be entered into among EVIO and
the Company providing for the borrowing by the Company from EVIO, from time to
time, of up to $1,000,000, substantially in the form attached as Exhibit “F” to
the Corporation;

 

“Disclosure Schedule” means the disclosure schedule attached hereto as Schedule
“A” providing full disclosure of all matters required to be disclosed by the
Vendors to the Purchaser under this Agreement with respect to each of the
Vendors, the Corporation and the Business;

 

“Doubtful Account” means an account that, based upon the ordinary course of the
Business consistent with past practices, is unlikely to be collectible;

 

“Employees” means all persons employed by the Corporation as set forth in
Schedule 4.29 attached hereto; “Employee” has a corresponding meaning;

 

“Environment” means the ambient air, all layers of the atmosphere, surface
water, underground water, all land, all living organisms and the interacting
natural systems that include components of air, land, water, organic and
inorganic matter and living organisms, and includes indoor spaces;

 

 - 3 -

  

 

“Environmental Laws” means means all Laws, and any policies or guidelines of any
Governmental Authorities, and any requirements or obligations arising under the
common law, relating to the Environment, the transportation of Hazardous
Substances, or occupational health and safety;

 

“EVIO” means EVIO, Inc., a corporation incorporated under the laws of the State
of Colorado;

 

“Governmental Authorities” or “Governmental Authority” means any government,
regulatory authority, governmental department, agency, commission, board,
tribunal, crown corporation, or court or other law, rule or regulation-making
entity having or purporting to have jurisdiction on behalf of any nation, or
province or state or other subdivision thereof or any municipality, district or
subdivision thereof;

 

“Hazardous Substances” means any substance or material which is flammable,
toxic, hazardous, or corrosive, or which might be detrimental to human, animal
or plant life or to the Environment, including any pollutant, contaminant, toxic
or hazardous waste, or any other substance the manufacture, use, storage,
removal, transfer, handling or ownership of which is regulated by Environmental
Laws;

 

“Interim Period” means the period from and including the date hereof to and
including the Closing Date; “Jodi Loan” means the shareholder loan in the amount
of $35,000 owing by the Corporation to Jodi;

 

“Laws” means all applicable laws, by-laws, rules, regulations, orders,
ordinances, protocols, codes, guidelines, policies, notices, directions and
judgements or other requirements of any Governmental Authorities;

 

“Leased Real Properties” means any immovable property, lands, buildings and
premises used in connection with the Business which are leased, subleased or
with respect to which a right to use or occupy has been granted to the
Corporation, a complete list of which is attached as Schedule 4.26;

 

“Leases” means the current lease for each of the Leased Real Properties;

 

“Letter of Intent” means the non-binding letter of intent between EVIO and the
Corporation dated February 20, 2018 setting forth the principal terms of the
transactions contemplated by this Agreement;

 

“Liens” means liens, charges, mortgages, pledges, security interests, Claims,
defects of title, restrictions and any other rights of third parties relating to
any property, including rights of set-off, and other encumbrances of any kind
and “Lien” means any of the foregoing;

 

“Material Contract” means:

 

 

(i)any Contract for the purchase of materials, supplies, goods, services,
equipment or other assets providing for annual payments by the Corporation in
excess of $50,000;

 

 

 

 

(ii)any sales, distribution or other similar agreement providing for the sale by
the Corporation of materials, supplies, goods, services, equipment or other
assets providing for annual payments by or to the Corporation in excess of
$50,000;

 

 

 

 

(iii)any Contract with respect to any capital expenditures in excess of $50,000
in the aggregate;

 

 - 4 -

  

 

 

(iv)any agreement for the borrowing of money, any currency exchange, interest
rate, commodities or other hedging arrangement or leasing transaction of the
type required to be capitalized in accordance with ASPE;

 

 

 

 

(v)any profit sharing, bonus, stock option, pension, retirement, disability,
stock purchase, medical, dental, hospitalization, insurance or similar plan or
agreement providing benefits to any current or former director, officer,
employee or consultant;

 

 

 

 

(vi)any Contract relating to indebtedness or the deferred purchase price of
property (whether incurred, assumed, guaranteed or secured by any asset);

 

 

 

 

(vii)any Contract for the sale of any assets, other than sales of inventory to
customers in the ordinary course of business;

 

 

 

 

(viii)any Contract that could prevent the Corporation from disposing of any of
its assets;

 

 

 

 

(ix)any Contract that could restrict the Business as currently conducted by the
Corporation on the date hereof;

 

 

 

 

(x)any agreement the termination of which would materially adversely affect the
Business;

 

 

 

 

(xi)any agreement which involves any commitment to or by the Corporation that
may reasonably extend beyond one year;

 

 

 

 

(xii)other than pursuant to the customary services agreements of the
Corporation, any agreement which involves any obligation or potential obligation
of the Corporation to indemnify any Person;

 

 

 

 

(xiii)any Contract with any Person with whom the Corporation does not deal at
arm’s length within the meaning of the Tax Act; or

 

 

 

 

(xiv)any other Contract or commitment not made in the ordinary course of
business that is material to the Corporation;

 

“Note” means the promissory note in the principal amount of $250,000 to be
issued by the Corporation pursuant to the Pre-Closing Reorganization;

 

“Permitted Liens” means (i) Liens for taxes, assessments or similar charges not
yet due and payable; (ii) Liens of mechanics, materialmen, warehousemen,
carriers, or other like Liens securing obligations incurred in the ordinary
course of business that are not yet due and payable; (iii) Liens that are not
material in amount and that do not adversely affect the use of the property
subject thereto; (iv) Liens that secure the payment of the purchase price of or
repayment of indebtedness for property acquired in the ordinary course of
business for which the sole recourse of the vendor or the lender is against such
property; (v) Liens in favour of the Purchaser; and (vi) those Liens described
in Schedule 1.01(b) attached hereto;

 

“Person” means any individual, sole proprietorship, partnership, unincorporated
association, unincorporated syndicate, unincorporated organization, trust, body
corporate, Governmental Authority, and a natural person in such person’s
capacity as trustee, executor, administrator or other legal representative;

 

 - 5 -

  

 

“Pre-Closing Reorganization” means the reorganization of the share capital of
the Corporation pursuant to which, immediately prior to the closing of the Sale
Transaction, the Corporation shall repurchase the 2,500 Class D Shares held by
Clare Rhyasen for cancellation in exchange for the Note, and Clare Rhyasen shall
cease to be a shareholder of the Corporation and shall resign as a director of
the Corporation;

 

“Pre-Closing Tax Period” means a taxation year or other fiscal period that ends
on or before the Closing Date;

 

“Purchased Shares” means 45 Class A Shares and 45 Class B Shares, together
representing 45% of the issued and outstanding shares in the capital of the
Corporation, as set out in Exhibit “A”;

 

“Purchaser’s Subscription” means the subscription by the Purchaser of 10 Class B
Shares and 10 Class A Shares for an aggregate purchase price of $460,000;

 

“Purchaser Subscription Agreement” means a duly executed subscription agreement
between the Purchaser and the Corporation in respect of the Purchaser’s
Subscription, substantially in the form attached hereto as Exhibit “G”;

 

“Related Party” means, for the purposes of this Agreement, (i) the Vendors, (ii)
any current or former officer, director, employee, associate or Affiliate of the
Corporation; (iii) any Person not dealing with the Corporation at arm’s length;
and (iv) any relative or any entity that is an associate or Affiliate of any of
the foregoing;

 

“Related Party Debt” means all indebtedness and payment obligations of any kind
(whether for money borrowed, guarantees, intercompany indebtedness, extension of
credit or otherwise) of the Corporation owing to or for the benefit of any
Related Party together with any related obligations including, without
limitation, the Jodi Loan and any Liens;

 

“Shareholder Loans” mean, collectively the Jodi Loan and the Clare Loan;

 

“Tax” and “Taxes” means all Canadian and foreign federal, provincial, state,
municipal, territorial or other taxes, imposts, levies, premiums, withholdings,
assessments and government fees, charges or dues of any kind whatsoever,
including, without limitation, all income, capital gains, sales, excise, use,
property, capital, goods and services, harmonized sales, business transfer and
value added taxes, and all customs and import duties, together with all
interest, fines and penalties with respect thereto;

 

“Tax Act” means the Income Tax Act (Canada), as amended;

 

“Tax Returns” means all reports, elections, declarations, information slips,
returns and other documents filed or required to be filed in respect of Taxes or
in respect of or pursuant to any Canadian or foreign federal, provincial, state,
municipal, territorial or other taxing statute;

 

“Vendors’ Subscription” means the subscription by the Vendors of an aggregate of
1,625,000 common shares in the capital of EVIO for an aggregate purchase price
of $1,950,000; and

 

“Vendor’s Subscription Agreement” means a duly executed subscription agreement
between each Vendor and EVIO in respect of the Vendors’ Subscription,
substantially in the form attached hereto as Exhibit “H”.

 

 - 6 -

  

 

1.02 The Exhibits and Schedules to this Agreement are incorporated herein by
this reference and are deemed to be a part hereof.

 

1.03 The division of this Agreement into articles and sections is for
convenience of reference only and shall not affect the interpretation or
construction of this Agreement.

 

1.04 Time shall be of the essence of this Agreement and of every part hereof and
no extension or variation of this Agreement shall operate as a waiver of this
provision.

 

1.05 This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the federal laws of Canada applicable
therein and dollar amounts referred to in this Agreement shall be in Canadian
funds.

 

1.06 All words and personal pronouns relating thereto shall be read and
construed as the number and gender of the party or parties referred to in each
case require.

 

1.07 This Agreement and the Ancillary Agreements and the terms hereof and
thereof shall constitute the entire agreement between the parties hereto with
respect to all of the matters herein and shall supersede any all prior
negotiations and understandings including, but not limited to, the Letter of
Intent. This Agreement shall not be amended, altered or qualified except by a
memorandum in writing signed by all of the parties hereto and any amendments,
alterations or qualifications hereof shall be null and void and shall not be
binding upon any party which has not given its consent as aforesaid.

 

1.08 If any provision of this Agreement shall be determined by an arbitrator or
any court of competent jurisdiction to be illegal, invalid or unenforceable,
that provision shall be severed from this Agreement and the remaining provisions
shall continue in full force and effect; provided that the severed provision is
not so material to impair the intent and purpose of this Agreement.

 

1.09 All accounting terms not specifically defined herein shall be construed in
accordance with ASPE and all determinations of an accounting nature in respect
of the Business required to be made herein shall be made in a manner consistent
with ASPE and on a basis consistent with the Corporation Financial Statements.

 

1.10 For the purpose of this Agreement: (A) an individual will be deemed to have
“knowledge” of a particular fact or other matter if: (i) such individual is
actually aware of such fact or other matter; or (ii) a reasonably prudent
individual could be expected to discover or otherwise become aware of such fact
or other matter in the course of conducting due investigation concerning the
existence of such fact or other matter; and (B) a corporation will be deemed to
have “knowledge” of a particular fact or other matter if any individual who is
serving as a director, officer or senior employee of such corporation has, or at
any time had, actual or constructive knowledge of such fact or other matter.

 

 - 7 -

  

 

1.11 The following are the Schedules to this Agreement:

 

Schedule “A”

-

Disclosure Schedule

Schedule 1.01(a)

-

Corporation Financial Statements

Schedule 1.01(b)

-

Permitted Liens

Schedule 4.10

-

Consents

Schedule 4.14

-

Absence of Unusual Transactions

Schedule 4.15

-

Non-Arm’s Length Transactions

Schedule 4.21

-

Inventory

Schedule 4.24

-

Intellectual Property

Schedule 4.26

 

Leased Real Property

Schedule 4.27

-

Material Contracts

Schedule 4.29

-

Employee and Independent Contractor Matters

Schedule 4.32

-

Insurance

Schedule 4.36

-

Indebtedness

Schedule 4.37

 

Hazardous Substances

 

1.12 The following are Exhibits to this Agreement:

 

Exhibit A

-

 

Issued and Outstanding Shares of the Corporation and Allocation of Purchase
Price

Exhibit B

-

 

Form of Release and Indemnity

Exhibit C

-

 

Form of Shareholders’ Agreement

Exhibit D

-

 

Form of Employment Agreement

Exhibit E

-

 

Form of Non-Competition Agreement

Exhibit F

-

 

Form of Credit Agreement

Exhibit G

-

 

Form of Purchaser Subscription Agreement

Exhibit H

-

 

Form of Vendor’s Subscription Agreement

 

ARTICLE 2 PURCHASE AND SALE

 

2.01 Subject to the terms and conditions hereof, the Vendors hereby agree to
sell, assign and transfer to the Purchaser and the Purchaser hereby agrees to
purchase from the Vendors the Purchased Shares.

 

ARTICLE 3 PURCHASE PRICE

 

3.01 The aggregate purchase price for the Purchased Shares shall be the amount
of $2,035,000 as allocated in Exhibit “A” (the “Purchase Price”).

 

3.02 The Purchase Price shall be payable by or on behalf of the Purchaser by
delivery to the Vendors (or as they may otherwise direct) by the Purchaser of
one or more certified cheques, bank drafts or wire transfers in the aggregate
amount of $2,035,000 (the “Closing Date Cash Payment”) as allocated between the
Vendors as set out in Exhibit “A”;

 

3.03 On the Closing Date, against delivery by the Vendors of certificates
evidencing the Purchased Shares duly endorsed for transfer and/or accompanied by
instruments of transfer in the manner contemplated by this Agreement, and upon
satisfaction of all other terms and conditions to be satisfied by the Vendors
hereunder, the Purchaser shall make the payment set out in Section 3.01.

 

 - 8 -

  

 

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION

 

The Vendors, jointly and severally, represent and warrant to the Purchaser that
all of the statements set out in this Article 4 are true, correct and complete
as of the date hereof and will be true, correct and complete as of the Closing
Date and acknowledge that the Purchaser is relying on such representations and
warranties in entering into this Agreement and the Ancillary Agreements to which
it is a party and completing the transactions contemplated herein.

 

4.01 Organization and Authority. The execution and delivery of this Agreement by
the Corporation and each Ancillary Agreement to which the Corporation is a
party, the performance by the Corporation of its obligations hereunder and
thereunder and the consummation by the Corporation of the transactions
contemplated herein and therein have been duly and validly authorized by all
necessary corporate or other action on the part of the Corporation and no other
corporate or other proceeding on the part of the Corporation is necessary to
authorize this Agreement or the Ancillary Agreements to which the Corporation is
a party or the performance by the Corporation of its obligations hereunder or
thereunder or to consummate the transactions contemplated herein or therein.
This Agreement and each of the Ancillary Agreements to which the Corporation is
a party have been duly and validly executed and delivered by the Corporation,
and (assuming due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement and each Ancillary Agreement to which the
Corporation is a party constitutes a legal, valid and binding obligation of the
Corporation enforceable against the Corporation in accordance with its terms,
subject only to any limitation under applicable Laws relating to: (i)
bankruptcy, winding-up, insolvency, arrangement, fraudulent preference and
conveyance, assignment and preference and other similar laws of general
application affecting creditors’ rights, and (ii) the discretion that a court
may exercise in the granting of equitable remedies such as specific performance
and injunction.

 

4.02 No Conflict. The execution and delivery by the Corporation of this
Agreement and each Ancillary Agreement to which it is a party and the
performance by the Corporation of its obligations hereunder and thereunder and
the completion of the transactions contemplated by this Agreement and the
Ancillary Agreements do not and will not:

 

 

(i)result in a violation of, default under or breach of, require any consent to
be obtained under or give rise to any termination rights by a third party,
payment obligation by the Corporation, or rights of a third party the exercise
of which would result in breach or default under any provision of: (A) the
Corporation’s certificate of incorporation, constating documents, by-laws or
other charter documents, including any shareholders’ agreement or any other
agreement or understanding with any Person; (B) any Laws; or (C) any Contract or
other instruments to which the Corporation is a party or pursuant to which any
of its assets or property may be affected;

 

 

 

 

(ii)give rise to any right of termination or acceleration of indebtedness of the
Corporation, or cause any third party indebtedness of the Corporation to come
due before its stated maturity or cause any available credit to cease to be
available;

 

 

 

 

(iii)result in the breach of, or cause the termination or revocation of, any
Authorization held by the Corporation necessary for the conduct of the Business
conducted by the Corporation;

 

 

 

 

(iv)result in the imposition of any Liens upon any of the assets of the
Corporation or restrict, hinder, impair or limit the ability of the Corporation
to carry on the Business as and where it is now being carried on or as and where
it may be carried on in the future; or

 

 

 

 

(v)result in any payment (including severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any shareholder, director,
officer or employee of the Corporation, or increase any benefits otherwise
payable under any Benefit Plan or result in the acceleration of time of payment
or vesting of any such benefits.

 

 - 9 -

  

 

4.03 Restrictive Documents. As at the Effective Date, the Corporation is not
subject to, or a party to, any charter or by-law restriction, Law, Claim,
shareholders agreement, voting trust, contract, instrument, indenture, mortgage,
lease, agreement, obligation, statute, regulation, order, judgment, decree,
licence, or permit which would be violated, contravened, breached by, or under
which default would occur, or any Lien or any other restriction of any kind or
character which would prevent the consummation of the transactions contemplated
by this Agreement or compliance with the terms, conditions and provisions of
this Agreement or the continued operation of the Business after the date hereof
on substantially the same basis as heretofore operated, or which would restrict
the ability of the Purchaser to acquire any of the Purchased Shares. As at the
Effective Date, there are no shareholders agreements, voting trust agreements,
share pledge agreements or any similar agreements in effect in respect of the
Corporation.

 

4.04 Title to Securities. The Corporation Shares will, on the Closing Date,
constitute, collectively, all of the outstanding securities of the Corporation
and will be owned by the Vendors with good, valid and marketable title thereto,
free and clear of all Liens.

 

4.05 Incorporation and Registration. The Corporation is a corporation duly
incorporated and validly existing under the laws of its jurisdiction of
incorporation and has all necessary corporate power, authority and capacity to
own its property and assets and to carry on its business as presently conducted.
Neither the nature of the Corporation’s business nor the character of the
property owned or leased by the Corporation requires it to be registered,
licensed or otherwise qualified as extra-provincial or foreign corporations in
any jurisdiction other than in the Province of Alberta where it is duly
registered, licensed or otherwise qualified for such purpose.

 

4.06 Authorized and Issued Capital. The authorized capital of the Corporation
consists of an unlimited number of special shares, an unlimited number of Class
A Shares, an unlimited number of Class B Shares, an unlimited number of Class C
common non-voting shares and an unlimited number of Class D Shares. The issued
and outstanding capital of the Corporation will, as of the Closing Date, consist
solely of those shares as set forth in subsection (B) of Exhibit “A” attached
hereto. All of the Corporation Shares have been duly issued and are outstanding
as fully paid and non-assessable shares in the capital of the Corporation, and
the holders thereof are the sole registered and beneficial holders of the
Corporation Shares in their respective share ownership as set forth in
subsection (B) of Exhibit “A” attached hereto. Other than as contemplated
herein, no Person has any right to require the Corporation to issue any shares
in its share capital or any security convertible into or exercisable or
exchangeable for shares in its share. Other than as contemplated in the
shareholders agreement set forth in Exhibit “C” attached hereto, no Person has
or will have any option, warrant, right, call, commitment, conversion right,
right of exchange or other agreement or any right, privilege or entitlement
(whether by law, pre-emptive or contractual) capable of becoming an option,
warrant, right, call, commitment, conversion right, right of exchange or other
agreement for (i) the purchase from the holders of any Corporation Shares or the
Corporation of any shares in its capital, or for the purchase, subscription,
allotment or issuance of any unissued securities in the capital of the
Corporation or (ii) the purchase or other acquisition from the Corporation of
any of its undertaking, property or assets. Other than the Vendors, no Person
has any right to participate in the proceeds from the sale of the Purchased
Shares.

 

 - 10 -

  

 

4.07 Title to the Assets. The Corporation is the sole beneficial and (where its
interests are registrable) the sole registered owner of all of its assets and
interests in assets, real and personal, with good and valid title, free and
clear of all Liens, other than the Permitted Liens as set forth in Schedule
1.01(b). In particular, without limiting the generality of the foregoing, there
has been no assignment, subletting or granting of any licence (of occupation or
otherwise) of or in respect of the Corporation’s assets or any granting of any
agreement or right capable of becoming an agreement or option for the purchase
of any of such assets other than pursuant to the provisions of, or as disclosed
in, this Agreement. The Corporation owns, leases or has the legal right to use
all of its properties and assets, including the Material Contracts, used or
currently intended to be used by the Corporation in the conduct of its Business,
and such properties, assets and rights constitute all the properties, assets and
rights as are necessary to conduct the Business as conducted, or currently
intended to be conducted, by the Corporation. The Business is the only business
operation carried on by the Corporation. The properties and assets of the
Corporation have been maintained in accordance with good business practice are
in good condition, repair and (where applicable) proper working order, having
regard to their use and age, and such assets have been properly and regularly
maintained. All of the assets of the Corporation are insured against loss or
damage by all usual insurable hazards and risks for the full insurable value
thereof and such insurance coverage will be continued in full force and effect
to and including the Closing Date.

 

4.08 Subsidiaries. The Corporation does not own, or have any interest in, any
securities of any other Person nor is the Corporation a party to any agreements
of any nature to acquire any securities of any other Person or to acquire or
lease any other business operations not forming part of the Business.

 

4.09 Regulatory Approvals. No Authorization is required on the part of the
Corporation in connection with the execution, delivery and performance of this
Agreement or any Ancillary Agreement to which it is a party or the performance
of the Corporation’s obligations under this Agreement or any Ancillary Agreement
to which it is a party and there is no requirement for the Corporation to make
any filing with or give any notice to any Governmental Authority as a condition
to the lawful completion of the transactions contemplated by this Agreement and
the Ancillary Agreements.

 

4.10 Consents. Other than as set forth in Schedule 4.10, there is no requirement
to obtain any Consent, approval or waiver of any party under any Contract to
which the Corporation is a party to complete any of the transactions
contemplated by this Agreement and the Ancillary Agreements or the Pre-Closing
Reorganization including, without limitation, in respect of the change of
control of the Corporation.

 

4.11 Financial Statements. The Corporation Financial Statements, a copy of which
is attached hereto in Schedule 1.01(a):

 

 

(i)have been prepared in accordance with ASPE on a basis consistent with those
of previous fiscal years;

 

 

 

 

(ii)present fully, fairly and correctly the assets, liabilities (whether
accrued, absolute, contingent or otherwise) and financial condition of the
Corporation;

 

 

 

 

(iii)are in accordance with the books and records of the Corporation;

 

 

 

 

(iv)contain and reflect all necessary adjustments for a fair presentation of the
results of operations and the financial condition for the periods covered
thereby; and

 

 

 

 

(v)in regards to the Contracts, commitments and otherwise of the Corporation,
contain and reflect adequate provision or allowance for all reasonably
anticipated liabilities, expenses and losses.

 

 - 11 -

  

 

4.12 Absence of Undisclosed Liabilities. Other than the Note, since March 31,
2018, the Corporation has not incurred any liabilities or obligations (whether
accrued, absolute, contingent or otherwise), which continue to be outstanding,
except which have been incurred in the ordinary course of business consistent
with past practice or which are not individually or in the aggregate materially
adverse to the Business, or the results of operations, assets, financial
condition or manner of conducting business.

 

4.13 Absence of Changes. Since March 31, 2018, there has not been:

 

 

(i)any material change in the financial condition, operations or prospects of
the Corporation other than changes in the ordinary course of business, none of
which individually or in the aggregate have been materially adverse to the
Business, or the results of operations, assets, financial condition or manner of
conducting business;

 

 

 

 

(ii)any damage, destruction, loss, labour trouble or other event, development or
condition of any character (whether or not covered by insurance) which
materially and adversely affects the Business, or the results of operations,
assets, financial condition or manner of conducting business; or

 

 

 

 

(iii)any material change in the level of Inventories.

 

4.14 Absence of Unusual Transactions. Since March 31, 2018, and other than the
transactions contemplated by the Pre-Closing Reorganization, the Corporation has
not:

 

 

(i)transferred, assigned, sold or otherwise disposed of any of the assets shown
or reflected in the Corporation Financial Statements or cancelled any debts or
entitlements except, in each case, in the ordinary and usual course of business;

 

 

 

 

(ii)made any capital expenditure or any commitment to do so individually or in
the aggregate in excess of $25,000, except those capital expenditures or
commitments made in the ordinary course of business;

 

 

 

 

(iii)other than the Note, incurred or assumed any obligation or liability
(whether accrued, absolute, contingent or otherwise) or incurred any
indebtedness for borrowed money, except unsecured current obligations and
liabilities incurred in the ordinary and usual course of business consistent
with past practice none of which individually or in the aggregate have been
materially adverse to the Business, or the results of operations, assets,
financial condition or manner of conducting business;

 

 

 

 

(iv)made any loan or advance, or assumed, guaranteed or otherwise become liable
with respect to the liabilities or obligations of any Person;

 

 

 

 

(v)discharged any secured or unsecured liability or obligation of any Person
owed to the Corporation (whether accrued, absolute, contingent or otherwise);

 

 - 12 -

  

 

 

(vi)paid any obligation or liability (whether accrued, absolute, contingent or
otherwise) other than liabilities included in the Corporation Financial
Statements and liabilities incurred since the date of the Corporation Financial
Statements in the ordinary and usual course of business and set forth in
Schedule 4.14(vi);

 

 

 

 

(vii)suffered an operating loss or any extraordinary loss, waived or omitted to
take any action in respect of any rights of substantial value, or entered into
any commitment or transaction not in the ordinary and usual course of business
where such loss, rights, commitment or transaction is or would be material in
relation to the Corporation;

 

 

 

 

(viii)granted any bonuses, whether monetary or otherwise, or made any general
wage or salary increases in respect of any Employee other than in the ordinary
course of business or materially changed the terms of employment for any
Employee;

 

 

 

 

(ix)made any bonus or profit sharing distribution or similar payment of any kind
or directly or indirectly, declared or paid any dividends or declared or made
any other payments or distributions on or in respect of any of its shares and
has not directly or indirectly, purchased or otherwise acquired any of its
shares;

 

 

 

 

(x)increased the benefits to which Employees are entitled under any Benefit Plan
or created any new Benefit Plan for any Employee;

 

 

 

 

(xi)hired or dismissed any key Employees;

 

 

 

 

(xii)suffered any shortage or any cessation or interruption of Inventory
shipments, supplies or ordinary services;

 

 

 

 

(xiii)cancelled or waived any Claims or rights other than in the ordinary course
of business;

 

 

 

 

(xiv)compromised or settled any litigation, proceeding or other governmental
action relating to the Corporation, its assets or the Business;

 

 

 

 

(xv)cancelled or reduced any of its insurance coverage;

 

 

 

 

(xvi)made any change in any method of accounting practice;

 

 

 

 

(xvii)written off any Account Receivable;

 

 

 

 

(xviii)mortgaged, pledged, subjected to lien, granted a security interest in or
otherwise encumbered any of its assets or property, whether tangible or
intangible; or

 

 

 

 

(xix)authorized, agreed or otherwise become committed to do any of the
foregoing.

 

4.15 Non-Arm’s Length Transactions. Other than the Note and the Shareholders
Loans, the Corporation does not have any Related Party Debt or any liability,
obligation or commitment, actual or contingent, in respect of any Related Party
Debt to be repaid, forgiven or otherwise extinguished.

 

 - 13 -

  

 

4.16 Accounts Receivable. All Accounts Receivable are bona fide and good and,
subject to any allowance for Doubtful Accounts that have been reflected in the
books and records and determined in accordance with ASPE, collectible without
set-off or counterclaim. All Accounts Receivable that have been collected since
July 31, 2017 have been collected in the ordinary course of business consistent
with past practice.

 

4.17 Tax Matters.

 

(a) The Corporation is not a non-resident of Canada for the purposes of the Tax
Act.

 

(b) The Corporation has charged, collected and remitted on a timely basis all
Taxes as required under Law on any sale, supply or delivery whatsoever, made by
it. The Corporation has not received a refund to which it is not entitled.

 

(c) All input tax credits or refunds claimed by the Corporation pursuant to the
Excise Tax Act (Canada) and any comparable Law of any province or territory in
Canada, have been proper, correctly calculated and documented as required by
Law.

 

(d) The Corporation has paid all Taxes which are due and payable within the time
required by Law, and has paid all assessments and reassessments it has received
in respect of Taxes. Adequate provision has been made in the Corporation
Financial Statements for all Taxes for the periods covered by such Corporation
Financial Statements. Since the date of such Corporation Financial Statements,
the Corporation has no liability for Taxes other than those arising in the
ordinary course of business. The Corporation has withheld and collected all
amounts required by Law to be withheld or collected by it on account of Taxes
and has remitted all such amounts to the appropriate Governmental Authority
within the time prescribed under any Law.

 

(e) The Corporation has filed or caused to be filed with the appropriate
Governmental Authority, within the times and in the manner prescribed by Law,
all Tax Returns which are required to be filed by or with respect to it. The
information contained in such Tax Returns is correct and complete and such Tax
Returns reflect accurately all liability for Taxes of the Corporation for the
periods covered thereby.

 

(f) There are no outstanding agreements, arrangements, waivers or objections
extending the statutory period or providing for an extension of time with
respect to the assessment or reassessment of Taxes or the filing of any Tax
Return, by or any payment of Taxes, by the Corporation.

 

(g) There are no written claims, actions suits, audits, proceedings,
investigations or other actions pending or threatened against the Corporation in
respect of Taxes, and, to the knowledge the Vendors, there is no reason to
expect that any such claim, action, suit, audit, proceeding, investigation or
other action may be asserted against the Corporation by any Governmental
Authority. The Corporation is not negotiating any final or draft assessment or
reassessment in respect of Taxes with any Governmental Authority and the
Corporation has not received any written indication from any Governmental
Authority that an assessment or reassessment is proposed or may be proposed in
respect of any Taxes for any period ending on or prior to the Closing Date.

 

(h) No claim has ever been made by a Governmental Authority in respect of Taxes
in a jurisdiction where the Corporation does not file Tax Returns that the
Corporation is or may be subject to Tax by that jurisdiction.

 

 - 14 -

  

 

(i) The Corporation is not bound by any tax sharing agreement, tax indemnity
obligation in favour of any Person or similar agreement in favour of any Person
with respect to Taxes (including any advance pricing agreement or similar
agreement relating to Taxes with any Governmental Authority).

 

(j) There are no circumstances which could result in the application to the
Corporation 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.

 

(k) The Corporation has not acquired property from a Person not dealing at arm’s
length (for purposes of the Tax Act) with it in circumstances that would result
in the Corporation becoming liable to pay Taxes of such Person under subsection
160(1) of the Tax Act or any analogous provision of any comparable Law of any
province or territory of Canada.

 

(l) The Corporation has not acquired property or services from, or disposed of
property or services to, a person with which it does not deal at arm’s length
(within the meaning of the Tax Act) for an amount that is other than the fair
market value of such property or services. The Corporation has complied with all
applicable transfer pricing provisions under Law including any requirements to
have obtained contemporaneous documentation.

 

(m) The Corporation has not made an “excessive eligible dividend designation” as
defined in subsection 89(1) of the Tax Act in respect of any dividend paid, or
deemed by any provision of the Tax Act to have been paid on any class of shares
of its capital.

 

(n) The Corporation has not made or filed any election under section 83 or
section 85 of the Tax Act or any equivalent provincial provision. The
Corporation shall not file any such election before the Closing Date.

 

(o) The Corporation is a Canadian-controlled private corporation (as defined in
the Tax Act) and has been one since its formation.

 

(p) The Corporation is properly registered and licensed for the purposes of
paying, collecting or remitting all applicable Taxes under the appropriate tax
legislation relating to its Business.

 

4.18 No Joint Venture Interests, etc. The Corporation is not a partner,
beneficiary, trustee, co-tenant, joint venturer or otherwise a participant in
any partnership, trust, joint venture, co-tenancy or other similar jointly owned
business undertaking and the Corporation does not have any other investment
interest in any business owned or controlled by any third party.

 

4.19 Absence of Guarantees. The Corporation has not given or agreed to give, nor
is it party to or bound by any guarantee or indemnity in respect of indebtedness
or other obligations, of any Person, or any other commitment by which the
Corporation is, or is contingently, responsible for such indebtedness or other
obligations.

 

4.20 Location of the Assets. All of the assets of the Corporation are located at
the Leased Real Properties.

 

4.21 Inventory. All Inventory is unexpired and in good and merchantable
condition. Schedule 4.21 sets forth a list of all Inventory.

 

 - 15 -

  

 

4.22 Legal Matters.

 

(a) Litigation. There is no court, administrative, regulatory or similar
proceeding; arbitration or other dispute settlement procedure; investigation or
inquiry by any Governmental Authority; or any similar matter or proceeding
(collectively, the “Proceedings”) against or involving the Corporation (whether
in progress or, to the knowledge of the Vendors, threatened). No event has
occurred which might give rise to any Proceedings and there is no judgment,
decree, injunction, rule, award or order of any court, government department,
board, commission, agency, arbitrator or similar body outstanding against the
Corporation. No complaint, grievance, Claim or investigation has been filed,
made or commenced against the Corporation. The Corporation is not the plaintiff
or complainant in any Proceeding. There are no Proceedings pending or, to the
knowledge of the Vendors, threatened against or affecting or involving the
Vendors that may prohibit, restrict or delay the completion by either of the
Vendors of the transactions contemplated by this Agreement. There is no
settlement agreement, judgment, injunction, order or decree binding upon the
Corporation which has or would have the effect of prohibiting or materially
impairing any current business practice of the Corporation, any acquisition of
property by the Corporation or the overall conduct of the Business as currently
conducted by the Corporation. The Corporation has not entered into any agreement
under which the Corporation is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any market or market segment.

 

(b) Compliance with Laws. There is no outstanding or, to the best of the
knowledge of the Vendors, threatened, order, writ, injunction, or decree of any
court, Governmental Authority, or arbitration tribunal against the Corporation
affecting, involving, or relating to the Business or the properties and assets
of the Corporation. The Corporation is not in violation of any applicable Law
affecting, involving, or relating to the Business or its properties and assets
except where non-compliance has no material adverse effect upon the financial
condition, operation, or prospects of the Business and the Corporation has not
received any notices of any allegation of any such violation.

 

(c) Adequacy of Authorizations. To its knowledge the Corporation owns, holds,
possesses or lawfully uses in the operation of its Business all Authorizations
that are required for the conduct of its Business as presently conducted or
currently intended to be conducted or for the ownership and use of the
Corporation’s properties and assets in compliance, in all material respects,
with all Laws applicable thereto. The Corporation is in compliance with all
terms and conditions of any such required Authorizations. All of the
Authorizations are valid, subsisting and in good standing and in full force and
effect, and to the knowledge of the Vendors, no suspension or cancellation of
any of them is being threatened, nor will any of the Authorizations be affected
by the consummation of the transactions described in this Agreement. The
Corporation is in compliance with all other applicable material limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations
contained in those Laws or contained in any Law, regulation, code, plan, order,
decree, judgment, issued, entered, promulgated, or approved thereunder relating
to or affecting the Business.

 

4.23 Restrictive Covenants. The Corporation is not a party to, or bound or
affected by any, commitment, agreement or document containing any covenant
expressly limiting the freedom of the Corporation to compete in any line of
business, transfer or move any of its assets or operations or which materially
or adversely affects the business practices, operations or conditions of the
Corporation or the continued operation of the Business after the Closing Date on
substantially the same basis as its business is presently carried on.

 

 - 16 -

  

 

4.24 Intellectual Property. Schedule 4.24 sets forth a true and complete list of
all: (i) patents, patent applications, copyrights, registered and unregistered
trade-marks, trade-mark applications, trade-names, logos, commercial symbols,
inventions, licences, trade secrets, patterns, drawings, computer software,
formulae, technical information, research data, concepts, methods, procedures,
designs, know-how, and all other intellectual property owned by, licensed to or
used by the Corporation (collectively, the “Intellectual Property”); and (ii)
material licenses with respect to the Intellectual Property (“Licenses”). The
Intellectual Property set forth in Schedule 4.24 comprises all intellectual
property required for the proper carrying on of the Business. The Corporation
has delivered or made available to the Purchaser, prior to the date of this
Agreement, correct and complete copies of all of the Licenses. The Intellectual
Property which is not owned by the Corporation is being used by the Corporation
only with the consent of or license from the rightful owner thereof and all such
licenses are in full force and effect. The Intellectual Property owned by the
Corporation is in full force and effect and has not been used or enforced or
failed to be used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of the Intellectual Property. The
Corporation is not party to any contract or commitment to pay any royalty,
license or other fee with respect to the use of Intellectual Property. To the
knowledge of the Vendors: (i) the conduct of the Business does not involve any
infringement, misuse or misappropriation of any intellectual property rights of
third parties; (ii) no infringement, misuse or misappropriation of the
Intellectual Property owned by the Corporation has occurred; and (iii) there are
no known material problems or defects in any software used in connection with
the Business.

 

4.25 Real Property. The Corporation is not the owner of any real property nor
has it ever owned any real property, nor has it entered into any agreement to
acquire real property.

 

4.26 Real Property Lease. The Leased Real Properties as set forth in Schedule
4.26 attached hereto constitute all of the real and immovable property interests
held for use, or used, by the Corporations. Each of the Leases is in good
standing, creates a good and valid leasehold estate in the Leased Real
Properties thereby demised and is in full force and effect as of the Closing
Date. None of the Leases violate, contravene or breach, and each Lease is used
in compliance with, any and all Laws and all permits applicable thereto. Save
and except as disclosed in Schedule 4.26, there are no written or oral
agreements, leases, undertakings, subleases, licenses, concessions, occupancy
agreements or other Contracts granting to any other Person the right of use or
occupancy of any of the Leased Real Properties (or any portion thereof), and
there is no other Person in possession of all or any portion of the Leased Real
Properties. Complete and accurate copies of the Leases, including all
amendments, modifications, notices or memoranda of lease, all estoppel
certificates or subordinations, non-disturbance and attornment agreements and
other documents related thereto, as of the date hereof, have been delivered to
the Purchaser. All rental and other payments required to be paid or made by the
Corporation pursuant to the Leases have been duly paid or made to date, and the
Corporation is not in default in meeting its obligations under any of the
Leases. There exists no event of default or event, occurrence, condition or act
(including the transactions contemplated by this Agreement) which, with the
giving of notice, the lapse of time or the happening of any other event or
condition, would become a default under any Lease. None of the lessors under any
of the Leases is in default in meeting any of its obligations under any of the
Leases.

 

4.27 Material Contracts. Schedule 4.27 sets forth a list of the Material
Contracts. Complete and accurate copies of the Material Contracts have been
delivered to the Purchaser, and:

 

 

(i)none of the Material Contracts contains any covenant: (A) expressly limiting
the freedom of the Corporation to compete in any line of business, or transfer
or move any of its assets; or (B) which affects the business practices,
operations or financial condition of the Corporation or the continued operation
of the Corporation on or after the Closing Date as currently conducted;

 

 - 17 -

  

 

 

(ii)the transactions contemplated by this Agreement will not result in any
change to any material terms of the Material Contracts;

 

 

 

 

(iii)each Material Contract is a legal, valid and binding obligation of the
Corporation, enforceable by or against the Corporation in accordance with its
terms, and is in full force and effect, and will be in full force and effect on
identical terms immediately following the Closing Date, subject, however, to
such limitations with respect to enforcement as are generally imposed by Law on
creditors, in particular in connection with bankruptcy or similar proceedings,
and to the extent that equitable remedies such as specific performance and
injunction are in the discretion of the competent court;

 

 

 

 

(iv)there are no exclusivity provisions or similar such provisions in any
Material Contract or other Contract with any Person that the Corporation has
provided, is or will be providing, or is required to provide, any products or
services to;

 

 

 

 

(v)there are no “most favoured nations” or similar such favourable pricing or
commercial terms in any Material Contract or other Contract with any Person that
the Corporation has provided, is or will be providing, or is required to
provide, any products or services to;

 

 

 

 

(vi)neither the Vendors nor the Corporation have entered into any agreements,
contracts, covenants or other arrangements with any Person to provide for
subsidies, discount purchase privileges or any other similar arrangements; and

 

 

 

 

(vii)in all material respects, all obligations of the Corporation under each of
the Material Contracts have been performed, and there are no defaults, events of
default or violations (or which with or without notice, lapse of time or both,
could reasonably be expected to, individually or in the aggregate, result in a
default, event of default or violation) under any such Material Contract on the
part of the Corporation or, to the knowledge of the Vendors, on the part of the
other party (or parties) to such Material Contract. Neither the Corporation nor,
to the knowledge of the Vendors, any other party (or parties) to any Material
Contract has repudiated any such Material Contract.

 

4.28 Other Contracts. With respect to any Contracts that are not Material
Contracts, the Corporation has not violated or breached any of the terms or
conditions of any such Contract and, to the knowledge of the Vendors, all of the
covenants to be performed by any other party to such Contracts have been fully
performed, except where such violation or breach or failure to fully perform any
such covenant could not reasonably be expected to have a material adverse effect
on the business practices, operations or financial condition of the Corporation
or the continued operation of the Corporation and its Affiliates on or after the
Closing Date as currently conducted.

 

4.29 Employee and Independent Contractor Matters. Schedule 4.29 sets forth a
list of all Employees and independent contractors of the Corporation, together
with the titles and material terms of employment or engagement, as applicable,
including, wages, bonuses paid or payable (whether monetary or otherwise),
benefits and the date upon which each such Employee or independent contractor
was first hired or engaged, as applicable, by the Corporation. Save and except
for the Employees, the Corporation has no other employees. Save and except as
provided in Schedule 4.29, there exists no written or oral service, bonus,
benefit, pension, profit sharing, medical benefits, group insurance, disability,
commission, retirement, consulting or accumulated time off plans or arrangements
with respect to any Employees. For greater clarity:

 

 - 18 -

  

 

 

(i)no Employee is on long-term disability leave, maternity leave, extended
absence or receiving workers’ compensation. Other than as set forth in Schedule
4.29, there are no written contracts of employment entered into with any of the
Employees;

 

 

 

 

(ii)the Corporation is in compliance with all Laws respecting employment and
employment practices, terms and conditions of employment, pay equity and wages
and hours and has not and is not engaged in any unfair labour practice;

 

 

 

 

(iii)no unfair labour practice, complaint or grievance against the Corporation
is pending or threatened before any labour relations board or similar
Governmental Authority with respect to the Business;

 

 

 

 

(iv)all vacation pay, bonuses, commissions and other benefit payments due to
current and former employees of the Corporation have been accrued in the
ordinary course of business consistent with past practice;

 

 

 

 

(v)all required employer and employee contributions and premiums under the
Benefit Plans have been made or accrued, the respective fund or funds
established under the Benefit Plans are funded in accordance with applicable
Laws, and no past service funding liabilities exist thereunder, except as
disclosed in the Corporation Financial Statements;

 

 

 

 

(vi)there are no charges, ongoing investigations, administrative proceedings, or
formal complaints of discrimination (including discrimination based upon sex,
age, marital status, race, national origin, sexual preference, handicap, or
veteran status) pending or, to the knowledge of the Vendors, threatened before
any Governmental Authority pertaining to the Corporation or the Employees;

 

 

 

 

(vii)no Employee has any agreement as to length of notice or severance payment
required to terminate his or her employment (including any notice or severance
payment that would arise as a result of the completion of the transactions
contemplated by this Agreement), other than such results by Law from the
employment of an Employee as to notice or severance;

 

 

 

 

(viii)any Person now or heretofore engaged by the Corporation as a consultant or
independent contractor, rather than an employee, has been properly classified as
such, and, to the knowledge of the Vendors, is not entitled to any compensation
or benefits to which employees are or were at the relevant time entitled, were
and have been engaged in accordance with all applicable Laws, and has been
treated accordingly and appropriately for all Tax purposes. No consultant or
independent contractor is in violation of any agreement between such consultant
or independent contractor and the Corporation, or of any policy or procedure
applicable of the Corporation to consultants or independent contractors, and
each consultant and independent contractor operates and has operated in material
compliance with the requirements of applicable Law;

 

 

 

 

(ix)the Corporation has no obligation or liability (whether accrued, absolute,
contingent or otherwise), including under any Benefit Plan, arising out of the
classification or treatment of any service provider as a consultant or
independent contractor and not as an employee; and

 

 

 

 

(x)

complete and accurate copies of all Contracts between the Corporation and any
independent contractor or consultant have been delivered to the Purchaser as of
the Closing Date.

 

 - 19 -

  

 

4.30 Collective Agreements. The Corporation has not made any agreements with any
labour union or employee association relating to the Business or made
commitments to or conducted negotiations with any labour union or employee
association with respect to any future agreements relating to the Business and
neither Vendor is aware of any current attempts to organize or establish any
labour union or employee association relating to the Business. There is not now
pending nor threatened any labour dispute, strike or work stoppage which affects
or which may affect the Business. There is not now pending nor threatened any
Claim, charge, grievance or complaint against the Corporation in connection with
the Business by any Employee or former employee. Neither the Corporation nor any
union is party to any claims or proceedings under applicable labour legislation
in connection with the Business. No trade union, council of trade unions,
employee bargaining agency or affiliated bargaining agent holds bargaining
rights with respect to any Employees and to the knowledge of the Vendors there
are no threatened or pending union organizing activities involving any Employee.

 

4.31 Benefit Plans. Each of the Benefit Plans has been established, maintained,
funded, invested and administered in compliance in all material respects with
its terms and with applicable Laws. All required contributions and/or premiums
to be made under the Benefit Plans have been fully paid to the date hereof in a
timely fashion in accordance with the terms of the Benefit Plans and applicable
Laws, and no Taxes, penalties or fees are owing or eligible under any Benefit
Plan, and there are no liabilities or contingent liabilities in respect of any
pension, benefit or compensation plan that has been discontinued. The Vendors
have provided the Purchaser with true, correct and complete copies of the
Benefit Plans and all relevant documentation related thereto. No Benefit Plan is
subject to any pending investigation, examination or other proceeding, action or
Claim initiated by any Governmental Authority, or by any other party (other than
routine Claims for benefits). No insurance policy or any other agreement
affecting any Benefit Plan requires or permits a retroactive increase in
contributions, premiums or other payments due thereunder. None of the Benefit
Plans provide benefits to retired employees or to the beneficiaries or
dependents of retired employees. The Corporation has never maintained, sponsored
or contributed to a defined benefit pension plan for the benefit of the
Employees or former employees. No Benefit Plan exists that could result in (i)
the payment to any Employee of any money, benefits or other property; (ii)
accelerated or increased funding requirements for any Benefit Plan; or (iii) the
acceleration or provision of any other increase rights or benefits to any
Employee, as a result of the transactions contemplated by this Agreement.

 

4.32 Insurance. Schedule 4.32 contains a complete and accurate list of all
insurance policies currently maintained by or for the Corporation, as well as
all self-insurance arrangements (including reserves established thereunder) and
includes details of the coverage and deductibles under each such policy or
arrangement. The Corporation maintains such policies of insurance, issued by
responsible insurers, as are appropriate to its operations, property and assets,
in such amounts and against such risks as are customarily carried and insured
against by owners of comparable businesses, properties and assets. All such
policies of insurance are in full force and effect and the Corporation is not in
default, as to the payment of premiums or otherwise, under the terms of any such
policy and the Corporation has not failed to give any notice or to present any
claim under any insurance policy in a due and timely fashion. Complete and
accurate copies of all insurance coverage policies have been delivered or made
available to the Purchaser as of the Closing Date.

 

 - 20 -

  

 

4.33 Minute Books. The corporate records and minute books of the Corporation
(including any amalgamated predecessor corporations) contain complete and
accurate minutes of all meetings of the directors and shareholders of the
Corporation held since the incorporation of the Corporation, all decisions of
the directors and shareholders of the Corporation made since the last directors’
and shareholders’ meeting, respectively, have been ratified by the directors and
shareholders, and the share certificate book, register of shareholders, register
of transfers and register of directors of the Corporation are complete and
accurate. Such corporate records and minute books are complete and accurate in
all material respects and all corporate proceedings and actions reflected
therein have been conducted or taken in compliance with all applicable Laws and
with the constating documents of the Corporation. Such corporate records and
minute books have been made available to the Purchaser prior to the date hereof.

 

4.34 Bankruptcy. No bankruptcy, insolvency or receivership proceedings have been
instituted or are pending against the Corporation, nor has the Corporation made
a voluntary assignment in bankruptcy or a proposal to creditors. The Corporation
is not an insolvent person within the meaning of the Bankruptcy and Insolvency
Act (Canada) or under any applicable bankruptcy legislation.

 

4.35 Books and Records. The books of account and financial records of the
Corporation reflect all transactions of the Corporation and have been kept in
accordance with ASPE and procedures on a basis consistent with those of
preceding accounting periods and have been fully, properly and accurately kept
and completed in all material respects.

 

4.36 Indebtedness. Other than as set out in Schedule 4.36, the Corporation has
no debt, including, without limitation, any shareholder loans, bank debt, credit
card debt, bank account overdrafts, capital leases or lien notes due and payable
as of the date hereof.

 

4.37 Environmental Matters. All operations of the Corporations conducted on the
Leased Real Properties and each Leased Real Property itself while occupied by a
Corporation have been and are now, in compliance with all Environmental Laws.
Save and except as set forth in Schedule 4.37, the Vendor has no knowledge of
any Hazardous Substances in, on or under the Leased Real Properties. None of the
Corporations has been required by any Governmental Authority to: (i) alter any
of the Leased Real Properties in order to be in compliance with Environmental
Laws; or (ii) perform any environmental closure, decommissioning,
rehabilitation, restoration or post-remedial investigations, on, about or in
connection with any Leased Real Property.

 

4.38 Full Disclosure. None of the foregoing representations, warranties and
statements of fact contains any untrue statement of material fact or omits to
state any material fact necessary to make any such statement, warranty or
representation not misleading to a prospective purchaser of the Purchased Shares
seeking full disclosure of all material information as to the Corporation and
the Business and the corporation’s assets and properties. As a condition of
closing, all of the representations, warranties, and agreements of each of the
Vendors contained in this Article 4 shall be true and correct and in full force
and effect on and as of the Closing Date.

 

 - 21 -

  

 

ARTICLE 5 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE VENDORS

 

The Vendors, jointly and severally, represent and warrant to the Purchaser that
all of the statements set out in this Article are true, correct and complete as
of the date hereof and will be true, correct and complete as of the Closing Date
and acknowledge that the Purchaser is relying on such representations and
warranties in connection with entering into this Agreement and completing the
transactions contemplated hereby.

 

5.01 Organization and Authority.

 

(a) Jodi has full legal capacity to execute and deliver this Agreement and the
Ancillary Agreements to which she is a party, and to perform her obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. This Agreement and each Ancillary Agreement to which Jodi is a
party has been duly and validly executed and delivered by her and this Agreement
and each Ancillary Agreement to which she is a party (assuming due
authorization, execution and delivery by the other parties hereto and thereto)
constitutes a legal, valid and binding obligation of Jodi, enforceable against
her in accordance with its terms. The failure of any spouse of Jodi’s to be a
party or signatory to any Ancillary Agreement shall not: (i) prevent Jodi from
performing her obligations and from consummating the transactions contemplated
thereunder; or (ii) prevent any Ancillary Agreement to which she is a party from
constituting a legal, valid and binding obligation of Jodi enforceable against
her in accordance with its terms.

 

(b) Darren has full legal capacity to execute and deliver this Agreement and the
Ancillary Agreements to which he is a party, and to perform his obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. This Agreement and each Ancillary Agreement to which Darren is a
party has been duly and validly executed and delivered by him and this Agreement
and each Ancillary Agreement to which he is a party (assuming due authorization,
execution and delivery by the other parties hereto and thereto) constitutes a
legal, valid and binding obligation of Darren, enforceable against him in
accordance with its terms. The failure of any spouse of Darren’s to be a party
or signatory to any Ancillary Agreement shall not: (i) prevent Darren from
performing his obligations and from consummating the transactions contemplated
thereunder; or (ii) prevent any Ancillary Agreement to which he is a party from
constituting a legal, valid and binding obligation of Darren enforceable against
him in accordance with its terms.

 

5.02 No Conflict. The execution and delivery by each of the Vendors of this
Agreement and each Ancillary Agreement to which he or she is a party and the
performance by each of the Vendors of his or her obligations hereunder and the
completion of the purchase of the Purchased Shares do not and will not:

 

 

(i)result in a violation of, default under or breach of, require any consent to
be obtained under or allow any Person to exercise any rights under any Contract
or other instruments to which either Vendor is a party or pursuant to which his
or her assets or property may be affected; or

 

 

 

 

(ii)result in the violation of any Law.

 

 - 22 -

  

 

5.03 Restrictive Documents. Neither Vendor is subject to, or a party to, any
charter or by-law restriction, Law, Claim, shareholders agreement, voting trust,
contract, instrument, indenture, mortgage, lease, agreement, obligation,
statute, regulation, order, judgment, decree, license, or permit which would be
violated, contravened, breached by, or under which default would occur, or any
Lien or any other restriction of any kind or character which would prevent the
consummation of the transactions contemplated by this Agreement or compliance
with the terms, conditions and provisions of this Agreement, or which would
restrict the ability of the Purchaser to acquire any of the Purchased Shares.

 

5.04 Title to Securities. Each of the persons listed in the attached Exhibit “A”
is the sole registered holder and beneficial owner of all the Corporation Shares
set forth next to his or her name. The Purchased Shares are owned by the Vendors
with good, valid and marketable title thereto, free and clear of all Liens other
than the rights of the Purchaser under this Agreement. The Vendors have the
exclusive right to dispose of the Purchased Shares pursuant to this Agreement
and no Person has any written or oral agreement, option, warrant, or any right
or privilege (whether by law, pre-emptive or contractual) capable of becoming
such for the purchase or acquisition of the Purchased Shares. All rights and
powers to vote the Corporation Shares are held exclusively by the Vendors. The
delivery of the share certificates representing the Purchased Shares to the
Purchaser pursuant to the provisions hereof on the Closing Date will transfer to
the Purchaser valid title to the Purchased Shares, free and clear of all Liens.
The Purchased Shares are not subject to the terms of any shareholders agreement,
voting trust agreement, share pledge agreement or similar agreement.

 

5.05 Regulatory Approvals. No Authorization is required on the part of either of
the Vendors in connection with the execution, delivery and performance of this
Agreement or any Ancillary Agreement to which either Vendor is a party or the
performance of either Vendor’s obligations under this Agreement or any Ancillary
Agreement to which he or it is a party and there is no requirement for either
Vendor to make any filing with or give any notice to any Governmental Authority
as a condition to the lawful completion of the transactions contemplated by this
Agreement and the Ancillary Agreements.

 

5.06 Tax Matters. Neither Vendor is a non-resident of Canada for the purposes of
the Tax Act.

 

5.07 Litigation. There is no suit, action, litigation, investigation, Claim,
complaint, grievance or proceeding, including, without limitation, any appeal or
application for review, in progress, or to the knowledge of the Vendors, pending
or threatened against or relating to either Vendor or affecting his or her
assets, at law or in equity, before any court, governmental department,
commission, board, bureau, agency or arbitrator or instrumentality, domestic or
foreign.

 

 - 23 -

  

 

5.08 Consents. No Consent, waiver, approval, authorization, exemption,
registration, license or declaration of or by or filing with or notification to
any Governmental Authority is required to be made or obtained by either Vendor
in connection with (i) the execution and delivery by the Vendors or enforcement
against the Vendors of this Agreement or any Ancillary Agreement to which either
Vendor is a party; (ii) the consummation of any transactions provided for
herein; or (iii) the Pre-Closing Reorganization.

 

5.09 No Brokers. There is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
either Vendor who might be entitled to any fee or commission from the Purchaser,
the Corporation or any of their respective Affiliates upon consummation of the
transactions contemplated by this Agreement.

 

5.10 Bankruptcy. No bankruptcy, insolvency or receivership proceedings have been
instituted or are pending against either Vendor, nor has either Vendor made a
voluntary assignment in bankruptcy or a proposal to creditors. Neither Vendor is
an insolvent person within the meaning of the Bankruptcy and Insolvency Act
(Canada) or under any applicable bankruptcy legislation.

 

5.11 Full Disclosure. The Vendors have fully made available to the Purchaser all
of the information that the Purchaser has requested for deciding whether to
complete the transactions contemplated in this Agreement and all information
which the Vendors believe is reasonably necessary to enable the Purchaser to
make such decision. None of the foregoing representations or statements of fact
contains any untrue statement of material fact or omits to state any material
fact necessary to make any such statement or representation not misleading to a
prospective purchaser of the Purchased Shares seeking full information as to the
business and affairs of the Vendors. As a condition of closing, all of the
representations, warranties, and agreements of each of the Vendors contained in
this Article 5 shall be true and correct and in full force and effect on and as
of the Closing Date.

 

ARTICLE 6 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER

 

The Purchaser represents and warrants to the Vendors and the Corporation that
all of the statements set out in this Article are true, correct and complete as
of the date hereof and will be true, correct and complete as of the Closing Date
and acknowledges that the Vendors are relying on such representations and
warranties in entering into this Agreement and the Ancillary Agreements to which
he or she is a party and completing the transactions contemplated herein.

 

6.01 Organization and Authority. The Purchaser is duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all necessary corporate power and authority to execute and
deliver this Agreement and each Ancillary Agreement to which it is a party and
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and each Ancillary Agreement by the Purchaser, the performance by the
Purchaser of its obligations hereunder and thereunder and the consummation by
the Purchaser of the transactions contemplated herein and therein have been duly
and validly authorized by all necessary corporate or other action on the part of
the Purchaser and no other corporate or other proceeding on the part of the
Purchaser is necessary to authorize this Agreement or any Ancillary Agreement to
which it is a party or the performance by the Purchaser of its obligations
hereunder or thereunder or to consummate the transactions contemplated herein
and therein. This Agreement and each Ancillary Agreement to which the Purchaser
is a party has been duly and validly executed and delivered by the Purchaser,
and (assuming due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement and each Ancillary Agreement to which it is a
party constitutes a legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms, subject only to
any limitation under applicable Laws relating to: (i) bankruptcy, winding-up,
insolvency, arrangement, fraudulent preference and conveyance, assignment and
preference and other similar laws of general application affecting creditors’
rights, and (ii) the discretion that a court may exercise in the granting of
equitable remedies such as specific performance and injunction.

 

 - 24 -

  

 

6.02 No Conflict. The execution and delivery by the Purchaser of this Agreement
and each Ancillary Agreement to which it is a party and the performance by the
Purchaser of its obligations hereunder and the completion of the purchase of the
Purchased Shares do not and will not result in a violation of, default under or
breach of (A) the Purchaser’s certificate of incorporation, constating
documents, by-laws or other charter documents, including any shareholders’
agreement or any other agreement or understanding with any Person; or (B) any
Laws.

 

6.03 Authorizations. There is no requirement for the Purchaser to make any
filing with, give any notice to, or obtain any Authorization as a condition to
the lawful completion of the transactions contemplated by this Agreement and the
Ancillary Agreements to which it is a party.

 

ARTICLE 7 COVENANTS OF THE VENDORS, THE PURCHASER AND THE CORPORATION

 

7.01 Except as expressly contemplated by this Agreement or with the prior
written consent of the Purchaser, during the Interim Period, the Vendors will,
and will cause the Corporation to:

 

 

(i)operate the Business only in the ordinary course of Business, consistent with
past practices;

 

 

 

 

(ii)take all actions within their control to ensure that the representations and
warranties in Article 4 and Article 5 remain true and correct at the Closing
Date, with the same force and effect as if such representations and warranties
were made at and as of the Closing Date, and to satisfy or cause to be satisfied
the conditions in Article 9;

 

 

 

 

(iii)promptly advise the Purchaser of (i) any facts that come to their attention
which would cause any of the representations and warranties in Article 4 or
Article 5 to be untrue in any respect; or (ii) any material adverse change in
the Business or the condition of the Corporation during the Interim Period;

 

 

 

 

(iv)take all action to preserve the Business and the goodwill of the Corporation
and its relationships with customers, suppliers and others having business
dealings with it, to keep available the services of its present officers and
employees and to maintain in full force and effect all agreements to which the
Corporation is a party, and take all other action reasonably requested by the
Purchaser in order that the Business and the condition of the Corporation will
not be impaired during the Interim Period;

 

 

 

 

(v)maintain (i) all of the tangible properties and assets of the Corporation in
the same condition as they now exist, ordinary wear and tear excepted; (ii) the
inventories of the Business in accordance with past practice; (iii) the books,
records and accounts of the Corporation in the ordinary course and record all
transactions on a basis consistent with past practice; and (iv) all of the
current insurance policies of the Corporation in full force and effect;

 

 - 25 -

  

 

 

(vi)ensure that the Corporation does not (i) create, incur or assume any
long-term debt (including obligations in respect of leases) or create any Lien
upon any of its properties or assets or guarantee or otherwise become liable for
the obligations of any other Person or make any loans or advances to any Person;
(ii) sell or otherwise dispose of any of its properties or assets except in the
ordinary course of Business; (iii) terminate or waive any right of substantial
value of the Business; (iv) make any capital expenditure, other than in the
ordinary course of Business; (v) enter into any agreement other than agreements
made in the ordinary course of Business consistent with past practice; (vi)
declare or pay any dividends, redeem or repurchase any shares or make any other
distributions in respect of the shares of the Corporation; or (vii) increase, in
any manner, the compensation or employee benefits of any of its directors,
officers or employees or pay or agree to pay to any of its directors, officers
or employees any pension, severance or termination amount or other employee
benefit not required by any of the employee benefit plans and programs referred
to in the Schedules;

 

 

 

 

(vii)use commercially reasonable efforts to ensure that the Corporation performs
all of its obligations falling due during the Interim Period under all
agreements to which the Corporation is a party or by which it is bound; and

 

 

 

 

(viii)not take any action to amend the articles or by-laws of the Corporation.

 

7.02 The Vendors hereby covenant and agree that, at the Closing Date, they will
do or cause to be done the following:

 

 

(i)deliver to the Purchaser share certificates representing the Purchased Shares
duly endorsed in blank for transfer, or accompanied by irrevocable security
transfer powers of attorney duly executed in blank;

 

 

 

 

(ii)take all necessary steps and proceedings as approved by legal counsel for
the Purchaser to permit all of the Purchased Shares to be duly transferred to
the Purchaser or its nominees;

 

 

 

 

(iii)obtain all necessary assurances, transfers, assignments and consents,
including all necessary Consents, and any other documents or instruments
necessary or reasonably required to effectively carry out the intent of this
Agreement and to transfer the Purchased Shares to the Purchaser, free and clear
of all Liens; and

 

 

 

 

(iv)deliver to the Purchaser an updated Disclosure Schedule providing the
required information as of the Business Day immediately preceding the Closing
Date,

 

and, immediately following the receipt by the Vendors of the Closing Date Cash
Payment, deliver to EVIO one or more certified cheques, bank drafts or wire
transfers in the aggregate amount of $1,950,000 on account of the Vendors’
Subscription pursuant to the terms of the Vendor’s Subscription Agreement.

 

7.03 The Purchaser hereby covenants and agrees that on the Closing Date it will
deliver to the Vendors (or as they may otherwise direct) one or more certified
cheques, bank drafts or wire transfers in the aggregate amount of $2,035,000 on
account of the Closing Date Cash Payment as contemplated by Section 3.02.

 

7.04 The Purchaser hereby covenants and agrees that immediately following the
completion of the Sale Transaction it shall deliver to the Corporation one or
more certified cheques, bank drafts or wire transfers in the aggregate amount of
$460,000 on account of the Purchaser’s Subscription pursuant to the terms of the
Purchaser Subscription Agreement and the Corporation shall contemporaneously use
such funds to repay the Note and the Jodi Note.

 

 - 26 -

  

 

7.05 The Corporation hereby covenants and agrees that on the Closing Date it
will take all necessary steps and proceedings to facilitate the addition of one
or more nominees of the Purchaser as a signatory in respect thereof.

 

7.06 The Purchaser hereby covenants with the Corporation to provide up to
$1,000,000 by way of a loan pursuant to the terms of the Credit Agreement. The
Corporation shall be entitled from time to time during the term of the Credit
Agreement to make draw down requests.

 

ARTICLE 8 SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES

 

8.01 The covenants, representations and warranties provided herein shall survive
the closing of the purchase and sale of the Purchased Shares contemplated herein
and, notwithstanding any such closing, shall continue in full force and effect,
subject to the following:

 

 

(i)the representations and warranties set out in Sections 4.17 and 5.06 shall
survive the closing of the transactions contemplated by this Agreement and the
Ancillary Agreements and shall continue in full force and effect until a date
being six (6) months after the expiration of the last of the limitation periods
contained in the Tax Act and/or any other legislation imposing tax on the
Corporation or either Vendor, as applicable, upon which the Governmental
Authorities shall no longer be entitled to assess or reassess liability for tax
against the Corporation or either Vendor, as applicable, for any period prior to
the Closing Date (taking into account any consent, waiver, agreement or other
document that extends the period during which a Governmental Authority may issue
a tax assessment);

 

 

 

 

(ii)the representations and warranties set out in Sections 4.01 to 4.07
(inclusive), 4.09, 4.10, 5.01 to 5.06 (inclusive), 5.09 and 6.01 to 6.03
(inclusive) shall survive the closing of the transactions contemplated by this
Agreement and shall continue in full force and effect indefinitely; and

 

 

 

 

(iii)all other representations and warranties provided herein (other than
referred to in Subsection 8.01(i) and 8.01(ii) above) shall survive the closing
of the transactions contemplated by this Agreement and shall continue in full
force and effect until the second anniversary of the Closing Date.

 

Notwithstanding the limitations set out in this Section 8.01, any Claim, damage,
loss, costs, liability or expense which is based on intentional
misrepresentation or fraud may be brought at any time.

 

ARTICLE 9 CONDITIONS

 

9.01 Conditions to the Obligations of the Purchaser. The Purchaser shall not be
obligated to complete the purchase of the Purchased Shares herein provided for
unless on the Closing Date each of the following conditions shall have been
satisfied:

 

 

(i)there shall have been performed or complied with, in all respects, all of the
obligations, covenants and agreements of the Vendors under this Agreement and
any Ancillary Agreement to which either Vendor is a party, each and every one of
which is hereby declared to be a separate condition to the closing of the said
transaction;

 

 - 27 -

  

 

 

(ii)all of the representations and warranties of the Vendors made pursuant to
this Agreement and the Ancillary Agreements shall be true and correct as of the
Closing Date, the truth and correctness of each such representation and warranty
is hereby declared to be a separate condition to the closing of the said
transaction;

 

 

 

 

(iii)on the Closing Date, there shall be no material adverse change in the
financial position of the Corporation from that reflected in the Corporation
Financial Statements;

 

 

 

 

(iv)there shall have been delivered to the Purchaser, in scope, form and terms
satisfactory to it and the Purchaser’s counsel, the following:

 

 

 

(a)certified copies of: (i) the constating documents and by-laws of the
Corporation; and (ii) all resolutions of the board of directors and, if
applicable, shareholders of the Corporation approving the transactions
contemplated hereby;

 

 

 

 

 

 

(b)a certificate of status (or equivalent) of the Corporation;

 

 

 

 

 

 

(c)an incumbency certificate for the Corporation;

 

 

 

 

 

 

(d)evidence that all necessary steps and proceedings as approved by counsel for
the Purchaser, acting reasonably, to permit all of the Purchased Shares to be
fully and validly transferred to the Purchaser have been taken;

 

 

 

 

 

 

(e)executed releases and, where applicable, resignations in favour of the
Purchaser and the Corporation by such directors, officers, shareholders,
consultants and employees of the Corporation as may be required by the Purchaser
of all of his, her or its claims against the Corporation with respect to any
matter in relation to his, her or its capacity as a director, officer,
shareholder, consultant or employee of the Corporation substantially in the form
attached hereto as Exhibit “B”;

 

 

 

 

 

 

(f)evidence satisfactory to the Purchaser that the Pre-Closing Reorganization
has been completed;

 

 

 

 

 

 

(g)evidence that the Purchaser has secured a lease for the additional 3,000
square feet of real estate in the premise adjacent to the existing rented
premises is leased;

 

 

 

 

 

 

(h)evidence that the Corporation has received a firm proposal for the financing
of Agilent equipment consisting of the following units: 1260II HPLC with 6470
Triple Quad Mass Spec (or QQQ)’ 7890 GC with 7010B (With HES) Triple Quad Mass
Spec (or QQQ); 7890 GC with 5977B Single Quad Mass Spec, with Headspace; and
7800 ICP-MS;

 

 

 

 

 

 

(i)a duly executed Purchaser Subscription Agreement executed by the Purchaser;

 

 

 

 

 

 

(j)a duly executed Vendor’s Subscription Agreement executed by each of the
Vendors;

 

 - 28 -

  

 

 

 

(k)a certificate of the Vendors dated the Closing Date as to compliance with the
conditions precedent set forth in subsections (i), (ii) and (iii) of this
Section 9.01;

 

 

 

 

 

 

(l)a duly executed shareholders agreement in respect of the Corporation
substantially in the form attached hereto as Exhibit “C”;

 

 

 

 

 

 

(m)a duly executed employment agreement between the Corporation and Jodi
substantially in the form attached hereto as Exhibit “D”;

 

 

 

 

 

 

(n)a duly executed non-competition agreement among the Corporation, the Vendors
substantially in the form attached hereto as Exhibit “E”;

 

 

 

 

 

 

(o)the Purchaser shall have received resolutions of the Corporation amending the
banking signing authority and banking signature cards of the Corporation in a
form acceptable to the Purchaser;

 

 

 

 

 

 

(p)an updated Disclosure Schedule providing the required information as of the
Business Day immediately preceding the Closing Date;

 

 

 

 

 

 

(q)a draft closing balance sheet of the Corporation prepared as of the date that
is not greater than five (5) Business Days prior to the Closing Date, prepared
in accordance with ASPE applied on a basis consistent with the preparation of
the Corporation Financial Statements, together with evidence satisfactory to the
Purchaser that the aggregate of the: (i) cash on hand in the Corporation’s bank
account; and (ii) Accounts Receivable of the Corporation, less the aggregate of
the Corporation’s: (iii) accounts payable and current liabilities excluding the
Note and the Shareholder Loans; (iv) written uncashed cheques; and (v), shall be
not less than $nil;

 

 

 

 

 

 

(r)evidence that the Note and Jodi Note shall be repaid contemporaneously and as
a condition to the completion of the purchase of the Purchased Shares;

 

 

 

 

 

 

(s)evidence that the Clare Note has been issued; and

 

 

(v)all Consents that may be required under any Contracts of the Corporation have
been obtained in a form satisfactory to the Purchaser without any special
conditions or monetary requirements being imposed; and

 

 

 

 

(vi)all consents, approvals, orders and Authorizations (or registrations,
filings or recordings with any such Governmental Authorities), required in
connection with the completion of the transactions contemplated by this
Agreement or the performance of any of the terms and conditions of this
Agreement shall have been obtained on or before the Closing Date. There shall be
no injunction or restraining order issued preventing, and no pending or
threatened claim, action, litigation or proceeding, judicial or administrative
or investigation against any party by any Governmental Authority, for the
purpose of enjoining or preventing the consummation of the transactions
contemplated in this Agreement or otherwise claiming that this Agreement or the
consummation thereof is improper or would give rise to proceedings under any
statute or rule of law.

 

 - 29 -

  

 

Any of the foregoing conditions may be waived in whole or in part by the
Purchaser without prejudice to its rights upon the non-performance of any other
condition or conditions, as provided for in this Section 9.01, any such waiver
to be binding upon the Purchaser only if the same is in writing.

 

9.02 Conditions to the Obligations of the Vendors. The Vendors shall not be
obligated to complete the sale of the Purchased Shares herein provided for
unless on the Closing Date each of the following conditions shall have been
satisfied:

 

 

(i)there shall have been performed or complied with, in all respects, all of the
Purchaser’s obligations, covenants and agreements under this Agreement and any
Ancillary Agreement to which it is a party, each and every one of which is
hereby declared to be a separate condition to the closing of the said
transaction;

 

 

 

 

(ii)all of the representations and warranties of the Purchaser made pursuant to
this Agreement and the Ancillary Agreements shall be true and correct as of the
Closing Date, the truth and correctness of each such representation and warranty
is hereby declared to be a separate condition to the closing of the said
transaction;

 

 

 

 

(iii)there shall have been delivered to the Vendors, in scope, form and terms
satisfactory to the Vendors and their counsel, the following:

 

 

 

(a)certified copies of: (i) the constating documents and by-laws of the
Purchaser; and

 

 

 

 

 

 

(ii)all resolutions of the board of directors of the Purchaser approving the
transactions contemplated hereby;

 

 

 

 

 

 

(b)a certificate of compliance of the Purchaser;

 

 

 

 

 

 

(c)an incumbency certificate for the Purchaser;

 

 

 

 

 

 

(d)a certificate of the Purchaser dated the Closing Date as to compliance with
the conditions precedent set forth in subsections (i) and (ii) of this Section
9.02;

 

 

 

 

 

 

(e)a duly executed shareholders agreement in respect of the Corporation
substantially in the form attached hereto as Exhibit “C”;

 

 

 

 

 

 

(f)a duly executed employment agreement between the Corporation and Jodi
substantially in the form attached hereto as Exhibit “D”;

 

 

 

 

 

 

(t)a duly executed Purchaser Subscription Agreement executed by the Purchaser;
and

 

 

 

 

 

(iv)

all consents, approvals, orders and Authorizations (or registrations, filings or
recordings with any such Governmental Authorities), required in connection with
the completion of the transactions contemplated by this Agreement or the
performance of any of the terms and conditions of this Agreement shall have been
obtained on or before the Closing Date. There shall be no injunction or
restraining order issued preventing, and no pending or threatened claim, action,
litigation or proceeding, judicial or administrative or investigation against
any party by any Governmental Authority, for the purpose of enjoining or
preventing the consummation of the transactions contemplated in this Agreement
or otherwise claiming that this Agreement or the consummation thereof is
improper or would give rise to proceedings under any statute or rule of law.

 

 - 30 -

  

 

Any of the foregoing conditions may be waived in whole or in part by the Vendors
without prejudice to their rights upon the non-performance of any other
condition or conditions, as provided for in this Section 9.02, any such waiver
to be binding upon the Vendors only if the same is in writing.

 

ARTICLE 10 INDEMNIFICATION

 

10.01 Indemnification in Favour of the Purchaser. The Vendors shall jointly and
severally indemnify, defend and save the Purchaser and its shareholders,
directors, officers, employees, agents and representatives harmless of and from
any Claim or loss suffered by, imposed upon or asserted against them (whether
direct or indirect) as a result of, in respect of, connected with or arising out
of, under or pursuant to:

 

 

(i)any failure by either Vendor to perform and fulfil any covenant to be
performed by it under this Agreement;

 

 

 

 

(ii)any Taxes of the Corporation which were required to have been paid in
respect of any Pre- Closing Tax Period to the extent such Taxes exceed the
amount specified in the balance sheet forming part of the Corporation Financial
Statements;

 

 

 

 

(iii)all debts, liabilities, Claims, Contracts or agreements of the Corporation
or relating to the Business or the Pre-Closing Reorganization, contingent or
otherwise, for any period prior to the Closing Date, whether such liabilities
are known to the Vendor at the Closing Date or not, and include, but are not
limited to, any liabilities for Tax, any Claims relating to employees of the
Corporation and any liabilities relating to any customer invoice discrepancies
and any customer disputes in regards thereto; or

 

 

 

 

(iv)subject to the limitations set out in Article 8, any misrepresentation or
breach of any representation or warranty given by the Vendors in this Agreement
or any Ancillary Agreement to which they are a party.

  

10.02 Indemnification in Favour of the Vendors. The Purchaser shall indemnify,
defend and save the Vendors harmless of and from any Claim or loss suffered by,
imposed upon or asserted against either Vendor as a result of, in respect of,
connected with or arising out of, under or pursuant to:

 

 

(i)any failure by the Purchaser to perform and fulfill any covenant of the
Purchaser to be performed by it under this Agreement; or

 

 

 

 

(ii)subject to the limitations set out in Article 8, any misrepresentation,
breach or inaccuracy of any representation or warranty given by Purchaser in
this Agreement or any Ancillary Agreement to which it is a party.

 

 - 31 -

  

  

10.03 Indemnification Proceedings.

 

 

(i)Any party seeking indemnification under this Article (the “indemnified
party”) shall forthwith notify the party against whom a Claim for
indemnification is sought hereunder (the “indemnifying party”) in writing, which
notice, to be delivered in strict accordance with Subsection 13.01 hereof, shall
specify, in reasonable detail, the nature and estimated amount of the Claim
provided that, in so doing, it may restrict or condition any disclosure in the
interest of preserving privileges of importance in any foreseeable litigation.
If a Claim by a third party is made against an indemnified party, and if the
indemnified party intends to seek indemnity with respect thereto under this
Article, the indemnified party shall promptly (and in any case, the later of 15
days of such Claim being made or such Claim coming to the attention of the
indemnifying party) notify the indemnifying party of such with reasonable
particulars. The indemnifying party shall have 15 days after receipt of either
such notice to undertake, conduct and control, through counsel of its own
choosing and at its expense, the settlement or defence thereof, and the
indemnified party shall co-operate with it in connection therewith; except that
with respect to settlements entered into by the indemnifying party (i) the
consent of the indemnified party shall be required if the settlement provides
for equitable relief against the indemnified party, which consent shall not be
unreasonably withheld or delayed; and (ii) the indemnifying party shall obtain
the release of the indemnified party. If the indemnifying party undertakes,
conducts and controls the settlement or defence of such Claim (i) the
indemnifying party shall permit the indemnified party to participate in (subject
to the indemnifying party’s right to conduct and control) such settlement or
defence through counsel chosen by the indemnified party, provided that the fees
and expenses of such counsel shall be borne by the indemnified party; and (ii)
the indemnifying party shall promptly reimburse the indemnified party for the
full amount of any loss resulting from any Claim and all related expenses (other
than the fees and expenses of counsel as aforesaid) incurred by the indemnified
party upon the final settlement or adjudication of such claims. The indemnified
party shall not pay or settle any Claim so long as the indemnifying party is
reasonably contesting any such Claim in good faith on a timely basis.
Notwithstanding the two immediately preceding sentences, the indemnified party
shall have the right to settle any such Claim, provided that in such event it
shall waive any right to indemnity therefor by the indemnifying party.
Notwithstanding the foregoing, in the event the indemnified party is ordered to
make payment in respect of Claim by a court of competent jurisdiction, such
event shall not constitute a waiver of any further rights to indemnity provided
in this Article 10. Notwithstanding any of the above, the indemnifying party
shall not be entitled to undertake, conduct or control the settlement or defence
of any claim in respect of Taxes and, for greater certainty, the indemnified
party shall be entitled to settle any such claim in its sole and absolute
discretion.

 

 

(ii)With respect to third party Claims, if the indemnifying party does not
notify the indemnified party within 30 days after the receipt of the indemnified
party’s notice of a Claim of indemnity hereunder that it elects to undertake the
defence thereof, the indemnified party shall have the right, but not the
obligation, to contest, settle or compromise the Claim in the exercise of its
reasonable judgement at the expense of the indemnifying party.

 

 

 

 

(iii)In the event of any Claim by a third party against an indemnified party,
the defence of which is being undertaken and controlled by the indemnifying
party, the indemnified party will use all reasonable efforts to make available
to the indemnifying party those employees whose assistance, testimony or
presence is necessary to assist the indemnifying party in evaluating and in
defending any such Claims; provided that the indemnifying party shall be
responsible for the expense associated with any employees made available by the
indemnified party to the indemnifying party hereunder, which expense shall be
equal to a reasonable amount to be mutually agreed upon per person per hour or
per day for each day or portion thereof that such employees are assisting the
indemnifying party and which expenses shall not exceed the actual cost to the
indemnified party associated with such employees.

 

 - 32 -

  

 

 

(iv)With respect to third party Claims, the indemnified party shall make
available to the indemnifying party or its representatives on a timely basis all
documents, records and other materials in the possession of the indemnified
party, at the expense of the indemnifying party, reasonably required by the
indemnifying party for its use in defending any Claim and shall otherwise
co-operate on a timely basis with the indemnifying party in the defence of such
Claim.

  

10.04 Set-off. To the extent that a Vendor is an indemnifying party or has been
named as an indemnifying party in an indemnity claim made pursuant to Article 10
hereof, the Purchaser shall have the right to satisfy any amount from time to
time owing to it by either Vendor by (i) way of set-off against amounts owing
from time to time by the Purchaser to the Vendors and (ii) by transfer of the
right to be paid the amounts owing to the Corporation by such Vendor(s) to the
Purchaser. The Purchaser shall provide thirty (30) days prior notice of its
intention to claim set-off under this Section 10.04 and such written notice
shall include all available particulars of the claim and the amounts owing to it
under this Article 10.

 

10.05 Effect of Investigation. The representations, warranties and covenants of
the Vendors, and the Purchaser’s right to indemnification with respect thereto,
shall not be affected or deemed waived by reason of any investigation made by or
on behalf of the Purchaser (including by any of its representatives) or by
reason of the fact that the Purchaser or any of their respective representatives
knew or should have known that any such representation or warranty is, was or
might be inaccurate or by reason of the waiver by the Purchaser of any condition
set forth in Section 9.01.

 

10.06 Characterization of Indemnification Payments. To the extent permitted
pursuant to applicable Laws, all payments made by or on behalf of an
indemnifying party to an indemnified party in respect of any claim to this
Article 10 shall be treated as adjustments to the Purchase Price for Tax
purposes.

 

10.07 Limitations of Indemnification Payments. The aggregate liability of the
Vendors pursuant to Section 10.01 shall not exceed an amount equal to the
Purchase Price paid or payable by the Purchaser hereunder, except in the case of
fraud, wilful misconduct or intentional misrepresentation or any Claims or
losses arising out of, with respect to or by reason of any breach of any of the
representations and warranties set out in Sections 4.01 to 4.06 (inclusive),
4.17 and 5.01 to 5.10 (inclusive) for which no limit on liability shall apply.

 

ARTICLE 11 CLOSING ARRANGEMENTS

 

11.01 Subject to the satisfaction of the terms and conditions herein, the
transactions contemplated by this Agreement shall be completed on the Closing
Date at such place or places or in such other manner as the parties agree (the
“Closing”). To the extent practicable, the Closing shall be completed through
electronic transmission of documents. At Closing, the Vendors shall deliver to
the Purchaser certificates representing the Purchased Shares duly endorsed in
blank for transfer (or other sufficient evidence of transfer), together with
reasonable evidence of the due compliance by the Vendors with all of the
conditions contained in Section 9.01, the Purchaser shall pay the Closing Date
Cash Payment as contemplated in this Agreement and shall deliver reasonable
evidence of the due compliance by the Purchaser with all of the conditions
contained in Section 9.02.

 

 - 33 -

  

 

ARTICLE 12 TERMINATION

 

12.01 This Agreement may be terminated at any time prior to the Closing by:

 

 

(i)the consent of each of the Purchaser and the Vendors;

 

 

 

 

(ii)either the Purchaser or the Vendors, if the Closing shall not have been
consummated by May 31, 2018, provided that the right to terminate this Agreement
pursuant to this Section 12.01(ii) shall not be available to such party whose
breach or violation of any representation, warranty, covenant, obligation or
agreement under this Agreement has been the cause of or has resulted in the
failure of the Closing to occur on or before such date;

 

 

 

 

(iii)the Purchaser, if there has been a breach by either Vendor of any
representation, warranty, covenant or agreement set forth in this Agreement or
any of the documents contemplated hereby which breach would result in the
failure to satisfy one or more of the conditions set forth in Article 9 which
the applicable Vendor fails to cure within ten (10) Business Days after written
notice thereof is given by the Purchaser; or

 

 

 

 

(iv)the Vendors, if there has been a breach by the Purchaser of any
representation, warranty, covenant or agreement set forth in this Agreement or
any of the documents contemplated hereby which breach would result in the
failure to satisfy one or more of the conditions set forth in Article 9 which
the Purchaser fails to cure within ten (10) Business Days after written notice
thereof is given by the Vendors.

  

Any termination of this Agreement pursuant to this Section 12.01 shall be
effected by a written instrument signed by the party or parties so terminating
to the other parties hereto (if any), which notice shall specify the Section
hereof pursuant to which this Agreement is being terminated.

 

12.02 In the event of the termination of this Agreement as provided in Section
12.01, this Agreement shall be of no further force or effect without any
liability to any Person in respect hereof or of the transactions contemplated
hereby on the part of any party hereto, except for Sections 1.02 to 1.10
(inclusive), Article 8, Article 10, this Article 12 and Article 13, each of
which shall survive the termination of this Agreement; provided, however, that
if this Agreement is terminated because of a breach by the Purchaser or either
Vendor of the representations, warranties, covenants, obligations or agreements
of such party set forth in this Agreement, the terminating party’s right to
pursue all legal remedies will survive such termination unimpaired.

 

 - 34 -

  

  

ARTICLE 13 GENERAL CONTRACT PROVISIONS

 

13.01 All notices, requests, demands or other communications by the terms hereof
required or permitted to be given by one party to another shall be given in
writing by registered mail, postage prepaid, addressed to such other party or
delivered or faxed to such other party as follows:

 

 

(a)to the Vendors at:

 

 

 

 

 

5464 Thibault Wynd NW

Edmonton, Alberta

T6R 3P9

 

 

 

 

 

Attention: Jodi McDonald and Darren McDonald

Email: jmcdonald@keystonelabs.ca

 

 

 

 

(b)

to the Purchaser at:

 

 

 

 

 

62930 O. B. Riley Rd.

Suite 300

Bend, OR 97703

 

 

 

 

 

Attention: William Waldrop

Email: william@eviolabs.com

 

 

 

 

(c)

to the Corporation at:

 

 

 

 

 

5464 Thibault Wynd NW

Edmonton, Alberta

T6R 3P9

 

 

 

 

 

Attention: Jodi McDonald

Email: jmcdonald@keystonelabs.ca

  

or at such other addresses or fax numbers as may be given by any of them to the
others and such notices, requests, demands, acceptances and other communications
shall be deemed to have been received on the next Business Day following the day
of delivery or fax; or if mailed, three (3) Business Days after the mailing
thereof. In the event of a strike or other disruption of postal service all
notices will be forwarded by delivery or fax.

 

13.02 The parties hereto shall sign such further and other papers, cause such
meetings to be held, resolutions passed, by-laws enacted, exercise their votes
and influence, do and perform and cause to be done and performed such further
and other acts and things as may be necessary or desirable in order to give full
effect to this Agreement and every part hereof.

 

13.03 Each party shall be responsible for and bear all of its own costs and
expenses in respect of the transactions contemplated by this Agreement. For
greater certainty, the Vendors shall be responsible for and bear all of the
costs and expenses, including legal fees, of the Corporation relating to the
period up to and including the Closing Date including with respect to the
Pre-Closing Reorganization.

 

13.04 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.

 

13.05 Any tender of documents or any money hereunder shall be made upon the
Vendors or the Purchaser or any solicitor acting for them and the money shall be
tendered by negotiable cheque certified by a bank or by wire transfer.

 

 - 35 -

  

  

13.06 The parties shall consult with each other before issuing any press release
or making any other public announcement with respect to this Agreement or the
transactions contemplated hereunder and no party shall issue any such press
release or make any such public announcement without the prior written consent
of the others (which consent shall not be unreasonably withheld or delayed).

 

13.07 Any dispute between the parties hereto with respect to the subject matter
of this Agreement a Claim shall be resolved as follows:

 

 

(a)First, the parties shall submit the matter to a mutually agreed to mediation
service for mediation by providing to the mediation service a joint, written
request for mediation, setting forth the subject of the dispute and the relief
requested. The parties shall cooperate with the mediation service and with one
another in selecting a neutral mediator and in scheduling the mediation
proceedings. The parties covenant that they will use commercially reasonable
efforts in participating in the mediation. The parties agree that the mediator’s
fees and expenses and the costs incidental to the mediation will be shared
equally between the parties. The place of the mediation shall be Edmonton,
Alberta The parties agree that all offers, promises, conduct and statements,
whether oral or written, made in the course of the mediation by any of the
parties, their agents, employees, experts and attorneys, and by the mediator and
any employees of the mediation service, are confidential, privileged and
inadmissible for any purpose, including impeachment, in any litigation,
arbitration or other proceeding involving the parties, provided that evidence
that is otherwise admissible or discoverable shall not be rendered inadmissible
or non- discoverable as a result of its use in the mediation.

 

 

 

 

(b)If the parties cannot resolve for any reason, including, but not limited to,
the failure of either party to agree to enter into mediation or agree to any
settlement proposed by the mediator, any Claim within thirty (30) days after the
date such Claim first arises, either party may commence binding arbitration in
accordance with the provisions of the Alberta Arbitration and Mediation Society
(the “Institute”) pursuant to the Arbitration Act (Alberta) and based upon the
following:

  

 

 

(i)the arbitration tribunal shall consist of one (1) arbitrator appointed by
mutual agreement of the parties, or in the event of failure to agree on an
arbitrator within seven (7) Business Days of the date on which a dispute is
determined to be resolved through arbitration, then the Institute shall appoint
the arbitrator from the list of qualified arbitrators maintained by the
Institute. If the Institute fails to appoint an arbitrator within fourteen (14)
Business Days of being asked to do so, any party may apply to have the
arbitrator appointed by a judge of the Alberta Court of Queen’s Bench;

 

 

 

 

 

 

(ii)the arbitration shall take place in Edmonton, Alberta;

 

 

 

 

 

 

(iii)the arbitration award shall be given in writing and shall be final and
binding on the parties and shall deal with the question of costs of arbitration
and all matters related thereto; and

 

 

 

 

 

 

(iv)judgment upon the award rendered may be entered in any Court having
jurisdiction, or, application may be made to such Court for a judicial
recognition of the award or an order of enforcement thereof, as the case may be.

  

13.08 This Agreement and any of the documents to be delivered or furnished
pursuant to this Agreement may be executed and delivered in any number of
counterparts, each of which when executed and delivered is an original but all
of which taken together constitute one and the same instrument. Any party may
deliver an executed copy of this Agreement or any of the documents to be
delivered or furnished pursuant to this Agreement by facsimile or other
electronic transmission.

 

[Remainder of page intentionally left blank.]

 

 - 36 -

  

 

 

IN WITNESS WHEREOF the parties have hereunto duly executed these presents as of
the date first hereinabove written.

 

 KEYSTONE LABS INC.    Per:

 

 

Authorized Signing Officer     

I have the authority to bind the Corporation.

 

 

 

 

 

 

EVIO CANADA INC.

 

 

 

 

 

 

Per:

 

 

 

 

Authorized Signing Officer

 

 

 

 

 

 

I have authority to bind the company.

 

 

 

 

)

 

 

 

 

)

 

 

 

 

)

 

 

 

Witness:

 

)

 

JODI MCDONALD

 

 

 

)

 

 

 

 

 

)

 

 

 

 

)

 

 

 

 

)

 

 

 

Witness:

 

)

 

DARREN MCDONALD

 

 

 

)

 

 

 

 - 37 -

  

 

Execution Copy

 

EXHIBIT “A”

 

Issued and Issued and Outstanding Shares of the Corporation and Allocation of
Purchase Price

 

(A) Issued and Outstanding Shares of the Corporation Immediately Prior to the
Pre-Closing Reorganization

 

Shareholder

Class and Number of Shares Owned

Jodi

100 Class A Shares

Darren

100 Class B Shares

Clare Rhyasen

2,500 Class D Shares

 

Total

100 Class A Shares

100 Class B Shares

2,500 Class D Shares

 

(B) Issued and Outstanding Shares of the Corporation Immediately Following the
Pre-Closing Reorganization and Allocation of Purchase Price

 

Shareholder

Class and Number of Shares Owned

Class and Number of Shares to be Sold

Allocation of Purchase Price

Jodi

100 Class A Shares

45 Class A Shares

$1,017,500

Darren

100 Class B Shares

45 Class B Shares

$1,017,500

Total

100 Class A Shares

100 Class B Shares

45 Class A Shares

45 Class B Shares

 

$2,035,000

 

  

  

 

EXHIBIT “B”

 

Form of Release and Indemnity

 

 

 

  

  

 

RESIGNATION, RELEASE AND INDEMNITY

 

TO:

KEYSTONE LABS, INC. (the “Corporation”)

 

 

AND TO:

EVIO CANADA INC. (“EVIO Canada”)

 

 

AND TO:

EVIO INC. (“EVIO” and, together with EVIO Canada, the “Purchaser”)

   

● (referred to herein as the “undersigned”):

 

(i) hereby resigns as an [officer, director and employee] of the Corporation
effective as of the date hereof; and

 

(ii) in consideration for entering into the share purchase agreement (the
“Purchase Agreement”) among the Corporation, the Purchaser, Jodi McDonald and
Darren McDonald dated as of [●], 2018, the receipt and sufficiency of which is
hereby acknowledged, and for other good and valuable consideration, hereby
remises, releases and forever discharges each of the Purchaser and the
Corporation of and from all actions, causes of action, suits, debts, duties,
accounts, bonds, covenants, contracts, claims and demands whatsoever
(hereinafter referred to as the “Claims”) which the undersigned as a director,
officer, employee or creditor of the Corporation now has or hereafter can, shall
or may have for or by reason of or in any way arising out of any cause, matter
or thing whatsoever existing up to the present time and in particular, without
in any way limiting the generality of the foregoing, for or by reason of or in
any way arising out of any and all claims for moneys, advances, salary, wages,
bonuses, termination pay, notice of termination of employment, indemnity in lieu
of notice, including claims for reinstatement, vacation pay, expenses,
retirement or pension allowances, director’s fees, participation in profits or
earnings or any other remuneration whether authorized or provided for by by-law,
resolution, contract or otherwise, other than Claims made pursuant to the
Purchase Agreement to which the Purchaser is a party.

 

And for the consideration set out herein the undersigned represents and warrants
that the undersigned has not assigned to any person any of the Claims with
respect to which the undersigned has agreed hereunder to release, remise and
forever discharge and has further agreed not to initiate or take part in any
proceedings in respect thereof.

 

And the undersigned hereby declares, covenants and agrees that the undersigned
has reviewed and fully understands the terms and binding effect of this
Resignation, Release and Indemnity, that the consideration set out hereunder is
accepted voluntarily for the purpose of making full and final compromise,
adjustment and settlement of all Claims as aforesaid; that there is no
representation, warranty, collateral agreement or condition affecting this
Resignation, Release and Indemnity supported hereby other than as expressed
herein in writing; and that the agreements and covenants contained herein shall
continue to remain in full force and effect for the benefit of each of the
Released Parties thereafter.

 

The undersigned further covenants and agrees not to join, assist and/or act in
concert in any manner whatsoever with any person in the making, and agrees not
to cause or acquiesce in the making by any person of any Claim or demand in the
bringing of any proceeding or action in any manner whatsoever against any of the
Released Parties which the undersigned has released hereunder arising out of or
in relation to matters hereinbefore remised, released and/or discharged.

  

The undersigned further covenants and agrees not to make any Claim or demand or
commence any action against any third party who might claim contribution,
indemnity or other relief over or against one or more of the Released Parties in
relation to the matters hereinbefore remised, released and/or discharged.

 

 

1

  

 

Without in any way limiting any of the rights or remedies otherwise available to
any of the Released Parties, the undersigned shall indemnify and hold harmless
each of the Released Parties against and from any loss, damage, injury, harm,
detriment, lost opportunity, liability, exposure, claim, demand, settlement,
judgment, award, fine, penalty, tax, fee, charge or expense (including
attorneys’ fees) that is directly or indirectly suffered or incurred at any time
by any of the Released Parties, or to which any of the Released Parties
otherwise becomes subject at any time, and that arises directly or indirectly
out of or by virtue of, or relates directly or indirectly to:

 

 

(a)any failure on the part of the undersigned to observe, perform or abide by,
or any other breach of, any restriction, covenant, obligation, representation,
warranty or other provision contained herein;

 

 

 

 

(b)the assertion or purported assertion of any Claims by the undersigned; and

 

 

 

 

(c)the assertion or purported assertion of any Claims by any third party in
relation to the matters hereinbefore remised, released and/or discharged.

 

The undersigned acknowledges, confirms and agrees that he had the opportunity to
seek, and was not prevented nor discouraged by any addressee hereto from
seeking, independent legal advice prior to the execution and delivery of this
Resignation, Release and Indemnity and that, in the event the undersigned did
not avail himself or herself of that opportunity prior to signing this
Resignation, Release and Indemnity the undersigned did so voluntarily without
any undue pressure and agrees that the undersigned’s failure to obtain
independent legal advice should not be used by him as a defence to the
enforcement of undersigned’s obligations set out herein.

 

The provisions hereof shall enure to the benefit of each of the Released Parties
and each of their respective successors and permitted assigns and shall be
binding upon the undersigned and his legal personal representatives, heirs,
executors, administrators, successors and permitted assigns.

 

This Resignation, Release and Indemnity may be delivered by facsimile or other
similar means of electronic reproducible transmission and if so executed and
delivered shall be legal, valid and binding on the undersigned so signing as if
originally signed.

 

IN WITNESS WHEREOF the undersigned has executed this Resignation, Release and
Indemnity this● day of ●, 2018

 

SIGNED, SEALED AND DELIVERED

 

)

 

 

in the presence of

 

)

 

 

 

 

)

 

 

 

 

)

 

 

 

 

)

 

 

Witness

 

)

●

 

 

 

2

  

 

EXHIBIT “C”

 

Form of Shareholders Agreement

 

 

 

 

 1

  

 

UNANIMOUS SHAREHOLDER AGREEMENT

 

THIS AGREEMENT made effective as of the ● day of April, 2018 (the “Effective
Date”).

 

BETWEEN

 

EVIO CANADA INC.

a company incorporated under the

federal laws of Canada

(“EVIO”)

 

- and -

 

JODI McDONALD

an individual resident in the Province of Alberta

(“Jodi”)

 

- and -

 

DARREN McDONALD

an individual resident in the Province of Alberta

(“Darren”)

 

- and -

 

KEYSTONE LABS INC.

a company incorporated under the

laws of the Province of Alberta

(the “Corporation”)

 

- and -

 

AND ALL SHAREHOLDERS WHO ARE, SUBSEQUENT TO

THE EFFECTIVE DATE, ISSUED SHARES, AND HAVE

SIGNED A COUNTERPART TO THIS AGREEMENT,

(the “Subsequent Shareholder”)

 

WHEREAS the Shareholders are the owners of all the issued and outstanding shares
in the capital of the Corporation;

 

AND WHEREAS the Corporation is in the business carried on as of the Effective
Date, consisting of analytical and microbiological testing services for
pharmaceutical, biotechnology, medical device, nutraceutical, medical cannabis
and related services, but excludes any production, processing or packaging
services (the “Business”);

 

AND WHEREAS the parties hereto have entered into this Agreement for the purposes
of, inter alia, (i) setting forth the manner in which the affairs of the
Corporation shall be conducted; (ii) providing for their respective rights and
obligations arising out of or in connection with the operations and affairs of
the Corporation; and (iii) governing the transfer of Shares in the Corporation;

 

 2

  

 

NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the respective
covenants and agreements of the parties hereto hereinafter contained and other
good and valuable consideration (the receipt and sufficiency of which are hereby
acknowledged by each party hereto), the parties hereto hereby agree as follows:

 

ARTICLE I INTERPRETATION

 

1.1In this Agreement, unless the context otherwise requires:

  

 

(a)“Act” shall mean the Business Corporations Act (Alberta), as may be amended
from time to time;

 

 

 

 

(b)“Affiliate” of a person means another person where (i) one of them is a
subsidiary of the other, or (ii) each of them is controlled by the same person;

 

 

 

 

(c)“Agreement” shall mean this Agreement and all preambles, recitals and
schedules hereto, along with any amendments hereto or thereto;

 

 

 

 

(d)“Articles” shall mean the certificate and articles of restatement of the
Corporation, dated January 6, 2006 and as may be further amended from time to
time;

 

 

 

 

(e)“Authorized Capital” shall mean the authorized capital of the Corporation as
set forth in the Articles;

 

 

 

 

(f)“Board of Directors” shall mean the board of directors of the Corporation as
constituted from time to time, and “Director” or “Directors” shall mean a member
or members of the Board of Directors, respectively;

 

 

 

 

(g)“By-Laws” shall mean the by-laws of the Corporation, as amended and
supplemented from time to time;

 

 

 

 

(h)“Counterpart” means an agreement to be bound to the terms and conditions of
this Agreement, signed by a Subsequent Shareholder, in the form set out in
Schedule “A”;

 

 

 

 

(i)“Permitted Entity” means, in respect of a Shareholder:

  

 

(A)an entity in respect of which the majority of voting shares are controlled by
such Shareholder or Principal(s) of such Shareholder;

 

 

 

 

(B)an affiliate of such Shareholder; or

 

 

 

 

(C)a trust controlled by the Shareholder and which has no beneficiaries other
than the Shareholder;

  

 

(j)“Personal Representative” shall mean the person in whom on the death of any
non- corporate Shareholder, as a result thereof, title of the Shares of such
Shareholders is or becomes vested and includes, where applicable, the heirs and
the administrator of such Shareholders;

 

 

 

 

(k)“Principal” means any of the persons described in Schedule “B” hereto who is
a principal of a corporate Shareholder;

  

 3

  

 

 

(l)“Related Transferee” has the meaning ascribed thereto in Section 6.4 hereof;

 

 

 

 

(m)“Related Transferor” has the meaning ascribed thereto in Section 6.4 hereof;

 

 

 

 

(n)“Shareholder” means any individual or corporation holding one or more Shares
in the share capital of the Corporation who is a party to this Agreement or
agrees to become bound by this Agreement as contemplated in this Agreement;

 

 

 

 

(o)“Shares” shall mean any issued and outstanding shares in the capital of the
Corporation; and

 

 

 

 

(p)“Total Disability” means if the Shareholder, or the Principal of a
Shareholder, due to illness, mental or physical reasons fails, for a period of
180 working days total in any 12 month period, to perform his or her duties for
the Corporation.

  

ARTICLE II SHARE OWNERSHIP

 

2.1The parties hereto acknowledge that, as of the date hereof, the Authorized
Capital consists of an unlimited number of Class A Common Voting Shares; an
unlimited number of Class B Non- Voting Common Shares; an unlimited number of
Class C Common Non-Voting Shares; and an unlimited number of Class D Preferred
Non-Voting Shares; of which 110 Class A Shares and 110 Class B Shares are issued
and outstanding as fully paid and non-assessable, and the parties holding same
are as follows:

 

NAME

 

NO. AND TYPE OF SHARES HELD

EVIO

 

55 Class A Shares, 55 Class B Shares

 

 

 

Jodi

 

55 Class A Shares

 

 

 

Darren

 

55 Class B Shares

 

 

Each Subsequent Shareholder will complete a document in the form set out in
Schedule “C” to reflect the identity of the Subsequent Shareholder and the
amount of shareholdings held by the Subsequent Shareholder with respect to the
Corporation.

  

2.2

(a)All share certificates issued by the Corporation to the Shareholders shall
have the following legend imprinted thereon:

 

 

 

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF A
UNANIMOUS SHAREHOLDERS AGREEMENT WITH THE CORPORATION AND SUCH SHARES ARE NOT
TRANSFERABLE ON THE BOOKS OF THE CORPORATION EXCEPT IN COMPLIANCE WITH THE TERMS
AND CONDITIONS OF SUCH AGREEMENT.”

 

 

 

 

All instruments issued by the Corporation that are convertible into shares or
evidence the right to acquire shares shall contain a legend to similar effect.

 

 

 

 

(b)The Shareholders shall submit the certificates representing the Shares held
by each of them prior to the execution of this Agreement to the Corporation in
order that the legend set forth in Section 2.2(a) hereof may be imprinted
thereon.

 

 4

  

 

2.3Each Shareholder hereby represents and warrants to and covenants with each of
the other parties hereto that the Shares held by the Shareholder are and shall
be owned beneficially by the said Shareholder and not as nominee of any party,
free and clear of all mortgages, charges, pledges and other encumbrances, except
for any pledge of Shares granted in connection with any bank or equipment
financing by the Corporation, or as otherwise contemplated pursuant to this
Agreement. The representations and warranties contained in this Section 2.3
shall not merge in the closing of this Agreement.

 

ARTICLE III FINANCIAL

 

3.1It is intended that the Shareholders shall not be required to make loans to
the Corporation.

 

 

3.2It is understood and agreed to among all of the Shareholders that they may
have to provide guarantees, indemnities, pledges of credit or other like
agreements with respect to the indebtedness of the Corporation. Unless otherwise
agreed to among all of the Shareholders, any guarantees, indemnities, pledges of
credit or other like agreements with respect to the indebtedness of the
Corporation which a lender or proposed lender to the Corporation requests a
Shareholder to enter into as a condition to the lender advancing funds to the
Corporation shall (regardless of the terms of, or who executes, the aforesaid
agreements) be borne by all of the Shareholders in proportion to the number of
Shares held by each Shareholder. Where a Shareholder has executed a joint and
several guarantee, the Corporation shall pay a guarantee fee to that Shareholder
annually in the amount of half of one (0.5%) percent of the amount of
indebtedness guaranteed.

 

 

3.3The Shareholders agree that they shall subordinate all shareholder advances
and their entitlement to any interest thereunder to permanent financing or other
borrowing by the Corporation to the extent required by the Corporation.

 

 

3.4Performance bonus recommendations, salary adjustment recommendations and
employment termination recommendations for employees of the Corporation
(including Shareholders) will be made by the Board of Directors; provided,
however, if the foregoing is in respect of Jodi, the nominees of Jodi shall
recuse themselves from voting on the matter.

 

 

3.5The directors shall in good faith work together with the Corporation to
prepare a mutually agreed upon annual business plan which shall include a
proposed operating budget of the Corporation for the subsequent twelve (12)
month period (the “Annual Business Plan”), such Annual Business Plan to be
revisited on a quarterly basis and prepared and approved annually. The parties
acknowledge that EVIO, Inc., EVIO’s parent corporation, is the leading provider
of accredited cannabis testing and consulting services in the United States. On
this basis, the parties agree that it is in the best interests of the
Corporation to implement and adopt in the Corporation’s Annual Business Plan so
much of the rigorous business standards, practices, procedures and protocols
followed by EVIO, Inc. in its cannabis testing and consulting services business
from time to time as are applicable to the Corporation’s Canadian cannabis
testing and consulting services business.

  

 5

  

 

ARTICLE IV BOARD OF DIRECTORS AND MANAGEMENT

 

4.1At all times that EVIO is a Shareholder that owns at least fifty percent
(50%) of the outstanding Shares, EVIO shall be eligible to appoint one (1)
director to the Board of Directors. Initially, EVIO’s nominee shall be William
Waldrop (“Will”). At all times that the Vendors or a Related Transferee
(collectively, the “Vendor Group”) are Shareholders that collectively own at
least at least fifty percent (50%) of the outstanding Shares, Jodi shall be
eligible to appoint one (1) director to the Board of Directors. Initially Jodi’s
nominee shall be Jodi. Each Shareholder will vote at all meetings of the
Shareholders and act in all other respects in connection with the corporate
proceedings of the Corporation in such manner as to ensure that Will or EVIO’s
nominee (so long as EVIO owns at least fifty percent (50%) of the outstanding
Shares) and Jodi or her nominee (so long as the Vendor Group owns at least fifty
percent (50%) of the outstanding Shares) are elected and appointed and
maintained in place from time to time as Directors of the Corporation. No
Shareholder shall exercise his/her/its voting rights to remove a Director
without the consent of the other Shareholders. In exercising their director’s
powers and discharging their director’s duties, Will and Jodi agree to (a) act
honestly and in good faith with a view to the best interests of the Corporation,
and (b) exercise the care, diligence and skill that a reasonably prudent person
would exercise in comparable circumstances. In the event that either EVIO or the
Vendor Group cease to own at least fifty percent (50%) of the outstanding Shares
and accordingly no longer hold the nomination rights set forth above, the
decision to add or remove any other directors shall be made by the Shareholders
holding at least fifty-one (51%) percent of the Shares.

 

 

4.2Any Shareholder entitled to nominate and elect a director shall be entitled
to remove any such director by notice to such director, the other Shareholders
and to the Corporation. Any vacancy occurring on the Board by reason of the
death, disqualification, inability to act, resignation or removal of any
Director (a “Terminated Director”) shall be filled only by a further nominee of
the Shareholder whose nominee was so affected so as to maintain a Board of
Directors consisting of the numbers of nominees specified in Section 4.1 and the
other Shareholders will vote all such Shares entitled to vote thereon in favour
of electing such individual. If any Person specified in Section 4.1 as having
the right to nominate a director gives written notice to the other Shareholders
of a desire to remove a director nominated by such Person, the other
Shareholders will vote all of their Shares entitled to vote thereon in favour of
removing that director. Following the death, disqualification, inability to act,
resignation or removal of any director, except as contemplated in Section 4.3,
no further business shall be transacted by the Board of Directors (other than to
fill such vacancy) for a period of ten (10) days unless the Party entitled to
appoint a replacement director consents in writing to the Board of Directors
transacting business or until a new director is elected or appointed to replace
the Terminated Director, whichever first occurs, provided that, in the event
that no new director is appointed within such period of ten (10) days,
notwithstanding such vacancy, the Board of Directors may thereafter transact any
and all business which may properly come before the Board of Directors, provided
in each case that a quorum for the meeting of the Board of Directors is
established.

 

 

4.3Except as otherwise required by law or by this Agreement, questions arising
at any meeting of Directors shall be decided by a majority of votes. Quorum for
attendance at a Directors meeting shall be a majority of the Directors present.
In the event that, pursuant to Section 4.2, a Terminated Director has not been
replaced in accordance with the provisions set out Section 4.2, in the event
that a Directors meeting has been called, yet quorum cannot be achieved on
account of the Terminated Director not having been replaced, any business
otherwise to be transacted at a Directors meeting shall be delayed for a period
of forty-eight (48) hours, at which point a Directors meeting shall be again
convened (the “Rescheduled Directors Meeting”). Quorum at a Rescheduled
Directors Meeting shall be one (1) Director.

 

 

4.4In the case of equality of votes at a meeting of Directors, no Director shall
have a second or casting vote in addition to his or her original vote.

 

 6

  

   

4.5

The officers of the Corporation shall be as follows:

 

 

 

 

(a)Will – Chief Executive Officer

 

 

 

 

(b)Jodi – President

 

 

 

 

(c)Lori Glauser – Chief Operating Officer

 

 

 

 

(d)Rod Szarka- Vice-President

  

4.6Any Director or any other person entitled to attend a meeting of Directors
may participate in the meeting by means of telephone or other communication
facilities that permit all persons participating in the meeting to hear each
other.

 

 

4.7Any matter recorded in the minutes of a meeting of the Shareholders of the
Corporation as having been approved or agreed upon by resolution or otherwise
shall be deemed, for the purposes hereof, to have been consented to by a
Shareholder only if the consent of such Shareholder shall have been indicated in
writing whether by endorsement of such minutes or otherwise.

 

 

4.8The accountants of the Corporation shall be such accountants as the
Shareholders shall appoint from time to time and such accountants shall, at the
fiscal year end of the Corporation and at such other times as they may be
reasonably requested by any of the Shareholders, examine the books and accounts
of the Corporation and for such purposes they shall have access to all books of
account, records and all vouchers, cheques, papers and documents of or which may
relate to the Corporation, including those of the Shareholders to the extent to
which such books, records, vouchers, cheques, papers and documents relate to the
Corporation. The parties agree that the fiscal year end of the Corporation shall
be July 31.

  

ARTICLE V FUNDAMENTAL CHANGES

 

5.1

No action by the Corporation shall be taken on any of the following matters
without the unanimous consent of Shareholders of the Corporation having the
right to vote on the matter:

 

 

 

 

(a)any amendments to the Articles or By-Laws;

 

 

 

 

(b)any sale, transfer or other disposal of all or a substantial part of the
assets and undertaking of the Corporation, or any acquisition or disposition by
the Corporation of any property having a value in excess of $1.0 million, unless
otherwise indicated in the Annual Business Plan;

 

 

 

 

(c)the issue or transfer of Shares or any obligations, charges, debts or other
instruments convertible into Shares or involving rights to vote;

 

 

 

 

(d)the winding up, dissolution or termination of the Corporation;

 

 

 

 

(e)any material change in the undertaking of any business or operation by the
Corporation, or any transaction out of the ordinary course of business of the
Corporation;

 

 

 

 

(f)the redemption or repurchase of any Shares by the Corporation other than as
provided for herein;

 

 

 

 

(g)purchasing, leasing as an agent, acquiring, selling or disposing of any real
property (including any leasehold interest therein) or other material assets
having a value in excess of $1.0 million, unless otherwise indicated in the
Annual Business Plan;

 

 7

  

  

 

(h)transferring, assigning, charging, selling or in any other manner encumbering
or disposing of the interest of any of the Shareholders hereto as a creditor of
the Corporation with respect to shareholder’s loans;

 

 

 

 

(i)the making of capital expenditures which, either alone or in conjunction with
other capital expenditures in any given financial year of the Corporation,
exceed in the aggregate $1.0 million, unless otherwise indicated in the Annual
Business Plan; or

 

 

 

 

(j)any new borrowing by the Corporation, which alone (i.e. excluding past or
future borrowing), exceeds $100,000, unless otherwise indicated in the Annual
Business Plan;;

 

 

 

 

(k)any deviation, in a material way, from the Annual Business Plan; or

 

 

 

 

(l)change the accountants or auditors of the Corporation,;

 

 

 

 

(m)amend or vary the Annual Business Plan as approved by the Board in accordance
with Section 3.5;

 

 

 

 

(n)approve the declaration, payment or setting aside for payment of any
dividend, the distribution of any surplus earnings or the return of capital to
any Shareholder;

 

 

 

 

(o)guarantee third party obligations;

 

 

 

 

(p)list or quote any Shares on any stock exchange;

 

 

 

 

(q)complete any initial public offering;

 

 

 

 

(r)change the size of the Board or the structure thereof, other than as
contemplated in this Agreement;

 

 

 

 

(s)create any Subsidiary, transfer any of the material assets of the Corporation
to such Subsidiary or issue any securities of any such Subsidiary;

 

 

 

 

(t)take any of the above actions with respect to any Subsidiary; or

 

 

 

 

(u)enter into any agreement to do any of the foregoing.

  

5.2The Directors of the Corporation shall, if applicable, act in accordance with
the terms of Section 5.1.

 

ARTICLE VI GENERAL RESTRICTIONS ON TRANSFER OF

SHARES; MANDATED SALE

 

6.1All of the Shareholders and Directors shall be deemed to have consented to
any transfer by sale, gift, bequest or otherwise, or encumber by pledge,
assignment, mortgage, charge or otherwise, or otherwise dispose of or cease to
be the holder of (the foregoing being collectively referred to in this Article
as “transfer”) of Shares made in accordance with this Agreement and to have
waived any restriction on transfer contained in the Articles or Bylaws in order
to give effect to such transfer.

 

 

6.2Except as provided in this Agreement, no Shareholder shall transfer any of
the Shares of which it is at any time the registered or beneficial owner.

  

 8

  

 

6.3In the case of any permitted transfer to any person other than another
Shareholder or to the Corporation, no such transfer shall be made, shall be
effective or shall be registered on the books of the Corporation until the
proposed transferee becomes a Shareholder party to this Agreement (and, if a
corporate Shareholder, its Principal also becomes a party to this Agreement) by
executing a counterpart of this Agreement and such other instruments as counsel
for the Corporation shall advise.

 

 

6.4If any Shareholder who is an individual (a “Related Transferor”) shall
request the other Shareholders to permit the transfer of any Shares held by the
Related Transferor to (i) a member of the immediate family of the Related
Transferor, (ii) a trust all the beneficiaries of whom are members of the
immediate family of the Related Transferor, or (iii) a company owned and
controlled by the Related Transferor alone or together with member of the
immediate family of the Related Transferor (the persons described in (i), (ii)
and (iii) being herein referred to as “Related Transferees”) the other
Shareholders shall not unreasonably withhold or delay giving such consent to the
proposed transfer as may be required under the applicable provisions of the
Articles and of this Agreement. No such transfer from a Related Transferor to a
Related Transferee shall be made, shall be effective or shall be registered on
the books of the Corporation until the Related Transferee becomes a Shareholder
party to this Agreement by executing a counterpart of this Agreement and such
other instruments as counsel for the Corporation shall advise, and the Related
Transferee has executed and delivered such instruments as shall be advised by
counsel for the Corporation as necessary to vest in the Related Transferor, in a
legally effective manner, absolute discretion to vote for and on behalf of the
Related Transferee at all meetings of Shareholders of the Corporation.

 

 

6.5Upon any transferee of Shares becoming a Shareholder party to this Agreement,
such transferee shall, with respect to the Shares acquired and held by such
transferee, have the same rights and obligations under this Agreement as the
transferor of such Shares had under this Agreement with respect to such Shares,
and any reference in this Agreement to the transferring party shall be deemed to
be a reference to and including the transferee party.

 

 

6.6If any Shareholder is a body corporate, then control of such Shareholder may
not be changed, directly or indirectly, whether by operation of law or
otherwise, without the prior written consent of the other Shareholders. If such
prior consent is not obtained, and control of a corporate Shareholder changes as
aforesaid, then such Shareholder shall be deemed to be a “Retiring Party” for
the purposes of Section 7.1 hereof. Notwithstanding the foregoing, each
Principal is entitled to transfer all or any part of its securities in the
Shareholder of which it is a Principal to a Permitted Entity. A Principal must
give prior written notice to the Corporation and the other Shareholders of any
such transfer. No proposed transfer of securities in a Shareholder to a
Permitted Entity is effective until the Permitted Entity complies with section
6.3.

 

 

6.7Notwithstanding any other provision of this Agreement other than Section 6.3,
each Shareholder that is a corporation or trust will be entitled, after giving
notice to the other Shareholders and to the Corporation, to sell or transfer
all, but not less than all, of the Shares beneficially owned by such Shareholder
to the individual controlling such Shareholder or a Permitted Entity in respect
of such Shareholder.

 

 9

  

  

ARTICLE VII RESIGNATION, TERMINATION TOTAL DISABILITY, BANKRUPTCY,

ETC.

 

7.1In the event a Shareholder, or the Principal of a Shareholder, as the case
may be:

  

 

(a)meets the requirements of Total Disability; or

 

 

 

 

(b)is declared bankrupt, makes an assignment for the benefit of creditors, or
has a receiving order made against it; or

 

 

 

 

(c)has taken steps to voluntarily dissolve or wind-up, or a court of competent
jurisdiction requires it to be wound-up; or

 

 

 

 

(d)is deemed a “Retiring Party” pursuant to Section 6.6; or

 

 

 

 

(e)becomes subject to an order under any family law legislation or any successor
legislation thereto or under the matrimonial laws of any jurisdiction requiring
its Shares be transferred, charged, encumbered, attached, seized or sold; or

 

 

 

 

(f)is in breach of or in default under any of the provisions of this Agreement
for greater than thirty (30) days after having received written notice of same
from the Corporation; or

 

 

 

 

(g)if convicted of an offense pursuant to the Criminal Code of Canada; or

 

 

 

 

(h)is an employee of its employer, whose employment is terminated for cause; the
affected Shareholder shall be deemed a “Retiring Party”.

  

7.2In circumstances where either of Sections 7.1(a) or (b) apply, the
Shareholders other than the Retiring Party (in this Section the “Other
Shareholders”) shall have the option, to purchase for cancellation all (but not
less than all) of the Shares owned by the Retiring Party, which option shall be
exercised by giving written notice to the Retiring Party or his/her Personal
Representative and by the other Shareholders within ninety (90) days of the said
event, for a price and in the manner calculated and set forth in Sections 7.3
through 7.5 hereof. In circumstances where any of Sections 7.1(c) to (h) apply,
the Corporation shall have the option to purchase for cancellation all (but not
less than all) of the Shares owned by the Retiring Party, which option shall be
exercised by giving written notice to the Retiring Party or his/her Personal
Representative and by the other Shareholders within ninety (90) days of the said
event, for a price and in the manner calculated and set forth in Sections 7.3
through 7.5 hereof. If either any relevant Other Shareholder or the Corporation
fails to exercise the option described above in this Section 7.2 within ninety
(90) days of the said event then the option will lapse.

 

 

7.3The purchase price for any Shares to be purchased pursuant to the provisions
of this Article VII shall be equal to the fair market value of such Shares at
the date that written notice is given by the relevant Other Shareholder or the
Corporation (hereinafter referred to as the “Purchaser”) of its intention to
purchase the Shares of the Retiring Party, multiplied by the appropriate
discount factor, if applicable, as set forth in Schedule “D”. The fair market
value of the Shares shall be determined by the Shareholders, in writing, on an
annual basis following the completion of the year-end financial statements. In
the event that the Shareholders cannot agree on the de of fair market value, the
Shareholders will agree on an independent third party valuator who will make the
assessment. Any dispute under this provision is to be resolved pursuant to the
provisions in Article XIII herein.

 

 10

  

 

7.4

In arriving at the fair market value determination, the Shareholders and/or the
valuator shall:

 

 

 

 

(a)be given such access to and copies of such documents as they shall request;

 

 

 

 

(b)determine the fair market value per share of the Shares as of the appropriate
date without premium for control or discount for minority;

 

 

 

 

(c)refer to and use as a guideline the valuation, if any, last determined
pursuant to the provisions of this Article VII;

 

 

 

 

(d)consider any additional factors relevant and material to the matter; and

 

 

 

 

(e)consult with, as necessary and appropriate, such accounting and/or financial
advisors as is necessary.

 

 

 

 

The valuation determined by the Shareholders in accordance with this Article VII
shall be binding upon all of the parties hereto.

  

7.5

Unless other terms of sale are agreed to by the parties to the sale, the terms
of any sale under this Article VII shall be as follows:

 

 

 

 

(a)a minimum of ten (10%) percent of the total purchase price shall be paid at
the time of closing by certified cheque, solicitors trust transfer or any other
means acceptable to the parties against delivery of the relevant share
certificates duly endorsed in blank with signatures guaranteed;

 

 

 

 

(b)the Purchaser shall execute and deliver to the Retiring Party a promissory
note in an amount equal to the unpaid balance of the purchase price at the time
of closing, and the unpaid balance, if any, from time to time outstanding of the
purchase price shall bear interest from the time of closing at a rate per annum
equal to the prime lending rate charged by the TD Bank plus one (1%) percent,
and such principal and interest shall be paid in one hundred twenty (120) equal
monthly consecutive installments commencing one (1) month from the time of
closing;

 

 

 

 

(c)default of any payment of principal or interest shall, at the option of the
holder of the promissory note, cause the entire balance thereof to mature,
provided that the Purchaser may prepay the same in whole or in part, in reverse
order of maturity, without notice of bonus payments;

 

 

 

 

(d)the closing shall be at 10:00 o’clock a.m. at the registered office of the
Corporation on the ninetieth (90th) day following the event causing one of the
Shareholders to become a Retiring Party;

 

 

 

 

(e)on closing, the Retiring Party, if applicable, shall tender his or her
resignation(s) or the resignation(s) of his or her nominee(s) from the Board of
Directors and as officer(s) of the Corporation; and

 

 

 

 

(f)if the Retiring Party refuses or neglects to complete the sale for any
reason, the Purchaser shall have the right, upon payment of the purchase price
to the credit of the Retiring Party in any chartered bank in the City of
Edmonton for and on behalf of and in the name of the Retiring Party or his or
her nominee or nominees, to execute and deliver such transfers, resignations and
other documents as may be necessary or desirable in order to complete the
transaction, and to that end the Retiring Party hereby irrevocably constitutes
the Purchaser his or her true and lawful attorney to complete the transaction
and execute on behalf of the Retiring Party every document necessary or
desirable in that behalf.

  

 11

  

 

ARTICLE VIII DEATH OF A SHAREHOLDER OR PRINCIPAL

 

8.1Upon the death of any Shareholder or Principal, as the case may be, the
Corporation shall proceed immediately to collect the proceeds of the policy or
policies of insurance maintained in accordance with Article XI hereof on the
life of the deceased Shareholder or Principal, as the case may be, payable to
the Corporation.

 

 

8.2Subject to the terms of this Agreement, within ninety (90) days after the
death of a Shareholder or Principal, as the case may be (the “Deceased
Shareholder”), the Personal Representative of the Deceased Shareholder shall
have the option to transfer to the Corporation and, where the Personal
Representative has exercised that option, the Corporation shall have the
obligation to repurchase or redeem the affected Shareholder’s Shares as
described in this Article VIII.

 

 

8.3Subject to the terms of this Agreement, within sixty (60) days after the
death of a Deceased Shareholder, the Corporation shall have the option to
purchase or redeem and, where the Corporation has exercised that option, the
Personal Representative of the Deceased Shareholder shall have the obligation to
sell the affected Shareholder’s Shares as described in this Article VIII.

 

 

8.4At the time of purchase, the estate of the Deceased Shareholder shall deliver
to the Corporation the Share Certificates representing the affected
Shareholder’s Shares, endorsed for transfer free and clear of all liens, charges
and encumbrances, and also such other documents including government releases
and certificates that may be necessary to transfer the Shares to the
Corporation.

 

 

8.5The price to be paid for the Shares (the “Purchase Price”), shall be the fair
market value per Share as at the date of death of the Deceased Shareholder (as
determined in accordance with Sections 7.3 and 7.4 hereof), multiplied by the
number of Shares of the Corporation held by the affected Shareholder (or the
Personal Representative).

 

 

8.6The Purchase Price shall be satisfied by the Corporation as follows:

 

 

(a)as to an amount equal to the aggregate of the insurance proceeds received by
the Corporation on the policy or policies of insurance on the life of the
Deceased Shareholder, by certified cheque on closing against delivery of the
relevant share certificates duly endorsed in blank with signatures guaranteed;

 

 

 

 

(b)as to the balance of the Purchase Price, if any, in accordance with the
provisions of Sections 7.5(b) and 7.5(f) mutatis mutandis, except (i) that the
unpaid balance from time to time outstanding shall bear interest from the time
of closing at a rate per annum equal to the prime lending rate charged by the TD
Bank plus one (1%) percent, and (ii) default by the Corporation in payment of
principal or interest must continue for a period of thirty (30) days before the
acceleration option set out in Section 7.5(c) is triggered.

  

8.7If, for the purposes of the Income Tax Act (Canada), (hereinafter called the
“ITA”), the capital dividend account of the Corporation (the “CDA”) is equal to
or greater than the amount of the deemed dividend which, for the purposes of the
ITA, will arise on the purchase by the Corporation of the Shares held by the
affected Shareholder, the Corporation shall take such steps and make such
elections as may be necessary to treat such dividend as a capital dividend for
the purposes of the ITA. If the CDA is less than the amount of the deemed
dividend referred to above, the Corporation shall purchase the Shares in stages
and make such elections and take such other appropriate steps as may be
necessary to ensure that, to the extent possible, the estate of the affected
Shareholder, as the case may be, is deemed, for the purposes of the ITA, to have
received a capital dividend equal to the full amount of the CDA.

 

 12

  

  

ARTICLE IX RIGHT OF FIRST REFUSAL

 

9.1If any Shareholder (the “Offeror”) receives a bona fide written offer (a
“Third Party Offer”) from any person dealing at arm’s length with the Offeror to
purchase any Shares that the Offeror beneficially owns (the “Offered Shares”),
which Third Party Offer is acceptable to the Offeror, the Offeror must give
notice of the Third Party Offer (the “Notice”) to the Corporation and to the
Shareholders other than the Offeror (the Shareholders other than the Offeror are
defined as the “Offerees”). The Third Party Offer must be an offer to purchase
only Shares and no other assets. The Notice must contain a copy of the Third
Party Offer, disclose the identity of the person making the Third Party Offer
and provide evidence sufficient to establish that such person has the power and
capacity, including financial ability, to complete the purchase of the Offered
Shares and that the conditions set out in Article VI will be satisfied. Upon the
Notice being given, the Offerees will have the right to purchase any or all of
the Offered Shares at the same price and upon the same terms and conditions as
are contained in the Third Party Offer.

 

 

9.2The Offerees will be entitled to purchase the Offered Shares pro rata based
upon the number of Shares beneficially owned by the Offerees at the date the
Notice was given or in such other proportion as the Offerees may agree in
writing. Each Offeree who desires to purchase any or all of the Offered Shares
that such Offeree is entitled to purchase in accordance with the provisions of
this Section 9.2 will give notice of such desire to the Offeror, to the
Corporation and to the other Offerees within 10 Business Days of having been
given the Notice.

 

 

9.3If any Offeree does not give notice as provided in Section 9.2 or provides
such notice but indicates therein that it wishes to purchase less than such
Offeree’s pro rata share of the Offered Shares, the Offered Shares that such
Offeree had been entitled to purchase but not so purchased (the “Rejected
Shares”) may instead be purchased by the Offerees who did give such notice pro
rata based upon the number of Shares beneficially owned by such Offerees at the
date the Notice was given or in such other proportion as such Offerees may agree
in writing, and, within five Business Days of the expiry of the 10 Business Day
period specified in Section 9.1, each Offeree who desires to purchase any or all
of the Rejected Shares that such Offeree is entitled to purchase in accordance
with the provisions of this Section 9.3 will give an additional notice to the
Offeror, to the Corporation and to the other Offerees. If any Offeree entitled
to give the additional notice does not do so or provides such notice but
indicates therein that it wishes to purchase less than such Offeree’s pro rata
share of the Rejected Shares, the Rejected Shares that such Offeree had been
entitled to purchase but were not so purchased may instead be purchased by the
Offerees who did give such additional notice, pro rata based upon the number of
Shares beneficially owned by such Offerees at the date the Notice was given or
in such other proportion as such Offerees may agree in writing, and so on from
time to time until the Offerees are willing to purchase all the Offered Shares
or until they are not willing to purchase any more.

 

 

9.4If the Offerees are willing to purchase any or all of the Offered Shares,
such transaction of purchase and sale will be completed in accordance with the
terms set out in the Third Party Offer by delivery of such Offered Shares by the
Offeror with good title, free and clear of all liens, charges, encumbrances and
any other rights of others, against payment by certified cheque, bank draft or
wire transfer by the Offerees. If, at the time of completion, any Offered Shares
are subject to any lien, charge, encumbrance or other right of others, the
Offerees will be entitled to deduct from the purchase money to be paid to the
Offeror the amount required to discharge all such liens, charges, encumbrances
or other rights of others and will apply such amount to the repayment, on behalf
of the Offeror, of the obligations secured thereby.

 

 13

  

  

9.5If the Offeror defaults in transferring the Offered Shares to the Offerees as
provided in this Section 9.5, the Corporation is authorized and directed to
receive the purchase money and thereupon to record the transfer of the Offered
Shares, to enter the names of the Offerees in the registers of the Corporation
as the holders of the Shares purchased by them, and to cause to be issued to the
Offerees share certificates for the Offered Shares in the names of such
Offerees. The Corporation will hold the purchase money received by it in trust
on behalf of the Offeror and will not commingle the purchase money with the
Corporation’s assets, except that any interest thereon will be for the account
of the Corporation. The receipt by the Corporation of the purchase money will be
a good discharge to the Offerees and, after their names have been entered in the
registers of the Corporation, the transaction of purchase and sale will be
deemed completed at the price and on the other terms and conditions contemplated
herein and the Offerees will for all purposes own the Offered Shares purchased
by them. Upon such registration, the Offeror will cease to have any right to or
in respect of the Offered Shares except the right to receive, without interest,
the purchase money received by the Corporation upon surrender of any
certificates that previously represented the Offered Shares.

 

 

9.6If, after the application of Section 9.3, all of the Offered Shares have not
been accepted for purchase by the Shareholders, the Corporation will be entitled
to purchase the remaining Offered Shares in accordance with Sections 9.1 to 9.5
as if it were the only Offeree, mutatis mutandis.

 

 

9.7If, after the application of Section 9.6, all of the Offered Shares have not
been accepted for purchase by the Shareholders or the Corporation, the rights of
the Shareholders and the Corporation to purchase the remainder of the Offered
Shares will terminate and, subject to Article VI, the Offeror may sell the
Offered Shares that have not been accepted for purchase by the Shareholders or
the Corporation to the person who made the Third Party Offer within four months
after the later of the expiry of the last of the 10 Business Day period
specified in Section 9.1 and the last of the five Business Day periods specified
in Section 9.2 only with the specific approval of such sale by the Corporation.
Any such sale must be at a price not less than the purchase price contained in
the Third Party Offer and on other terms no more favourable to such third party
than those contained in the Third Party Offer. If the Offered Shares are not
sold within such four month period on such terms, the rights of the Corporation
and the Shareholders other than the Offeror pursuant to this Section 9 will
again take effect.

 

 

9.8If the Offeror is entitled to sell any Offered Shares to the person who made
the Third Party Offer following compliance with this Section 9, the Offeror will
be entitled to provide such financial information and documents of the
Corporation to the person who made the Third Party Offer as would be reasonable
in the circumstances, provided that the person who made the Third Party Offer
enters into a confidentiality agreement with the Corporation in form and
substance acceptable to the Board.

  

ARTICLE X SECURITY FOR PURCHASE OF SHARES

 

10.1As security for the unpaid balance, if any, of the purchase price with
respect to a purchase and sale of Shares pursuant to this Agreement, the
purchasing Shareholder shall pledge the said Shares being the subject matter of
such purchase and sale (hereinafter called the “Pledged Shares”) to and in
favour of the disposing Shareholder, free and clear of any lien, charge or
encumbrance of whatsoever nature.

 

 14

  

  

10.2The certificates evidencing the Pledged Shares shall be endorsed in blank by
the purchasing Shareholder with signature guaranteed at the time of closing and
shall be delivered to the solicitors for the Corporation, or to such other
persons as the parties hereto may agree (hereinafter called the “Trustee”) to be
held in trust as provided herein, together with a certified copy of a resolution
of the Board of Directors consenting to the transfer of the said Shares to the
disposing Shareholder pursuant to the provisions of this Article XI. Subject as
herein provided, the Trustee shall hold the certificates evidencing the Pledged
Shares until the purchase price therefor has been paid in full, at which time
and upon proof thereof being furnished to the Trustee in the form of a receipt
signed by the disposing Shareholder and an affirmative statement of payment
signed by the purchasing Shareholder (acting promptly, reasonably and in good
faith), the Trustee shall deliver the said certificates to the purchasing
Shareholder.

 

 

10.3If at any time and from time to time during the period that the purchase
price remains outstanding:

  

 

(a)any of the said Shares are subdivided, consolidated, changed or reclassified;
or

 

 

 

 

(b)the Corporation is reorganized or amalgamated with another company or any
other event occurs which results in the substitution or exchange of any of the
Shares for, or the conversion of any of the said Shares into, other securities;

 

 

 

 

the Corporation, forthwith after the occurrence of any such event shall
substitute for the Pledged Shares the resulting shares or other securities. In
connection with this, share certificates or other evidence of ownership of such
resulting shares or other securities in transferable form with signatures
guaranteed shall be forthwith deposited with the Trustee against receipt of the
said share certificates.

 

10.4Until such time as the security hereby constituted shall become enforceable,
the purchasing Shareholder shall be entitled to and may exercise all voting and
other rights attached to the Pledged Shares.

 

 

10.5While any part of the purchase price of any Shares sold pursuant to this
Agreement by the disposing Shareholder is unpaid, the purchasing Shareholder,
insofar as it is permitted by law to do so, covenants and agrees hereby that it
will not vote in favour of nor suffer the Corporation to do any of the
following, namely:

  

 

(a)to allot or issue stock, bonds or other corporate securities;

 

 

 

 

(b)to incur any obligations or liabilities, (absolute or contingent), except if
incurred under contracts or agreements entered into in the ordinary course of
business of the Corporation;

 

 

 

 

(c)to purchase or redeem any Shares in the capital stock of the Corporation;

 

 

 

 

(d)to mortgage, pledge or subject to lien, charge or any other encumbrance any
assets, tangible or intangible, of the Corporation except in the ordinary course
of business;

 

 

 

 

(e)to sell or transfer any assets, cancel any debts or claims or transact any
business except in each case in the ordinary course of the business of the
Corporation;

 

 15

  

 

 

(f)to knowingly permit any extraordinary losses or waive any rights of
substantial value to the Corporation;

 

 

 

 

(g)to enter into any agreement other than in the ordinary course of business of
the Corporation including, but not limited to, agreements regarding increases in
salaries, bonuses, payments, stock options or deferred compensation, provided
that increments may be paid to the purchasing Shareholder, by way of increased
salary or compensation in an amount which shall not exceed ten (10%) percent of
its previous year’s aggregate consideration;

 

 

 

 

(h)to grant options, warrants or other rights to acquire Shares of the capital
stock of the Corporation;

 

 

 

 

(i)to re-organize the capital structure of the Corporation; or

 

 

 

 

(j)to merge, consolidate, amalgamate or sell the business assets or undertakings
of the Corporation;

 

 

 

 

unless the disposing Shareholder is supplied with evidence satisfactory to it
that any amounts owing to it under this Agreement will be paid in full at the
time of closing upon completion of the foregoing events.

  

10.6

(a)In the event that the purchasing Shareholder defaults in payment of the
purchase price or the interest thereon or upon the breach of any of the
covenants set forth in Section 10.5 hereof, the disposing Shareholder may give
notice thereof to the Trustee who shall forthwith give notice to the purchasing
Shareholder of such default or breach. If payment of the amount owing by the
purchasing Shareholder to the disposing Shareholder is not made or such breach
is not cured by the purchasing Shareholder within forty five (45) days of
receiving notice thereof from the Trustee, the balance of the moneys then
remaining unpaid on account of the purchase price shall immediately become due
and payable. If the purchasing Shareholder fails to pay the balance of the
moneys remaining unpaid within thirty (30) days following such balance becoming
due and payable as aforesaid, the disposing Shareholder shall have the right to
realize upon the said Shares by way of a sale thereof as herein provided or, if
the purchasing Shareholder has not paid at least seventy five (75%) percent of
the purchase price therefor, the disposing Shareholder shall alternatively have
the right to take delivery of the certificates evidencing the Pledged Shares
from the Trustee as herein provided and continue to hold and own the same as if
such Shares had never been sold by it and the provisions of this Agreement shall
continue to govern the rights of the Shareholders with respect to the
disposition of their Shares.

 

 

 

 

(b)If less than seventy five (75%) percent of the purchase price for the Pledged
Shares has been paid by the purchasing Shareholder, the disposing Shareholder
shall notify the Trustee within thirty (30) days of the expiry of the aforesaid
forty five (45) days notice period as to whether it intends to realize upon the
Pledged Shares by way of a sale thereof or intends to hold same. In the event
that the disposing Shareholder fails to give such notice, it shall be deemed to
have elected to hold and own the Pledged Shares. The disposing Shareholder shall
take delivery of the Pledged Shares for its own account, in full and complete
satisfaction of any claims that it may have against the purchasing Shareholder
with respect to the unpaid balance of the purchase price for the Pledged Shares
and will not pursue any other remedies available according to law. If, however,
the disposing Shareholder elects to sell the said Shares as provided herein,
such action shall not be deemed to exclude any other remedy which may be
available to it at law to recover the moneys and interest thereon due to it
under this Agreement.

  

 16

  

 

10.7 

If the disposing Shareholder elects to realize upon the Pledged Shares by way of
a sale, the following provisions shall apply:

 

 

 

 

(a)any such sale shall be on the best terms which, after making reasonable
effort, the disposing Shareholder is able to obtain; provided, however, that the
purchasing Shareholder shall be given the opportunity to obtain an offer for the
purchase of the Pledged Shares and if a bona fide offer is obtained by the
purchasing Shareholder which provides for better terms, including the payment of
the purchase moneys in full by cash or certified cheque, then the offer obtained
by the purchasing Shareholder shall be used for such realization;

 

 

 

 

(b)the disposing Shareholder may, at its option, purchase the said Shares on the
same terms and conditions as the best offer obtained by either the purchasing or
disposing Shareholder as provided above; and

 

 

 

 

(c)after deducting from the proceeds of any such sale reasonable allowance for
all costs, charges and expenses reasonably incurred by the disposing Shareholder
in connection therewith, the residue of the moneys arising from such sale shall
be applied on account of or in payment of the balance of the moneys and accrued
interest thereon then remaining unpaid on account of the purchase price and if
any surplus remains the same shall be paid forthwith to the purchasing
Shareholder.

 

ARTICLE XI INSURANCE

 

11.1The Corporation may maintain in full force and effect until the death of any
Shareholder (or, if a corporate Shareholder, a Principal), or until the prior
sale of all the Shares held by any Shareholder, life insurance coverage on each
of such parties in a face amount equal to the estimated fair market value of the
Shares held by each Shareholder, under which coverage the Corporation will be
the named beneficiary. For purposes of this Article XI only, in determining the
estimated fair market value of the Shares held by each Shareholder, the
Corporation will be valued either by using the estimated fair market value of
the net assets of the Corporation or by an earnings multiple based on normalized
income. For purposes of this Article XI only, in calculating the fair market
value of the Shares, the party making such valuation shall not take into account
any of the insurance proceeds payable on the death of the Deceased Shareholder
(or Principal).

 

 

11.2Upon the death of any Shareholder (or Principal), the Corporation shall
apply the proceeds received under the insurance coverage described in Section
11.1 in accordance with the provisions of Article VIII. Any proceeds received by
the Corporation from the said insurance in excess of the amount required by the
provisions of Article VIII shall be retained by the Corporation.

 

 17

  

 

11.3Upon the termination of this Agreement for any reason, whether in whole or
as it may apply to a particular party hereto, the Corporation shall forthwith
offer to assign, transfer and set over to the party in respect of whom this
Agreement has been terminated, (hereinafter referred to as the “Terminating
Party”), the right, title and interest of the Corporation in and to the
insurance policy or policies, insuring the life of the Terminating Party for a
price equal to the aggregate of the cash surrender value, if any, and of any
accumulated dividends or other distribution on such insurance policy or
policies, plus the unused portion of the last premium paid thereon as determined
by the insurer, or the sum of One ($1.00) Dollar, whichever is the greater as of
a date immediately prior to the termination of this Agreement vis-a-vis the
Terminating Party. Upon payment of such price by the Terminating Party to the
Corporation, the Corporation shall forthwith assign, transfer and set over unto
the Terminating Party all such rights, title and interest in and to the said
insurance policy or policies and shall deliver the same to the Terminating
Party. Should the Terminating Party not decide within a period of sixty (60)
days from the date of the aforesaid offer by the Corporation to acquire the said
insurance policy or policies, the said offer shall lapse and be null and void
and the Corporation shall forthwith surrender the policy or policies to the
insurer for the cash surrender value thereof together with the amount of any
accumulated dividends or other distribution thereon, which when received shall
be retained by the Corporation.

  

ARTICLE XII CONFIDENTIALITY, NON-COMPETITION

AND NON-SOLICITATION

 

12.1

(a)It is essential to the success of the Corporation that the business and
affairs of the Corporation be kept in the strictest confidence. During the term
of this Agreement, each Shareholder and Principal shall keep all information
pertaining to or concerning the Corporation (other than as hereinafter provided)
in the strictest confidence and not use any such information or disclose any
such information other than for legitimate business purposes in connection with
the Corporation. In the event of the termination of this Agreement, each party
hereto, and in the event a Shareholder ceases to be a Shareholder, such
Shareholder and its Principal shall keep all information pertaining to or
concerning the Corporation (other than as hereinafter provided) in the strictest
confidence and not use any such information. Notwithstanding any of the
foregoing, any Shareholder or Principal may disclose any such information

  

 

 

(i)to an Affiliate or Associate (as defined below) of the party where it is
necessary for the purposes of the Corporation that such Affiliate or Associate
receive the information and provided that the recipient Affiliate or Associate
enters into an agreement with the Corporation under which such Affiliate or
Associate agrees not to use such information for any purpose other than those of
the Corporation and to be bound by the provisions of this Section 12.1(a);

 

 

 

 

 

 

(ii)to a governmental or other authority to which the disclosure is required by
law and where there is no reasonable means to avoid such disclosure;

 

 

 

 

 

 

(iii)to a court determining the rights of the parties under this Agreement.

 

 

 

 

 

 

(iv)if it becomes generally known in the industry to which the business of the
Corporation is related other than through a breach of this Agreement;

 

 

 

 

 

 

(v)if it is lawfully obtained from a third party without breach of this
Agreement by the Party; or

 

 

 

 

 

 

(vi)if it is reasonably required to be disclosed by a Shareholder to protect its
interests in connection with any proposed transfer of Shares that is pursuant or
subject to this Agreement.

 

 

 

 

 

(b)

The terms “Affiliate” and “Associate” as used in this Article XIII shall have
the respective meanings ascribed thereto in the Act.

 

 18

  

 

12.2

(a)Each Shareholder and Principal covenants and agrees with each other party
hereto that until the expiry of two (2) years from the date upon which the
affected Shareholder ceases to be a Shareholder, it, he or she will not and will
use its, his or her best efforts to ensure that any Affiliate or Associate of
such Shareholder does not, either alone or in partnership or in conjunction with
any persons, as principal, employee, agent, shareholder or in any manner
whatsoever (i), carry on or be engaged in or be concerned with or interested in,
or advise, lend money to, guarantee the debts or obligations of, or permit its,
his or her name or any part thereof to be used or employed by any person who
supplies or provides services to any client or customer of the Corporation or is
otherwise engaged in or concerned with or interested in any business activity
similar to the Business or competitive with that carried on by the Corporation
at the time such Shareholder ceased to be a Shareholder, within the Province of
Alberta; or (ii) engage in soliciting any customer, clients, suppliers or
strategic partners of the Corporation relating to the supply and service of the
same or similar services as Corporation in order to direct or attempt to direct
such customers, clients, suppliers or strategic partners away from the
Corporation, or (iii) engage in obtaining or attempting to obtain the withdrawal
from the Corporation of any employees of the Corporation.

 

 

 

 

(b)The restrictions in Section 12.2(a) are acknowledged by each Shareholder and
Principal to be separate, distinct and severable covenants and to be reasonable
and valid and all defences to the strict enforcement thereof by each other party
hereto are hereby waived by each Shareholder and Principal to the fullest extent
permitted by law.

 

 

 

12.3 

Nothing in Section 12.2(a) shall operate to prevent a Shareholder or Principal
or the Corporation or an Affiliate or Associate of any of them from owning in
the aggregate not more than five (5%) percent of the outstanding shares of any
corporation engaged in or concerned with or interested in any business activity
similar to or competitive with that carried on by the Corporation, the shares of
which are listed for trading on any stock exchange or which trade on the
over-the-counter market, provided that such shareholding does not constitute de
facto control of such corporation.

  

ARTICLE XIII ARBITRATION

 

13.1Except with respect to a determination of fair market value, as contemplated
in Section 7.3, which shall not be subject to arbitration, in the event that any
the disagreement arises between any of the parties hereto with reference to this
Agreement or any matter arising hereunder and upon which the parties cannot
agree (other than a matter governed by the provisions of Article VII hereof),
then every such disagreement shall be referred to arbitration pursuant to the
provisions of the Arbitration Act (Alberta) and in accordance with the
provisions of this Article XIII.

 

 

13.2Any dispute not resolved by the parties within fifteen (15) days of
reference to the other may be referred to arbitration by any party at any time
thereafter. Disputes referred to arbitration will be governed by the following:

  

 

(a)the party desiring arbitration will notify the other parties of such desire
and the parties will attempt to agree, within five (5) business days, on a
single arbitrator who will be named to resolve the dispute. If the parties are
unable to agree, if there are only two parties involved in the dispute, each of
those parties shall chose an arbitrator and the two (2) arbitrators shall
jointly chose a third arbitrator within five (5) business days of their
appointment. If there are three (3) or more parties involved in the dispute,
there shall be three (3) arbitrators, one of whom shall be chosen by each of the
three (3) Shareholders involved in the dispute holding the most Shares in the
Corporation within five (5) business days;

 

 19

  

 

 

(b)the arbitration will take place in Edmonton, Alberta;

 

 

 

 

(c)the decision of the arbitrator(s) will be final and binding on the parties to
the arbitration and no appeal will be taken from any determination unless the
determination contains an error of law, which results in a determination which
is patently unreasonable;

 

 

 

 

(d)each of the parties will co-operate with the arbitrator(s) and, subject to
the doctrine of privilege, will provide the arbitrator(s) with all information
in its possession or under its control necessary or relevant to the matter being
determined. The parties will use their reasonable best efforts to cause any
arbitration hearing that may be held hereunder to be completed as soon as
practicable;

 

 

 

 

(e)the arbitrator(s) will be required to make an award as soon as possible, and
if at all practicable, within ten (10) business days after the conclusion of the
arbitration hearing. The arbitrator(s) may determine all questions of law and
jurisdiction including questions as to whether the dispute is arbitrable, and
has the right to grant permanent and interim relief or injunctive relief or
other forms of equitable relief, and will have the discretion to award costs
including reasonable legal fees, interest and costs of the arbitration;

 

 

 

 

(f)except as modified herein, the provisions of the Arbitration Act (Alberta) as
amended from time to time, will govern any arbitration conducted under this
Section;

 

 

 

 

(g)the arbitrator(s), to the extent permitted by law, may order the
reinstatement of any Shareholder as an employee of the Corporation; and

 

 

 

 

(h)judgment upon an award, including any interim award, rendered by the
arbitrator(s) may be entered in any Court having jurisdiction thereof.

  

13.3Except where clearly prevented by the nature of the matter in dispute, the
affected parties agree to continue performing their respective obligations under
the Agreement applicable while the dispute is being resolved or arbitrated
unless and until such obligations are terminated or expire in accordance with
the provisions of the Agreement.

 

 

13.4Nothing in the dispute resolution process will prevent an affected party
from applying for or obtaining any interim, interlocutory or preliminary
injunctive or declaratory relief or from bringing any claim for contribution or
indemnity in the same Court in which a suit against the party is brought by any
third person.

 

 

13.5The parties hereto covenant that they will not apply nor will they have any
right to apply by any means to any court to challenge any decision of the
arbitrator on a matter properly before the arbitrator.

 

 20

  

  

ARTICLE XIV PIGGYBACK RIGHT OF MINORITY AND DRAG

ALONG OBLIGATION OF MAJORITY

  

14.1

Piggy-Back Right.

 

 

 

 

(a)If, at any time, holders of at least fifty (50%) percent of the Shares on a
fully diluted basis (in this Section 14.1, the “Majority Shareholders”) obtain
from any person (in this Section 15.1 a “Third Party”) a bona fide offer (a
“Sell-Down Offer”) to purchase all of the issued and outstanding Shares and
Shareholder’s loans held by the Majority Shareholders and if the Majority
Shareholders wish to accept the Sell-Down Offer, the Majority Shareholders shall
first comply with the provisions of Article IX. Further, and after having
complied with Article IX, the Majority Shareholders shall obtain from the Third
Party a bona fide irrevocable offer addressed to the other Shareholders (in this
Section 15.1, the “Other Shareholders”) containing terms and conditions
identical (except as contemplated in this Section 14.1) to those contained in
the Sell-Down Offer to purchase all of the issued and outstanding Shares held by
the Other Shareholders (the “Piggy-Back Offer”). The Piggy-Back Offer shall
provide that the purchase of the issued and outstanding Shares and Shareholder’s
loans of the Other Shareholders is conditional on the purchase of issued and
outstanding Shares and Shareholder’s loans held by the Majority Shareholders.
The Majority Shareholders shall deliver the Piggy-Back Offer to each Other
Shareholder, together with a copy of the Sell-Down Offer.

 

 

 

 

(b)The Other Shareholders shall have the right, exercisable by notice given to
the Majority Shareholders (as agent for and on behalf of the Third Party) within
ten (10) days after the deemed receipt of the Piggy-Back Offer either to accept
the Piggy-Back Offer or to reject the Piggy-Back Offer. Any Other Shareholder
that fails to give that notice shall be deemed to have rejected the Piggy-Back
Offer.

 

 

 

 

(c)On the closing date set out in the Sell-Down Offer and the Piggy-Back Offer
in circumstances where both the Sell Down Offer and the Piggy Back Offer have
been accepted by the Majority Shareholders and the Other Shareholders,
respectively:

 

 

 

(i)each Other Shareholder shall sell to the Third Party the Shares and
Shareholder’s loan described in the Piggy-Back Offer;

 

 

 

 

 

 

(ii)the Majority Shareholders shall sell to the Third Party under the Sell-Down
Offer the Shares and Shareholder’s loans described in that offer; and

 

 

 

 

 

 

(iii)the Majority Shareholders and its shareholders shall represent and warrant
that none of the Majority Shareholders, its shareholders and their respective
Affiliates (which, as used in this Article XIV, shall have the meaning ascribed
thereto in the Act) have entered into any collateral agreement, commitment or
understanding with the offeror of the Sell-Down Offer that has the effect of
providing the Majority Shareholders or any of its shareholders or their
respective Affiliates with consideration that is not identical to the
consideration, if any, payable to the Other Shareholders pursuant to the
Piggy-Back Offer.

  

 

(d)Where the Piggy-Back Offer is not accepted by the Other Shareholders, the
Majority Shareholders shall be entitled to accept the Sell-Down Offer only with
the specific approval of such sale by the Corporation.

 

 

 

 

(e)If the purchase and sale under the Sell-Down Offer and Piggy-Back Offer is
not completed within ninety (90) days after the Piggy-Back Offer is delivered to
the Other Shareholders, the provisions of Section 14.1 shall again apply to any
proposed sale of Shares and Shareholder’s Loans by the Majority Shareholders and
so on from time to time, provided that the Majority Shareholders shall not be
entitled to deliver a Piggy-Back Offer from the date that it has delivered a
Piggy-Back Offer to the Other Shareholders until the date that is one hundred
and eighty (180) days thereafter.

 

 21

  

  

ARTICLE XV GENERAL

 

15.1Each of the parties severally agrees to indemnify each of the other parties
hereto against, and reimburse each of the other parties for, any and all
liabilities which such other party or parties may incur or become subject to and
amounts which such other party or parties may pay or be required to pay which
are in excess of the proportionate share of the liabilities and obligations of
the parties under the terms of this Agreement, provided that nothing in this
Section 16.1 shall in any way be deemed to or shall require any party to incur
any liability or provide any funds other than as may be expressly provided for
in any other provisions of this Agreement.

 

 

15.2No consent or waiver, expressed or implied, by any party hereto of any
breach or default by any other party hereto in the performance of his/her/its
obligations hereunder shall be deemed to be construed to be a consent to or
waiver of any other breach or default in the performance by such other party of
the same or any other obligations of such party hereunder. Failure on the part
of any party to complain of any act or failure to act of any other party or to
declare the other party in default, irrespective of how long such failure
continues, shall not constitute a waiver by the first mentioned party of
his/her/its rights hereunder.

 

 

15.3The parties acknowledge that they are governed by the Act and have entered
into this Agreement in accordance with Section 146 of the Act. In the event of
any conflict between the provisions of this Agreement and the Articles or
By-laws, the provisions of this Agreement shall govern to the extent of any
inconsistency. All of the Shareholders agree to vote or cause to be voted its
Shares so as to cause the Articles or By-laws, or both, as the case may be, to
be amended to resolve any such conflict in favour of the provisions of this
Agreement.

 

 

15.4The Corporation by its execution hereof hereby acknowledges that it has
actual notice of the terms of this Agreement, consents hereto and hereby
covenants with the Shareholders that it will at all times during the continuance
hereof be governed by this Agreement in carrying out its business and affairs
and accordingly, shall give or cause to be given such notices, execute or cause
to be executed such deeds, transfers and documents and do or cause to be done
all such acts, matters and things as may from time to time be necessary or
conducive to the carrying out of the terms hereof. This Agreement shall continue
to be effective notwithstanding the sale of Shares by a Shareholder howsoever,
and this Agreement shall be binding upon the remaining Shareholders so long as
there are at least two Shareholders.

 

 

15.5The provisions of this Agreement relating to Shares of the Corporation owned
by the Shareholders shall apply mutatis mutandis to any Shares or securities
into which such Shares may be converted, changed, reclassified, redivided,
redesignated, redeemed, subdivided or consolidated, to any Shares or securities
that are received by the Shareholders hereto or securities of the Corporation or
of any successor or continuing company or corporation to the Corporation that
may be received by the Shareholders hereto on a reorganization, amalgamation,
consolidation or merger, statutory or otherwise.

 

 

15.6Any provisions of this Agreement prohibited by the laws of any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
without invalidating the remaining terms and provisions hereof.

  

 22

  

 

15.7The Shareholders and Principals agree to sign all such documents and do all
such things as may be necessary or desirable (including causing his/her/its
shares to be voted, whether at a meeting of Shareholders or by way of resolution
in writing) to more completely and effectively carry out the terms and
intentions of this Agreement and to cause the Corporation to act in the manner
contemplated by this Agreement.

 

 

15.8Each Shareholder represents and warrants to the other parties:

 

 

(a)if it is a corporation, that it has been duly incorporated and is validly
subsisting as a corporation in good standing under the laws of its jurisdiction
of incorporation and is duly licensed and qualified in all jurisdictions wherein
the nature of its assets or the business transacted by it makes such licensing
or qualification necessary or, if it is an individual, that he or she is of the
full age of majority and has all requisite legal capacity and competence to
execute and deliver this Agreement and to observe and perform his or her
covenants and obligations hereunder;

 

 

 

 

(b)if it is a corporation, that is has the corporate power to own its assets,
carry on its business as presently conducted and to enter into and perform its
obligations under this Agreement;

 

 

 

 

(c)that this Agreement has been duly authorized, executed and delivered by it
and constitutes a valid and binding obligation enforceable against it in
accordance with its terms;

 

 

 

 

(d)that the execution, delivery and performance of this Agreement will not
violate any provisions of any indenture, agreement or other instrument to which
it is a party or by which it is bound or be in conflict with, result in a breach
of, or constitute a default under any such indenture, agreement or other
instrument or result in the creation or imposition of a lien, charge or
encumbrance of any nature whatsoever upon any of its property or assets;

 

 

 

 

(e)that there are no suits or proceedings pending, or to its knowledge
threatened, in any court or before any regulatory commission, board or other
administrative governmental agency against or affecting it which will have a
material adverse effect on its financial condition or business; and

 

 

 

 

(f)that all the foregoing representations and warranties shall be deemed to be
continuing.

 

 

 

15.9

Any and all written notice or written communication given or required to be
given to a party hereunder may be delivered, or, provided postal service shall
not be interrupted or threatened with interruption, mailed by registered mail,
and shall be deemed:

  

 

(a)in the case of delivery to such party to have been duly given when the same
is personally delivered to the party if an individual or to an officer of the
party if the party is a corporation;

 

 

 

 

(b)if addressed to such party at its address set forth in the records of the
Corporation, and in the case of the Corporation at its registered office
address, in the case of dispatch by registered mail, to have been duly given at
5:00 o’clock in the afternoon (local time of the sender) on the 10th day after
the same was deposited with the post office.

 

 23

  

 

15.10Nothing in this Agreement shall be deemed in any way or for any purpose to
constitute any party a partner of, or a member of a joint venture or joint
enterprise with, any other party to this Agreement in the conduct of any
business or otherwise.

 

 

15.11Time shall be of the essence of this Agreement.

 

 

15.12This Agreement constitutes the entire agreement among the parties relating
to the subject matter hereof and shall not be modified, amended or assigned
except with the consent in writing of the parties hereto. A consent to any
assignment required hereunder may be arbitrarily or unreasonably withheld until
the proposed assignee executes and delivers such documents as, in the opinion of
the legal counsel of the Corporation, are necessary to oblige himself or itself
hereunder.

 

 

15.13This Agreement shall be governed and construed in accordance with the laws
of the Province of Alberta and the federal laws of Canada applicable therein,
and, subject to Article XV hereof, the courts of such Province shall have
exclusive jurisdiction to ascertain any action in connection with this
Agreement.

 

 

15.14If at the time of any sale of Shares as contemplated in this Agreement:

 

 

(a)there are any loans outstanding from the Corporation to the selling
Shareholder(s) and/or their Principals or vice versa, such loans shall be paid;
and

 

 

 

 

(b)there are any securities or covenants lodged by the selling Shareholder(s) or
their Principals with any person or institution or any personal guarantees given
by the Selling Shareholder(s) or their or Principal(s) to secure any
indebtedness, liability or obligation of the Corporation, the remaining parties
to this Agreement shall use commercially reasonable efforts to have the selling
Shareholder(s) and any Principal(s) released therefrom. If, notwithstanding such
efforts, the releases as aforesaid are not obtained, the remaining parties shall
deliver to the Selling Shareholder(s) and their Principal(s) their indemnity in
writing indemnifying the Selling Shareholder(s) and their Principal(s) from any
and all liabilities thereunder.

  

15.15In this Agreement, wherever the singular and masculine are used, they shall
be construed as if the plural or the feminine or the neuter had been used, where
the context or the party or parties so requires, and the rest of the sentence
shall be construed as if the grammatical and terminological changes thereby
rendered necessary had been made.

 

 

15.16This Agreement may be signed in paper form, by facsimile signature or by
electronic signature. It may also be signed in one or more counterparts and,
once signed, can be delivered personally, by facsimile or by email of the
signing page in Adobe Portable Document Format (pdf). All electronic signatures
shall be considered binding on the signature thereto.

 

 

15.17This Agreement may be executed by the parties in counterparts and when all
parties have executed at least as many counterparts as there are parties, all of
such counterparts shall be deemed to be originals and all such counterparts
taken together shall constitute one and the same agreement.

 

 

15.18This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their Personal Representatives, successors and permitted
assigns and any reference to a right or an obligation of a party hereto shall be
deemed to include a reference to such Personal Representatives, successors and
permitted assigns to the extent that the context requires.

 

 24

  

 

15.19The Parties confirm that they accept that this Agreement as well as all
other documents relating to this Agreement, including notices, be drawn up in
English only.

 

 

15.20Each of the parties hereto represents and warrants to the other parties
hereto and acknowledges and agrees that: (a) it/he has read this Agreement, is
aware of the contents, and understands them; (b) it/he has had an opportunity to
consider this Agreement and obtain independent professional advice, including
without limitation, legal advice and any advice relating to any potential
accounting and/or tax liability before signing the Agreement; (c) in executing
this Agreement it/he has not relied upon anything told or promised to him by any
Person, except as contained herein; (d) it/he has satisfied himself of all facts
and matters pertaining to the subject matter of, and he has taken independent
legal, accounting and/or tax advice and counsel concerning the subject matter
hereof and acknowledges that he is not relying or receiving any legal,
accounting or tax advice from the other parties hereto and/or their respective
professional advisors; and (e) it/he was not prevented nor discouraged by the
other parties hereto from seeking independent legal, accounting, tax and/or any
other professional advisor’s advice prior to the execution and delivery of this
Agreement and agrees that failure to obtain independent legal, accounting, tax
or any other professional advisor’s advice shall not be used by it/him as a
defense to the enforcement of his or her obligations under this Agreement.

  

15.21Each party hereto acknowledges that such party has been represented by
counsel or has been strongly encouraged to obtain separate counsel in connection
with this Agreement. Accordingly, any rule of law or legal decision that would
require interpretation of any claimed ambiguities in this Agreement against the
party that drafted it has no application and any such right is expressly waived.

 

 

15.22NOTE: THIS AGREEMENT HAS BEEN PREPARED BY THE LAW FIRM OF DENTONS CANADA
LLP ACTING IN THEIR CAPACITY AS SOLICITORS FOR THE CORPORATION. EACH SHAREHOLDER
SHOULD RECOGNIZE THAT THESE SOLICITORS ARE UNABLE TO GIVE THEM INDEPENDENT LEGAL
ADVICE ON THIS AGREEMENT AND EACH SHAREHOLDER SHOULD ALSO RECOGNIZE THAT THEIR
INDIVIDUAL INTERESTS MAY BE DIFFERENT FROM THE INTERESTS OF ONE OR MORE OF THE
OTHER SHAREHOLDERS. EACH SHAREHOLDER IS ENCOURAGED TO OBTAIN INDEPENDENT LEGAL
ADVICE ON THIS AGREEMENT OR ANY OTHER RELATED MATTER OF CONCERN TO THEM.

 

 25

  

  

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

 

 EVIO CANADA INC.    Per:

 

 

William Waldrop   

Chief Executive Officer

     

 

KEYSTONE LABS INC.

 

 

 

 

 

 

Per:

 

 

 

 

Jodi McDonald

 

 

 

President

 

  

 

 

 

 

Witness

 

JODI McDONALD

 

 

 

 

 

 

 

 

 

Witness

 

DARREN McDONALD

 

  

 26

  

 

SCHEDULE “A”

 

COUNTERPART

 

The undersigned was issued                          Class Shares in the capital
stock of Keystone Labs Inc. (the “Corporation”) on                              
(the “Counterpart Execution Date”)

 

This document constitutes a counterpart signature page for the Unanimous
Shareholder Agreement dated effective April 1, 2018 among EVIO Canada Inc., Jodi
McDonald, Darren McDonald, Keystone Labs Inc. and “Those persons who have
executed this Agreement or who have otherwise become bound to this Agreement,”
which currently includes                                     (the “USA”)

 

Further to Sections 15.4 and 15.16 of the Unanimous Shareholders Agreement, the
undersigned is executing a counterpart hereof for the purposes of becoming a
party to the Unanimous Shareholders Agreement and acknowledges having received a
copy of the Unanimous Shareholders Agreement. Upon execution and delivery of
this counterpart, the undersigned shall be a Shareholder, as that term is
defined in the Unanimous Shareholders Agreement, for all purposes of the
Unanimous Shareholders Agreement.

 

Dated for reference as of the Counterpart Execution Date.

 

 ______________________________________________                                                                                                       

 

 27

  

 

SCHEDULE “B”

 

SHAREHOLDER

PRINCIPAL

 

 28

  

 

SCHEDULE “C”

 

NAME OF THE SUBSEQUENT

SHAREHOLDER

SHAREHOLDINGS

(CLASS AND AMOUNT)

 

 29

  

 

SCHEDULE “D”

 

SUMMARY OF DETERMINATION OF PAYMENTS IN RESPECT OF TRIGGERING EVENTS

 

TRIGGER EVENT

TRIGGERING EVENT PURCHASE PRICE

Death of an Individual Shareholder or Principal

Fair Market Value

Termination with Cause

75% of Fair Market Value

Termination without Cause

Fair Market Value

Section 7.1(a): Total Disability of an Individual Shareholder or Principal

Fair Market Value

Section 7.1(b): Is declared bankrupt, makes an assignment for the benefit of
creditors or has a receiving order made against it

15% of Fair Market Value

Section 7.1(c): Has taken steps to voluntarily dissolve or wind-up or a court of
competent jurisdiction requires it to be wound-up

80% of Fair Market Value

Section 7.1(d): Is deemed a “Retiring Party” pursuant to Section 6.6

Fair Market Value

Section 7.1(e): Becomes subject to an order under any family law legislation or
any successor legislation thereto or under the matrimonial laws of any
jurisdiction requiring its Shares be transferred, charged, encumbered, attached,
seized or sold

80% of Fair Market Value

Section 7.1(f): Is in breach of or in default under any of the provisions of
this Agreement for greater than thirty (30) days after having received written
notice of same from the Corporation

65% of Fair Market Value

Section 7.1(g): If convicted of an offense pursuant to the Criminal Code of
Canada

65% of Fair Market Value

Section 7.1(h): Is an employee whose employment is terminated for cause

75% of Fair Market Value

 

 30

  

 

EXHIBIT “D”

 

Form of Employment Agreement

 

 

 

  

  

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS AGREEMENT made as of the ● day of April, 2018.

 

BETWEEN:

 

KEYSTONE LABS INC., a corporation incorporated under the laws of the Province of
Alberta

 

(the “Corporation”)

 

-and-

 

JODI MCDONALD, an individual residing in the City of Edmonton, in the Province
of Alberta

 

(the “Executive”).

 

RECITALS:

 

A.It is a condition of closing of the share purchase agreement dated April ●,
2018 among the Corporation, EVIO Canada Inc., the Executive and Darren McDonald
(the “Share Purchase Agreement”), that the Executive enter into an employment
agreement pursuant to which the Executive shall continue to serve as the
President of the Corporation.

 

 

B.The Corporation wishes to employ the Executive as President and the Executive
wishes to be employed by the Corporation.

  

NOW THEREFORE in consideration of the mutual covenants and agreements contained
herein (the receipt and sufficiency of which are acknowledged by the parties),
it is hereby agreed as follows.

 

ARTICLE 1

COMMENCEMENT AND TERM OF EMPLOYMENT

 

1.01Term. This Agreement shall take effect on the ● day of April, 2018 (the
“Effective Date”) and shall be effective for an indefinite term unless
terminated earlier pursuant this Agreement.

 

ARTICLE 2

ASSIGNMENT

 

2.01Position. The Executive shall be employed by the Corporation as President.

 

 

2.02Duties. The Executive shall fulfill the normal responsibilities, duties and
authorities associated with the positions of President, as may be assigned by
the Board of Directors of the Corporation (the “Board”) from time to time.
Unless otherwise agreed by the parties, the Executive shall perform her duties
in the Corporation’s office in Edmonton, Alberta; however, the Executive will
travel on behalf of the Corporation when required.

 

 

2.03Loyal and Conscientious Performance. During her employment with the
Corporation, the Executive shall devote her full energies, interests, abilities
and productive time to the proper and efficient performance of her duties under
this Agreement. The foregoing shall not preclude the Executive from engaging in
civic, charitable or religious activities which will not present any direct
conflict of interest with the Corporation or affect the performance of the
Executive’s duties hereunder.

 

 1

  

 

2.04No Contractual Obligations. The Executive represents and warrants that she
is under no contractual obligations with any former employer or other third
party that would preclude or restrict in any manner her employment with the
Corporation. The Executive further represents and warrants that she shall not at
any time disclose to the Corporation confidential information in respect of any
former employer or other third party, and the Executive confirms and
acknowledges that she has been expressly advised by the Corporation to refrain
from disclosing any such information under any circumstances whatsoever.

 

 

2.05Compliance with Policies and Procedures. The Executive shall comply with the
Corporation’s lawful policies and procedures, as they exist from time to time
(including any code of ethics or business conduct).

 

ARTICLE 3

REMUNERATION

 

3.01Salary. The Corporation shall pay the Executive during the first year of the
term of this Agreement an annual base salary of $110,000 per year, less
applicable deductions and withholdings (the “Salary”). The Corporation shall pay
the Executive during the second year of the term of this Agreement an annual
base salary of $120,000 per year, less applicable deductions and withholdings.
During the third year of the term, the Executive’s Salary shall be determined by
a compensation committee of the Corporation to be established following the
Effective Date. An increase is not guaranteed but rather is at the sole
discretion of the Corporation’s compensation committee. The Salary shall be
payable in accordance with the Corporation’s payroll policy, if any, as amended
from time to time.

 

 

3.02Vacation. The Executive shall be entitled to six (6) weeks’ vacation per
calendar year, the timing of which shall be agreed upon by the parties. Any
vacation not taken during a calendar year shall not be carried over to the
following year, subject to the minimum vacation accrual entitlement prescribed
by applicable legislation. All vacation taken shall first be applied against the
employment standards minimum entitlement. Such vacations may be taken only at
such times as the Executive and the Corporation may from time to time reasonably
determine having regard to the operations of the Corporation; and provided
further that such vacations may be taken only within the year of entitlement
thereto and may not be accumulated from year to year. If the Executive’s
employment is terminated pursuant to Article 9 hereof, the Executive will not be
entitled to receive any payment in lieu of any vacation in excess of vacation
accrued up to the date of his termination.

 

 

3.03Benefits. The Executive will be eligible to participate in the Company’s
group benefits insurance, if and when they become available, in accordance with
the terms and conditions of the plan, if any, as may be amended from time to
time.

 

 

3.04Business Expenses. The Corporation shall reimburse the Executive for all
reasonable and customary business expenses (including for all authorized travel
and out-of-pocket expenses) that the Executive incurs in performing her
employment services and that are incurred and accounted for in accordance with
the Corporation’s policies and procedures. The Executive shall furnish any
statements, receipts, invoices and other documentation that the Corporation may
reasonably require in order to process such reimbursements.

 

 2

  

 

ARTICLE 4

CONFIDENTIALITY AND NON-DISCLOSURE OBLIGATIONS

 

4.01

Definitions. In this Agreement the following terms have the following meanings:

 

 

 

 

(a) 

“Confidential Information” means all information, data, documents, agreements,
files and other materials in whatever form (including, without limitation, in
written, oral, visual or electronic form), which is disclosed or otherwise
furnished by the Corporation to the Executive in the course of the Executive’s
employment, whether or not such information is marked confidential, that relates
directly or indirectly to the Corporation’s business, clients, customers,
products, services, affairs, finances and trade secrets, including, without
limitation:

 

 

 

 

 

 

(i)information concerning the Corporation’s and its customers’, suppliers’ and
other third parties’, past, present and future business affairs including,
without limitation, finances, supplier information, services, customer
information, products, organizational structure and internal practices,
forecasts, sales and other financial results, records and budgets, and business,
marketing, development, sales and other commercial strategies

 

 

 

 

 

 

(ii)all or any portion of analysis, notations, plans, compilations, reports,
forecasts, studies, samples, statistics, summaries, interpretations and other
documents created, developed, prepared, received, obtained, or generated or
derived from such information, data, documents, agreements, files or other
materials by the Executive in connection with the Executive’s employment; and

 

 

 

 

 

 

(iii)other information that is marked or otherwise identified as confidential or
proprietary, or that would otherwise appear to a reasonable person to be
confidential or proprietary in the context and circumstances in which the
information is known or used.

 

 

 

 

 

(b)

“Copies” means copies or records of any Confidential Information in whatever
form including without limitation, notations, extracts, analysis, studies,
plans, compilations or any other way of representing, recording or recalling
information which contains, reflects, or is derived or generated from
Confidential Information.

 

4.02

The Executive shall only use the Confidential Information or Copies for the
purpose of the Executive’s employment and, without prejudice to the duties of
confidentiality owed by the Executive at common law, the Executive shall not
directly or indirectly, without the written authorization of the Corporation,
either during the employment or at any time after termination of the employment,
howsoever arising:

 

 

 

 

(a)use any Confidential Information or make or use any Copies for the Executive
own benefit or purposes, or for the benefit or purposes of any other person,
company or organization whatsoever; or

 

 

 

 

(b)disclose any Confidential Information or Copies to any person, company or
other organization whatsoever.

 

 

 

4.03

The restrictions in Section 4.02 above do not apply to any Confidential
Information which is or becomes generally available to and known by the public,
other than as a result of the Executive’s unauthorized disclosure or material
breach of this Agreement, or which was already in the Executive’s possession or
available to the Executive on a non-confidential basis before her employment
commenced.

 

 3

  

   

4.04

The Executive shall be responsible for protecting the confidentiality of the
Confidential Information and shall:

 

 

 

 

(a)keep the Confidential Information and Copies strictly confidential;

 

 

 

 

(b)use the Executive’s best endeavours to prevent the use or communication of
any Confidential Information by any person, company or organization (except for
the purpose of the employment or as authorized in writing by the Corporation);
and

 

 

 

 

(c)inform the Corporation immediately on becoming aware or suspecting that any
such person, company or organization improperly knows or has used any
Confidential Information or Copies.

 

 

 

4.05 

If, either during or after the Executive’s employment, the Executive is
compelled or required to disclose any Confidential Information by law or court
order or pursuant to any requirement, request or process of any legal,
regulatory or governmental authority, the Executive shall give the Corporation
prompt prior written notice of such requirement, request or process so that the
Corporation may seek an appropriate protective order or other remedy, and the
Executive shall cooperate with the Corporation to obtain such protective order
or other remedy.

 

 

 

4.06

Except for one copy of this Agreement, any Confidential Information, written or
electronic in the possession of the Executive shall be returned to the
Corporation on such date that the Executive employment with the Corporation
ceases.

  

ARTICLE 5

PROPRIETARY RIGHTS

 

5.01The Executive acknowledges that the Confidential Information is a valuable
and unique asset of the Corporation and that the Confidential Information is and
will remain the exclusive property of the Corporation.

 

 

5.02The Executive further acknowledges that all Confidential Information and all
other discoveries, know-how, inventions, ideas, concepts, processes, products,
protocols, drawings, maps, treatments, methods, formulae, research, innovations,
tests and improvements, computer programs, or parts thereof, conceived,
developed, reduced to practice or otherwise made by the Executive either alone
or with others, during the course of the Executive’s employment with the
Corporation or relating to the business of the Corporation, whether or not
conceived, developed, reduced to practice or made during the Executive’s regular
working hours or on the premises of the Corporation (collectively, the
“Assets”), and any and all services and products which embody, emulate or employ
any such Assets will be the sole property of the Corporation and all copyrights,
patents, patent rights, trademarks, service marks, trade secrets, industrial
designs/design patents and reproduction rights to, and other proprietary rights
in such Assets, whether or not patentable or copyrightable, will belong
exclusively to the Corporation. The Executive hereby assigns and agrees to
assign all of the Executive’s rights, title and interest in the Assets, to the
Corporation or its nominee. For purposes of the Canadian Copyright Act, to the
extent, if any, that such laws are applicable to any such Assets, it will be
considered a work made in the course of employment and the Corporation will be
considered the author thereof. The Executive hereby waives for the benefit of
the Corporation and its successors and assigns any and all moral rights in
respect of any Assets.

 

 4

  

  

5.03The Executive agrees to provide any further assurances, undertakings and
information as may be reasonably required by the Corporation to give effect to
an assignment of rights to Assets and, without limiting the generality of the
foregoing, will do or cause to be done all acts and things, execute and deliver
or cause to be executed and delivered all agreements and documents as may be
required for such an assignment.

 

 

5.04The Executive represents and warrants that the Executive has not and will
not, to the best of the Executive’s knowledge and belief, use or cause to be
incorporated into any of the Executive’s work product with the Corporation any
data, software, information, designs, techniques or know-how which the Executive
or the Corporation does not have the right to use, including the confidential or
proprietary information of the Executive’s prior employers.

 

ARTICLE 6

NON-COMPETITION AND NON-SOLICITATION

  

6.01

Definitions. In this Agreement, the following terms have the following meanings:

 

 

 

 

(a)“Business” means the business carried on by the Corporation as at the
Effective Date, consisting of analytical and microbiological testing services
for pharmaceutical, biotechnology, medical device, nutraceutical, medical
cannabis and related industries, but excluding production, processing and
packaging services.

 

 

 

 

(b)“Customer” means a customer of the Corporation at the date of the termination
of the Executive’s employment that the Executive serviced or managed on behalf
of the Corporation at any time within the 12 months preceding the termination of
the Executive’s employment and that is a customer of the Corporation at the time
of any direct or indirect post-termination solicitation by the Executive.

 

 

 

 

(c)“employee of the Corporation” means an employee who is employed by the
Corporation at the date of the termination of the Executive’s employment or any
time during the 12 month period prior to the date of the termination of the
Executive’s employment and at the time of the attempted or actual recruitment,
solicitation or inducement.

 

 

 

 

(d)“Geographic Area” means the geographic area of the Province of Alberta.

 

 

 

 

(e)“Prospective Customer” means a potential customer that the Executive pursued
or contacted or was negotiating with on behalf of the Corporation for the
purpose of the Business, at any time within the 12 months preceding the
termination of the Executive’s employment, and with whom the Corporation has not
ceased such pursuit, contact or negotiations as of the date of the termination
of the Executive’s employment, and as of the date of the Executive’s direct or
indirect post-termination solicitation.

 

 

 

 

(f)“Supplier” means a supplier, independent contractor or dependent contractor
who is contracted with the Corporation to supply goods or services at the date
of the termination of the Executive’s employment or at any time during the 12
month period prior to the date of the termination of the Executive’s employment
and at the time of the attempted or actual recruitment, solicitation or
inducement.

 

 

 

6.02

The Executive agrees and understands that the employees of the Corporation are
an integral part of the Corporation’s Business and it is necessary to afford
fair protection to the Corporation from the loss of any of its employees.

 

 5

  

 

6.03The Executive understands and agrees that during the Executive’s employment
the Executive will be encouraged to maintain close contact and a close working
relationship with the Corporation’s Customers and will gain a knowledge of the
Corporation’s Customers which could injure the Corporation if such knowledge was
made available to a competitor or used for a competitive purpose.

 

 

6.04Non-Solicitation of Employees and Suppliers. The Executive agrees that
during the Executive’s employment and for twelve (12) months after termination
of the Executive’s employment for any reason, the Executive shall not, either
directly or indirectly, on the Executive’s own behalf or on the behalf of any
other person, firm or business identity, recruit, solicit, persuade or otherwise
induce or attempt to recruit, solicit, persuade or induce any Supplier or any
person who is an employee of the Corporation to terminate their Supplier
contract or contract of employment with the Corporation.

 

 

6.05Non-Solicitation of Customers or Prospective Customers. The Executive agrees
that during the Executive’s employment and for 12 months after termination of
the Executive’s employment for any reason, the Executive shall not, either
directly or indirectly, on the Executive’s own behalf or on the behalf of any
other person, firm or business identity, solicit any Customer or Prospective
Customer of the Corporation for the purpose of offering products or services
that are the same as, substantially similar to or competitive with the Business.

 

 

6.06Non-Competition. The Executive agrees that during the Executive’s employment
and for twelve (12) months after termination of the Executive’s employment for
any reason, the Executive shall not, either directly or indirectly, on the
Executive’s own behalf or on the behalf of any other person, firm or business
identity, within the Geographic Area, be engaged in, concerned with or
interested in any company or business entity that is engaged in Business
competitive to the Corporation.

 

 

6.07This Section shall not be construed so as to restrict the Executive’s right
to accept employment with or to engage in any business that is not competitive
with the Business of the Corporation.

 

ARTICLE 7

NON-DISPARAGEMENT

 

7.01Non-Disparagement. The Executive covenants and agrees that she shall not
engage in any pattern of conduct that involves the making or publishing of
written or oral statements or remarks (including, without limitation, the
repetition or distribution of derogatory rumours, allegations, negative reports
or comments) which are disparaging, deleterious or damaging to the integrity,
reputation or goodwill of the Corporation, its respective affiliates or its and
their respective products, services or employees (including officers and
directors).

 

ARTICLE 8

REMEDIES

 

8.01The Executive acknowledges and agrees that monetary damages may not be a
sufficient remedy for any breach by the Executive of the obligations set out in
Article 4, Article 5, Article 6 and Article 7 of this Agreement, and that in
addition to all other remedies available at law, the Corporation shall be
entitled to seek injunctive or other equitable relief as a remedy for any such
breach.

 

 6

  

 

ARTICLE 9

TERMINATION

 

9.01Termination by the Corporation for Cause. The Corporation may terminate this
Agreement and the Executive’s employment without payment of any compensation
either by way of anticipated earnings or damages of any kind at any time for
cause in accordance with the laws of the Province of Alberta.

 

 

9.02Termination Upon Death of the Executive. If the Executive’s employment
terminates as a result of the Executive’s death, the Executive’s estate shall be
entitled to the Executive’s base Salary and vacation pay accrued as of the time
of the Executive’s death, and any other minimum entitlements that may be owing
under applicable employment standards legislation.

 

 

9.03Voluntary Resignation. In the event the Executive wishes to resign her
employment voluntarily, she shall provide at least sixty (60) days’ notice in
writing to the Corporation. The Corporation may waive such notice in whole or in
part, in which case the Executive’s base Salary will be continued for the
duration of the resignation notice period only, and her benefits will be
continued only as minimally required by applicable employment standards
legislation. The Corporation shall have no other obligations to the Executive
whatsoever.

 

 

9.04Termination by the Employer Without Cause. If the Executive’s employment is
terminated by the Corporation without cause for any reason other than death or
frustration of contract, then the Corporation shall be required to provide the
Executive with the following:

  

 

(a)all accrued but unpaid Salary and vacation pay accrued to the date of
termination, along with payment for any outstanding expenses as of the date of
termination;

 

 

 

 

(b)the minimum amount of vacation pay and benefits continuation, if any, to
which the Executive may be entitled under applicable employment standards
legislation; and

 

 

 

 

(c)either of: (i) during the period from the Effective Date until the second
anniversary of the Effective Date, the greater of twelve (12) months’ base
Salary, less applicable deductions, and the minimum applicable notice and
severance pay, if any, required by Alberta’s Employment Standards Code; and (ii)
on and after the second anniversary of the Effective Date, the greater of six
(6) months’ base Salary, less applicable deductions, and the minimum applicable
notice and severance pay, if any, required by Alberta’s Employment Standards
Code.

 

 

 

 

In no case will the Executive receive less than her minimum entitlements under
applicable employment standards legislation.

 

 

 

These termination provisions will continue to apply throughout the Executive’s
employment notwithstanding any changes to the Executive’s compensation, title,
duties, or responsibilities.

  

9.05Release. In exchange for the payments and benefits set out in Section 9.04,
the Executive shall execute a full and final release in favour of the
Corporation. If the Executive does not sign a full and final release, the
Executive shall receive only the Executive’s minimum entitlements under
applicable employment standards legislation.

 

 

9.06Return of Property. The Executive shall return to the Corporation any
company property, documents, and computer disks, whether in original form or as
copies, that are the Corporation’s property or in any way related to the
Business and that are under the Executive’s direct or indirect control.

 

 7

  

  

9.07Intention to Comply with Applicable Employment Legislation. The payments
described in this section shall be in full and final satisfaction of all claims
the Executive may have against the Corporation arising from the termination or
cessation of the Executive’s employment, pursuant to any statutes or the common
law. The Executive agrees that, upon the Corporation providing her with such
payments and benefits, the Executive shall not be entitled to any further
notice, payment in lieu of notice, termination pay, severance pay, damages,
costs or compensation in respect of her employment or the termination thereof,
whether under statute, common law or contract. If any provision of this section
or of this Agreement should fall below the minimum standards prescribed by
applicable labour and employment legislation, those minimum standards shall be
substituted for and shall completely replace the impugned section.

 

ARTICLE 10

DIRECTORS AND OFFICERS

 

10.01Resignation. If the Executive is a director or officer at the relevant
time, the Executive agrees that after termination of her employment with the
Corporation she will tender her resignation from any position she may hold as an
officer or director of the Corporation or any of its affiliated or associated
companies.

 

 

10.02Indemnity. Subject to the provisions of the Business Corporations Act
(Alberta), the Corporation agrees to indemnify and save the Executive harmless
from and against all demands, claims, costs, charges and expenses, including any
amount paid to settle an action or satisfy a judgment, reasonably incurred by
her in respect of any civil, criminal or administrative action or proceeding to
which the Executive is made a party by reason of being or having been a director
or officer of the Corporation or of any affiliated Corporation, whether before
or after any termination if:

  

 

(a)the Executive acted honestly and good faith with a view to the best interests
of the Corporation; and

 

 

 

 

(b)in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, the Executive had reasonable grounds for
believing that her conduct was lawful.

  

ARTICLE 11

GENERAL PROVISIONS

 

11.01Headings. The headings of the Articles and paragraphs herein are inserted
for convenience of reference only and shall not affect the meaning or
construction hereof.

 

 

11.02Independent Advice. The Executive confirms having had the opportunity to
obtain independent legal advice regarding this Agreement and that the Executive
is signing this Agreement freely and voluntarily with full understanding of its
contents. It is further agreed and acknowledged that this Agreement is the
result of a negotiation between the parties and the rule of contra proferentem
shall not apply to the interpretation of this Agreement.

 

 

11.03Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the Province of Alberta and the federal laws of
Canada applicable therein. Each of the parties hereby irrevocably attorns to the
jurisdiction of the courts of the Province of Alberta with respect to any
matters arising out of this Agreement.

 

 8

  

 

11.04Entire Agreement. This Agreement, together with the documents referred to
herein, constitutes and expresses the whole agreement of the parties hereto with
reference to any of the matters or things herein provided for or herein before
discussed or mentioned with reference to such employment. All promises,
representations, collateral agreements and understandings not expressly
incorporated in this Agreement are hereby superseded by the within Agreement.

 

 

11.05Severability. If any provision contained herein is determined to be void or
unenforceable in whole or in part, it shall not be deemed to affect or impair
the validity of any other provision herein and each such provision, in whole or
in part, is deemed to be separate and distinct.

 

 

11.06Amendment. This Agreement may only be amended by a written document signed
by each of the parties.

 

 

11.07Successors. This Agreement and all rights of the Executive hereunder shall
enure to the benefit of and be enforceable by the Executive and her personal or
legal representatives, heirs, executors, administrators and successors and shall
enure to the benefit of and be binding upon the Corporation, its successors and
assigns.

 

 

11.08Notice. To be effective, a notice must be in writing and delivered (a)
personally, either to the individual designated below for that party or to an
individual having apparent authority to accept deliveries on behalf of that
individual at its address set out below, or (b) by electronic mail to the
address or electronic mail address set out opposite the party’s name below or to
any other address or electronic mail address for a party as that party from time
to time designates to the other parties in the same manner:

  

in the case of the Executive, to:

 

5464 Thibault Wynd NW

Edmonton, Alberta

T6R 3P9

 

Email: jmcdonald@keystonelabs.ca

 

in the case of the Corporation, to:

 

5464 Thibault Wynd NW

Edmonton, Alberta

T6R 3P9

 

Attention: Jodi McDonald

Email: jmcdonald@keystonelabs.ca

 

11.09Taxes. All payments under this Agreement shall be subject to withholding of
such amounts, if any, relating to tax or other payroll deductions as the
Corporation may reasonably determine and should withhold pursuant to any
applicable law or regulation.

 

 

11.10Currency. All dollar amounts set forth or referred to in this Agreement
refer to Canadian currency.

 

 

11.11Counterparts. This Agreement may be signed in any number of counterparts,
each of which is an original, and all of which taken together constitute one
single document. Counterparts may be transmitted by fax or in electronically
scanned form. Parties transmitting by fax or electronically shall also deliver
the original counterpart to each other party, but failure to do so does not
invalidate this Agreement.

 

[Signature page follows]

 

 9

  

 

IN WITNESS WHEREOF, the parties hereto have executed this agreement to be
effective as of the Effective Date:

 

 

KEYSTONE LABS INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

 

 

Witness signature

 

JODI MCDONALD

 

Name:

 

 

 

(please print)

 

 

 

 

 

 

Address:

 

 

 

 

 

 

 10

  

 

EXHIBIT “E”

 

Form of Non-Competition Agreement

 

 

 

 

  

  

 

THIS NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY AGREEMENT made as of
the ● day of April, 2018 (the “Effective Date”).

 

B E T W E E N:

 

KEYSTONE LABS INC., a corporation incorporated under the laws of the Province of
Alberta

(hereinafter called the “Corporation”)

 

OF THE FIRST PART

 

- and -

 

JODI MCDONALD, an individual resident in the City of Edmonton, in the Province
of Alberta

(hereinafter called “Jodi”)

 

OF THE SECOND PART

 

- and -

 

DARREN MCDONALD, an individual resident in the City of Edmonton, in the Province
of Alberta

(hereinafter called “Darren” and, together, with Jodi, the “Vendors”)

 

OF THE THIRD PART

 

- and –

 

EVIO CANADA INC., a corporation existing under the laws of the Federal laws of
Canada

(hereinafter called the “Purchaser”)

 

OF THE FOURTH PART

 

WHEREAS the Vendors, the Purchaser and the Corporation entered into a share
purchase agreement dated April ●, 2018 (the “Purchase Agreement”) pursuant to
which, among other things, the Purchaser shall purchase from the Vendors 50% of
the issued and outstanding shares in the capital of the Corporation, after
giving effect to the Pre-Closing Reorganization (as defined in the Purchase
Agreement);

 

AND WHEREAS the obligations of the Purchaser under the Purchase Agreement are
expressly subject to certain conditions set out therein, including the entering
into of this Agreement;

 

AND WHEREAS the Purchaser and the Corporation desire to obtain certain
assurances from the Vendors that the Vendors will not enter into competition
with the Business (as hereinafter defined);

 

AND WHEREAS the Purchaser and the Corporation desire to obtain certain
assurances from the Vendors that the Vendors will not solicit customers,
suppliers or employees of the Business;

 

 1

  

 

AND WHEREAS the Purchaser and the Corporation desire to obtain certain
assurances from the Vendors that the Vendors will not disclose information to
the public with respect to the Business considered confidential to the Purchaser
and the Corporation;

 

AND WHEREAS the Vendors have agreed to give the Purchaser and the Corporation
such assurances in order to induce the Purchaser to conclude the purchase and
sale of the securities of the Corporation (the “Transaction”) contemplated by
the Purchase Agreement and this Agreement is being executed and delivered by the
parties hereto contemporaneously with the closing of the Transaction.

 

NOW THEREFORE, in consideration of the Purchaser completing the transactions
contemplated under the Purchase Agreement and the covenants and undertakings
contained herein, and subject to and on the terms and conditions herein set
forth, the parties hereto agree as follows:

 

1. Defined Terms

 

1.1. All terms defined in the Purchase Agreement and used herein shall have the
meaning ascribed to them in the Purchase Agreement unless the contrary is so
provided in this Agreement.

 

“Affiliate” shall have the meaning ascribed thereto by the Business Corporations
Act (Ontario) and, for purposes of this Agreement, shall also include any Person
“Controlled by”, “Controlling”, or under common “Control” with, another Person;

 

“Agreement” means this Non-Competition, Non-Solicitation and Confidentiality
Agreement among the Purchaser, the Corporation and the Vendors, as same may be
amended, supplemented or restated from time to time;

 

“Business” means, collectively, the business carried on by the Corporation as at
the Effective Date, consisting of analytical and microbiological testing
services for pharmaceutical, biotechnology, medical device, nutraceutical,
medical cannabis and related industries, but for certainty excludes any
production, processing or packaging services;

 

“Person” means any individual, sole proprietorship, partnership, unincorporated
association, unincorporated syndicate, unincorporated organization, trust, body
corporate and a natural person in such person’s capacity as trustee, executor,
administrator or other legal representative; and

 

“Protected Information” means all information in respect of the Business and
includes, but is not limited to, information that is either confidential, not
publicly disseminated, or proprietary in nature pertaining to the customers of
the Business (including identities of customers and prospective customers, and
their respective preferences, businesses or habits), business relationships
including those with suppliers and others, products (including prices, costs,
markets, sales or content), financial information or measures, business methods,
future business plans, data bases, matters of a technical nature including
know-how, data, formulae, secret processes and designs, models, operating
procedures, knowledge of the organization, and other information owned,
developed, used or possessed with respect to the Business but shall exclude all
information that becomes available to the Vendors on a non-confidential basis
from a source other than the Purchaser or the Corporation or their respective
representatives, provided that such source is not bound by a confidentiality
agreement with the Purchaser or the Corporation, as applicable, or their
respective representatives or otherwise prohibited from transmitting the
information by a contractual, legal or fiduciary obligation.

 

 2

  

  

2. Confidentiality Agreement

 

2.1. Subject to Section 2.2, the Vendors agree: (i) to hold all Protected
Information in confidence; (ii) that they will not use for their own benefit in
connection with the operation of any business which is competitive with the
Business, any Protected Information; and (iii) that they will not divulge,
disclose or communicate, or authorize anyone to use, divulge or communicate to
any individual or entity, in any form or manner whatsoever, any Protected
Information (other than to their professional advisors and any Affiliate). The
obligations of the Vendors hereunder shall not apply to any information which
is, or becomes, information in the public domain through no violation of this
Agreement by the Vendors.

 

2.2. Prior to any unauthorized use or disclosure which is required by law, the
Vendors shall give the Purchaser and the Corporation, as applicable, reasonable
prior written notice of any disclosure of Protected Information required by law.
If requested by the Purchaser or the Corporation, the Vendors shall permit and
co-operate with any effort by the Purchaser or the Corporation, as applicable,
to obtain a protective order or similar protection for the Purchaser or the
Corporation, as applicable. The Purchaser or the Corporation, as applicable,
shall reimburse the Vendors for all reasonable costs and expenses, including but
not limited to legal fees, incurred by him in assisting the Purchaser or the
Corporation, as applicable, to obtain such an order.

 

3. Restriction Against Competition

 

3.1. Subject to Section 3.2, during the period ending on the date that is two
(2) years following the date that the Vendors (or their permitted transferees)
cease to be shareholders of the Corporation and within the Province of Alberta
(the “Prohibited Area”), the Vendors shall not, without the prior written
consent of the Purchaser (which consent may be unreasonably and arbitrarily
withheld at the Purchaser’s sole discretion), directly or indirectly, whether
through a corporation or otherwise, individually or in partnership, jointly or
in conjunction with any Person, firm, Affiliate, association, syndicate, company
or corporation or any other entity whether as principal, agent, joint venturer,
partner, director, officer, employee, employer, consultant, investor, lender,
independent contractor, licensor, licensee, franchisor, franchisee, distributor,
consultant, supplier, trustee, shareholder or other equity holder (other than as
a shareholder of less than five percent (5%) of the voting equity of an entity
offering its securities to the public, and other than as a shareholder of EVIO
Inc., no matter what percentage of voting equity held) or in any other manner
whatsoever, at any time during the such period, do any of the following:

 

3.1.1. carry on, engage in, invest in, participate in, operate, become employed
by, become a partner of, render advice, technical assistance or any other
service whatsoever (whether for compensation or otherwise) to any business which
is similar to, competitive with or substantially the same as the Business;

 

3.1.2. lend money to or guarantee the debts and obligations of any Person or
entity engaging in any business which is competitive with the Business;

 

3.1.3. make use, in any business which is competitive with the Business, of any
list of customers or suppliers (including identities of customers and
prospective customers and suppliers and prospective suppliers, identities of
individual contacts at business entities which are customers or prospective
customers or suppliers or prospective suppliers, and their respective
preferences, businesses or habits) of the Business; or

 

3.1.4. procure or assist any Person, firm Affiliate, association, syndicate,
company or corporation or any other entity in performing the acts prohibited by
this Section 3.

 

 3

  

  

4. Restriction Against Solicitation

 

4.1. During the period ending on the date that is three (3) years following the
date that the Vendors (or their permitted transferees) cease to be shareholders
of the Corporation and within the Prohibited Area, the Vendors shall not,
without the prior written consent of the Purchaser (which consent may be
unreasonably and arbitrarily withheld at the Purchasers’ sole discretion),
directly or indirectly, whether through a corporation or otherwise, individually
or in partnership, jointly or in conjunction with any Person, firm, Affiliate,
association, syndicate, company or corporation or any other entity whether as
principal, agent, joint venturer, partner, director, officer, employee,
employer, consultant, investor, lender, independent contractor, licensor,
licensee, franchisor, franchisee, distributor, consultant, supplier, trustee,
shareholder or other equity holder (other than as a shareholder of less than
five percent (5%) of the voting equity of an entity offering its securities to
the public, and other than as a shareholder of EVIO Inc., no matter what
percentage of voting equity held) or in any other manner whatsoever, at any time
during the such period, solicit or contact, directly or through others, for the
purpose or with the effect of competing or interfering with or harming any part
of the Business:

 

4.1.1. any customer or supplier of the Corporation or any of their respective
Affiliates at any time during the last twelve (12) months preceding the date of
this Agreement and with whom the Vendors dealt during such period;

 

4.1.2 any prospect that received or requested a proposal or offer from the
Vendors or, as applicable, any of their respective Affiliates at any time during
the last twelve (12) months preceding the date of this Agreement and with whom
the Vendors dealt during such period;

 

4.1.3. any known Affiliate of any such customer or supplier or prospect;

 

4.1.4. any of the individual contacts established by the Corporation, any of its
Affiliates or the Vendors or others at the Corporation or its Affiliates
subsequent to the date of this Agreement;

 

4.1.5. any individual who is an employee or independent contractor of the
Corporation or any of its Affiliates at the time of the solicitation or contact
or who has been an employee or independent contractor within twelve (12) months
before such solicitation or contact; or

 

4.1.6. perform or assist any person in performing any acts prohibited by this
Section 4.

 

5. Non-Violation

 

5.1. The undersigned may become an employee of or consultant to the Purchaser or
the Corporation or their Affiliated companies, whether or not within the
Prohibited Area, which shall not be deemed to be a violation of the
non-competition and non-solicitation covenants set forth in Sections 3.1 and 4.1
herein.

 

5.2 The performance by Jodi of the terms and provisions of that certain
employment agreement with the Corporation shall be deemed not to violate the
terms and provisions of this Agreement. Further, Jodi’s equity holdings in EVIO
Inc., as consideration for the purchase of the shares of Keystone Labs Inc.
pursuant to the share purchase agreement dated as of the Effective Date, shall
be deemed not to violate the terms and provisions of this Agreement.

 

5. 3 The Vendors’ shareholdings in the Corporation shall be deemed not to
violate the terms and provisions of this Agreement.

 

 4

  

 

6. Acknowledgements of the Vendors

 

6.1. The Vendors acknowledge that the provisions hereof are reasonable in order
to protect the business and proprietary interests of the Purchaser and the
Corporation and their Affiliates both as to the duration of time and geographic
limitation therein provided, based on the business, plans and prospects of the
Purchaser and the Corporation and their Affiliates as at the Effective Date, and
the confidential and proprietary information to which the Vendors have had and
will have access. In the event that any clause or portion of any covenants in
Section 3.1 or Section 4.1 should be unenforceable or declared invalid by a
court of competent jurisdiction for any reason whatsoever, such unenforceability
or invalidity shall not affect the enforceability or validity of the remaining
portions of the covenants and such unenforceable or invalid portion shall be
severable from the remainder of this Agreement. Notwithstanding the foregoing,
in the event that any court of competent jurisdiction shall determine that the
time period or the geographical area restrictions hereof are unreasonable, then
the covenants in Section 3.1 and Section 4.1 as they relate to such restrictive
time period or geographical area shall be automatically amended to incorporate
the time period or geographical area which such court determines to be
reasonable.

 

6.2. The Vendors acknowledge that the restrictions and covenants contained in
Section 3 and Section 4 hereof shall be construed independently of any other
provision of this Agreement, and the existence of any claim or cause of action
by the Vendors against the Purchaser or the Corporation, whether predicated on
this Agreement or otherwise, shall not constitute a defence to the enforcement
by the Purchaser or the Corporation, as applicable, of the covenants or
restrictions hereof provided, however, that if any provision shall be held to be
illegal, invalid or unenforceable in any jurisdiction, the decision shall not
affect any other covenants or provisions of this Agreement or the application of
any other covenant or provision in respect of each year during which the
aforesaid covenants are to continue.

 

7. Injunctive Relief

 

7.1. The parties agree that, without prejudice to any and all remedies which may
be available to the Purchaser or the Corporation at law or in equity for a
breach of the covenants of the Vendors hereunder, the Purchaser or the
Corporation, as applicable, shall be entitled to seek injunctive relief,
including an interim injunction, in any court of competent jurisdiction, to
enforce any of the covenants of the Vendors hereof upon the breach or threatened
breach thereof, together with reimbursement for all reasonable legal fees and
other expenses incurred in connection therewith.

 

8. Severability

 

8.1. If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other terms
and provisions of this Agreement shall nevertheless remain in full force and
effect.

 

9. Applicable Law

 

9.1. This Agreement shall be construed and enforced in accordance with, and the
rights of the parties hereto shall be governed by, the laws of the Province of
Alberta and the federal laws of Canada applicable therein. Each of the parties
hereto hereby irrevocably submits to the exclusive jurisdiction of the courts of
the Province of Alberta, judicial district of Edmonton and covenants to appear
before such courts.

 

 5

  

  

10. Assignment

 

10.1. The rights of the Purchaser and the Corporation under this Agreement may
not be assigned by the Purchaser or the Corporation, as applicable, other than
in connection with any sale of the Business to, and upon such assignment shall
enure to the benefit of, any assignee of the Purchaser or the Corporation, as
applicable, or to any Person who shall succeed to the Business or any material
part thereof. Any assignee of the Purchaser or the Corporation, as applicable,
shall covenant and be bound by the terms of this Agreement and the Purchase
Agreement, to the extent that they continue to be applicable. This Agreement may
not be assigned, in whole or in part, by the Vendors.

 

11. Successors and Assigns

 

11.1. The provisions of this Agreement shall enure to the benefit of the
Purchaser and the Corporation and their respective successors and assigns and
shall be binding upon the Vendors and their respective heirs and legal
representatives.

 

12. No Waiver

 

12.1. Except as waived in writing by a party hereto, no action taken pursuant to
this Agreement or failure to pursue the enforcement of any right pursuant to
this Agreement shall be deemed to constitute a waiver by such party of
compliance with any covenants or promises contained herein. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach.

 

13. Notices

 

13.1. All notices, requests, demands or other communications (“Notice”) by the
terms hereof required or permitted to be given by one party to another shall be
given in writing by registered mail, postage prepaid, addressed to such other
party or delivered or faxed to such other party as follows:

 

 

(a)to the Vendors at:

 

 

 

 

 

5464 Thibault Wynd NW

Edmonton, Alberta

T6R 3P9

 

 

 

 

 

Attention: Jodi McDonald and Darren McDonald

Email: jmcdonald@keystonelabs.ca

 

 

(b)to the Purchaser at:

 

 

 

 

 

62930 O. B. Riley Rd.

Suite 300

Bend, OR 97703

 

 

 

 

 

Attention: William Waldrop

Email: william@eviolabs.com

 

 6

  

  

 

(c)to the Corporation at:

 

 

 

 

 

5464 Thibault Wynd NW

Edmonton, Alberta

T6R 3P9

 

 

 

 

 

Attention: William Waldrop

Email: william@eviolabs.com

  

or at such other addresses or fax numbers as may be given by any of them to the
others and such notices, requests, demands, acceptances and other communications
shall be deemed to have been received on the next Business Day following the day
of delivery or fax; or if mailed, three (3) Business Days after the mailing
thereof. In the event of a strike or other disruption of postal service all
notices will be forwarded by delivery or fax.

 

14. Gender and Number

 

14.1. Words importing the singular number only shall include the plural and vice
versa, words importing gender shall include all genders, and words importing any
particular type of person, including individuals, shall include all persons.

 

15. Counterparts

 

15.1. This Agreement may be executed in any number of counterparts (by original
or electronic signature), each of which shall be an original, and such
counterparts shall together constitute but one and the same instrument.

 

16. Headings

 

16.1. The headings used in this Agreement are for convenience only and do not
form a part of this Agreement nor are they intended to interpret, define or
limit the scope, extent or intent of this Agreement or any provision hereof.

 

17. Entire Agreement

 

17.1. Except for the Purchase Agreement, the unanimous shareholders agreements
and the employment agreement between Jodi and the Corporation dated as of the
Effective Date, this Agreement, together with the agreements and other documents
to be delivered pursuant hereto, constitutes the entire agreement between the
parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties and there are no warranties, representations or other
agreements between the parties in connection with the subject matter hereof
except as specifically set forth herein and therein. No supplement,
modification, waiver or termination of this Agreement shall be binding unless
executed in writing by the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed to constitute or shall constitute a waiver of any
other provision (whether or not similar) nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.

 

[Remainder of page intentionally left blank.]

 

 7

  

 

 

IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of
the day, month and year first above written.

 

 KEYSTONE LABS INC.    Per:

 

 

Authorized Signing Officer     

I have the authority to bind the Corporation.

 

 

 

 

 

EVIO CANADA INC.

 

 

 

 

 

 

Per:

 

 

 

 

Authorized Signing Officer

 

 

 

 

 

 

I have authority to bind the company.

 

 

 

 

 

EVIO INC.

 

 

 

 

 

 

Per:

 

 

 

 

Authorized Signing Officer

 

 

 

 

 

 

I have the authority to bind the Corporation.

 

 

 

 

)

 

 

 

 

)

 

 

 

 

)

 

 

 

Witness:

 

)

 

JODI MCDONALD

 

 

 

)

 

 

 

 

 

)

 

 

 

 

)

 

 

 

 

)

 

 

 

Witness:

 

)

 

DARREN MCDONALD

 

 

 

)

 

 

 

 8

  

 

EXHIBIT “F”

 

Form of Credit Agreement

 

 

 

  

  

 

LOAN AGREEMENT

 

THIS AGREEMENT made as of the ● day of ●, 20●.

 

B E T W E E N:

 

KEYSTONE LABS INC., a corporation existing under the laws of the Province of
Alberta

 

(hereinafter called the "Borrower")

 

OF THE FIRST PART

 

- and -

 

EVIO, INC., a corporation incorporated under the laws of the State of Colorado

 

(hereinafter called the "Lender")

 

OF THE SECOND PART

 

WHEREAS the Lender has agreed to advance to the Borrower by way of a loan, upon
the Borrower’s request(s) from time to time, an amount of up to C$1,000,000
(being hereinafter referred to collectively as the "Indebtedness");

 

NOW THEREFORE THIS AGREEMENT TO WITNESSETH THAT in consideration of the
covenants contained herein, the parties hereto agree as follows:

 

1. The Indebtedness shall be payable by the Borrower on demand therefore made by
the Lender at any time, subject to any postponements the Lender may hereafter
agree to in writing with other creditors of the Borrower.

 

2. The Indebtedness shall be evidenced by a promissory note substantially in the
form of Schedule "A" attached hereto. The Indebtedness shall be secured by a
general security agreement (“GSA”) to be executed by the Borrower in favour of
the Lender, such GSA to charge all of the personal property, assets and
undertaking of the Borrower, to be in form and substance satisfactory to the
Lender acting reasonably and to be registered on the public record as the
Lender, in its absolute discretion, might deem necessary or advisable
(including, without limitation, pursuant to the Personal Property Security Act
(Alberta)).

 

3. The Indebtedness shall bear interest at the rate of 8% per annum after demand
by the Lender.

 

4. Any notice required or permitted to be given hereunder may be delivered or
sent by prepaid registered mail to the parties hereto as follows:

  

 

To the Borrower:

5464 Thibault Wynd NW

Edmonton, Alberta

T6R 3P9

 

 

 

 

 

Attention: Jodi McDonald

Email: jmcdonald@keystonelabs.ca'

 

 1

  

 

 

To The Lender:

62930 O. B. Riley Rd.

Suite 300

Bend, OR 97703

 

 

 

 

 

Attention: William Waldrop

Email: william@eviolabs.com

  

Any such notice shall be deemed to have been given, if delivered, on the date of
delivery, and if sent by mail, on the third business day following the date of
mailing.

 

5. This Agreement shall be governed by and construed in accordance with the laws
of the Province of Alberta and the laws of Canada applicable therein, and shall
in all respects be considered to be an Alberta contract.

 

6. This Agreement shall be binding upon and shall enure to the benefit of the
parties hereto their respective executors, administrators, legal representatives
successors and permitted assigns.

 

7. The Borrower shall from to time to time and at all times hereafter, upon
every reasonable request of the Lender, make, do and execute or cause and
procure to be made, done and executed all such further acts, deeds or assurances
as may be reasonably required by the Lender in furtherance of the provisions
hereof, for the purpose of registration or otherwise.

 

IN WITNESS WHEREOF this agreement has been executed by the parties hereto.

 

 

KEYSTONE LABS INC.

    Per:

 

Authorized Signing Officer

      

I have the authority to bind the Corporation.

 

 

 

 

 

EVIO, INC.

 

 

 

 

 

 

Per:

 

 

 

Authorized Signing Officer

 

 

 

 

 

 

I have authority to bind the company.

 

 

 2

  

 

SCHEDULE A

 

PROMISSORY NOTE

 

$1,000,000

●, 20●

 

 

FOR VALUE RECEIVED, the undersigned acknowledges itself indebted and promises to
pay to or to the order of the EVIO, Inc. (the “Lender”) at 62930 O. B. Riley
Rd., Suite 300, Bend, OR 97703, or at such other address as directed by the
Lender, from time to time, the principal amount of the lesser of (i) ONE MILLION
DOLLARS ($1,000,000) and, (ii) the aggregate unpaid principal balance of the
indebtedness, as recorded on the attached Exhibit “A”, in lawful money of Canada
on demand.

 

The amount outstanding under this promissory note shall bear interest at a rate
of 8% per annum. The interest shall be payable on or before the first day of
each month in respect of the immediately preceding calendar month. Unpaid
interest shall be added to the principal.

 

Upon default of any payment of principal or interest, the entire principal
amount, plus interest, at the option of the Lender hereof exercisable at any
time after default without notice or demand, shall immediately be accelerated
and become due and payable.

 

The undersigned waives demand and presentment for payment, notice of
non-payment, protest or notice of protest of this promissory note, and all other
formalities whatsoever with respect to this promissory note.

 

The undersigned authorizes the Lender to record on the reverse of this
promissory note or on any attachment to this promissory note all advances,
repayments, prepayments and the unpaid principal balance from time to time. The
undersigned agrees that in the absence of manifest error the record kept by the
Lender on this promissory note or any attachment shall be conclusive evidence of
the matters recorded, provided that the failure of the Lender to record or
correctly record any amount or date shall not affect the obligation of the
undersigned to pay the outstanding amount of this promissory note.

 

This promissory note shall be governed by and construed in accordance with the
laws of the Province of Ontario.

 

This promissory note shall enure to the benefit of the successors and assigns of
the Lender and shall be binding upon the undersigned and its successors and
assigns.

 

DATED as of the ● day of ●, 20●.

 

 

KEYSTONE LABS INC.

    

Per:

 

Authorized Signing Officer

 

 

 

 

 

I have the authority to bind the Corporation.

 

 

 3

  

 

EXHIBIT A

 

REPAYMENTS OF PRINCIPAL

  

Date

Amount of

Indebtedness

Amount of

Principal Repaid

Unpaid Principal

Balance

Notation

Made by

 ●

$●

 

$●

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

  

 

EXHIBIT “G”

Form of Purchaser Subscription Agreement

 

 

 

 

  

  

 

EXHIBIT “H”

Form of Vendors’ Subscription Agreement

 

 

 

 

  

  

 

SCHEDULE “A”

Disclosure Schedule

(see attached)